A n n u a l R e p o r t
2 017
Aiming to grow the business and increase the corporate value of all Group companies
Corporate Philosophy
Takara Bio Group (Biomedical Business)
Takara Shuzo (Domestic Business)
Takara Holdings Inc.
Providing safe and reliable products and services backed by our technologyDomestic Alcoholic Beverages, Seasonings and Raw Alcohol Businesses
Overseas Alcoholic Beverages Business and Japanese Food Wholesale Business in overseas markets
Bioindustry Business, Gene Therapy Business, AgriBio Business
Takara Shuzo International Group(Overseas Business)
Spreading Japanese food culture around the world through washu (Japanese alcoholic beverages) and washoku (Japanese cuisine)
Corporate Philosophy / Business Structure / INDEXPerformance HighlightsMedium-Term Management PlanTo Our Shareholders and Investors
Strategy 1 :
Strategy 2 :
Strategy 3 :
Business OverviewCorporate GovernanceSocial and Environmental InitiativesEleven-Year Consolidated Financial SummaryCompany InformationMajor Consolidated SubsidiariesFinancial SectionInvestor Information
... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
.. . . . . . . . . . . . . . . . . . . . 11
.. . . . . . . 13
.. . . . . . . . . . . . . . . . . . . 15.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Statements in this report, other than those based on historical fact, concerning the current plans, prospects, strategies, and expectations of the Company and its Group companies represent forecasts of future results, or forward-looking statements. While such statements are based on the conclusions of management according to information available at the time of writing, they reflect many assumptions and opinions derived from information that includes major risks and uncertainties. Actual results may vary significantly from these forecasts due to various factors. Factors that could influence actual results include, but are not limited to, economic conditions, especially trends in consumer spending, as well as exchange rate fluctuations, changes in laws and government systems, pressure from competitors’ prices and product strategies, declines in selling power of the Company’s existing and new products, disruptions to production, violations of the Company’s intellectual property rights, rapid advances in technology, and unfavorable verdicts in major litigation.
Forward-Looking Statements
Business Structure INDEX
Contributing to the creationof a vital society and a healthylifestyle through our fermentationtechnology and biotechnologyin a way that achieves harmony with nature
With the establishment of Takara Shuzo International Co., Ltd. on July 3, 2017, business segments have been revised from the fiscal year ending March 31, 2018. Unless otherwise stated, this report refers to the post-revision business segments. See page 6 for details about the revision to business segments.
Revision of Business Segments
Takara Shuzo
Takara Shuzo International Group
Takara Bio Group
Contributing to the health of humankind through the development of revolutionary biotechnologies such as gene therapy
1 TAKARA HOLDINGS INC. Annual Report 20171 TAKARA HOLDINGS INC. Annual Report 2017 2TAKARA HOLDINGS INC. Annual Report 2017
Aiming to cement our position as the top manufacturer of traditional Japanese alcoholic beverages
Accelerating speed of growth through company split
Achieve prodigious growth by strengthening domestic business and accelerating overseas expansion
The Takara Group aims to increase its corporate value globally providing safe and reliable products and services backed by our technology, and contributing to medical progress and enriching the lives of people around the world. Takara Holdings Inc. has authority over Takara Shuzo, which handles the Alcoholic Beverages Business and Seasonings Business in Japan, the Takara Shuzo International Group, which operates the Japanese Food Wholesale Business and the Alcoholic Beverages Business in overseas markets, and the Takara Bio Group, which promotes the Biomedical Business, and maximizes its business results by coordinating and controlling the management of all Group companies under its umbrella.
Strengthening the Group management base, developing corporate culture and personnel, and promoting social and environmental activities
The Takara Group’s Corporate History¥234,193
Net Sales
million
¥290,000million
(Target)1926 1971 1981 1991 2001 2011 2020
(Planned)(FY)20182017
Medium-TermManagement Plan
FY2017
234,193
59.959.9
6,2136,658
80,458
34.434.4
2016201520142013
250,000
200,000
150,000
100,000
50,000
0
63
62
61
60
1
0
200,989209,568
225,364
4,550
1.91.9
4,608
135,043
6.46.4
130,386274,368
3.23.2
100,000
80,000
60,000
40,000
20,000
0
36
35
34
33
1
02017 2016201520142013 2017 2016201520142013 2017
2016201520142013 2017 2016201520142013 2017 2016201520142013 2017
68,225 70,631
5,000
4,000
3,000
2,000
1,000
0
4
3
2
1
0
3,0903,376
150,000
100,000
50,000
0
12
10
8
6
4
2
0
100,040
121,431
300,000
250,000
200,000
150,000
100,000
50,000
0
6
4
2
0
8,480
3.63.6
10,000
8,000
6,000
4,000
2,000
0
15,000
10,000
5,000
0
6.5
6.0
5.5
5.0
4.5
0.5
0
9,133 9,490
5,282
8,967
4,997
4,687
7,055
10,28012,000
10,000
8,000
6,000
4,000
2,000
0
8
6
4
2
0
4,973
61.561.561.861.8
60.360.3
77,815
33.933.9 33.733.7
1.51.5 1.61.6
2.32.33.13.1
4.84.84.54.5
13,551
5.85.8
11,680
6,180
6,003
5.25.2
2016201520142013 2017 2016201520142013 2017
5,537
9,533
74,003
33.733.7
11,096
5.15.1
219,490
61.261.2
4.54.5
5,706
2.62.6
2.02.0
3,754
1.71.7
5.45.4
131,923
4.54.5
9.39.3
4.94.9
Structure of Sales(Fiscal 2017)
Structure of Earnings(Fiscal 2017)
¥234,193
Structure of sales by region
77.8%
22.2%
¥13,551million
¥13,551 5.8 ¥135,043 6.4 ¥274,368 3.2
¥4,550 1.9 ¥8,480 3.6 ¥6,658 ¥6,213
34.534.5
63.8%
16.0%
12.5%
253,253207,586
238,577
2.32.32.72.7
264,438
2.32.3
4.64.6
800
600
400
200
0
80
60
40
20
0
493.14
603.44
23.0123.01
671.11
35.0635.06
647.97
2016201520142013 2017
28.3628.36
655.60
¥42.15
42.1542.15
¥671.11
50.8350.83
37.4%
23.5%
23.6%
(Millions of Yen)
Performance Highlights(Fiscal 2017, ended March 31, 2017)
Net Sales / Cost of Sales Ratio
Total Shareholders’ Equity / ROE
Total Assets / ROA
EPS / BPS
R&D Expenses /R&D Expenses to Net Sales Ratio
Net Income Attributable to Owners of the Parent / Net Income to Net Sales Ratio
Capital Expenditures /Depreciation and Amortization
Net SalesCost of Sales Ratio
(Millions of Yen) SG&A ExpensesSG&A Expenses Ratio
(Millions of Yen)(%)
R&D ExpensesR&D Expenses to Net Sales Ratio
Capital ExpendituresDepreciation and Amortization
(Millions of Yen) (%) Net Income Attributable to Owners of the ParentNet Income to Net Sales Ratio
(Millions of Yen) (Millions of Yen)(%)
(%) Operating IncomeOperating Income to Net Sales Ratio
(Millions of Yen) (%) Total Shareholders’ EquityROE
(Millions of Yen) (%) Total AssetsROA
(Millions of Yen) (%)BPSEPS(Yen) (Yen)
(Years ended March 31) (Years ended March 31) (Years ended March 31) (Years ended March 31) (Years ended March 31) (Years ended March 31)
(Years ended March 31) (Years ended March 31) (Years ended March 31)
Medium-TermManagement Plan
FY2014
Medium-TermManagement Plan
FY2020
3 TAKARA HOLDINGS INC. Annual Report 2017 4TAKARA HOLDINGS INC. Annual Report 2017
¥234,193 59.9million % million % %
million % million million million%
¥80,458 34.4 million %million %million
SG&A Expenses /SG&A Expenses Ratio
Operating Income /Operating Income to Net Sales Ratio
Consolidatednet sales
Consolidatedoperating income
Structure of salesby region
million
Domestic
Overseas
Takara Shuzo
Takara Shuzo International Group
Takara Bio Group
Other
Takara Shuzo
Takara Shuzo International Group
Takara Bio Group
Other
Takara Shuzo
Takara Shuzo International Group
Takara Bio GroupFounding (began manufacturing and selling sake)
Began manufacturing shochu and mirin
Established Takara Shuzo Co., Ltd.
Listed stock on the exchange
1842
1864
1925
1949
Launched Takara Shochu Jun
Launched “restriction enzymes,” the first Japanese made reagents for genetic engineering research (began Biomedical Business)
Began local sake manufacturing in the United States
1977
1979
1982
Launched Takara Can Chu-Hi
Acquired the assets of The Tomatin Distillery Co., Ltd. (U.K.)
Acquired exclusive Japan marketing rights for PCR systems
Made Age International, Inc. (U.S.) into a consolidated subsidiary
1984
1986
1988
1992
Established Takara Biotechnology (Dalian) Co., Ltd.
Established Beijing Takara Foods Co., Ltd. (now Takara Shuzo Foods CO., Ltd.)
Commenced global sales of gene therapy research reagent RetroNectin®
1993
1995
1997
Launched Ikkomon, 100% sweet potato shochu
Restructured to a holding company structure
Takara Bio Inc. stock listed on The Tokyo Stock Exchange Mothers
Acquired management rights of Clontech Laboratories, Inc. (now Takara Bio USA, Inc.) (U.S.)
2001
2002
2004
2005
Acquired the shares of FOODEX S.A.S. (France) and entered the Japanese Food Wholesale Business in overseas markets
Started the long-term management vision “Takara Group Vision 2020”Launched Sho Chiku Bai Shirakabegura Mio Sparkling Sake
Acquired management rights of Tazaki Foods Ltd. (U.K.)
2010
2011
2013
Acquired management rights of Cominport Distribución S.L. (Spain)Completed Center for Gene and Cell Processing
Takara Bio Inc. changes to Tokyo Stock Exchange, First SectionMade Mutual Trading Co., Inc. (U.S.) into a consolidated subsidiary
Established Takara Shuzo International Co., Ltd.
2014
2016
2017
(CY)
¥290 ¥15.5 billion or above 33% or above
(Year ended March 31, 2017)
¥290Net sales
¥15.5Operating income
33%Overseas sales over total net sales
billion or above
billion or above
billion or above
Takara Holdings prepares Takara GroupMedium-Term Management Plan FY2020
Medium-Term Management Plan
Takara Group Vision 2020Management Goal
1st step
2nd step
¥209.5 billionNet sales
(Year ended March 31, 2014)
2011.4 – 2014.3
2014.4 – 2017.3
¥9.4 billionOperating income
13.0%
Takara Group Medium-TermManagement Plan FY2014
Takara Group Medium-TermManagement Plan FY2017
Basic Policy
Business Strategies
FinancialPolicy
Strengthening our Management BaseStrengthening management Strengthening business management with a view to expanding our business globallyStrengthening business management with a view to expanding our business globally
Tangible Goals Net sales Operating income Overseas sales over
total net sales
Year endingMarch 31, 2020Consolidated
By further increasing the overseas sales ratio together with having a full product line-up and many products with a competitive edge both in Japan and overseas, we are aiming to build up a great number of fields in which we can beat competitors and establish a balanced business foundation able to grow revenues significantly no matter what environmental changes occur.
Grow businesses in markets in Japan and overseas in which the Group can leverage its strengths, establish a balanced business structure that is readily adaptable to changing conditions
Expand sales in all categories, with sake as the core, improve the profit ratio and cement our position as a top manufacturer of traditional Japanese alcoholic beverages in the domestic alcoholic beverages and seasonings markets.
Maintain a strong balance sheet and make growth-oriented investments while also improving our ROE and achieving proper stock price levels by providing appropriate shareholder returns.
Japanese Food Wholesale Business in overseas markets
Bioindustry Business
Overseas Alcoholic Beverages Business
Dramatically expand our scope of business by enlarging our overseas Japanese food wholesaler network, together with developing our business foundation and strengthening our position with the goal of becoming a leading company in the global Japanese alcoholic beverages and foods market.
Strengthen our three business segments, namely, the Bioindustry, Gene Therapy, and AgriBio businesses, and the business base that supports these efforts, enhance our standing as a global enterprise and regenerative medical product company, and achieve prodigious growth.
• We will continue developing products differentiated through technology application while striving to expand a full product line-up in order to respond to increasingly diverse consumer needs in a speedy and timely manner.
• We will improve our profit ratio by selling a greater proportion of high added-value products.
• We will continue working to ensure the safety of our raw materials and strengthen our quality control system in order to provide safe and reliable products.
• The Group will maintain a 50% equity ratio and credit rating of A (single-A flat).• The Group will proactively invest in areas where profit growth is expected in each of the Domestic,
Overseas, and Bioindustry businesses. • The Group will review and implement a shareholder return policy aimed at dividends with a 30% deemed
dividend payout ratio* target and an ROE in the high six per cent range. • We will achieve business growth at group
companies by acquiring new customers in existing markets and by moving into peripheral business areas.
• We will select partner companies that can help to further expand our network as well as making efforts to create synergy between group companies.
We will remain number one in CDMO business involving regenerative medical products.
Gene Therapy Business
We will aim to acquire approval for the first gene therapy product in Japan.
AgriBio Business
We will achieve stable and ongoing profits as our number two profit-making business.
• We will expand our product lineups of high-quality sake at our overseas production bases as well as striving to strengthen export strategy, including the establishment of Mio Sparkling Sake as a global brand.
Takara Bio Group (Biomedical Business)
Takara Shuzo(Domestic Business)
¥160 billion or above
Net sales
¥6.2 billion or above
Operating income
Takara Shuzo International Group(Overseas Business)
¥75 billion or above
Net sales
¥4.3 billion or above
Operating income
¥38.5 billion or above
Net sales
¥4.0 billion or above
Operating income
Long-term management vision
Realization ofTakara Group Vision
2020
Long-termmanagement vision
Overseas sales over total net sales
¥234.1 billionNet sales
¥13.5 billionOperating income
22.2%Overseas sales over total net sales
(Tangible goals)
2017.4 – 2020.3
Takara Group Medium-TermManagement Plan FY2020
3rd step
or above
* Deemed dividend payout ratio = Total dividends / Consolidated operating income x (1 - Statutory effective tax rate)
Corporate culture and personnel Developing the people that support the Group and improving the Group's human capital strategy
Developing the people that support the Group and improving the Group's human capital strategy
CSR Developing systems consistent with the Corporate Governance Policy, conducting philanthropic and environmental activities, and releasing ESG-related information
Change to business segments
Previous segments
Takara Shuzo
Takara Shuzo International Group
Takara Bio Group
New segments (Starting fiscal 2018)
Domestic Alcoholic Beverages, Seasonings and Raw Alcohol Businesses
Overseas Alcoholic Beverages Business and Japanese Food Wholesale Business in overseas markets
Takara Shuzo Group(Alcoholic beverages and Seasonings Business)
Takara Bio Group (Biomedical Business)
Takara Healthcare (Health Foods Business)
TAKARA HOLDINGS INC. Annual Report 20175 TAKARA HOLDINGS INC. Annual Report 2017 6TAKARA HOLDINGS INC. Annual Report 2017
To Our Shareholders and Investors
In fiscal 2017, although the Japanese economy maintained a moderate recovery as the hiring and income environment improved, personal spending remained weak. Looking abroad, while the U.S. and European economies have continued to expand gradually, there was continued uncertainty for the future of the global economy owing to economic slowdowns in emerging countries, primarily China, the Brexit issue in the U.K., the impact of future policies in the U.S. and other issues.
Under these economic circumstances, moving into the final fiscal year of the Takara Group Medium-Term Management Plan FY2017, which is the second step of efforts toward achieving the Takara Group Vision 2020, our long-term vision, the Group continued to make efforts to improve domestic business profitability and to expand and grow our overseas business while working on steady business activities with aim of transforming into a well-balanced business structure that can hold up well to business environment changes by expanding and growing our overseas business and accelerating growth in our Biomedical Business.
As a result of these efforts, Takara Group’s consolidated net sales increased 3.9% year on year to ¥234,193 million, achieving a record high for the sixth year in a row. On the profit front, consolidated operating income increased ¥1,870 million, or 16.0% year on year, to ¥13,551 million, consolidated ordinary income grew 11.7% year on year to ¥14,344 million, setting a record high since the introduction of the consolidated accounting system. Net income attributable to owners of the parent also increased 20.2% year on year to ¥8,480 million, achieving double-digit growth.
In the business results for each group, both net sales and profit increased at the Takara Shuzo Group. Although sales of shochu declined, sales of light-alcohol refreshers increased.
Moreover, sales in the Japanese Food Wholesale Business in overseas markets rose significantly with Keta Foods, Lda of Portugal and Mutual Trading Co., Inc. of the U.S. joining the Group in addition to sales growth at each of the companies in Europe.
At the Takara Bio Group, although net sales declined by 1.2% year on year as a result of the appreciation in the exchange rate for the yen, operating income grew by 20.1% year on year, mainly due to a fall in the cost of sales ratio.
Business Results in Fiscal 2017
Analysis of Changes in Consolidated Financial Results for Fiscal 2017 Change in
net sales
+¥8,829million
Fiscal2016
Fiscal2017
TakaraShuzoGroup
TakaraBio
Group
Other
+9,146
-353 -99
+135
225,364
234,193
TakaraHealthcare
Fiscal2016
Fiscal2017
TakaraShuzoGroup
TakaraBio
Group
OtherTakaraHealthcare
(Millions of Yen) (Millions of Yen)
+1,345
+535 -51 +41
11,680
13,551
¥234,193million ¥13,551million
The Takara Group launched the Takara Group Medium-Term Management Plan FY2020, the new three-year plan aimed at achieving Takara Group Vision 2020.
The Takara Group set a record high for consolidated net sales for the sixth consecutive year.
In our long-term vision Takara Group Vision 2020, which we formulated in fiscal 2011, the Group set out “leverage its strengths, establish a balanced business structure that is readily adaptable to changing conditions” as its goal. The three years of the Takara Group Medium-Term Management Plan FY2017 (hereinafter, “the Plan”) was positioned as a vital period for achieving this vision.
We established consolidated net sales of at least ¥230.0 billion, operating income of at least ¥12.0 billion, and an overseas sales ratio of 16% or higher as the three tangible goals for the Plan, and promoted initiatives. In fiscal 2017, we achieved all of these tangible goals in addition to also obtaining certain qualitative results, focused on the four priority strategies listed in the Plan. At the Takara Shuzo Group, in addition to steadily promoting the development of Sho Chiku Bai Shirakabegura Mio Sparkling Sake, which is a strategic product, a new product development system that can accommodate changes in the market in a speedy and flexible manner has been established. Moreover, in the Japanese Food Wholesale Business in overseas markets, the Takara Shuzo Group has not only expanded the business in the European market, but has also successfully entered the U.S. and the Oceania region. At the Takara Bio Group,
Medium-Term Management Plan FY2017
The Takara Group achieved all of its tangible goals as well as gaining a substantial qualitative yield.
Consolidated Net Sales
Consolidated Operating Income
* Business segments stated as of fiscal year ended March 31, 2017
The Takara Group successfully achieved all of its tangible goals for consolidated net sales and consolidated operating income among others in fiscal 2017, the final fiscal year of the Takara Group Medium-Term Management Plan FY2017.Starting in fiscal 2018, we are launching the Takara Group Medium-Term Management Plan FY2020, our new three-year plan, and we will continue to promote even more proactive initiatives aimed at achieving Takara Group Vision 2020, our long-term vision.
Representative Director and PresidentTakara Holdings Inc.
Toshio Kakimoto
the CDMO (Contract Development and Manufacturing Organization) business has steadily expanded utilizing the Center for Gene and Cell Processing and the Biomedical Center established in Kusatsu City, Shiga Prefecture, Japan. In addition, there has also been significant progress in the Gene Therapy Business, including the conclusion of an exclusive licensing agreement with Otsuka Pharmaceutical Co., Ltd. on the development and sale in Japan of the oncolytic virus HF10. Putting these achievements together, we have rated the three years of the Medium-Term Plan FY2017 as a major step forward toward achieving our long-term vision.
On the other hand, we believe that raising profitability in the domestic business and further developing Sho Chiku Bai Shirakabegura Mio Sparkling Sake remain as challenges and that it is also necessary to increase the overseas sales ratio of total net sales even more in order to establish a business structure that can hold up well to business environment changes.
Change inoperating
income
+¥1,870million
7 TAKARA HOLDINGS INC. Annual Report 2017 8TAKARA HOLDINGS INC. Annual Report 2017
In fiscal 2018, while the trend of gradual economic recovery is expected to continue in Japan, Europe and the U.S, it is expected that the global economy overall will continue to be even more uncertain due to issues such as the direction of the policies taken by the new administration in the U.S., the trend of the Brexit issue in the U.K., and the impact of economic slowdowns in emerging countries, primarily China.
Under these economic circumstances, the Takara Group will promote its three-year Medium-Term Management Plan FY2020, (hereinafter, “the New Plan”) which runs from fiscal 2018 and ends in fiscal 2020 (the fiscal year ending March 31, 2020).
We have stated that “building up a great number of fields in which we can beat competitors and establish
Medium-Term Management Plan FY2020 and Business Results Forecasts for Fiscal 2018
We will promote our new Medium-Term Management Plan with the aim of further growth.
The Group’s policy on shareholder returns is to increase dividends in line with the level of consolidated operating income with a target deemed dividend payout ratio* signifying total dividends vs. operating income after taxes of 30%. The Group also has a policy of implementing share buybacks designed to contribute to capital efficiency enhancement in a flexible manner depending on conditions. As for our dividend for the year, we added a ¥1 increase over last year’s ¥12 dividend, which included a ¥1 commemorative dividend to celebrate our 90th anniversary, bringing this year’s dividend to ¥13. Next year, we plan to add a further ¥1, bringing the ordinary dividend to ¥14 per share.
On July 3, 2017, the Takara Group spun off the overseas business of Takara Shuzo Co., Ltd. and established the new Takara Shuzo International Co., Ltd. As a result of this business reorganization, the Takara Shuzo International Group, which includes overseas alcoholic beverage subsidiaries and overseas Japanese food wholesale subsidiaries will further accelerate the growth of our overseas business, implementing speedier and more appropriate decision making to match a business environment that differs from the domestic business environment in Japan and developing and strengthening its business foundations, including global bases, amid the rapid expansion in the market for Japanese food worldwide. Moreover, with the launch of the New Plan, we will revise our business segments into three, namely, Takara Shuzo (Domestic Business), Takara Shuzo International Group (Overseas Business), and Takara Bio Group (Biomedical Business) starting in fiscal 2018. As a result, the Takara Group’s business activities will be more visible both externally and internally, with the formation of a management system under which
To Our Shareholders
We will achieve the Takara Group Vision 2020 and leap forward to a new stage.
In our long-term vision Takara Group Vision 2020, which we formulated in fiscal 2011, the Group set out “leverage its strengths, establish a balanced business structure that is readily adaptable to changing conditions” as its goal. The three years of the Takara Group Medium-Term Management Plan FY2017 (hereinafter, “the Plan”) was positioned as a vital period for achieving this vision.
We established consolidated net sales of at least ¥230.0 billion, operating income of at least ¥12.0 billion, and an overseas sales ratio of 16% or higher as the three tangible goals for the Plan, and promoted initiatives. In fiscal 2017, we achieved all of these tangible goals in addition to also obtaining certain qualitative results, focused on the four priority strategies listed in the Plan. At the Takara Shuzo Group, in addition to steadily promoting the development of Sho Chiku Bai Shirakabegura Mio Sparkling Sake, which is a strategic product, a new product development system that can accommodate changes in the market in a speedy and flexible manner has been established. Moreover, in the Japanese Food Wholesale Business in overseas markets, the Takara Shuzo Group has not only expanded the business in the European market, but has also successfully entered the U.S. and the Oceania region. At the Takara Bio Group,
Business Results Forecasts for FY2018
Consolidated Net Sales
Consolidated Operating Income
2015 2016 2017 2018(Planned)
2020(Target)
(Millions of Yen)
10.012.0*
14.013.0
(Millions of Yen)
¥268,000million ¥14,000millionOverseas Sales over Total Net Sales
Deemed Dividend Payout Ratio30.5%
To Our Shareholders and Investors
Shareholder Returns
(%) (Yen)
Representative Director and PresidentTakara Holdings Inc.
(%)
* Includes a ¥1 commemorative dividend
%28.0 Divided per Share Yen13.0
28.028.022.222.2 28.328.3
17.817.8
20.520.5
30.530.5
33.033.0
219,490219,490225,364225,364
290,000290,000
30.930.9 29.229.2
268,000268,000
234,193234,193
11,09611,096
15,50015,500
14,00014,000
13,55113,551
11,68011,680
Divided per ShareDeemed Dividend Payout RatioPerformance and PlansMedium-Term Management Plan FY2020 Tangible Goals
Medium-Term Management Plan FY2020 Tangible Goals
Performance and PlansMedium-Term Management Plan FY2020 Tangible Goals
Performance and Plans
2015 2016 2017 2018(Planned)
2020(Target)
2015 2016 2017 2018(Planned)
2015 2016 2017 2018(Planned)
2020(Target)
(Years to March 31) (Years to March 31) (Years to March 31) (Years to March 31)
the CDMO (Contract Development and Manufacturing Organization) business has steadily expanded utilizing the Center for Gene and Cell Processing and the Biomedical Center established in Kusatsu City, Shiga Prefecture, Japan. In addition, there has also been significant progress in the Gene Therapy Business, including the conclusion of an exclusive licensing agreement with Otsuka Pharmaceutical Co., Ltd. on the development and sale in Japan of the oncolytic virus HF10. Putting these achievements together, we have rated the three years of the Medium-Term Plan FY2017 as a major step forward toward achieving our long-term vision.
On the other hand, we believe that raising profitability in the domestic business and further developing Sho Chiku Bai Shirakabegura Mio Sparkling Sake remain as challenges and that it is also necessary to increase the overseas sales ratio of total net sales even more in order to establish a business structure that can hold up well to business environment changes.
a balanced business foundation able to grow revenues significantly no matter what environmental changes occur by further increasing the overseas sales ratio together with having a full product line-up and many products with a competitive edge both in Japan and overseas” is the basic policy under our New Plan. We have established tangible goals of at least ¥290.0 billion in Takara Group consolidated net sales in the fiscal year ending March 31, 2020 as well as operating income of at least ¥15.5 billion, and an overseas sales ratio of at least 33%. We also aim to achieve consolidated operating income of ¥15.0 billion, which was the guideline in the Takara Group Vision 2020, one year early. (For details of the New Plan, see pages 5 and 6)
The Takara Shuzo will cement its position as a top manufacturer of traditional Japanese alcoholic beverages in the domestic alcoholic beverages and seasoning markets by expanding sales in all categories, with sake as the core, improving the profit ratio. Takara Shuzo International Group, which handles the Overseas Alcoholic Beverage Business and the Japanese Food Wholesale Business in overseas markets, will dramatically expand its scope of business by enlarging its overseas Japanese food wholesaler network, together with developing its business foundation and strengthening its position with the goal of becoming a leading company in the global Japanese alcoholic beverages and foods markets. The Takara Bio Group will continue working on strengthening its three business segments, namely, the Bioindustry, Gene Therapy, and AgriBio businesses, and the business base that supports these efforts, enhance its standing as a global enterprise and regenerative medical product company, and achieve prodigious growth.
As a result of these initiatives, the business results forecasts for fiscal 2018, the first fiscal year of the New Plan, are consolidated net sales of ¥268.0 billion, up 14.4% year on year, consolidated operating income of ¥14.0 billion, up 3.3% year on year, consolidated ordinary income of ¥14.4 billion, up 0.4% year on year, and net income attributable to owners of the parent of ¥8.5 billion, up 0.2% year on year.
each of the operating companies strives to promote the strategies in the New Plan with clearer responsibility. Under this new system, it has been decided that I, Toshio Kakimoto, will step down as President of Takara Shuzo Co., Ltd., the position in which I have served for five years since fiscal 2013, and will concentrate exclusively on coordinating and overseeing the Group’s overall management as President of Takara Holdings Inc.
The Takara Group will continue to steadily promote growth strategies in each business segment for the next three years in order to achieve the Takara Group Vision 2020 and leap forward again to the new stage ahead. I beseech all of our valued shareholders and investors for their continued support.
August 2017
* Deemed Dividend Payout Ratio = Total dividends / Consolidated operating income × (1 - statutory effective tax rate)
Tangible goalin Medium-Term
ManagementPlan FY2020
At least
¥290,000million
Tangible goalin Medium-Term
ManagementPlan FY2020
At least
¥15,500million
Tangible goalin Medium-Term
ManagementPlan FY2020
At least
33.0%
9 TAKARA HOLDINGS INC. Annual Report 2017 10TAKARA HOLDINGS INC. Annual Report 2017
Expand shareof soft-pack
marketsegment
Consolidateposition as
number onein sake forrestaurant
and barmarket
Developnew markets
and users
Develop andfoster productsin expanding
small-and-mediumvolume
(specially designated sakes)
marketSho Chiku Bai Ten
Sho Chiku Bai Gokai
New!
Sho Chiku Bai TenKarakuchi Junmai
(Launched September 2016)
Sho Chiku Bai GokaiJunmai Karakuchi
(Launched August 2016)
Tokusen Sho Chiku BaiJunmai Daiginjo
(Launched September 2016)
Sho Chiku Baispecially designated sake series
Sho Chiku Bai :The sake for celebrations
Sho Chiku Bai ShirakabeguraMio GOLD Sparkling Sake
(Launched December 2016)as limited-run product
01Aiming to cement our position as the top manufacturer of traditional Japanese alcoholic beverages
Strategy 1 Takara Shuzo
New product development system to accommodate market changes in a speedy fashion
Focus on expanding product line-up in sake category
Sake Product Strategy Centered on Sho Chiku Bai
Beginning in fiscal 2017, we have been promoting a new product development strategy in the Alcoholic Beverages and Seasonings Business that Takara Shuzo operates in Japan. While continuing to develop differentiated products by using technologies, which has long been our basic business policy, we have strengthened our development system for new products in order to accommodate market changes in a speedy and timely fashion. We are conducting product development in each category that is based on ultra-fresh data from the sales frontline, including market needs and sales trends, through close collaboration between business units and technology units. By doing this, we increased the number of new product launches in fiscal 2017 significantly to 31 brands from 18 brands in fiscal 2016, as the results take shape and start to steadily appear.
We will further strengthen this strategy under the Takara Group Medium-Term Management Plan FY2020, our new three-year plan commencing in fiscal 2018. In addition to focusing on our existing core products and strategic products, we will expand our product line-up with the development and launch of new products to supplement them and increase our competitive edge across every category of alcoholic beverage and seasoning by fielding a product mix with a full product line-up.
Within the Alcoholic Beverages and Seasonings Business, we are focusing on the sake category in particular. In order to further enhance the value of Takara Shuzo’s Sho Chiku Bai sake brand, we are now promoting four broad strategies as we actively strive to launch and foster new products.
First, with regards to Mio, which is a strategic product, we launched the limited-run Sho Chiku Bai Shirakabegura Mio GOLD Sparkling Sake in December 2016. Going forward,
we will continue to focus on fostering the brand with the aim of developing new markets and users and stimulating the sake market as a whole. Furthermore, with the aim of expanding market share in the soft-pack market, which is a volume sales segment, primarily around Sho Chiku Bai Ten, we launched Sho Chiku Bai Ten Karakuchi Junmai as part of the line-up, which gained popularity. In the restaurant and bar market, we launched specially designated sakes such as a Junmai sake for the exclusively restaurant and bar market brand Gokai, with a focus on consolidating our position as number one in sake for that market. We also strengthened our product line-up for the small-and-medium volume (specially designated sakes) market, which has been expanding over the past few years, by launching products such as Tokusen Sho Chiku Bai Junmai Daiginjo. In fiscal 2017, Takara Shuzo was able to expand its sales volume amid a contracting market for sake overall in Japan partly due to promoting this product strategy and the contribution of new products to sales.
Going forward, we will continue to expand net sales in
Sho Chiku Bai Shirakabegura Mio
Sparkling Sake
each category of alcoholic beverages and seasonings, and sake in particular. As we do this, we will cement our position as the top manufacturer of traditional Japanese alcoholic beverages
in Japan’s alcoholic beverage and seasonings market by enhancing our sales mix of high value added products and improving profitability.
11 TAKARA HOLDINGS INC. Annual Report 2017 12TAKARA HOLDINGS INC. Annual Report 2017
14,13116,202 16,314
19,73718,180
02Trend of Net Sales in the Japanese Food Wholesale Business in Overseas Markets
2016201520142013 2017 2018 2020
(Years to March 31)(Target)(Planned)
Europe U.S. Australia
700
600
500
400
300
200
100
020122011
(Hundred Millions of Yen)
Keta Foods, Lda,Mutual Trading
Co., Inc., andNippon Food
Supplies Pty Ltd.join the Group
Bases for Japanese Food Wholesale Business in overseas markets
Bases for Overseas Alcoholic Beverages Business
Overseas Business Network ofTakara Shuzo International Group
Trends in the Volumeof Sake Exports
2016201520142013
Source: Trade Statistics, Ministry of Finance
20,000
15,000
10,000
5,000
02012
(kl)
Takara ShuzoFoods Co., Ltd.
The Tomatin Distillery Co. Ltd.
U.K. Representative Office
Tazaki Foods Ltd.
Paris Representative Office
Shanghai Takara ShuzoInternational Trading Co., Ltd.
Takara ShuzoAsia Pacific Pte. Ltd.
Takara Sake USA Inc.Age International, Inc.
(made into consolidated subsidiaries since November 2016)
(July 2017 –)
(January 2017 –)
Mutual Trading Co., Inc.
Nippon Food Supplies Company Ltd.
Takara Shuzo International CO., Ltd.FOODEX Group
Japanese Food Wholesale Business in overseas markets
FOODEX S.A.S.
Cominport Distribución S.L.
(July 2016 –)
Keta Foods, Lda
Tazaki Foods’ Yutaka Brand
Examples of products handledin the Japanese Food Wholesale
Business in overseas marketsStrategy 2 Takara Shuzo International Group
Accelerating speed of growth through company split
Overseas business of Takara Shuzo spun off as Takara Shuzo International
In July 2017, the Takara Group spun off the overseas business of Takara Shuzo as Takara Shuzo International.
Takara Shuzo’s overseas business has a long history, having first exported Sho Chiku Bai sake to the U.S. in 1951. In 1982, Takara Shuzo commenced local production of sake in the U.S., and its Overseas Alcoholic Beverages Business has subsequently expanded steadily.
The acquisition of the shares of French Japanese food wholesaler FOODEX S.A.S. in April 2010 was a major turning point marking Takara Shuzo’s entry into the Japanese Food Wholesale Business in overseas markets. Subsequently, the business expanded rapidly as Tazaki Foods Ltd. of the U.K. and Cominport Distribución S.L. of Spain were welcomed into the Takara Group one after the other. In fiscal 2017, Keta Foods, Lda of Portugal, Mutual Trading Co., Inc. of the U.S., which had long been in a partner relationship with us, and Nippon Food Supplies Pty Ltd. of Australia were also welcomed into the Group in July 2016, November 2016, and January 2017 respectively, expanding the global Japanese food wholesale network in Europe, the U.S., and Australia.
The major goal for the establishment of Takara Shuzo International is to further accelerate the growth of this overseas business. We will aim for prompter and more precise decision-making tailored to the business environment in each country and region and the development and strengthening of the business foundation, including overseas bases.
Further expand the network and generate synergies
Amid the increasing expansion seen in the market for Japanese food around the world, the Takara Shuzo International Group will leverage the powerful network that it has already built in the Japanese Food Wholesale Business in overseas markets as it seeks to grow the business of each Group company by expanding sales in existing markets and developing nearby areas in addition to selecting new partners with the aim of further expansion.
Meanwhile, the Takara Shuzo International Group will also work to generate synergies between Group companies. We will take advantage of our business scale, which has more than doubled with the entry of Mutual Trading Co., Inc. into the Group, and plan to promote reduction of procurement costs and distribution of strategic products to each area
through joint purchasing and the common use of business processes and systems in the future.
Priority Strategy 1
Overseas Alcoholic Beverages Business
Consolidate position as leading manufacturer of Japanese alcoholic beverages overseas
In view of the rising demand for sake overseas, the Overseas Alcoholic Beverages Business will focus on developing premium sake exclusively for the overseas market and expanding the lineup of specially designated sakes. In addition to strengthening the strategy for exports from Japan, we will reinforce the range of both locally produced and Japanese produced products at Takara Sake USA in the U.S. and Takara Shuzo Foods in China.
We will also promote efforts aimed at turning Mio Sparkling Sake into a global brand to further increase our competitiveness in the overseas Japanese alcoholic beverages market.
Strengthening the business foundation in anticipation of medium- to long-term business growth
While aiming for further business expansion overseas, we will also work to reduce global-scale business risks. Working with a specialist team at Takara Holdings, we will strengthen initiatives aimed at establishing a business foundation, including internal control, accounting, and quality assurance, at companies that are newly welcomed into the Group.
At the same time, we will also strengthen control systems for management overall, which includes thorough compliance and promotion of risk management, not only in relation to the earnings performance of each company as we continue making progress toward being the leading company in the global Japanese alcoholic beverages and foods market.
Priority Strategy 2
13 TAKARA HOLDINGS INC. Annual Report 2017 14TAKARA HOLDINGS INC. Annual Report 2017
3,2513,749
4,500
03Fully Equipped Environment for Societal Implementation of Gene and Cell Therapies Ultra-low Input Nucleic Acid Analysis Scheme
Achieve prodigious growth by strengthening domestic business and accelerating overseas expansion
As a growth segment, the Takara Bio Group is now focusing its efforts particularly on the CDMO business, which, as a research and development partner, provides a broad array of Contract Development and Manufacturing services, including regenerative medical products. The Center for Gene and Cell Processing, which is the core facility, provides extensive support services for the development of regenerative medical products, including the manufacture of regenerative medical products and cell processing. The Biomedical Center provides genetic testing support services such as genetic analysis using a next-generation sequencer. The
Net Salesin CDMO Business
202020182017
(Years to March 31)
(Planned)(Actual) (Target)
Life Innovation Center (Kawasaki, Kanagawa, Japan)
5,000
4,000
3,000
2,000
1,000
0
(Millions of Yen)
Cell Processing FacilityLIC Annex of the Center
for Gene and Cell Processing opens
Providing a seamless packageof support for the development
of regenerative medical products
In addition to providing contracted cell processing services for stem cells, gene-modified cells, and other cells used in clinical testing, the facility will serve as a cell processing center that provides investigational drugs for gene therapy projects conducted by Takara Bio to clinical testing facilities in the greater Tokyo region.
Hospitals Clinics
Gene-modified
cells
Gene-modifiedcells
Bloodcollection
Bloodcollection
Gene-modifiedcells
Bloodcollection
WaferGenHigh-throughput
quantitative PCR systems
Clontech brandUltra-low input RNAanalysis technologies
WaferGenSingle cell analysis
systems
Takara BioContract gene
analysis services
Takara BioContract gene
analysis services
High-throughputquantitative PCR
analysis
Next-generationsequencing
Single cell
RNA analysis DNA analysis
Next-generation sequencing libraries
WaferGenAutomated library
preparation systems
RubiconUltra-low input DNAanalysis technologies
BloodCellsOrgans
WaferGenAutomated library
preparation systems
Biomedical Center
Genetic testing Regenerative medical products
The Center for Geneand Cell Processing
• Genetic testing for regenerative medical products
• Whole human genome sequence analysis• Comprehensive cancer gene analysis• Gene expression analysis
• Cell processing• iPS cell production• Vector production• Cell bank production and storage
• Production and analysis of genes, antibodies, proteins, etc.
• Next-generation sequencer and array analysis• Single cell analysis and genome editing
Advanced research support
Basic research support for geneticengineering and cell engineering
Contracted Services Related to Regenerative Medical ProductsContracted Gene Research and Testing
Hospitals Clinics
Gene-modified
cells
Bloodcollection
Biomedical Center Center for Geneand Cell Processing
Strategy 3 Takara Bio Group
Sustainable growth centered on CDMO business
Strengthening Domestic Business
The Takara Bio Group is also actively striving to expand its business overseas. The Takara Bio Group has acquired two
Maximizing synergies through acquisition of Rubicon Genomics and WaferGen Bio-systems
Accelerating Overseas Expansion
CDMO business has grown steadily by leveraging its ability to provide a seamless contract service with high value added based on collaboration between these two facilities.
In April 2017, the Takara Bio Group commenced operations at the LIC Annex of the Center for Gene and Cell Processing, a new cell processing facility established inside the Life Innovation Center, a center for the commercialization and industrialization of regenerative and cell therapies operated by Kanagawa Prefecture, Japan. This has meant an approximate 1.5-fold expansion in the production capacity of the business overall.
U.S.-based companies through all-stock acquisitions. Rubicon Genomics, Inc., acquired in January 2017, performs ultra-low input DNA analysis while WaferGen Bio-systems, Inc., acquired in February 2017, possesses its own single cell analysis systems. By welcoming Rubicon into the Group, Rubicon’s sample preparation technologies for ultra-low input DNA sequencing complement our sample preparation technologies for ultra-low input RNA sequencing analysis, allowing the Group to provide a broader range of research products and services in the area of ultra-low input nucleic acid analysis. Furthermore, with the addition of preparation systems (instruments) for WaferGen’s next-generation sequencing analysis, the Group is now able to provide a full range of products and services spanning basic research to industrial applications.
By combining the strengthening of the domestic business with the acceleration of business expansion overseas, we are aiming for prodigious growth across the entire Takara Bio Group.
Cell-free nucleic acidCirculating tumor cells
15 TAKARA HOLDINGS INC. Annual Report 2017 16TAKARA HOLDINGS INC. Annual Report 2017
Fiscal2016
Light-alcohol
refreshers
SakeShochu Seasonings JapaneseFood
WholesaleBusiness
in overseasmarkets
Fiscal2017
Other
192,025
201,171
+85
+2,981
-1,374
+321
+8,265
-1,134
¥9,755(Millions of Yen)
million
(Millions of Yen)
Takara Shuzo’s Share of Japan’s Alcohol Market
201620152013 2014(Years ended March 31)
¥201,171
2017
(Millions of Yen)
million
192,025190,089
182,306176,946
201,171
201620152013 2014(Years ended March 31)
2017
8,4107,840
6,3296,387
9,755
Shochu marketShare in 2015
Sake marketShare in 2016
Light-alcoholrefreshermarket
Share in 2016
marketShare in 2016
Hon Mirin
Takara Shochu NIPPON was launched in light of the recent popularity of ko-type products with a distinctive fragrance and flavor and increasing demand from in-bound visitors to Japan. It uses 3% cherry barrel aged shochu and domestic Japanese cherry leaves as part of its raw materials, which is unique for shochu, to achieve a distinctive fragrance reminiscent of sakuramochi (rice cakes filled with red bean paste and wrapped in a cherry leaf). The Takara Shuzo aims to stimulate the entire ko-type shochu market by proposing hitherto unseen new value in addition to awakening demand not only among existing consumers but also among a wide range of new consumers, including young people, with the product, which it has named NIPPON in order to nurture the next-generation of Japan’s iconic ko-type shochu.
Takara Can Chu-Hi was Japan’s first canned chu-hi product launched in 1984, and its dry, luxurious flavor has been popular for over thirty years.
Takara Ryori-no-Tame-no Seishu Zero Carbs is a cooking sake made from 100% Japanese-grown rice with zero carbs thanks to the work of Takara Shuzo’s unique yeast while also containing zero salt and approximately 20%* increase in umami components.
Health consciousness in recent years lies behind an increase in demand for seasonings that are best for sugar-restricted, reduced-salt recipes. With the launch of this product, Takara Shuzo is supporting a healthy diet as well as working to further develop the Takara Ryori-no-Tame-no Seishu brand.
Adding Zero Carbs variety to Takara Ryori-no-Tame-no Seishu series
In the Simplified Container and Packaging Grand Prize 2017 organized by the Hokkaido Council to Promote Simplified Containers and Packaging,* the 900ml Sho Chiku Bai Ten eco-pouch won a Special Award. This is a commendation for products that realize simplified containers and packaging that lead to reductions in garbage, conservation of resources, and reductions in energy consumption, and this product was highly evaluated for eliminating the need for sorting of materials as the pouch and the cap are both plastic as well as for the fact that it can be rolled up for collection.
Sho Chiku Bai Ten eco-pouch wins Simplified Container and Packaging Grand Prize Special Award
TOPICS Takara Shuzo Group
Takara Can Chu-Hi Dry, the latest launch, is characterized by the punch of 9% alcohol content and a dry flavor with zero carbs and zero purines. It will further raise Takara Shuzo’s presence in the dry chu-hi market segment, which has been increasing in popularity over the past few years.
Takara Shuzo launched sales of limited edition Sho Chiku Bai Shirakabegura Mio GOLD Sparkling Sake containing gold leaf for the Christmas and end of year party season. A special carton was used for this gorgeous luxury product, in which glittering gold leaf dances, so that it could also be used as a nice gift. This will lead to wider recognition of the Mio brand and acquisition of new fans.
Launching limited edition Mio GOLD, sparkling sake with gorgeous gold leaf
* Business segments stated as of fiscal year ended March 31, 2017
Launching new ko-type shochu with sweet fragrance reminiscent of sakuramochi
Net Sales Operating Income Analysis of Changes in Net Sales for Fiscal 2017
Net sales of shochu declined affected by the shrinking market despite efforts to develop new demand, including the launch of Takara Shochu NIPPON. Net sales of sake were practically flat year on year, due in part to the decline in net sales outside Japan impacted by the appreciation in the value of the yen, although the Takara Shuzo Group worked on expanding sales through the launch of new products, including Sho Chiku Bai Shirakabegura Mio GOLD Sparkling Sake. Net sales of light-alcohol refreshers increased with the contribution from the newly released Takara Can Chu-Hi Dry and other products in addition to continued expansion in
sales of Takara Shochu High Ball. Net sales of seasonings rose despite the decline in sales of Hon Mirin as other seasonings, mainly cooking sake, continued to fare well. Net sales in the Japanese Food Wholesale Business in overseas markets increased significantly due to the consolidation of Keta Foods, Lda of Portugal and Mutual Trading Co., Inc. of the U.S. in addition to the steady expansion in net sales at existing wholesalers.
As a result, the Takara Shuzo Group’s overall net sales increased 4.8% year on year to ¥201,171 million. Operating income increased 16.0% to ¥9,755 million.
Growth in sales and profit driven by light-alcohol refreshers and Japanese Food Wholesale Business in overseas markets
Takara Shuzo Group(Alcoholic Beverages and Seasonings Business)
ShochuSakeLight-alcohol refreshersSeasoningsJapanese Food Wholesale Business in overseas marketsOther
..................................................................
...........................
...........................................
28.8 %12.3 %15.3 %12.3 %
14.4 %16.8 %
Takara Shuzo
9.3%
Takara Shuzo
10.7%
Data source: Estimated by Takara Shuzo based on figures published by Nikkan Keizai Tsushin Co., Ltd.
Data source: Nikkan Keizai Tsushin Co., Ltd. Data source: Jouzou Sangyo Newspaper Data source: Takara Shuzo estimates
Takara Shochu NIPPON
Sho Chiku Bai Shirakabegura Mio GOLD Sparkling Sake Takara Can Chu-Hi Dry
Takara Ryori-no-Tame-no Seishu Zero Carbs
* Compared with Takara Shuzo’s sake products
* A group composed of relevant government ministries and offices and local governments, distribution companies, and consumer groups, etc. that aims to achieve a recycling-oriented society and conserve the local environment through the simplification of containers and packaging.
Sales byProduct
Category
Business Overview(Fiscal 2017, ended March 31, 2017)
Takara Shuzo
12.4%
Takara Shuzo
55.4%
Launching new flavor with 9% alcohol from the original Takara Can Chu-Hi brand
17 TAKARA HOLDINGS INC. Annual Report 2017 18TAKARA HOLDINGS INC. Annual Report 2017
Business Overview(Fiscal 2017, ended March 31, 2017)
29,72929,375(Millions of Yen)
million
(Millions of Yen)
201620152013 2014(Years ended March 31)
2017
(Millions of Yen)
million
201620152013 2014(Years ended March 31)
2017
Three projects in Gene Therapy Business commence clinical trials in Japan
Oncolytic Virus HF10Conclusion of exclusive license agreement with Otsuka Pharmaceutical Co., Ltd. and commencement of phase II clinical trials in Japan for malignant melanomaTakara Bio concluded an exclusive license agreement with Otsuka Pharmaceutical Co., Ltd. (hereinafter, “Otsuka”) for the development and commercialization of oncolytic virus HF10 in Japan in December 2016. Takara Bio and Otsuka will promote clinical development in Japan with the aim of launching products to include HF10 as regenerative medical products for tumors, including pancreatic cancer. Otsuka will exclusively commercialize the products developed in Japan, while Takara Bio will manufacture formulations for clinical testing and post-approval marketing and supply them to Otsuka for a fee.
Meanwhile, the clinical trials of HF10 for malignant melanoma that Takara Bio has been conducted will continue with the implementation of a Phase II clinical trial in Japan.
A Phase I / II clinical trial of NY-ESO-1 siTCR gene therapy for synovial sarcoma commenced in Japan.
In the clinical trial, TCR which recognizes NY-ESO-1, a tumor antigen, is transferred ex vivo to the lymphocytes of patients, and the gene transduction lymphocytes are infused back to the patients. The patients will be monitored for safety and efficacy. Takara Bio has already commenced a Phase Ib clinical trial of NY-ESO-1 siTCR gene therapy targeting solid tumor in Canada. With the safety and efficacy data obtained from the clinical trials in Japan and Canada, Takara Bio is attempting to achieve early approval with the aim of achieving approval in Japan in fiscal 2021.
CD19-CAR Project Commencement of Phase I / II Clinical Trial in JapanTakara Bio commenced a Phase I / II clinical trial for gene therapy using Chimeric Antigen Receptor (CAR) targeting acute lymphoblastic leukemia (ALL) in Japan.
In the clinical trial, CAR developed to recognize CD19 (CD19-CAR), a protein expressing on the surface of malignant lymphocytes, is transferred ex vivo to the lymphocytes of patients with adult ALL, and the gene modified lymphocytes are infused back to the patients, The patients will be monitored for safety and efficacy. Takara Bio is promoting the CD19-CAR project for early approval and aims to obtain approval in Japan in fiscal 2021.
NY-ESO-1 siTCR ProjectCommencement of Phase I / II Clinical Trial in Japan
TOPICS Takara Bio Group
* Business segments stated as of fiscal year ended March 31, 2017
In the Bioindustry Business, although sales of mainstay research reagents and scientific instruments overseas increased on a local currency basis, net sales declined due to the appreciation in the value of the yen. Sales of contract research services increased. In the Gene Therapy Business, ¥500 million in revenue relating to the oncolytic virus HF10 was generated. In the AgriBio Business, net sales for Health Foods Businesses and mushroom related products declined.
As a result, the Takara Bio Group’s overall net sales decreased 1.2% year on year to ¥29,375 million.
On the earnings front, operating income increased 20.1% year on year to ¥3,202 million due to a decline in the cost ratio, primarily resulting from changes in the composition of sales by product, although expenses were incurred in relation to share acquisitions in the U.S. in SG&A expenses.
Net Sales Operating Income
1,6911,954
2,3022,667
29,72925,96923,905
20,564
3,20229,375
Analysis of Changes in Net Sales for Fiscal 2017
Profit growth because of reduction in cost ratio despite decline in sales due to impact of yen appreciation
Takara Healthcare(Health Foods Business)
At Takara Healthcare, sales of the herb (Peucedanum japonicum) Isosamidin series, which is being promoted, increased, but those of the mainstay Gagome kombu (kelp) Fucoidan series remained flat from the previous year, and OEM cosmetics declined.
As a result, net sales at Takara Healthcare declined 5.3% year on year to ¥1,766 million, and operating income fell 80.3% year on year to ¥12 million due to an increase in sales promotion and administrative expenses.
Sales and profit down, mainly due to decline in sales of OEM cosmetics
*1 Independent development projects: Projects for which Takara Bio is conducting development through to approval application independently*2 Joint projects: Projects for which Takara Bio is conducting co-development with another company*3 ALL: Acute lymphoblastic leukemia
(Millions of Yen)
million
201620152013 2014(Years ended March 31)
2017
(Millions of Yen)
million
201620152013 2014(Years ended March 31)
2017
Net Sales
<Main products>• Gagome kombu (kelp) Fucoidan• Herb (Peucedanum japonicum) Isosamidin
Operating Income
¥3,202¥29,375
¥12¥1,766
-22
2138
641,865
1,6521,424
2,008
12
1,766
+480
+500
-1,051-176
-106
Bioindustry-747
Takara Bio Group(Biomedical Business)
Independent Development Projects Plan*1
Independent development projects Target disease Present state Launch target
HF10
siTCR
CAR
NY-ESO-1
CD19 · CAR
Japan
Japan
Japan
Malignant melanoma
Synovial sarcoma
Adult ALL*3
Phase II clinical trials: In progress
Phase I / II clinical trials: Applications submitted
Phase I / II clinical trials: In progress
FY2019
FY2021
FY2021
Joint Projects Plan*2
Joint projects
HF10
siTCR
CAR
NY-ESO-1
MAGE-A4
CD19 · CAR
Japan
United States
Japan
Japan
Japan
Pancreatic cancer
Malignant melanoma
Esophageal cancer, etc.
Esophageal cancer, etc.
Child ALL*3
Phase I clinical trials: Preparations underway
Phase II clinical trials: Completed, Phase III clinical trials: In planning
Phase I clinical trials: In progress
Phase I clinical trials: In progress
In planning
Target disease Present state
BioindustryGene TherapyAgriBio
............................................
..............................
90.5 %1.7 %7.8 %
Sales byBusinessCategory
Fiscal2016
Contractresearchservice
and other
GeneTherapy
Scientificinstruments
Researchregents
Fiscal2017
AgriBio
19 TAKARA HOLDINGS INC. Annual Report 2017 20TAKARA HOLDINGS INC. Annual Report 2017
Corporate Governance
Corporate Governance Initiatives
Basic Policy on Corporate Governance
Based on our corporate philosophy, which is “Contributing to the creation of a vital society and a healthy lifestyle through our fermentation technology and biotechnology in a way that achieves harmony with nature,” the Takara Group benefits society by unlocking new potential in the culinary, lifestyle, and life science fields through our fermentation technologies for traditional Japanese sake and our cutting-edge innovation in biotechnologies and by continuing to create new value.
Under the ten-year long-term management vision Takara Group Vision 2020 announced in April 2011, we aim to expand not only the domestic business but also our overseas business based on our uniquely robust business portfolio that consists of the promising growth areas of Biomedical and Health Foods Businesses in addition to the foundation businesses of Alcoholic Beverages and Seasonings while at the same time building a well-balanced business structure that can hold up well to business environment changes. Under the three-year Takara Group Medium-Term Management Plan FY2020, the concrete action plan for our long-term vision, we have set a basic policy of further increasing overseas sales ratio together with having a full product line-up and many products with a competitive edge
Corporate Governance Structure
The Company has adopted the Audit & Supervisory Board system of corporate governance from the perspective of strengthening supervisory functions. Under this structure, directors with a high level of expert knowledge and extensive experience in each business carry out management decision-making and oversee operations in order to perform auditing and supervision of business execution at each operating subsidiary through the formulation and implementation of management strategy while highly independent external directors and external Audit & Supervisory Board members with broad knowledge based on the perspective of all stakeholders, including shareholders, are involved in the audit and supervision of business execution, thereby carrying out highly effective supervision of directors.
In addition, Takara Holdings has formulated the “Rules and Regulations for Overseeing Group Companies,” and, as the holding company, while maintaining independence and autonomy among Group companies, requires each company to deliberate and consult in advance on important management matters through a management committee system which includes the Group Strategy Committee, adopting a structure that provides supervision of business execution while supporting appropriate risk taking.
Directors and Board of Directors
The Company’s Board of Directors is composed of nine directors, including two external directors. Based on the resolution of the 105th General Shareholders’ Meeting held on June, 2016, the Company adopted a system of electing a number of external directors for the purpose of sustained growth and improving corporate value over the medium- to long-term.
Moreover, the term of office for directors is one year in order to respond promptly to the management environment
Audit & Supervisory Board Members and Audit & Supervisory Board
The Company’s Audit & Supervisory Board is composed of five Audit & Supervisory Board members, including three external Audit & Supervisory Board members. The Company’s Audit & Supervisory Board members and Audit & Supervisory Board make appropriate decisions from an independent and objective standpoint with regard to the performance of their roles and responsibilities.
Furthermore, the Audit & Supervisory Board members do not only appropriately implement accounting and operational auditing through participation at the Board of Directors’ meetings and various important management committees and forums for the exchange of views with the management team and internal auditing departments, but also make a variety of recommendations to the management team when they deem it necessary.
Election of Independent Officers
The Company has determined that three of the five external officers, external directors Yukiko Yabu and Toshihiko Yoshida and external Audit & Supervisory Board member Kumiko Kitai, are independent with no risk of conflict of interest with general shareholders based on the “Independence Standards for Outside Officers*” stipulated by the Company, and so has designated them as independent officers.
both in Japan and overseas with the aim of building up a great number of fields in which we can beat competitors and establish a balanced business foundation able to grow revenues significantly no matter what environmental changes occur. Based on this policy, we are announcing a policy of aiming to improve ROE through performance targets such as net sales, operating income, and overseas sales ratio, as well as through investment in growth and appropriate shareholder returns. Specifically, we will pay dividends based on operating income with a target of 30% for the deemed dividend payout ratio*1 together with implementing acquisitions of treasury stock and sales of cross shareholdings in a flexible manner as circumstances permit.
The steady implementation of the long-term vision and the Medium-Term Management Plan and the achievement of continuous growth and an increase in corporate value over the medium- to long-term requires a corporate governance structure that provides transparent, fair, timely, and resolute decision making based on the perspective of stakeholders, including shareholders, customers, employees, creditors, and local communities, and the Group is making efforts in accordance with the specific policies set forth in the Takara Holdings Corporate Governance Policy*2.
ReportDirection
General Shareholders’ Meeting
Executive Divisions and Group Companies
Audit & Supervisory Board(5 members)
(3 external auditors)
Representative Directors(3 members)
Audit Division
Compliance Committee andInternal Control Committee
General AffairsDepartment
(Executive Officeof Compliance
Committee)
Group Strategy Committee
Main Management Committee System(Consultation on important matters)
Takara ShuzoStrategy Committee
Takara ShuzoInternational Strategy
Committee
Audit Division(Executive Office
of InternalControl
Committee)
Election and dismissal
Selection andoversight
Convocation
AuditAuditAudit
Election and dismissal
Coordination
Report
Coordination
Accountingaudit
Coordination
Report
ReportDirection
ReportDirection ReportDirection
ReportDirection
Internal audit
Audit
Report
Direction
Report
Election
Election and dismissal
Acco
un
ting
Au
dito
rs
Corporate Governance System (As of July 3, 2017)
DirectionReport
Reasons for Election as Independent Officer and Attendance at Board of Directors’ Meeting and Audit & Supervisory Board Meetings (Fiscal year ended March 31, 2017)
Name Reasons for ElectionAttendance at
Board ofDirectors’ Meetings
Attendance atAudit & Supervisory
Board Meetings
Yukiko Yabu(External Director)
Yukiko Yabu served in a series of key positions at Panasonic Corporation, and the Company has determined that her broad knowledge and extensive experience and track record in such areas as the planning and development of general consumer products, market research and analysis, and marketing will be useful in the further enhancement of its management structure.
12 out of12 meetings
—
Toshihiko Yoshida served in key positions, including at the National Tax Agency JAPAN, and the Company has determined that his broad knowledge and extensive experience and track record concerning tax affairs will be useful in the further enhancement of its management structure.
Toshihiko Yoshida(External Director)
7 out of7 meetings
—
After joining the Ministry of Labour, Kumiko Kitai served as Vice-Governor of Shizuoka Prefecture followed by a series of key positions in the Ministry of Health, Labour and Welfare, and the Company has determined that her broad knowledge and her experience and track record due to her extensive career to date will be useful in the further enhancement of its audit structure.
Kumiko Kitai(External Audit &
SupervisoryBoard Member)
11 out of12 meetings
14 out of14 meetings
* See Corporate Governance on the Takara Holdings website.http://ir.takara.co.jp/en/Management_index/CorporateGovernance.html
* Set out in Takara Holdings Corporate Governance Policy.
* The role of the Takara Bio Coordination Committee is to report on the business activities of Takara Bio Inc. The committee does not inhibit Takara Bio’s autonomy, and its prior approval is not required for the decisions of Takara Bio’s Board of Directors.
Takara BioCoordinationCommittee*
Board of Directors(9 members)
(2 external director)
and to clarify the management responsibility of the directors.The effectiveness of the Board of Directors of the Company
has been evaluated with a focus on its administrative aspects. An outline is available via the Company website*, among other means.
Supervision, and determination ofthe bills regarding the dismissal,
refusal of reappointment, and election
*1 Deemed dividend payout ratio:Total dividends/Consolidated operating income x (1- statutory effective tax rate)
*2 See Corporate Governance on the Takara Holdings website.http://ir.takara.co.jp/en/Management_index/CorporateGovernance.html
21 TAKARA HOLDINGS INC. Annual Report 2017 22TAKARA HOLDINGS INC. Annual Report 2017
Corporate Governance
Messages from External Directors
Governance has been visibly strengthened, including the evaluation of the effectiveness of the Board of Directors.Starting in fiscal 2017, there are two external directors, and we have both spoken freely at each committee, particularly the Board of Directors from our respective expert and diverse external perspectives. Serious deliberations have been held at the meetings, and there have been no proposals or decisions to date that deviate from the corporate philosophy or the Medium-Term Management Plan. Moreover, governance has been visibly strengthened, including the evaluation of the Board of Directors and enhanced compliance through thorough implementation of workstyle reforms in the workplace in collaboration with the Audit & Supervisory Board as initiatives for effective corporate governance.
In fiscal 2018, while the clarification of overseas business strategy and market growth is expected with the establishment of Takara Shuzo International Co., Ltd. in July, the number of overseas subsidiaries will increase and the thorough reinforcement of governance from a global perspective will be a challenge. The Company’s strengths are its “ability to develop differentiated products based on fermentation and biotechnologies” and “management decision-making with a sense of speed” supported by “sincere human resources and corporate culture.” With the start of our new structure for Takara Shuzo, the Takara Shuzo International Group and the Takara Bio Group, we will continue to keep a watchful eye on each of the operating companies going forward and work as external officers to take advantage of the Company’s strengths in increasing its corporate value.
I give a high evaluation for the practice of proactive and firm management and the high level of compliance awareness.
Since I was appointed in June 2016, I have attended the Board of Directors and various management meetings bearing in mind that each of the businesses in the Takara Group respond appropriately to changes in the business environment and various risks to achieve steady growth.
While all the projects that are deliberated are important, I feel that positive and steady management has been implemented for offensive projects such as the expansion of the Japanese Food Wholesale Business in overseas markets, and that this includes not simply aiming to expand in scale but also making judgements that value relationships of trust with partner companies not to mention giving adequate consideration of the advantages and risks. On the other hand, there are things that need to be observed with certainty in the areas of alcoholic beverages, health food, and biotechnology such as quality control and legal regulations, and I felt through my exchanges of opinions with executive directors and inspection tours of plants and research facilities that there is a high awareness of compliance.
Going forward, I will serve in the role of external director with the aim of increasing corporate value through management with balance between offense and defense based on the Takara Group Medium-Term Management Plan FY2020.
Status of Risk Management System
Compliance
The Takara Group has established a Compliance Committee chaired by the president in order to ensure trustworthy and fair corporate activities and is undertaking a reinforcement of the group-wide compliance promotion structure. Our goal is fulfilling the corporate social responsibility of the entire Takara Group and increasing the Group’s corporate value by way of each Group company complying appropriately with laws and social ethics and responding to crisis management based on the Takara Group Compliance Action Guidelines.
The helplines that the Company has established as whistleblowing contacts in the event that legal infringements and unfair practices are discovered provide two points of contact inside the Company (General Affairs Department) and outside the Company (a third party organization). In accordance with Japan’s Whistleblower Protection Act and the Helpline Rules, the helplines are run so as to ensure that whistleblowers do not receive disadvantageous treatment due to making a report. The Company gives full consideration to maintaining confidentiality when investigating reports and takes appropriate action based on confirmed facts.
Policies on Response to Large-Scale Purchases of the Company’s Shares
Based on the approval of the 96th General Shareholders’ Meeting, held on June 28, 2007, Takara Holdings introduced policies on its response to large-scale purchases of the Company’s shares without the prior agreement of the Company’s Board of Directors (Takeover Defense Guidelines). These policies were introduced with the objective of ensuring and enhancing the corporate value of Takara Holdings and the Takara Group and thereby the common interests of shareholders.
Subsequently, the partial revision and continuation of Takeover Defense Guidelines was approved at the 99th General Shareholders’ Meeting, held on June 29, 2010, and the 102nd General Shareholders’ Meeting, held on June 27, 2013. Recently, spurred by the expiry of the period of validity of the measures, the meeting of the Company’s Board of Directors, held on May 9, 2016, resolved on the partial revision of the content, including the establishment of a new Independent Committee, which was approved at the Company’s 105th General Shareholders’ Meeting, held on June 29, 2016.
The details are published on the Takara Holdings website* and in the Securities Report (in Japanese only).
Activities with Important Repercussions for Corporate GovernancePolicies Concerning Our Publicly Traded Subsidiary Takara Bio Inc.
Takara Holdings Inc. is the parent company of Takara Bio Inc.,
Officer Compensation
Compensation for directors and Audit & Supervisory Board members is determined based on the Rules for Compensation of Officers approved by the Board of Directors within the range of the ceiling on the total amount of compensation for each approved by the general shareholders’ meeting. The amount of compensation for directors consists of a responsibility component (fixed amount of compensation) and a performance-evaluation component (amount of performance-linked compensation) determined in accordance with the performance evaluation score for the previous fiscal year for each director, which is based on the standard amount for each position. The individual performance evaluations of directors for the performance-evaluation component are performed by the President in consultation with other representative directors. In addition, the amount of compensation for Audit & Supervisory Board members is determined based on consultation with the Audit & Supervisory Board members.
Revisions of the Rules for Compensation of Officers relating to directors are based on the resolution of the Board of Directors while revisions relating to Audit & Supervisory Board members are subject to consultation with the Audit & Supervisory Board members.
Risk Management
The Takara Group strives to prevent the materialization of risk and to mitigate risk while prioritizing risks by comprehensively investigating workplaces to identify risk on an every-day basis. Such activities are repeatedly carried out each year, and the results from the activities are reported to the Compliance Committee.
Moreover, in the event of situations with a possibility of endangering life and limb or those that could seriously impact on corporate confidence or assets, we establish an Emergency Response Headquarters while cooperating with each department to take prompt and targeted action.
Meanwhile, we have formulated a Business Continuity Plan (BCP) based on the scenario of a large-scale earthquake. Specifically, in addition to taking such steps as ensuring electric power at our production sites through the introduction of private electricity generating equipment, enhancing the reliability of information dissemination, and preparing back up offices for an emergency, we are making sure of the plan’s effectiveness by running drills based on the plan.
Notes : 1. Amount of compensation for directors does not include employee salary
component for Directors serving concurrently as employees.2. With regard to the ceiling on the amount of compensation for directors, the
106th General Shareholders’ Meeting held on June 29, 2017 approved up to ¥136 million per annum (includes up to ¥20 million for external directors), and with regard to the amount of performance-linked compensation (for directors other than external directors), the 104th General Shareholders’ Meeting held on June 26, 2015 approved an amount equivalent to up to 1% of consolidated operating income for the previous fiscal year (however, these amounts do not include the employee salary component for directors serving concurrently as employees). In addition, at the 106th General Shareholders’ Meeting held on June 29, 2017, an annual amount of up to ¥120 million was approved with regard to the ceiling on compensation for Audit & Supervisory Board members.
3. There were nine directors (including two external directors) and five Audit & Supervisory Board members (includes three external Audit & Supervisory Board members) as of March 31, 2017. This disparity with the number of directors and Audit & Supervisory Board members stated above is due to the inclusion above of two directors who resigned at the conclusion of the 105th General Shareholders’ Meeting, held on June 29, 2016.
Compensation for Directors and Audit & Supervisory Board Members (Fiscal year ended March 31, 2017)
Director(External Directors)
Officer categoryNumber of
eligible officersTotal amount(Millions of Yen)
Number of eligible officers
Total amount(Millions of Yen)
Amount of performance-linked compensationFixed amount of compensation Total
(Millions ofYen)
Audit & Supervisory Board Member
(External Audit &Supervisory
Board Members)
Total(External Officers)
11(2)
5(3)
16(5)
84(5)
40(21)
125(27)
9(−)
−(−)
9(−)
73(−)
−(−)
73(−)
158(5)
40(21)
199(27)
* See Takeover Defense Guidelines on the Takara Holdings website.http://ir.takara.co.jp/en/Management_index/TakeoverDefense.html
holding 60.9% of the voting rights of Takara Bio (Tokyo Stock Exchange First Section; Securities code number: 4974) as of March 31, 2017. The relationship between the Company and Takara Bio is outlined below.1) Listed subsidiary Takara BioOn April 1, 2002, Takara Bio was spun off from the parent company as a wholly owned subsidiary. Subsequently, the parent company's share of voting rights was reduced to its current level through third party capital increases, public subscriptions, the issue of bonds with warrants, and other corporate actions.
As of March 31, 2017, Takara Holdings is a holding company comprising 45 subsidiaries and three affiliates. Takara Bio is positioned as the subsidiary specializing in biotechnology and promoting biotechnology-related businesses for the Group.2) Holding company management of Group companies Takara Bio abides by the “Rules and Regulations for Overseeing Group Companies” and receives reports on decisions and other actions of the board of directors, but is not required to seek the approval of the board before enacting policies and operates independently of the holding company.
Further, although Takara Bio’s representative directors, and other board members and executive officers, are requested to attend meetings of the Group Strategy Committee, Takara Bio Coordination Committee, and other committees of the Company as circumstances require, the objective of this attendance is to discuss overall Group policies and facilitate reporting among Group companies, and does not inhibit the autonomy or independence of Takara Bio.
Toshihiko Yoshida
(Appointed June 29, 2016)External Director
Yukiko Yabu
(Appointed June 26, 2015)
External Director
23 TAKARA HOLDINGS INC. Annual Report 2017 24TAKARA HOLDINGS INC. Annual Report 2017
Yuzo Watanabe (61)
Hisashi Omiya (74)
Representative Director and Chairman
Apr. 1968 Joins CompanyApr. 1974 General Manager of New Business Development DivisionMay 1974 DirectorJun. 1982 Managing DirectorJun. 1988 Senior Managing DirectorJul. 1989 Chief Officer of Bio Business DivisionApr. 1990 Chief Officer of East-District Alcoholic Beverages Business DivisionJun. 1991 Executive Vice PresidentApr. 1993 Chief Officer of Alcoholic Beverages Business DivisionJun. 1993 PresidentApr. 2002 President, Takara Shuzo Co., Ltd. Chairman, Takara Bio Inc. (incumbent)Jun. 2012 Chairman, Takara Holdings Inc. (incumbent) Chairman, Takara Shuzo Co., Ltd. (incumbent)Jul. 2017 Chairman, Takara Shuzo International Co., Ltd. (incumbent)
Toshio Kakimoto (66)
Representative Director and President
Apr. 1973 Joins CompanyApr. 1998 General Manager of Manufacturing DivisionJun. 2003 Director, Takara Shuzo Co., Ltd.Jun. 2004 Managing Director, Takara Shuzo Co., Ltd.Jun. 2010 Executive Vice President Executive Vice President, Takara Shuzo Co., Ltd.Jun. 2012 President (incumbent) President, Takara Shuzo Co., Ltd.Jun. 2017 Director, Takara Shuzo Co., Ltd. (incumbent)Jul. 2017 Director, Takara Shuzo International Co., Ltd. (incumbent)
Mutsumi Kimura (54)
Representative Director and Executive Vice President(Operational Management, Investor Relations, Personnel, Accounting & Shared Services, Business Support & IT Promotion)
Apr. 1985 Joins CompanyApr. 2002 Director, Takara Bio Inc.Jun. 2004 Managing Director, Takara Bio Inc.Jun. 2007 Senior Managing Director, Takara Bio Inc.May 2009 Executive Vice President, Takara Bio Inc.Jun. 2014 Director Senior Managing Director, Takara Shuzo Co., Ltd. Jun. 2016 Executive Vice President (incumbent)Jun. 2017 Director, Takara Shuzo Co., Ltd. (incumbent)Jul. 2017 President, Takara Shuzo International Co., Ltd. (incumbent)
Kenji Murata (57)
Director
Apr. 1983 Joins CompanyApr. 2005 General Manager of Supply Chain Management Dept., Takara Shuzo Co., Ltd.Jun. 2010 Director, Chief Officer of Production Technology & Supply Division, Takara Shuzo Co., Ltd.Jun. 2014 Managing Director, Chief Officer of Seasoning & Alcohol Business Division, Takara Shuzo Co., Ltd.Jun. 2016 Director (incumbent) Executive Vice President, Takara Shuzo Co., Ltd.Jun. 2017 President, Takara Shuzo Co., Ltd. (incumbent)
Yukiko Yabu (59)
External Director
Apr. 2013 Group Manager, Director in-charge for Consumer Research, Global Marketing Planning Center, Appliances Company, Panasonic CorporationMar. 2014 Retires from Panasonic CorporationJun. 2015 External Director (incumbent) Director, Takara Shuzo Co., Ltd.
Toshihiko Yoshida (62)
External Director
Jul. 2014 Director, Takamatsu Regional Taxation Bureau , National Tax AgencyJul. 2015 Retired from National Tax AgencyAug. 2015 Tax accountant, Toshihiko Yoshida Certified Tax Accountant Office (incumbent)Jun. 2016 External Director (incumbent) Director, Takara Shuzo Co., Ltd.
Minoru Washino (62)
Managing Director(Environment & Public Relations, General Affairs, Quality Assurance)
Apr. 1978 Joins CompanyApr. 2003 General Manager of Regal GroupApr. 2012 General Manager of General Affairs Division Jun. 2014 Director Director, Takara Shuzo Co., Ltd.Jun. 2017 Managing Director (incumbent)
Koichi Nakao (55)
Director
Apr. 1985 Joins CompanyApr. 2002 Director, Takara Bio Inc.Jun. 2003 Managing Director, Takara Bio Inc.Jun. 2004 Senior Managing Director, Takara Bio Inc.Jun. 2007 Executive Vice President, Takara Bio Inc.May. 2009 President, Takara Bio Inc. (incumbent) President, Takara Bio USA Holdings Inc. (incumbent)Jun. 2009 Director (incumbent)
Kazuyoshi Ito (56)
Director
Apr. 1985 Joins CompanyJun. 2004 President, Takara Sake USA Inc.Apr. 2008 Senior Executive Officer, Global Chief Strategy Officer, Takara Shuzo Co., Ltd. President, USA Takara Holding Company (incumbent) Chairman of the Board, The Tomatin Distillery Co.,Ltd. (incumbent)Oct. 2010 Directeur Général, FOODEX S.A.S. (incumbent)Jun. 2013 Director (incumbent) Director, Takara Shuzo Co., Ltd.Jul. 2013 President and CEO, Takara Europe Holdings B.V. (incumbent)Jun. 2014 Managing Director, Takara Shuzo Co., Ltd.Jun. 2016 Senior Managing Director, Takara Shuzo Co., Ltd.Jul. 2017 Executive Vice President, Takara Shuzo International Co., Ltd. (incumbent)
Standing Audit & Supervisory Board Member
Apr. 1978 Joins CompanyJun. 2003 General Manager of Technology Division, Takara Shuzo Co., Ltd.Apr. 2007 Manager of Kurokabe-gura Distillery, Takara Shuzo Co., Ltd.Apr. 2009 Executive Officer, Manager of Kurokabe-gura Distillery, Takara Shuzo Co., Ltd.Apr. 2011 Executive Officer, Manager of Matsudo Factory, Takara Shuzo Co., Ltd.Apr. 2013 Executive Officer, General Manager of Quality Assurance Dept.Jun. 2015 Standing Audit & Supervisory Board Member (incumbent) Audit & Supervisory Board Member, Takara Shuzo Co., Ltd.
Toshihito Yamanaka (56)
Standing Audit & Supervisory Board Member(External Audit & Supervisory Board Member)
Apr. 2012 General Manager of Branch Banking Division III, Mizuho Bank, Ltd.Apr. 2013 Deputy Director-General of Group Human Resources Division, Mizuho Bank, Ltd.Jun. 2013 Retirement from Mizuho Bank, Ltd. Standing Audit & Supervisory Board Member (incumbent) Audit & Supervisory Board Member, Takara Shuzo Co., Ltd.
Tomoyuki Mieda (61)
Standing Audit & Supervisory Board Member (External Audit& Supervisory Board Member)
Jun. 2011 Auditor, The Norinchukin BankJun. 2013 Retires as Auditor, The Norinchukin Bank Audit & Supervisory Board Member Standing Audit & Supervisory Board Member, Takara Shuzo Co., Ltd.Jun. 2017 Standing Audit & Supervisory Board Member (incumbent)
Kumiko Kitai (64)
Audit & Supervisory Board Member (External Audit & Supervisory Board Member)
Shinji Ueda (64)
Standing Audit & Supervisory Board Member
Apr. 1976 Joins CompanyJun. 2001 General Manager of Secretary’s OfficeJun. 2013 Audit & Supervisory Board Member Standing Audit & Supervisory Board Member, Takara Shuzo Co., Ltd. Audit & Supervisory Board Member, Takara Bio Inc.Jun. 2017 Standing Audit & Supervisory Board Member (incumbent)
Corporate Governance
Aug. 2005 Director-General, The Equal Employment, Children and Families Bureau, Ministry of Health, Labour and WelfareAug. 2007 Retirement from Ministry of Health, Labour and Welfare Senior Managing Director, Japan Industrial Safety & Health Association May 2011 Retires as Senior Managing Director, Japan Industrial Safety & Health AssociationJun. 2011 Audit & Supervisory Board Member (incumbent) Audit & Supervisory Board Member, Takara Shuzo Co., Ltd.Jun. 2014 Attorney-at-law, Kachidoki Law Office (incumbent)
Board of Directors
Audit & Supervisory Board Members
Board of Directors and Audit & Supervisory Board Members (As of July 3, 2017)
25 TAKARA HOLDINGS INC. Annual Report 2017 26TAKARA HOLDINGS INC. Annual Report 2017
Social and Environmental Initiatives
In March 2017, we opened the Takara Holdings Corporate History Museum, a training facility for Group employees inside and outside Japan, in Takenaka-cho, Fushimi-ku, Kyoto, which is where the company was established, as one of our 90th anniversary projects.
The business territory of the Takara Group, which originated in the sake brewing business in 1842, has now expanded into the Biomedical Business and the Japanese Food Wholesale Business in overseas markets while in terms of geographical regions we have also actively extended our business activities in Europe, the U.S., Asia, and Oceania in addition to diversifying our human resources. Going forward, we will utilize this facility to unite the Group as a whole and foster a culture for promoting improvement in corporate value as well as striving to train the human resources that will support the Group into the future.
Quality Control
Training for new employees
Takara Holdings Corporate History Museum
Opening of Takara Holdings Corporate History Museum, a training facility, on company foundation site
Quality Control in the Alcoholic Beverages and Seasonings Business
Takara Holdings established the Takara Harmonist Fund in 1985 as a public trust fund which has provided every year since then assistance to groups and individuals conducting persistent natural environment protection activities and research. As of March 31, 2017, the fund has assisted in 333 cases with cumulative subsidies of approximately ¥159 million.
Since 2004, Takara Shuzo has held its annual Takara Shuzo Farm School to teach children who shoulder the next generation about the value of nature’s bounty and the importance of biodiversity.
TOPICS
Takara Bio GroupTakara ShuzoTakara Holdings Inc. Takara Shuzo International Group
Takara Shuzo acquired quality management system international standard ISO 9001 certification and always conducts rigid quality control at all its plants to ensure food safety and security. Takara Shuzo has also acquired food safety management system FSSC 22000* certification at all plants.
Takara Shuzo also implements strict label indication screenings to accurately convey raw material and nutritional composition information.
Environmental Preservation
Reducing CO2 Emissions
Takara Shuzo’s use of heavy oil and gas to produce steam for production processes and electricity in processes such as filling containers with products produces CO2 emissions as well as those produced when distributing products from plants.
In the year ended March 31, 2017, we achieved year-on-year reductions in CO2 emissions per unit of production of 7.6% and 1.0% in total emissions in production departments as a result of making efforts to switch to high efficiency boilers and curb transfers of products by rigorously implementing production in the area of consumption and other measures. In transportation departments, while emissions per unit of production were unchanged, total emissions rose 5.2% as a result of an increase in production volume.
Social Behavior
Reducing Water Consumption
Takara Shuzo not only uses water as a raw material for alcohol, but also for washing equipment and containers, distilling alcohol, cooling products, and other uses. We strive to reuse and conserve water in these processes, undertaking reductions in water consumption. In the year ended March 31, 2017, we promoted improvements in methods for cleaning production facilities and other measures and achieved year-on-year reductions of 8.2% in usage per unit of production as well as 1.5% in total water used.
Environmental Preservation through Social Contribution Activities
4R Initiatives
In the alcoholic beverage industry, disposing of used empty containers is a major problem. Takara Shuzo promotes the “4Rs,” Refuse, Reduce, Reuse and Recycle, which includes “Hakariuri,” selling products by weight of their content and using bottles that can be refilled to minimize the need for new containers. Since beginning Hakariuri in 1998, we have achieved cumulative savings of about 8.66 million 2.7ℓ plastic bottles and about 2.17 million sheets of cardboard as of March 31, 2017.
Complying with Regulations on Genetically Modified Organisms
Takara Bio works to comply with laws and regulations including the Act on the Conservation and Sustainable Use of Biological Diversity through Regulations on the Use of Living Modified Organisms (hereinafter “the Cartagena Law”). It strives to ensure biodiversity as well as safety and health with the establishment of the Genetic Modification Safety Regulations and thorough scrutiny by the Genetic Modification Committee, which has been set up in-house.
In the sale of research reagents covered by the Cartagena Law Takara Bio alerts customers about legal compliance. Moreover, it confirms whether users have carried out ministerial
Training Human Resources
Fostering Globally-Minded Human Resources
We provide overseas business internships aimed at fostering human resources capable of playing active roles overseas. The aim is for employees to increase their sense of purpose and acquire the skills and languages required for business by acquiring new perspectives through practical experience at overseas subsidiaries. Moreover, we provide global communication training and English language ability testing as part of our training for newly hired recruits in our efforts to foster the human resources that will be responsible for the overseas business.
In supporting the self-development of our employees, we also recognize multiple attendance for language-related courses through correspondence education programs. We also provide an English language learning program and other courses for prospective employees during the preliminary offer of employment period.
We aim to cultivate the in-house culture required to actively expand a global business through these efforts.
Quality Control in the Biomedical Business
Takara Biotechnology (Dalian) Co., Ltd. and DSS Takara Bio India Pvt. Ltd., which manufacture research reagents for Takara Bio Group, have obtained ISO 9001 certification, the international standard in quality management systems, and implement rigorous quality controls.
Furthermore, facilities in Japan that manufacture investigational drugs have established quality control systems that comply with GMP and implement all types of quality and safety tests on products.
* A benchmark accreditation standard established by the Global Food Safety Initiative (GFSI) that integrates ISO 22000, the international standard for food safety management systems, with ISO/TS 22002-1 (or ISO/TS 22002-4), an outgrowth of it.
Consideration of Animal Welfare
Takara Bio has formulated the Guidelines on Animal Testing and the Regulations for Implementation of Animal Testing in accordance with the primary aims of various laws and guidelines stipulated by relevant groups.
In March 2017, the in-house animal testing facility received certification from the Center for the Accreditation of Laboratory Animal Care and Use of The Japan Health Sciences Foundation, recognizing that animal testing is carried out appropriately based on a scientific perspective with voluntary management of animal testing and consideration to animal welfare.
confirmation concerning containment measures for genetically modified organisms whenever necessary.
Promoting Appropriate Consumption of Alcohol
Takara Shuzo strives to enlighten the public on moderate drinking by the rules. In addition to using warning labels on alcoholic beverages it sells in Japan to raise awareness of underage drinking and drunk-driving, it also provides warnings to raise awareness about alcohol consumption by pregnant women. It also publishes a booklet entitled Maintaining a Positive Relationship with Alcohol that provides accurate information on alcoholic beverages and ways to drink correctly. Furthermore, Takara Shuzo International Group also provides warning and education about the appropriate consumption of alcohol overseas as well using labeling and advertising in accordance with the regulations in each country.
Weeding at Takara ShuzoFarm School
TAKARA HOLDINGS INC. Annual Report 201727 TAKARA HOLDINGS INC. Annual Report 2017 28TAKARA HOLDINGS INC. Annual Report 2017
Millions of Yen (Note 1) Millions of Yen (Note 1)Thousands of
U.S. Dollars (Note 2)
2017/3
For the Years Ended March 31
(U.S. Dollars)
Notes: 1. Japanese yen amounts are rounded down to the nearest million yen. Per share information is rounded to the nearest yen, and ratios to the first decimal place. 2. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made
at the rate of ¥112 to U.S. $1, the approximate rate of exchange at March 31, 2017. 3. Deemed dividend payout ratio = Total dividends / (Consolidated operating income x (1- statutory effective tax rate))
* Business segments stated as of fiscal year ended March 31, 2017
As of March 31
Total Assets
Interest-bearing Debt
Total equity
Total shareholders’ equity
Ratios (%):
Return on assets (ROA)
Return on equity (ROE)
Equity ratio
D/E ratio
Dividend payout ratio
Deemed dividend payout ratio (Note 3)
Per Share of Common Stock (Yen and U.S. Dollars (Note 2)):
Basic net income
Total equity
Cash dividends
2017/3
¥ 274,368
47,852
165,920
135,043
¥ 42.15
671.11
13.00
3.2%
6.4
49.2
35.4
30.8
28.0
Net sales
Takara Shuzo Group
Takara Bio Group
Takara Healthcare
Other (including eliminations)
Cost of sales
Gross profit
Selling, general and administrative (SG&A) expenses
Operating income (loss)
Takara Shuzo Group
Takara Bio Group
Takara Healthcare
Other (including eliminations)
Income before income taxes and minority interests
Net income attributable to owners of the parent
Depreciation and amortization
Capital expenditures
Research and development (R&D) expenses
Cash flows provided by operating activities
Cash flows provided by (used in) investing activities
Cash flows provided by (used in) financing activities
Free cash flow
$ 2,091,009
1,796,170
262,277
15,768
16,777
1,251,625
839,375
718,375
120,991
87,098
28,589
107
5,179
129,643
75,714
55,473
59,446
40,625
114,518
144,643
(25,250)
262,813
2015/3
¥ 219,490
190,089
25,969
1,652
1,779
134,390
85,099
74,003
11,096
7,840
2,302
38
914
11,453
5,706
5,537
9,533
3,754
9,545
(10,253)
6,819
(708)
2016/3
¥ 225,364
192,025
29,729
1,865
1,744
135,868
89,495
77,815
11,680
8,410
2,667
64
538
12,548
7,055
6,180
6,003
4,608
10,373
(10,864)
(9,482)
(490)
¥ 264,438
48,324
158,404
131,923
¥ 28.36
655.60
10.00
2.3%
4.5
49.9
36.6
35.3
28.3
¥ 253,253
42,837
156,148
130,386
¥ 35.06
647.97
12.00
2.7%
5.4
51.5
32.9
34.2
30.9
2014/3
¥ 238,577
38,909
146,422
121,431
¥ 50.83
603.44
11.00
4.6%
9.3
50.9
32.0
21.6
37.6
¥ 209,568
182,306
23,905
1,424
1,931
129,447
80,121
70,631
9,490
6,329
1,954
21
1,184
18,642
10,280
4,997
8,967
3,376
7,233
(12,254)
2,562
(5,021)
2013/3
¥ 200,989
176,946
20,564
2,008
1,469
123,630
77,359
68,225
9,133
6,387
1,691
(22)
1,076
9,256
4,687
4,973
5,282
3,090
7,967
(3,672)
1,229
4,295
¥ 207,586
43,098
114,318
100,040
¥ 23.01
493.14
9.00
2.3%
4.8
48.2
43.1
39.1
32.2
2011/3
¥ 189,769
166,790
18,737
2,567
1,673
115,480
74,289
65,953
8,335
6,568
1,097
(252)
921
7,505
3,788
5,384
3,735
3,076
9,462
(11,323)
(3,199)
(1,861)
¥ 192,448
38,881
106,895
94,308
¥ 18.21
454.21
8.50
2.0%
4.0
49.0
41.2
46.7
35.9
2007/3
¥ 198,535
174,143
20,982
396
3,013
122,325
76,210
68,550
7,660
6,568
(215)
(161)
1,468
7,660
4,208
6,692
3,617
3,593
12,782
(7,526)
(1,558)
5,256
¥ 213,393
39,083
115,570
102,507
¥ 19.44
473.61
7.50
2.0%
4.1
48.0
38.1
38.6
35.9
2008/3
¥ 191,878
166,788
20,278
3,087
1,733
117,864
74,014
65,507
8,506
7,177
560
(500)
1,268
8,321
4,658
6,384
3,852
3,643
9,816
(411)
3,414
9,404
¥ 207,843
43,717
113,273
99,969
¥ 21.53
462.00
8.50
2.2%
4.6
48.1
43.7
39.5
36.7
2009/3
¥ 192,790
169,301
18,913
2,853
1,722
118,849
73,941
65,090
8,851
7,465
426
(356)
1,315
8,193
5,639
5,992
3,616
3,343
8,954
(7,769)
(9,294)
1,184
¥ 190,792
39,092
105,316
93,093
¥ 26.32
437.42
8.50
2.8%
5.8
48.8
42.0
32.3
34.7
2010/3
¥ 190,525
166,969
19,325
2,486
1,743
115,805
74,719
66,146
8,572
7,129
553
(316)
1,206
8,208
4,677
5,652
3,645
3,665
10,452
(7,350)
(3,219)
3,102
¥ 195,495
39,162
109,206
96,666
¥ 22.20
459.92
8.50
2.4%
4.9
49.4
40.5
38.3
35.4
2012/3
¥ 198,690
175,503
19,578
2,338
1,269
121,462
77,228
67,963
9,264
6,768
1,547
(114)
1,063
8,590
3,995
5,209
5,330
3,027
9,013
(4,779)
(3,265)
4,233
¥ 197,437
38,493
107,659
94,783
¥ 19.32
461.41
9.00
2.0%
4.2
48.0
40.6
46.6
33.9
$ 2,449,714
427,250
1,481,429
1,205,741
$ 0.38
5.99
0.12
—
—
—
—
—
—
Eleven-Year Consolidated Financial Summary(Fiscal 2017, ended March 31, 2017)
¥ 234,193
201,171
29,375
1,766
1,879
140,182
94,010
80,458
13,551
9,755
3,202
12
580
14,520
8,480
6,213
6,658
4,550
12,826
16,200
(2,828)
29,026
29 TAKARA HOLDINGS INC. Annual Report 2017 30TAKARA HOLDINGS INC. Annual Report 2017
Company Information
Takara Shuzo (Domestic Business)
Shochu
The history of the Takara Group’s core Alcoholic Beverages and Seasonings Business goes back to 1842. We have been providing for more than 170 years a wide variety of products underpinned by our creative and proven technology responding to the values and tastes of consumers. As one of Japan’s leading manufacturers of traditional Japanese alcoholic beverages and seasonings such as sake, shochu, or Hon mirin, we have built up our balanced product portfolio generated by our unique development capabilities of new technologies with the stable production system.
Proprietary brewing and storage technologies garnered over many years have enabled Takara Shuzo to contribute to the development of the shochu market through the pursuit of shochu products that satisfy changing consumer preferences and continually creating markets for shochu.
For ko-type shochu, Takara Shuzo has built the largest share of the market based on brands of unique quality and flavor, including the traditional and reassuring No.1 ko-type shochu brand Takara Shochu. This brand includes Takara Shochu NIPPON, mixed with 3% of cherry barrel aged shochu, and Takara Shochu Jun, which continues to be an enduring seller more than 40 years after its launch. Moreover, in the honkaku shochu market, Takara Shuzo has launched and nurtured a range of unique shochu products for the discerning palate, particularly Ikkomon, which stresses its 100% sweet-potato-base and Shirashinken barley shochu, which accentuates the rich flavor of barley, as well as original products that use unique technology like Yokaichi, which is tailored for those who wish to enjoy shochu casually with their evening meal.
Takara Shuzo International Group (Overseas Business)
Takara Shuzo International Group operates the Japanese Food Wholesale Business in overseas markets, which sells Japanese food to Japanese restaurants and retail stores overseas, and the Overseas Alcoholic Beverage Business, which exports alcoholic beverages as well as manufacturing and selling them overseas amid the increasing popularity of Japanese food overseas in recent years brought about by rising health consciousness around the world and the registration of “Washoku” as UNESCO Intangible Cultural Heritage.
Takara Bio Group (Biomedical Business)
The mission of the Takara Group’s Biomedical Business is to contribute to the health of humankind by developing revolutionary biomedical technologies such as gene therapy. The Takara Bio Group—whose role is to make this reality—is generating stable earnings from the Bioindustry Business, which forms the core of its technology base in addition to striving to develop the AgriBio Business as a secondary income business. We are working to achieve the early commercialization of gene therapies by investing the management resources from these two businesses in the Gene Therapy Business.
SakeAs the sake for celebrations, Sho Chiku Bai has become the foremost brand in the special occasion and gift sake market.
Also, Takara Shuzo produces such quality sake as the new-concept sparkling sake Sho Chiku Bai Shirakabegura Mio and Sho Chiku Bai Shirakabegura Kimoto Junmai at a specially built facility. Completed in 2001, the Shirakabegura Brewery combines leading-edge facilities that recreate traditional, artisan-inspired brewing techniques and sake brewing done by hand in order to comprehensively pursue what is truly authentic sake. In 2011, we launched Sho Chiku Bai Ten, which has a clean and dry feel from a two-stage brewing process utilizing two different strains of yeast, in a new pouch-pack container. We satisfy diverse customer needs. In the restaurant and bar market, Sho Chiku Bai Gokai enjoys strong customer endorsement. Going forward, we will continue to propose new products with a commitment to the workmanship and ingredients involved in Sho Chiku Bai.
Bioindustry BusinessThis business supports life science research worldwide, in both the research support field and the CDMO business. The Group reflects market needs by developing and supplying research reagents and scientific instruments such as highly functional PCR enzymes and real-time PCR systems used for gene amplification, in addition to contract research services including next-generating sequencing and contract production services for iPS cells.
Gene Therapy BusinessThis business implements clinical development of gene therapies, primarily targeting cancer.
It is aiming for the early commercialization of oncolytic virus HF10 targeting malignant melanoma and pancreatic cancer, NY-ESO-1 · siTCR gene therapy targeting synovial sarcoma, and CD19-CAR gene therapy targeting acute lymphocytic leukemia.
AgriBio BusinessTakara Bio uses biotechnology to analyze the properties of food ingredients. It then uses the functionality of “fucoidan” derived from Gagome kombu (kelp), “isosamidin” derived from herb (Peucedanum japonicum) and other ingredients to develop and manufacture health food products.
Also, Takara Bio takes advantage of its technologies for large-scale cultivation of mushrooms in order to produce and sell Honshimeji and Hatakeshimeji among others.
Japanese Food Wholesale Business in overseas markets
FOODEX S.A.S. (France), Tazaki Foods Ltd. (U.K.), Cominport Distribución S.L. (Spain), and Keta Foods, Lda (Portugal) in Europe,
Light-Alcohol RefreshersMany people love the unique taste of products backed by our proven technology such as Takara Shochu High Ball, with its distinctively dry flavor that remains a favorite in the neighborhood bars of downtown Tokyo, and Takara Can Chu-Hi, Japan’s first canned chu-hi product that has been on the market for over 30 years since making its powerful debut in 1984.
Moreover, we will continue to develop and nurture products that deliver delicious new value to customers such as the Takara Zero Jitate, Kajitsu na Kire which is an industry first chu-hi using fruit juice to achieve five zeros (zero carbs, zero purines, zero added sweeteners, zero aromatics, and zero coloring).
SeasoningsAiming to provide delicious food through products derived from traditional sake brewing techniques, Takara Shuzo offers a wide range of alcohol-based seasonings that render dishes more delicious and enrich meal times. These seasonings include Takara Hon Mirin, which as a leading brand has continually evolved in tandem with Japanese cuisine, and Ryori-no-Tame-no Seishu, a cooking sake without added salt.
In the food-processing market, for ready-prepared meals and processed food products Takara Shuzo offers a lineup of alcohol-based seasonings and soup stocks. Also, the company will continue to provide customers with solutions to diverse issues through food analysis, cooking research, and recipe development.
Mutual Trading Co., Inc. in North America, and Nippon Food Supplies Company Pty Ltd. in Australia have each been aggressively extending their respective businesses aiming at the expanding Japanese food market.
Overseas Alcoholic Beverages Business
The business operates based on four companies, which are Takara Sake USA Inc., which manufactures and sells sake and mirin for the entire U.S. and in Europe, Takara Shuzo Foods Co., Ltd., which manufactures and sells sake, Hon Mirin, and shochu in China, Age International, Inc., which handles Blanton’s Bourbon whisky, and the Tomatin Distillery Co. Ltd., which manufactures and sells Scotch whisky.
TAKARA HOLDINGS INC. Annual Report 201731 TAKARA HOLDINGS INC. Annual Report 2017 32TAKARA HOLDINGS INC. Annual Report 2017
TAKARA SHUZO CO., LTD. ¥1,000 million 100%Manufacture and sale of alcoholic beverages, seasonings, and raw alcohol
Note: Percentage of equity owned in parentheses indicates percentage of indirectly owned equity.
Percentage ofEquity OwnedName Address Issued Capital Line of Business
20 Naginataboko-cho, Shijo-dori Karasuma Higashi-iru,Shimogyo-ku, Kyoto 600-8688, Japan
TAKARA SHUZO INTERNATIONAL CO., LTD. ¥10 million 100%Management of group companies, export and sale, etc. of alcoholic beverages and seasonings
20 Naginataboko-cho, Shijo-dori Karasuma Higashi-iru,Shimogyo-ku, Kyoto 600-8688, Japan
TAKARA BIO INC. ¥14,965 million 60.9%
Development and sale of research reagents andscientific instruments, contract research services and commercialization of gene therapy, and production and sale of health foods andmushroom products
Nojihigashi 7-4-38, Kusatsu, Shiga 520-0058, Japan
38 Mitsueda, Hoidani, Kyotamba-cho, Funai-gun,Kyoto 622-0313, Japan
810-9 Koseda Yakushima-cho, Kumage-gun, Kagoshima 891-4207, Japan
9006 Aza-Kin, Kin-cho, Kunigami-gun, Okinawa 904-1201, Japan
1290 Terra Bella Avenue, Mountain View, CA 94043, U.S.A.
2, avenue du President Kennedy, 78100 St Germain en Laye, France
Arvid Wallgrens Backe 20, 41346, Göteborg, Sweden
A-5 Mohan Co-op Industrial Estate, Mathura Road, New Delhi,110044, India
No.19 Dongbei 2nd Street, Development Zone, Dalian, China 116600
Life Science Park, 22 KeXueYuan Road Changping District, Beijing, China 102206
Lotte New T Castle 601, 429-1, Gasan-dong, Gumchun-gu, Seoul, 153-803, Korea
¥10 million
¥3 million
¥5 million
US$83 thousand
€891 thousand
SEK2,222thousand*
Rs.110 million
¥2,350 million
¥1,330 million
=W3,860 million
(49.0%)
(48.3%)
(49.0%)
(100.0%)
(100.0%)
(100.0%)
(51.0%)
(100.0%)
(100.0%)
(100.0%)
Production and sale of mushrooms
Production of Ashitaba, etc.
Production and sale of mushrooms
Development and sale of research reagents
Sale of research reagents
Development, production, sale and contractservice of research reagents
Production and sale of research reagents
Development, production and contractservice of research reagents
Sale of research reagents
Sale of research reagents and scientificinstruments
Mizuho Nourin Co., Ltd.
Takara Bio Farming Center Inc.
Kinoko Center Kin Inc.
Takara Bio USA, Inc.
Takara Bio Europe S.A.S.
Takara Bio Europe AB
DSS Takara Bio India Pvt. Ltd.
Takara Biotechnology (Dalian) Co., Ltd.
Takara Biomedical Technology(Beijing) Co., Ltd.
Takara Korea Biomedical Inc.
708 Addison St., Berkeley, CA 94710, U.S.A.
229 W.Main St., Frankfort, KY 40602, U.S.A.
431Crocker St. Los Angeles CA 90013, U.S.A.
Tomatin, Inverness-shire, IV13 7YT Scotland, U.K.
12 Innova Way, Enfield, Middlesex EN3 7FL, U.K.
4, impasse des Carrières 75016 Paris, France
Avenida Marconi nave 1 - P.A.E. Neysa Sur - 28021, Madrid, Spain
Quinta do Olival das Minas Quinta do Duque No.26, 2625-573 Valonga, Prtugal
Unit 8/697 Gardeners Rd,Alexandria NSW 2015, Australia
No.31 Nanyuan West St. Fengtai District Beijing, China 100076
Room 103, Building 12, No.505, Zhong Shan Nan Road, Shanghai, China 200010
Level 8, Suite 8. 08, M Hotel, 81 Anson Road Singapore 079908
US$7,000 thousand
US$250thousand
US$2,703thousand
£3,297 thousand
£357 thousand
€250 thousand
€143 thousand
€15 thousand
A$17 million*1
RMB130,000thousand
RMB4,896thousand
S$500thousand*2
(90.0%)
(100.0%)
(54.6%)
(80.6%)
(100.0%)
(100.0%)
(100.0%)
(100.0%)
(51.0%)
(62.0%)
(100.0%)
(100.0%)
Manufacture, sale, export, and import and saleof alcoholic beverages
Sale of bourbon whisky
Import and wholesale of alcoholic beverages,foods, seasonings, etc.
Manufacture and sale of Scotch whisky
Import and wholesale of alcoholic beverages,foods, seasonings, etc.
Import and wholesale of alcoholic beverages,foods, seasonings, etc.
Import and wholesale of alcoholic beverages,foods, seasonings, etc.
Import and wholesale of alcoholic beverages,foods, seasonings, etc.
Import and wholesale of alcoholic beverages,foods, seasonings, etc.
Manufacture, sale, export, and import and sale of alcoholic beverages
Export, and import and sale of alcoholicbeverages and foods
Market development and sales promotion forTakara Shuzo products
Takara Sake USA Inc.
Age International, Inc.
Mutual Trading Co., Inc.
The Tomatin Distillery Co., Ltd
Tazaki Foods Ltd
FOODEX S.A.S.
Cominport Distribución S.L.
Keta Foods, Lda
Nippon Food Supplies Company Pty Ltd
Takara Shuzo Foods Co., Ltd.
Shanghai Takara Shuzo International Trading Co., Ltd.
Takara Shuzo Asia Pacific Pte. Ltd.
*1 Australian dollars *2 Singapore dollars
* Swedish Krona
Major Consolidated Subsidiaries(As of July 3, 2017)
85-1 Mikura-cho, Sanjo-dori Karasuma Nishi-iru, Nakagyo-ku, Kyoto 604-8166, Japan
1 Butai-cho, Fushimi-ku, Kyoto 612-8338, Japan
9 Butai-cho, Fushimi-ku, Kyoto 612-8338, Japan
20 Naginataboko-cho, Shijo-dori Karasuma Higashi-iru,Shimogyo-ku, Kyoto 600-8008, Japan
55-13 Osumihama, Kyotanabe, Kyoto 610-0343, Japan
22-38, Nishidomari-cho, Nagasaki 850-0075, Japan
9 Butai-cho, Fushimi-ku, Kyoto 612-8338, Japan
9 Butai-cho, Fushimi-ku, Kyoto 612-8338, Japan
2-12, 3-chome, Akasaka, Minato-ku, Tokyo 107-0052, Japan
¥90 million
¥90 million
¥30 million
¥20 million
¥50 million
¥250 million
¥30 million
¥10 million
¥80 million
100.0%
100.0%
100.0%
100.0%
(100.0%)
(100.0%)
(100.0%)
(100.0%)
(100.0%)
Development and sale of health foods
Printing
Sale of alcoholic beverages and real estate leasing
Marketing research, sales promotion planning,and temporary staffing service
Transportation, warehousing, automobile service,non-life insurance agent, travel agent, etc.
Transportation, customs broker, warehousing,etc.
Wholesale of glass bottles
Sale of feed
Import and sale of wine
Takara Healthcare Inc.
Taihei Printing Co., Ltd.
Kawahigashi Shoji Co., Ltd.
Total Management Business Co., Ltd.
Takara Butsuryu System Co., Ltd.
TAKARA CHOU UN Co., Ltd.
Takara Yoki Co., Ltd.
Takara Bussan Co., Ltd.
Luc Corporation, Ltd.
Takara Shuzo (Domestic Business)
Takara Shuzo International Group (Overseas Business)
Takara Bio Group (Biomedical Business)
Others (Domestic Group Companies)
Financial SectionFinancial Section
Contents Management’s Discussion and Analysis 35
Consolidated Balance Sheet 43
Consolidated Statement of Income 45
Consolidated Statement of Comprehensive Income 46
Consolidated Statement of Changes in Equity 46
Consolidated Statement of Cash Flows 47
Notes to Consolidated Financial Statements 48
Independent Auditor’s Report 74
33 TAKARA HOLDINGS INC. Annual Report 2017 34TAKARA HOLDINGS INC. Annual Report 2017
35 TAKARA HOLDINGS INC. Annual Report 2017 36TAKARA HOLDINGS INC. Annual Report 2017
In the fiscal year under review, ended March 31, 2017, although the Japanese economy maintained a moderate recovery as the hiring and income environment improved, personal spending remained weak. Looking abroad, while the U.S. and European economies have continued to expand gradually, there was continued uncertainty for the future of the global economy owing to economic slowdowns in emerging countries, primarily China, the Brexit issue in the U.K, the impact of future policies in the U.S. and other issues.
Under these economic circumstances, moving into the final fiscal year of the Takara Group Medium-Term Management Plan FY2017, which is the second step of efforts toward achieving the Takara Group Vision 2020, our long-term vision, the Group continued to make efforts to improve domestic business profitability and to expand and grow our overseas business while working on steady business activities with aim of transforming into a well-balanced business structure that can hold up well to business environment changes by accelerating growth in our Biomedical Business.
• Shochu¥58,001 million (decreased 2.3%)
• Sake¥24,822 million (increased 0.3%)
• Light-alcohol refreshers¥30,796 million (increased 10.7%)
• Other liquors¥14,116 million (decreased 0.4%)
• Hon Mirin alcohol-based seasonings¥14,991 million (decreased 0.8%)
• Other seasonings¥9,749 million (increased 4.7%)
• Raw alcohol¥7,771 million (increased 8.0%)
• Japanese Food Wholesale Business in overseas markets¥28,933 million (increased 40.0%)
• Other¥11,987 million (decreased 12.1%)
• Bioindustry¥26,573 million (decreased 2.7%)
Research reagents ¥19,436 million (decreased 5.1%) Scientific instruments ¥2,911 million (decreased 5.7%) Contract research services and other ¥4,225 million (increased 12.8%)
• Gene Therapy ¥500 million (no sales recorded in the previous fiscal year)
• AgriBio¥2,301 million (decreased 4.4%)
Consolidated net sales attained an all-time high of ¥234,193 million, an increase of 3.9% year on year.
Analysis of performance by business segment is as follows.
In Japan, a severe competitive environment is expected to continue due to the decrease in consumption of alcoholic beverages because of the population decline and aging of society, the diversification of consumer preferences and an ongoing frugal mindset. Meanwhile, there have been new opportunities including expansion of the home-meal replacement and away-from-home meals markets owing to more women entering the workplace and increases in the number of elderly or single adult households.
Overseas, it has been expected that Japanese food markets will further grow primarily owing to increasing attention to Japanese foods and a global increase in the number of Japanese restaurants.
In this environment, the Takara Shuzo Group worked mainly on improving the earning power of its business in Japan by developing high-quality products differentiated by its technology and increasing its overseas business by expanding the overseas Japanese food wholesaler network mainly in the U.S. and Europe. As a result, the Takara Shuzo Group’s overall net sales during fiscal 2017 increased 4.8% year on year to ¥201,171 million.
The breakdown of the segment’s net sales by product category is as follows.
Management’s Discussion and Analysis
Net Sales
Gross profit stood at ¥94,010 million, up by 5.0% from the previous fiscal year, accompanying the increase in net sales.
SG&A expenses rose by 3.4% from the previous fiscal year to ¥80,458 million as a result of increases in promotion expenses, and personnel expenses at overseas subsidiaries among others. As a result, operating income rose 16.0% year on year to ¥13,551 million.
The following is an overview of each business segment.
Gross Profit, Selling, General, and Administrative (SG&A) Expenses, and Operating Income
At the Takara Shuzo Group, in Japan, a severe competitive environment is expected to continue due to the decrease in consumption of alcoholic beverages because of the population decline and aging of society, the diversification of consumer preferences and an ongoing frugal mindset. Meanwhile, there have been new opportunities including expansion of the home-meal replacement and away-from-home meals markets owing to more women entering the workplace and increases in the number of elderly or single adult households.
Overseas, it has been expected that Japanese food markets will further grow primarily owing to increasing attention to Japanese foods and a global increase in the number of Japanese restaurants.
In this environment, the Takara Shuzo Group worked mainly on improving the earning power of its business in Japan by developing high-quality products differentiated by its technology and increasing its overseas business by expanding the overseas Japanese food wholesaler network mainly in the U.S. and Europe.
Takara Shuzo Co., Ltd. recorded sales growth on the non-consolidated basis due to the increase in sales of sake and light-alcohol refreshers even though sales of shochu declined. In addition, the Japanese Food Wholesale Business in overseas market and other businesses recorded an increase in sales. As a result, the Takara Shuzo Group’s overall net
Takara Shuzo Group
Under such conditions that the health food market was expected to expand further against the backdrop of increasing needs for better health due to population aging and a well-established system of foods with function claims, Takara Healthcare strove to expand sales in the mail-order sales business through aggressive and efficient advertising, focusing on the Gagome kombu (kelp) Fucoidan series and
Takara Healthcare
Takara Shuzo Group
Other comprises other function companies, including a printing business. Net sales in this segment increased 2.0% year on year, to ¥5,924 million.
Other
sales increased 4.8% year on year to ¥201,171 million, with gross profit up 5.2% to ¥74,841 million. SG&A expenses were up 3.8% to ¥65,086 million following a rise in personnel expenses and promotion expenses among others, resulting in operating income that increased 16.0% to ¥9,755 million.
Utilizing biotechnology developed over many years, the Takara Bio Group concentrated management resources on three areas: the Bioindustry business, the Gene Therapy business, and the AgriBio business, and worked to improve business results.
Takara Bio Group’s net sales fell 1.2% year on year to ¥29,375 million because sales of research reagents and scientific instruments declined in part due to the appreciation of the yen even though sales of ¥500 million were recorded in the Gene Therapy Business (no sales recorded in the previous fiscal year). Meanwhile, as the cost rate fell due to changes in the structure of sales for each product and other factors, gross profit increased 3.9% year on year to ¥16,952 million. SG&A expenses were up 0.7% to ¥13,749 million following expenses incurred in relation to share acquisitions for U.S. WaferGen Bio-systems, Inc. and Rubicon Genomics, Inc., resulting in operating income which increased 20.1% year on year, to ¥3,202 million.
Takara Bio Group
Takara Healthcare strove to expand sales in the mail-order sales business through aggressive and efficient advertising, focusing on the Gagome kombu (kelp) Fucoidan series and the Herb (Peucedanum japonicum) Isosamidin series.
With these actions, sales of isosamidin-related products increased, but those of fucoidan-related products remained flat from the previous fiscal year, and OEM cosmetics declined, with Takara Healthcare’s net sales decreasing 5.3% year on year, to ¥1,766 million. Gross profit was up 12.8% to ¥1,097 million, SG&A expenses were up 19.5% to ¥1,084 million following a rise in sales promotion and administrative expenses, resulting in operating income which decreased 80.3% year on year, to ¥12 million.
Takara Healthcare
In fiscal 2017, operating income in other increased 7.7% year on year, to ¥580 million.
In accordance with the spinning off of the overseas business of Takara Shuzo Co., Ltd. on July 3, 2017 and the establishment of Takara Shuzo International Co., Ltd., the three reporting segments of the Takara Shuzo Group, Takara Bio Group, and Takara Healthcare reported in the fiscal year under review, ended March 31, 2017, will be changed to the Takara Shuzo, Takara Shuzo International
Other
the Herb (Peucedanum japonicum) Isosamidin series.With these actions, sales of isosamidin-related products
increased, but those of fucoidan-related products remained flat from the previous fiscal year, and OEM cosmetics declined, with Takara Healthcare’s net sales decreasing 5.3% year on year, to ¥1,766 million.
Utilizing biotechnology developed over many years, the Takara Bio Group concentrated management resources on three areas: the Bioindustry Business, the Gene Therapy Business, and the AgriBio Business, and worked to improve business results.
Net sales for the Takara Bio Group during fiscal 2017 stood at ¥29,375 million, down 1.2% year on year. The breakdown of this segment’s net sales by product and service category is as follows.
Takara Bio Group
Group, and Takara Bio Group reporting segments in the fiscal year ending March 31, 2018.
37 TAKARA HOLDINGS INC. Annual Report 2017 38TAKARA HOLDINGS INC. Annual Report 2017
Turning to non-operating income and expenses, non-operating income declined 16.0% year on year to ¥1,537 million due to a fall in interest income and subsidy income while non-operating expenses rose 11.0% year on year to ¥744 million owing to an increase in interest expenses. As a result, ordinary income was up 11.7% year on year to ¥14,344 million.
In terms of extraordinary income and loss, the Group recorded gain on step acquisitions and gain on sales of noncurrent assets as extraordinary income and impairment loss and loss on sales and retirement of noncurrent assets as extraordinary loss. As a result, income before income taxes and minority interests was up 15.7% year on year to ¥14,520 million, and net income attributable to owners of the parent increased 20.2% to ¥8,480 million.
Fiscal 2017 was the final year of the Takara Group Medium-Term Plan 2017, and the Group achieved all of the tangible goals set in the plan, which were consolidated net sales of at least ¥230 billion, operating income of at least ¥12 billion, and an overseas sales ratio of 16% or higher.
Other Income (Expenses) and Net Income
Net cash provided by operating activities increased ¥2,452 million year on year, to ¥12,826 million primarily due to profit before income taxes of ¥14,520 million, depreciation and amortization of ¥5,171 million, an increase in notes and accounts receivable-trade of ¥1,334 million, an increase in inventories of ¥1,377 million and income taxes paid of ¥5,218 million.
Net cash provided by investment activities resulted in revenue of ¥16,200 million compared with an expenditure of ¥10,864 million in the previous fiscal year primarily due to payments into time deposits of ¥7,510 million, proceeds from the withdrawal of time deposits of ¥15,959 million, the purchase of securities of ¥10,059 million, proceeds from sales and redemption of securities of ¥22,028 million and purchase of property, plant and equipment and intangible assets of ¥5,376 million.
Net cash used in financing activities decreased by ¥6,653 million year on year primarily due to redemption of bonds of ¥5,000 million, although there were expenditures of ¥2,828 million including cash dividends paid of ¥2,413 million.
As a result, cash and cash equivalents at fiscal year-end, including the effect of exchange rate change on cash and cash equivalents, stood at ¥58,765 million, up ¥26,228 million from the previous fiscal year-end.
Cash Flows
In fiscal 2017, operating income in other increased 7.7% year on year, to ¥580 million.
In accordance with the spinning off of the overseas business of Takara Shuzo Co., Ltd. on July 3, 2017 and the establishment of Takara Shuzo International Co., Ltd., the three reporting segments of the Takara Shuzo Group, Takara Bio Group, and Takara Healthcare reported in the fiscal year under review, ended March 31, 2017, will be changed to the Takara Shuzo, Takara Shuzo International
(Assets)At the end of the fiscal year under review, current assets were ¥173,912 million, an increase of ¥14,839 million compared with that at the end of the previous fiscal year. This was primarily due to an increase in cash and deposits of ¥19,686 million, an increase in notes and accounts receivable-trade of ¥4,546 million and an increase in merchandise and finished goods of ¥5,560 million respectively, as well as a decline in securities of ¥15,000 million.
Noncurrent assets were ¥100,456 million, an increase of ¥6,276 million compared with that at the end of the previous fiscal year. This was primarily because of an increase in property, plant and equipment of ¥6,108 million.
As a result, total assets were ¥274,368 million, an increase of ¥21,115 million compared with that at the end of the previous fiscal year.
(Liabilities)At the end of the fiscal year under review, current liabilities totaled ¥65,506 million, an increase of ¥17,858 million compared with that at the end of the previous fiscal year. This was mainly due to increases in notes and accounts payable-trade of ¥1,603 million, short-term loans payable of ¥4,212 million, and current portion of bonds of ¥10,000 million respectively.
Noncurrent liabilities were ¥42,941 million, a decrease of ¥6,514 million compared with that at the end of the previous fiscal year. This was primarily due to a ¥10,000 million decrease resulting from the transfer of bonds to current liabilities, whereas long-term loans payable increased by ¥741 million and deferred tax liabilities by ¥1,917 million, respectively.
As a result, total liabilities were ¥108,447 million, an increase of ¥11,343 million compared with that at the end of the previous fiscal year.
(Net Assets)At the end of the fiscal year under review, total net assets were ¥165,920 million, an increase of ¥9,771 million compared with that at the end of the previous fiscal year. The main factors were increases of ¥6,066 million in retained earnings, ¥2,760 million in valuation difference on available-for-sale securities and ¥5,115 million in non-controlling interests respectively, as well as a decline of ¥4,122 million in foreign currency translation adjustment.
As a result, equity ratio totaled 49.2%, compared with 51.5% at the end of the previous fiscal year.
Financial Position
In April 2011, the Group commenced the Takara Group Vision 2020, a 10-year long-term management vision for which the Group is taking measures through medium-term management plans every three years. The Group recently prepared the Takara Group Medium-Term Management Plan FY2020 ending in fiscal 2020, the year ending March 31, 2020.
The basic policy of the Takara Group Medium-Term Management Plan FY2020 calls for building up a great number of fields in which the Group can beat competitors and establish a balanced business foundation able to grow revenues significantly, no matter what environmental changes occur, by further increasing the overseas sales ratio together with having a full product line-up and many products with a competitive edge, both in Japan and overseas. An outline is as follows.
By further increasing the overseas sales ratio together with having a full product line-up and many products with a competitive edge both in Japan and overseas, the Group is aiming to build up a great number of fields in which it can beat competitors and establish a balanced business foundation able to grow revenues significantly no matter what environmental changes occur.
Year ending March 31, 2020: Takara Group net sales at least ¥290 billion, operating income at least ¥15.5 billion, overseas sales accounting for at least 33% of net sales(Numerical goals are projections at the time of preparation of the Medium-Term Management Plan and do not constitute a guarantee of achievement.)
Takara ShuzoExpand sales in all categories, with sake as the core, improve the profit ratio and cement position as a top manufacturer of traditional Japanese alcoholic beverages in the domestic alcoholic beverages and seasonings markets.
Takara Shuzo International GroupDramatically expand scope of business by enlarging overseas Japanese food wholesaler network, together with developing business foundation and strengthening position with the goal of becoming a leading company in the global Japanese alcoholic beverages and foods market.
Medium- to Long-Term Business Strategies
Takara Bio GroupStrengthen the three business segments, namely, Bioindustry, Gene Therapy, and AgriBio Businesses, and the business base that supports these efforts, enhance standing as a global enterprise and regenerative medical product company, and achieve prodigious growth.
Maintain a strong balance sheet and make growth-oriented investments while also improving our ROE and achieving proper stock price levels by providing appropriate shareholder returns.
Strengthening managementStrengthening business management with a view to expanding our business globally
Corporate culture and personnelDeveloping the people that support the Group and improving the Group's human capital strategy
CSRDeveloping systems consistent with the Corporate Governance Policy, conducting social and environmental activities, and releasing ESG-related information
Basic policy
Tangible goals
Business strategies
In terms of the Group’s financial position, net cash provided by operating activities increased ¥2,452 million year on year and net cash provided by investment activities increased ¥27,065 million year on year, primarily due to proceeds from sales and redemption of securities. Net cash used in financing activities decreased ¥6,653 million year on year despite cash dividends paid due to redemption of bonds in the previous fiscal year.
As a result, cash and cash equivalents at fiscal year-end stood at ¥58,765 million, up ¥26,228 million from the previous fiscal year-end.
The Group intends to finance immediate capital expenditure, investment in sectors where growth can be anticipated, and shareholder returns with its own funds. However, in April 2017, the Group raised ¥15,000 million through the issuance of straight bonds to be applied to the redemption of bonds scheduled for next fiscal year and beyond and the loan of working funds to subsidiaries.
The Company has obtained an A rating for both issued bonds and in the preliminary rating for shelf registration from Rating and Investment Information, Inc. (R&I) and Japan Credit Rating Agency, Ltd. (JCR). The Company has
Analysis of Capital Resources and Liquidity
Financial policy
Strengthening our management base
Group, and Takara Bio Group reporting segments in the fiscal year ending March 31, 2018.
also established a commitment line with a ¥10,000 million credit limit with the aim of flexible fund procurement.
39 TAKARA HOLDINGS INC. Annual Report 2017 40TAKARA HOLDINGS INC. Annual Report 2017
In terms of the Group’s financial position, net cash provided by operating activities increased ¥2,452 million year on year and net cash provided by investment activities increased ¥27,065 million year on year, primarily due to proceeds from sales and redemption of securities. Net cash used in financing activities decreased ¥6,653 million year on year despite cash dividends paid due to redemption of bonds in the previous fiscal year.
As a result, cash and cash equivalents at fiscal year-end stood at ¥58,765 million, up ¥26,228 million from the previous fiscal year-end.
The Group intends to finance immediate capital expenditure, investment in sectors where growth can be anticipated, and shareholder returns with its own funds. However, in April 2017, the Group raised ¥15,000 million through the issuance of straight bonds to be applied to the redemption of bonds scheduled for next fiscal year and beyond and the loan of working funds to subsidiaries.
The Company has obtained an A rating for both issued bonds and in the preliminary rating for shelf registration from Rating and Investment Information, Inc. (R&I) and Japan Credit Rating Agency, Ltd. (JCR). The Company has
The following are major potential risks to which the Takara Group (the Group and its affiliated companies) is exposed in its business and other activities. In addition, conditions that may not become a risk are also described from the viewpoint of positive information disclosure to investors. Upon identification of the possibility of such risks, the Group will make its best efforts to avoid such an occurrence or take countermeasures against such an occurrence.
Descriptions related to the possible occurrence of events in the future are based on the Group’s judgments as of March 31, 2017. Please note that the following descriptions do not cover all of the risk factors concerning investment decisions.
<1> Risks concerning dependence on particular markets and productsMore than 90% of sales of the Group’s Alcoholic Beverages and Seasonings Business are generated within Japan, and its market is highly vulnerable to changes in the tastes of consumers. The Group therefore strives to develop both original products that meet the ever-changing tastes of consumers and unique products that differentiate the Group from competitors. However, changes in consumer trends have been accelerating recently. For this reason, if the Group fails to offer attractive products that satisfy the tastes of consumers and reflect market trends, business growth and profitability will suffer and may adversely affect the Group’s business performance and financial position. Furthermore, in Japan, population decline, the low birthrate and the rapidly aging population have become advanced. If these factors result in a decline in liquor demand, the Group’s business may be adversely affected.
<2> Risks concerning market competition
The recent deregulation in alcoholic beverage retail licensing has drastically changed the liquor distribution structure and prompted competing companies to reduce prices and pursue new product strategies, which has intensified competition in the marketplace. In such a competitive business environment, the Group is striving to address the challenges by developing and cultivating high value-added products, strengthening its brand power, carrying out sales activities that reflect the changes in distribution channels, and cutting costs. However, if competition increases to a level that cannot be countered by these measures and strategies, the Group’s business
Business Risks
performance and financial position may be adversely affected.
<3> Risks concerning dependence on particular plants for manufacturingMost of the Group’s alcoholic beverage products are manufactured at the Fushimi Plant (Fushimi Ward, Kyoto City) and the Matsudo Plant (Matsudo City, Chiba Prefecture), both operated by Takara Shuzo Co., Ltd. Furthermore, the Group is expanding the production lines at these two plants. Therefore, in the event of a major earthquake or any other occurrence that prevents operations in either of these areas, it may threaten to seriously affect the manufacture and supply of products, which may adversely affect the Group’s business performance and financial position. In addition, ethyl alcohol, a major raw material used by the Group, is classified by the Fire Service Law as a hazardous material, Class 4 (inflammable liquid, possessing a serious risk of starting and spreading a fire, which, once started, is hard to extinguish).
<4> Risks concerning fluctuations of raw material prices
The Group’s procurement of raw materials could be indirectly affected by the climatic and economic conditions of supplier countries and regions. Ethanol for shochu and other products comes mainly from South America and Asia, and rice for sake and other products is procured in Japan; therefore, the prices of these raw materials are influenced by weather conditions in these areas and the market for the raw material. Recently, the purchase price of ethanol has been increasing, and any hike in the procurement cost of raw materials will cause an increase in our production cost. If this increase cannot be added to the sales price due to, for example, market conditions, this in turn may adversely affect the Group’s business performance and financial position.
<5> Risks concerning Japan’s legal regulations
The Alcoholic Beverages Business of the Group is subject to regulations specified under the Liquor Tax Law that governs licenses for the manufacturing and/or selling of alcoholic beverages and liquor taxes in Japan. In accordance with the Liquor Tax Law, the Group has obtained, in addition to the license as a seller, the license for manufacturing each type of product and for operating each manufacturing plant from the relevant taxation offices. In future business operations, the Group will continue to be regulated by the Liquor Tax Law, and consequently any change to the liquor tax rates may affect selling prices and sales trends.
<6> Risks concerning social attitudes toward drinking
It has been said that drinking alcoholic beverages in moderation generally relieves weariness, increases appetite, eases stress, and works as a social lubricant. On the other hand, many
problems in habitual drinking have been pointed out, such as intoxication, organ damage due to chronic drinking, alcohol use disorder, under-age drinking, and damage to the fetus owing to drinking by pregnant women, characteristics of which are not seen in any other beverages or foods. Realizing these problems, the Group, as an organization producing and selling alcoholic beverages, is carrying out various activities to spread the idea of “controlled, moderate drinking” from the viewpoint of meeting its social responsibilities by helping to maintain and improve people’s health. If these alcohol- attributable problems become more serious within society, the Group’s production and sales activities may be further regulated or otherwise affected, and the future growth, business performance, and financial position of the Group’s Alcoholic Beverages Business may deteriorate.
<1> Risks concerning R&D activities
In the Biomedical Business, the Group has been conducting a wide range of R&D activities in fields covering a broad range of biotechnology-related industries. The Group considers these R&D activities extremely important in order to keep the Group’s competitive edge. The Group therefore aggressively invests in R&D. However, there is no guarantee that the R&D activities will advance as planned, and because clinical development in the Gene Therapy Business takes a very long time, it is also not guaranteed that any R&D activities will bear fruit in a timely manner. A delay in R&D activities may adversely affect the business plans, business performance, and financial position of the Group’s Biomedical Business. Furthermore, there is no guarantee that the R&D activities currently in progress will produce their expected results. Such a failure could hinder the Group from meeting its planned revenue-making expectations.
<2> Risks concerning market competition
Currently, the revenue base of the Group’s Biomedical Business is generated by our Bioindustry Business, whose major product is research reagents related to the real-time Polymerase Chain Reaction (PCR) method. However, the real-time PCR license granted to the Group is not an exclusive license, with many other companies similarly granted the real-time PCR license, thereby intensifying competition. Moreover, unlike medical equipment, since neither permission nor approval is required for the manufacture and sale of scientific instruments, entry into the market is relatively easy; therefore, there are many competing companies in the market. Moreover, cancer immunotherapy and other cell therapies are now being used to improve the quality of life (QOL) of patients and not just as a cure for a disease. Therefore, their marketability is expected
(hereinafter the “Pharmaceuticals and Medical Devices Law”) and consequently are not regulated by that law. However, if these regulations are tightened or new regulations are enforced following the expansion of industries providing research support services, the Group’s business may be adversely affected.
The relevant laws and regulations such as the Pharmaceutical and Medical Devices Law, the Act on the Safety of Regenerative Medicine, and the Cartagena Law regulate the commercialization of gene and cell therapies that the Group is seeking to develop, and the Group intends to comply with such laws and regulations. These laws and regulations are concerned with securing the quality, effectiveness, and safety of drugs, regenerative therapy products, quasi drugs, specified processed cell products, cosmetics, and medical instruments, and the trading of these products requires obtaining approval or permission from the relevant authorities. Should the Group be unable to obtain the relevant permission or approval for each project for which it is carrying out R&D activities in the Group’s Gene Therapy Business, it may adversely affect the Group’s business.
<5> Risks concerning intellectual property rights
In biotechnology-related industries, where the success of business depends solely on the success of R&D activities, the Group regards securing intellectual property rights, including patents, as extremely important, and it protects technologies developed in-house with patents to prevent competitors from imitating them. The Group will continue placing the highest priority on applying for patents in its R&D activities. All applications are not always registered, however, and when a registered patent is made invalid for any reason, or expires, the Group’s business strategies or operational results may suffer an impact.
In addition, the Group is always mindful that, in biotechnology-related industries with continuous cutthroat competition in R&D, its patented technology may be superseded at any time by a competitor exercising technological capabilities that exceed those used in the Group’s R&D ventures. The Group is also willing to acquire or buy licenses for promising patent rights held by third parties, but this strategy may be prohibitively expensive or alternatively there is a possibility that the Group may not be able to acquire licenses for necessary patent rights.
(3) Risks Shared by the Whole Group
<1> Risks concerning impairment losses of investment securities
The Group owns marketable securities. If their market values fall drastically, the difference between the acquisition cost and market price is booked as a loss for the fiscal year. Such
a loss may adversely affect the Group’s business performance and financial position.
<2> Risks concerning impairment losses of fixed assets
The Group owns fixed assets. If the Group determines that an impairment loss should be recognized on any fixed assets or asset group specified by the accounting standard for impairment of fixed assets, the book value of the asset or asset group in question is lowered to the recoverable price, and the difference is booked as a loss for the fiscal year. Such a loss may adversely affect the Group’s business performance and financial position.
<3> Risks concerning retirement benefit liabilities
The Group calculates the cost of its employees’ retirement benefits and pension liabilities based on such preconditions as the discount rate used in actuarial calculations and the expected rate of return on pension assets. If the actual results are different from the preconditions or the preconditions have changed or if the yield on the investment in pension assets management worsens, it may adversely affect the Group’s business performance and financial position.
<4> Risks concerning business and capital alliances
The Group promotes business and capital alliances with other companies, primarily outside Japan, as part of its growth strategy. However, if the business, management, and financial position of alliance partners and investments deteriorate due to the impact of changes in the business environment surrounding the alliance partners and investments and other factors, the Group’s business performance and financial position may be adversely affected. Moreover, if there is a large amount of amortization of goodwill accompanying an investment, or if the need arises to record a large amount of impairment losses due to the poor performance of an investment or other factors, the Group’s business performance and financial position may adversely affected.
<5> Risks concerning overseas operations
The Group’s operations include the manufacture and sale of products in North America, Europe, and China as well as other regions of Asia. If any of these countries or regions experiences a drastic change in the condition of their economies, politics, and / or societies, or suffers damage from a natural disaster, such as a major earthquake, the demand for the Group’s products could deteriorate and/or production facilities might have to suspend production. Such an occurrence could seriously affect the Group’s business plans and performance.
problem should arise related to this issue, the business performance of the Group may be adversely affected.
Moreover, in sales of health foods, the Group makes its best efforts to observe the provisions of the Pharmaceutical Affairs Law in regard to expressing and advertising efficacies and effects and providing directions for proper usage. Due to the general nature of health foods, however, the Group cannot completely rule out the possibility of it violating any provision on mandatory information. If any violation occurs within the Group, trust in the Group may deteriorate and the business performance of the Group may be adversely affected.
As the Group is also selling certain products over the Internet, the Group is subject to mandatory information regulations based on the Specified Commercial Transactions Law.
<9> Risks concerning information control
The Group retains personal information about numerous individuals through, among other activities, sales promotion campaigns and mail-order sales. The Group takes every precaution to prevent the leakage of such information by establishing an information control system, appointing personnel in charge of information security, conducting ongoing staff training, and taking other related measures. However, the risk remains that some unexpected incidents could lead to the loss, leakage, or falsification of personal and/or other internal information. In such cases, the Group could lose its credibility among the general public, which may adversely affect the Group’s business.
<10> Risks concerning lawsuits
The Group strives to observe all the laws and regulations relevant to its business operations by enhancing its compliance measures. However, as the Group conducts its business both within and outside Japan, there remains a risk of a third party filing a suit over such issues as the Product Liability Law, intellectual property rights, or a claim for compensation for an invention irrespective of whether or not the Group or its employees have violated any law. If a court case were to be brought against the Group, or if the court decision were to go against the Group, the Group’s business performance and financial position may be adversely affected.
and more providers will likely appear.In the Gene Therapy Business, various gene transfer
methods and effective vectors have been developed, and the applications of gene therapy are expanding from congenital diseases, infectious diseases, and various types of cancer to nonfatal chronic illnesses. Thus, a potentially enormous market has opened up, which has resulted in many companies starting to invest in gene therapy research and development, including major pharmaceutical companies and venture firms in Europe and the U.S.
In the AgriBio Business, the health food industry is booming and many businesses, not just food manufacturers but many pharmaceutical companies as well, are entering the rapidly growing market, and competition is intensifying. Under such circumstances, the Group is seeking differentiation through the development of functional food ingredients that it has discovered and clarified the scientific basis for itself. However, such a development strategy may not necessarily be successful, and if competitors commercialize similar products and fields of technology first, the business performance, and financial position of the Group may be adversely affected.
<3> Risks concerning dependence in manufacturing
Currently, the Group’s Biomedical Business is highly dependent on Takara Biotechnology (Dalian) Co., Ltd., a Chinese subsidiary of the Takara Group, for manufacturing products related to the Bioindustry Business. In the future, the Group’s reliance on this company is expected to grow. Therefore, in the event of a deterioration in security, a major earthquake, or any other occurrence that prevents operations in the region where this subsidiary is located, the whole Group could lose most of its capacity to manufacture the products concerned, which may adversely affect the Group’s business performance and financial position.
<4> Risks concerning legal regulations specific to the Biomedical Business
R&D activities in the Bioindustry Business are regulated by relevant legislations, such as the Law Concerning Prevention from Radiation Hazards Due to Radioisotopes, Etc., and the Law Concerning the Conservation and Sustainable Use of Biological Diversity through Regulations on the Use of Living Modified Organisms (hereinafter the “Cartagena Law”), and the Group intends to observe these laws and regulations. In manufacturing, sales and import and export of research reagents, the Group is also required to follow the Poisonous and Deleterious Substance Control Law and the Quarantine Act. Research reagents are not drugs or regenerative therapy products as defined by the Law for Ensuring the Quality, Efficacy, and Safety of Pharmaceuticals and Medical Devices
<6> Risks concerning fluctuations in exchange rates
Local currency-denominated items, including sales, expenses, and asset and liability accounts are translated into Japanese yen for the purpose of the preparation of the consolidated financial statements. These items may be affected by the exchange rate at translation.
The Group enters into foreign currency forward contracts and exchange rate hedging to minimize the adverse effects caused by short-term fluctuations in exchange rates. In the medium- to long-term, however, the Group may fail to accurately carry out procurement and sales activities as planned due to fluctuations in exchange rates. Therefore, fluctuations in exchange rates may adversely affect the Group’s business performance and financial position.
<7> Risks concerning product liability
All of the products developed and manufactured by the Group are exposed to the risk of product liability compensation. If any defect is found during the manufacturing, selling, or clinical testing process, or any health impairment is caused by an alcoholic beverage, food, drug, or medical instrument in particular, the Group may be subject to a product liability claim. Despite possessing product liability insurance, it is uncertain whether or not the insurance will cover the full amount of the final compensation. A defect that results in large-scale recalls or product liability compensation not only causes a huge financial cost but also affects the Group’s reputation, business performance, and financial position.
<8> Risks concerning legal regulations
The Group is developing businesses in various countries and regions subject to local governmental regulations, such as those granting permission to begin business operations or undertake investment, export restrictions because of national security or other reasons, and trade conditions, including tariff duties. The Group is also subject to legislation governing trade, monopoly, patent, consumer, taxation, foreign currency exchange, transportation, and environmental and recycling issues. If the Group is unable to observe any of the legislative regulations, its activities may be restricted and an increase in costs may occur.
Also, as a corporation involved in the manufacture and sale of food products, the Group maintains business facilities, manages equipment, containers and packages, as well as controls production processes and sales activities in accordance with the provisions of the Food Sanitation Law. The Group observes the Food Sanitation Law and takes extra care to control food hygiene. Food safety matters, including food hygiene and such problems as intentional interference, are an unavoidable issue. Therefore, if any
(1) Risks Concerning the Alcoholic Beverages and Seasonings Business and Its Business Environment
also established a commitment line with a ¥10,000 million credit limit with the aim of flexible fund procurement.
(2) Risks Concerning the Biomedical Business and Its Business Environment
41 TAKARA HOLDINGS INC. Annual Report 2017 42TAKARA HOLDINGS INC. Annual Report 2017
<1> Risks concerning R&D activities
In the Biomedical Business, the Group has been conducting a wide range of R&D activities in fields covering a broad range of biotechnology-related industries. The Group considers these R&D activities extremely important in order to keep the Group’s competitive edge. The Group therefore aggressively invests in R&D. However, there is no guarantee that the R&D activities will advance as planned, and because clinical development in the Gene Therapy Business takes a very long time, it is also not guaranteed that any R&D activities will bear fruit in a timely manner. A delay in R&D activities may adversely affect the business plans, business performance, and financial position of the Group’s Biomedical Business. Furthermore, there is no guarantee that the R&D activities currently in progress will produce their expected results. Such a failure could hinder the Group from meeting its planned revenue-making expectations.
<2> Risks concerning market competition
Currently, the revenue base of the Group’s Biomedical Business is generated by our Bioindustry Business, whose major product is research reagents related to the real-time Polymerase Chain Reaction (PCR) method. However, the real-time PCR license granted to the Group is not an exclusive license, with many other companies similarly granted the real-time PCR license, thereby intensifying competition. Moreover, unlike medical equipment, since neither permission nor approval is required for the manufacture and sale of scientific instruments, entry into the market is relatively easy; therefore, there are many competing companies in the market. Moreover, cancer immunotherapy and other cell therapies are now being used to improve the quality of life (QOL) of patients and not just as a cure for a disease. Therefore, their marketability is expected
(hereinafter the “Pharmaceuticals and Medical Devices Law”) and consequently are not regulated by that law. However, if these regulations are tightened or new regulations are enforced following the expansion of industries providing research support services, the Group’s business may be adversely affected.
The relevant laws and regulations such as the Pharmaceutical and Medical Devices Law, the Act on the Safety of Regenerative Medicine, and the Cartagena Law regulate the commercialization of gene and cell therapies that the Group is seeking to develop, and the Group intends to comply with such laws and regulations. These laws and regulations are concerned with securing the quality, effectiveness, and safety of drugs, regenerative therapy products, quasi drugs, specified processed cell products, cosmetics, and medical instruments, and the trading of these products requires obtaining approval or permission from the relevant authorities. Should the Group be unable to obtain the relevant permission or approval for each project for which it is carrying out R&D activities in the Group’s Gene Therapy Business, it may adversely affect the Group’s business.
<5> Risks concerning intellectual property rights
In biotechnology-related industries, where the success of business depends solely on the success of R&D activities, the Group regards securing intellectual property rights, including patents, as extremely important, and it protects technologies developed in-house with patents to prevent competitors from imitating them. The Group will continue placing the highest priority on applying for patents in its R&D activities. All applications are not always registered, however, and when a registered patent is made invalid for any reason, or expires, the Group’s business strategies or operational results may suffer an impact.
In addition, the Group is always mindful that, in biotechnology-related industries with continuous cutthroat competition in R&D, its patented technology may be superseded at any time by a competitor exercising technological capabilities that exceed those used in the Group’s R&D ventures. The Group is also willing to acquire or buy licenses for promising patent rights held by third parties, but this strategy may be prohibitively expensive or alternatively there is a possibility that the Group may not be able to acquire licenses for necessary patent rights.
(3) Risks Shared by the Whole Group
<1> Risks concerning impairment losses of investment securities
The Group owns marketable securities. If their market values fall drastically, the difference between the acquisition cost and market price is booked as a loss for the fiscal year. Such
a loss may adversely affect the Group’s business performance and financial position.
<2> Risks concerning impairment losses of fixed assets
The Group owns fixed assets. If the Group determines that an impairment loss should be recognized on any fixed assets or asset group specified by the accounting standard for impairment of fixed assets, the book value of the asset or asset group in question is lowered to the recoverable price, and the difference is booked as a loss for the fiscal year. Such a loss may adversely affect the Group’s business performance and financial position.
<3> Risks concerning retirement benefit liabilities
The Group calculates the cost of its employees’ retirement benefits and pension liabilities based on such preconditions as the discount rate used in actuarial calculations and the expected rate of return on pension assets. If the actual results are different from the preconditions or the preconditions have changed or if the yield on the investment in pension assets management worsens, it may adversely affect the Group’s business performance and financial position.
<4> Risks concerning business and capital alliances
The Group promotes business and capital alliances with other companies, primarily outside Japan, as part of its growth strategy. However, if the business, management, and financial position of alliance partners and investments deteriorate due to the impact of changes in the business environment surrounding the alliance partners and investments and other factors, the Group’s business performance and financial position may be adversely affected. Moreover, if there is a large amount of amortization of goodwill accompanying an investment, or if the need arises to record a large amount of impairment losses due to the poor performance of an investment or other factors, the Group’s business performance and financial position may adversely affected.
<5> Risks concerning overseas operations
The Group’s operations include the manufacture and sale of products in North America, Europe, and China as well as other regions of Asia. If any of these countries or regions experiences a drastic change in the condition of their economies, politics, and / or societies, or suffers damage from a natural disaster, such as a major earthquake, the demand for the Group’s products could deteriorate and/or production facilities might have to suspend production. Such an occurrence could seriously affect the Group’s business plans and performance.
problem should arise related to this issue, the business performance of the Group may be adversely affected.
Moreover, in sales of health foods, the Group makes its best efforts to observe the provisions of the Pharmaceutical Affairs Law in regard to expressing and advertising efficacies and effects and providing directions for proper usage. Due to the general nature of health foods, however, the Group cannot completely rule out the possibility of it violating any provision on mandatory information. If any violation occurs within the Group, trust in the Group may deteriorate and the business performance of the Group may be adversely affected.
As the Group is also selling certain products over the Internet, the Group is subject to mandatory information regulations based on the Specified Commercial Transactions Law.
<9> Risks concerning information control
The Group retains personal information about numerous individuals through, among other activities, sales promotion campaigns and mail-order sales. The Group takes every precaution to prevent the leakage of such information by establishing an information control system, appointing personnel in charge of information security, conducting ongoing staff training, and taking other related measures. However, the risk remains that some unexpected incidents could lead to the loss, leakage, or falsification of personal and/or other internal information. In such cases, the Group could lose its credibility among the general public, which may adversely affect the Group’s business.
<10> Risks concerning lawsuits
The Group strives to observe all the laws and regulations relevant to its business operations by enhancing its compliance measures. However, as the Group conducts its business both within and outside Japan, there remains a risk of a third party filing a suit over such issues as the Product Liability Law, intellectual property rights, or a claim for compensation for an invention irrespective of whether or not the Group or its employees have violated any law. If a court case were to be brought against the Group, or if the court decision were to go against the Group, the Group’s business performance and financial position may be adversely affected.
and more providers will likely appear.In the Gene Therapy Business, various gene transfer
methods and effective vectors have been developed, and the applications of gene therapy are expanding from congenital diseases, infectious diseases, and various types of cancer to nonfatal chronic illnesses. Thus, a potentially enormous market has opened up, which has resulted in many companies starting to invest in gene therapy research and development, including major pharmaceutical companies and venture firms in Europe and the U.S.
In the AgriBio Business, the health food industry is booming and many businesses, not just food manufacturers but many pharmaceutical companies as well, are entering the rapidly growing market, and competition is intensifying. Under such circumstances, the Group is seeking differentiation through the development of functional food ingredients that it has discovered and clarified the scientific basis for itself. However, such a development strategy may not necessarily be successful, and if competitors commercialize similar products and fields of technology first, the business performance, and financial position of the Group may be adversely affected.
<3> Risks concerning dependence in manufacturing
Currently, the Group’s Biomedical Business is highly dependent on Takara Biotechnology (Dalian) Co., Ltd., a Chinese subsidiary of the Takara Group, for manufacturing products related to the Bioindustry Business. In the future, the Group’s reliance on this company is expected to grow. Therefore, in the event of a deterioration in security, a major earthquake, or any other occurrence that prevents operations in the region where this subsidiary is located, the whole Group could lose most of its capacity to manufacture the products concerned, which may adversely affect the Group’s business performance and financial position.
<4> Risks concerning legal regulations specific to the Biomedical Business
R&D activities in the Bioindustry Business are regulated by relevant legislations, such as the Law Concerning Prevention from Radiation Hazards Due to Radioisotopes, Etc., and the Law Concerning the Conservation and Sustainable Use of Biological Diversity through Regulations on the Use of Living Modified Organisms (hereinafter the “Cartagena Law”), and the Group intends to observe these laws and regulations. In manufacturing, sales and import and export of research reagents, the Group is also required to follow the Poisonous and Deleterious Substance Control Law and the Quarantine Act. Research reagents are not drugs or regenerative therapy products as defined by the Law for Ensuring the Quality, Efficacy, and Safety of Pharmaceuticals and Medical Devices
<6> Risks concerning fluctuations in exchange rates
Local currency-denominated items, including sales, expenses, and asset and liability accounts are translated into Japanese yen for the purpose of the preparation of the consolidated financial statements. These items may be affected by the exchange rate at translation.
The Group enters into foreign currency forward contracts and exchange rate hedging to minimize the adverse effects caused by short-term fluctuations in exchange rates. In the medium- to long-term, however, the Group may fail to accurately carry out procurement and sales activities as planned due to fluctuations in exchange rates. Therefore, fluctuations in exchange rates may adversely affect the Group’s business performance and financial position.
<7> Risks concerning product liability
All of the products developed and manufactured by the Group are exposed to the risk of product liability compensation. If any defect is found during the manufacturing, selling, or clinical testing process, or any health impairment is caused by an alcoholic beverage, food, drug, or medical instrument in particular, the Group may be subject to a product liability claim. Despite possessing product liability insurance, it is uncertain whether or not the insurance will cover the full amount of the final compensation. A defect that results in large-scale recalls or product liability compensation not only causes a huge financial cost but also affects the Group’s reputation, business performance, and financial position.
<8> Risks concerning legal regulations
The Group is developing businesses in various countries and regions subject to local governmental regulations, such as those granting permission to begin business operations or undertake investment, export restrictions because of national security or other reasons, and trade conditions, including tariff duties. The Group is also subject to legislation governing trade, monopoly, patent, consumer, taxation, foreign currency exchange, transportation, and environmental and recycling issues. If the Group is unable to observe any of the legislative regulations, its activities may be restricted and an increase in costs may occur.
Also, as a corporation involved in the manufacture and sale of food products, the Group maintains business facilities, manages equipment, containers and packages, as well as controls production processes and sales activities in accordance with the provisions of the Food Sanitation Law. The Group observes the Food Sanitation Law and takes extra care to control food hygiene. Food safety matters, including food hygiene and such problems as intentional interference, are an unavoidable issue. Therefore, if any
43 TAKARA HOLDINGS INC. Annual Report 2017 44TAKARA HOLDINGS INC. Annual Report 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet
Millions of YenThousands of
U.S. Dollars (Note 1)
ASSETS
TOTAL
CURRENT ASSETS:
Cash and cash equivalents (Note 16)
Time deposits (Note 16)
Marketable securities (Notes 4 and 16)
Notes and accounts receivable (Notes 7 and 16):
Trade
Associated companies
Other
Allowance for doubtful accounts
Inventories (Notes 5, 7, and 8)
Deferred tax assets (Note 13)
Prepaid expenses and other current assets
Total current assets
PROPERTY, PLANT, AND EQUIPMENT (Notes 6, 7, and 20):
Land
Buildings and structures
Machinery, equipment, and vehicles
Tools, furniture, and fixtures
Lease assets
Construction in progress
Total
Accumulated depreciation
Net property, plant, and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 4 and 16)
Investments in associated companies
Goodwill (Note 21)
Deferred tax assets (Note 13)
Other assets (Note 9)
Total investments and other assets
See notes to consolidated financial statements.
Takara Holdings Inc. and Consolidated SubsidiariesMarch 31, 2017
2016 20172017
¥ 32,536
16,551
17,537
53,330
271
1,176
(231)
34,218
2,070
1,612
159,073
18,118
48,903
82,182
12,812
1,483
104
163,605
(110,540)
53,065
20,356
4,390
6,975
1,683
7,708
41,114
¥ 253,253
$ 524,687
67,178
44,830
517,419
6,946
(2,107)
355,812
18,857
19,142
1,552,785
179,366
481,964
737,169
130,437
18,357
2,339
1,549,651
(1,021,312)
528,339
215,491
12,919
59,160
13,357
67,633
368,589
$ 2,449,714
¥ 58,765
7,524
5,021
57,951
778
(236)
39,851
2,112
2,144
173,912
20,089
53,980
82,563
14,609
2,056
262
173,561
(114,387)
59,174
24,135
1,447
6,626
1,496
7,575
41,282
¥ 274,368
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands of
U.S. Dollars (Note 1)
LIABILITIES AND EQUITY
See notes to consolidated financial statements.
2016 20172017
¥ 8,389
11,106
16,759
6
4,822
7,593
2,468
8,025
1,899
4,435
65,506
21,776
8,961
5,342
5,564
1,296
42,941
13,226
1,650
119,729
(9,939)
9,583
0
1,426
(634)
135,043
30,877
165,920
¥ 274,368
$ 74,901
99,160
149,633
53
43,053
67,794
22,035
71,651
16,955
39,598
584,875
194,428
80,008
47,696
49,678
11,571
383,401
118,089
14,732
1,069,008
(88,741)
85,562
0
12,732
(5,660)
1,205,741
275,687
1,481,428
$ 2,449,714
¥ 4,920
321
15,149
30
3,130
7,855
2,307
7,192
1,870
4,868
47,648
30,967
8,544
5,379
3,647
918
49,456
13,226
1,879
113,663
(9,938)
6,822
(445)
5,548
(370)
130,386
25,762
156,148
¥ 253,253
CURRENT LIABILITIES:
Short-term bank loans (Notes 7 and 16)
Current portion of long-term debt (Notes 7 and 16)
Notes and accounts payable (Note 16):
Trade
Associated companies
Construction and other
Liquor taxes payable (Notes 8 and 16)
Income taxes payable (Note 16)
Accrued expenses
Accrued sales promotion expenses
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:
Long-term debt (Notes 7 and 16)
Liability for retirement benefits (Note 9)
Deposits
Deferred tax liabilities (Note 13)
Other
Total long-term liabilities
COMMITMENTS AND CONTINGENT LIABILITES (Notes 7, 14, and 17)
EQUITY (Notes 10 and 18):
Common stock, authorized, 870,000,000 shares; issued, 217,699,743 shares in both 2017 and 2016
Capital surplus
Retained earnings
Treasury stock, at cost, 16,475,731 shares in 2017 and 16,475,391 shares in 2016
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting (Note 17)
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests
Total equity
TOTAL
45 TAKARA HOLDINGS INC. Annual Report 2017 46TAKARA HOLDINGS INC. Annual Report 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .
. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of IncomeTakara Holdings Inc. and Consolidated Subsidiaries Year Ended March 31, 2017
Consolidated Statement of Comprehensive IncomeTakara Holdings Inc. and Consolidated Subsidiaries Year Ended March 31, 2017
Millions of YenThousands of
U.S. Dollars (Note 1)
NET SALES (Notes 11 and 20)
COST OF SALES (Notes 8, 9, 11, 14, and 20)
Gross profit
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
(Notes 9, 12, 14, and 20)
Operating income
OTHER INCOME (EXPENSES):
Interest and dividend income
Equity in earnings of associated companies
Subsidy income
Gain on step acquisitions
Gain on sales of property, plant, and equipment
Reversal of provision for loss on business liquidation
Interest expense
Foreign exchange losses
Impairment loss (Notes 6 and 20)
Loss on disposals of property, plant, and equipment
Other, net
Other income, net
INCOME BEFORE INCOME TAXES
INCOME TAXES (Note 13):
Current
Deferred
Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT
PER SHARE OF COMMON STOCK (Notes 2.s and 18):
Basic net income
Cash dividends applicable to the year
2016 20172017
¥ 234,193
140,182
94,010
80,458
13,551
659
268
288
878
206
(481)
(76)
(667)
(264)
157
968
14,520
5,208
74
5,283
9,236
755
¥ 8,480
¥ 42.15
13.00
$ 2,091,008
1,251,625
839,375
718,375
120,991
5,883
2,392
2,571
7,839
1,839
(4,294)
(678)
(5,955)
(2,357)
1,401
8,642
129,642
46,500
660
47,169
82,464
6,741
$ 75,714
$ 0.37
0.11
Millions of YenThousands of
U.S. Dollars (Note 1)
2016 20172017¥ 9,236
2,760446
(4,310)(348)
(1,451)
¥ 7,784
¥ 7,300483
$ 82,464
24,6423,982
(38,482)(3,107)
(12,955)
$ 69,500
$ 65,1784,312
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yen U.S. Dollars
See notes to consolidated financial statements.
See notes to consolidated financial statements.
Consolidated Statement of Changes in EquityTakara Holdings Inc. and Consolidated Subsidiaries Year Ended March 31, 2017
Millions of Yen
Accumulated Other Comprehensive Income
Thousands
Number ofShares ofCommon
StockOutstanding
CommonStock
CapitalSurplus
RetainedEarnings
TreasuryStock
Unrealized Gain on Available-for-Sale Securities
Deferred (Loss) Gain on
Derivatives under Hedge Accounting
ForeignCurrency
Translation Adjustments
Defined Retirement
Benefit Plans Total
Non-controlling
InterestsTotalEquity
201,225
(1)
201,224
0
201,224
¥13,226
13,226
¥13,226
¥158,404
7,055(2,012)
(1)
(1,316)(27)
(5,954)
156,148
8,480(2,414)
(0)
(229)3,935
¥165,920
¥26,481
(718)
25,762
5,115
¥30,877
¥131,923
7,055(2,012)
(1)
(1,316)(27)
(5,235)
130,386
8,480(2,414)
(0)
(229)(1,179)
¥135,043
¥7,431
(1,882)
5,548
(4,122)
¥1,426
¥(297)
(72)
(370)
(264)
¥(634)
¥ 558
(1,003)
(445)
445
¥ 0
¥9,098
(2,276)
6,822
2,760
¥9,583
¥(9,937)
(1)
(9,938)
(0)
¥(9,939)
¥108,647
7,055(2,012)
(27)
113,663
8,480(2,414)
¥119,729
¥3,196
0
(1,316)
1,879
0
(229)
¥1,650
Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
CommonStock
CapitalSurplus
RetainedEarnings
TreasuryStock
Unrealized Gain on Available-for-Sale Securities
Deferred (Loss)Gain on
Derivatives under Hedge Accounting
ForeignCurrency
Translation Adjustments
Defined Retirement
Benefit Plans Total
Non-controlling
InterestsTotalEquity
$1,394,178
75,714(21,553)
(0)(2,044)
35,133
$1,481,428
$1,014,848
75,714(21,553)
$1,069,008
$118,089
$118,089
$16,776
0
(2,044)
$14,732
$(88,732)
(0)
$(88,741)
$1,164,160
75,714(21,553)
(0)
(2,044)(10,526)
$1,205,741
$(3,303)
(2,357)
$(5,660)
$230,017
45,669
$275,687
$49,535
(36,803)
$12,732
$(3,973)
3,973
$ 0
$60,910
24,642
$85,562
¥ 225,364
135,868
89,495
77,815
11,680
747
334
471
21
48
(447)
(50)
(281)
(311)
337
867
12,548
4,839
(60)
4,778
7,769
713
¥ 7,055
¥ 35.06
12.00
¥ 7,769
(2,276)(1,010)(2,300)
(74)4
(5,657)
¥ 2,111
¥ 1,820291
See notes to consolidated financial statements.
BALANCE, APRIL 1, 2015Net income attributable to owners of the parent Cash dividends, ¥10.0 per shareNet increase in treasury stock Purchase of shares of consolidated subsidiaryChange of scope of consolidationNet change in the year
BALANCE, MARCH 31, 2016Net income attributable to owners of the parent Cash dividends, ¥12.0 per shareNet increase in treasury stock Purchase of shares of consolidated subsidiaryNet change in the year
BALANCE, MARCH 31, 2017
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
. . . . . . . . . . .
. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
. . . . . . .
. . . . . . . . . . .
. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
BALANCE, MARCH 31, 2016Net income attributable to owners of the parent Cash dividends, $0.10 per shareNet increase in treasury stock Purchase of shares of consolidated subsidiaryNet change in the year
BALANCE, MARCH 31, 2017
. . . . . . . . . . . . . . . . . . .
. . . . . . .
. . . . . . . . . . .
. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS) (Note 18):Unrealized gain (loss) on available-for-sale securitiesDeferred gain (loss) on derivatives under hedge accountingForeign currency translation adjustmentsDefined retirement benefit plansShare of other comprehensive income in associates
Total other comprehensive loss
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:Owners of the parentNoncontrolling interests
47 TAKARA HOLDINGS INC. Annual Report 2017 TAKARA HOLDINGS INC. Annual Report 2017 48
Notes to Consolidated Financial StatementsTakara Holdings Inc. and Consolidated Subsidiaries Year Ended March 31, 2017
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Consolidation — The consolidated financial statements as of March 31, 2017, include the accounts of the Company and its 61 (44 in 2016) consolidated subsidiaries (together, the “Group”). Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.
Investments in associated companies (1 in 2017, and 2 in 2016) are accounted for by the equity method.
Investments in the remaining associated companies are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
The difference of the cost of acquisition from the fair value of the net assets of an acquired subsidiary at the date of acquisition is recorded as goodwill and other intangibles and amortized on a pro rata basis over a certain period not exceeding 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also eliminated.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements — Under Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force (“PITF”) No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,” the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification—"FASB ASC”) tentatively may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through
other comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.
c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method — ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments,” requires adjustments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s financial statements are used in applying the equity method, unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.
d. Business Combinations — Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the
accounting for the business combination had been completed at the acquisition date. A parent’s ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus as long as the parent retains control over its subsidiary.
On November 14, 2016, Takara Shuzo Co., Ltd. (“Shuzo”), a consolidated subsidiary of the Company, subscribed the third-party allotment of shares by Mutual Trading Co., Inc. (“Mutual Trading”), an affiliate accounted for by the equity method of the Company, in which Shuzo had owed 45.4% of shares of Mutual Trading before the subscription. As a result, Shuzo became to own 51.0% of shares of Mutual Trading, and Mutual Trading became a consolidated subsidiary of the Company.
On January 17, 2017, Shuzo subscribed the third-party allotment of shares by Nippon Food Supplies Company Pty Ltd (“Nippon Food”). As a result, Shuzo acquired 51.0% of shares of Nippon Food and Nippon Food became a consolidated subsidiary company of the Company.
These acquisitions were accounted for by the purchase method of accounting (see Note 3).
e. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificates of deposit, trust fund investments, commercial paper, and trust beneficiary rights, all of which mature or become due within three months of the date of acquisition.
f. Marketable and Investment Securities — Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) held-to-maturity debt securities, for which there is the positive intent and ability to hold to maturity, are reported at amortized cost and (2) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method.
For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
g. Inventories — Inventories are mainly stated at the lower of cost, determined by the average method, or net selling value.
h. Property, Plant, and Equipment — Property, plant, and equipment are stated at cost. Depreciation is computed principally by the declining-balance method at rates based on the estimated useful lives of the assets. The range of useful lives is principally from 3 to 50 years for buildings and structures and from 4 to 15 years for machinery, equipment, and vehicles.
Pursuant to an amendment to the Corporate Tax Act, certain domestic consolidated subsidiaries adopted ASBJ PITF No. 32, “Practical Solution on a change in depreciation method due to Tax Reform 2016” and changed the depreciation method for building improvements and structures acquired on or after April 1, 2016, from the declining-balance method to the straight-line method.
The effect of the change is immaterial.
i. Long-Lived Assets — The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. j. Goodwill — The Company and its domestic and overseas consolidated subsidiaries amortize goodwill on a pro rata basis over a certain period not exceeding 20 years. Accounting for impairment of long-lived assets also applies to goodwill.
k. Retirement and Pension Plans — Each of the employee retirement benefit programs of the Company and certain consolidated subsidiaries consist of an unfunded lump-sum severance payment plan, a defined benefit corporate pension plan and a defined contribution pension plan as described in Note 9.
The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis. Actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within accumulated other comprehensive income, after adjusting for tax effects, and are recognized in profit or loss over 10 years no longer than the expected average remaining service period of the employees.
l. Allowance for Doubtful Accounts — The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding.
m. Accrued Sales Promotion Expenses — Accrued sales promotion expenses are stated at amounts considered to be appropriate based on the purchased quantities of finished products by retail stores, identified by Shuzo, multiplied by the past year actual unit cost of the relevant products.
n. Leases — Finance lease transactions are capitalized by recognizing lease assets and lease obligations in the balance sheet.
Lease assets related to finance lease transactions without title transfer are depreciated on a straight-line basis over the leased periods as their useful lives and with no residual value.
o. Income Taxes — The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.
The Group applied ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” effective April 1, 2016. There was no impact from the adoption of this guidance for the year ended March 31, 2017.
p. Foreign Currency Transactions — All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.
q. Foreign Currency Financial Statements — The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date, except for equity, which is translated at the historical rate. The resulting translation differences, less those attributable to noncontrolling interests, are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the average exchange rate. r. Derivative Financial Instruments — The Group uses derivative financial instruments, such as foreign currency forward contracts and foreign currency options, as a means of hedging exposure to foreign currency exchange rate risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: (1) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income and (2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
The foreign currency forward contracts are utilized to hedge payments of royalties and foreign currency import transactions. Payables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting.
Foreign currency options are utilized to hedge foreign currency exposures in the procurement of raw materials from overseas suppliers. These options, which qualify for hedge accounting, are measured at fair value at the balance sheet date and the unrealized gains or losses are deferred until maturity as another liability or asset.
s. Per Share Information — Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year.
t. Company Split — The Company resolved at the Board of Directors meeting held on February 16, 2017 that Shuzo will spin off
a part of its business through a company split (incorporation-type company split) and transfer it to a company to be established named Takara Shuzo International Co., Ltd. (“Shuzo International”). Shuzo International will allot and deliver all the shares issued in conjunction with the company split to Shuzo, while at the same time Shuzo will allocate all the shares allotted and delivered to the Company, the wholly owning parent company of Shuzo, as dividends of surplus. Consequently, Shuzo International will become a wholly owned subsidiary of the Company.
1. Form of the company splitIncorporation-type Company SplitShuzo will be the splitting company, and Shuzo International will be the succeeding company.
2. Split business and scaleBusiness: Management of foreign group companies, and export
and sale of alcoholic beverages, seasonings, etc.Scale of sales: ¥621 million ($5,544 thousand) as of March 31, 2017
3. Outline of the splitting company and succeeding company
4. Financial situation and performance for the most recent fiscal year of the splitting company
5. Effective date of the company split July 3, 2017 (scheduled)
6. Rights and obligations to be succeeded to the newly established companyThe newly established company will succeed the assets, liabilities, contracts and other rights and obligations that belong to the transferred business of the splitting company as of the date of the company split.
Consolidated Statement of Cash FlowsTakara Holdings Inc. and Consolidated Subsidiaries Year Ended March 31, 2017
Millions of YenThousands of
U.S. Dollars (Note 1)
2016 20172017
¥ 12,548
(4,664)6,180
281
688(2,171)
25(239)244
(1,747)(9)
140(904)
(2,174)10,373
2,903(13,173)
6,225(5,743)
(51)(1,026)
(10,864)
(5,000)(2,014)
(2,022)(445)
(9,482)
(240)(10,212)42,749
¥ 32,536
¥ 14,520
(5,218)6,213
667(878)
(1,334)(1,377)
37208
(261)478
6419
(653)(1,694)12,826
8,449(10,070)22,028(5,376)
(1,327)
2,070
42616,200
(2,413)
(415)(2,828)
3126,22832,536
¥ 58,765
$ 129,642
(46,589)55,4735,955
(7,839)
(11,910)(12,294)
3301,857
(2,330)4,267
533,741
(5,830)(15,125)114,517
75,437(89,910)196,678(48,000)
(11,848)
18,482
3,803144,642
(21,544)
(3,705)(25,250)
276234,178290,500
$ 524,687
See notes to consolidated financial statements.
OPERATING ACTIVITIES:Income before income taxes Adjustments for:
Income taxes paidDepreciation and amortizationImpairment lossGain on step acquisitionsChanges in assets and liabilities:
(Increase) decrease in trade receivablesIncrease in inventoriesDecrease in interest and dividends receivableIncrease (decrease) in trade payables(Decrease) increase in liquor taxes payableIncrease (decrease) in consumption taxes payableIncrease (decrease) in interest payableIncrease in liability for retirement benefits
Other, netTotal adjustmentsNet cash provided by operating activities
INVESTING ACTIVITIES:Net decrease in time depositsPurchases of marketable securities and investment securitiesProceeds from sales and redemption of marketable securitiesPurchases of property, plant, and equipmentProceeds from purchase of shares of subsidiaries resulting in
change in scope of consolidation (Note 15)Purchase of shares of subsidiaries resulting in change
in scope of consolidation (Note 15)Payments for sales of shares of subsidiaries resulting in change
in scope of consolidationOther, net
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES:Redemption of bondsCash dividends paidPurchase of ownership interests in a subsidiary without
a change in consolidation scope Other, net
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ONCASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTSCASH AND CASH EQUIVALENTS, BEGINNING OF YEARCASH AND CASH EQUIVALENTS, END OF YEAR
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2016 consolidated financial statements to conform to the classifications used in 2017.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Takara Holdings Inc. (the “Company”) is incorporated and operates. Japanese yen figures of less than a million yen are rounded down to the nearest million yen, except for per share data and the amounts in Notes 2.s and 18. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥112 to $1, the approximate rate of exchange at March 31, 2017. U.S. dollar figures of less than a thousand dollars are rounded down to the nearest thousand dollars, except for per share data and the amounts and in Notes 2.s and 18. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
49 TAKARA HOLDINGS INC. Annual Report 2017 50TAKARA HOLDINGS INC. Annual Report 2017
a. Consolidation — The consolidated financial statements as of March 31, 2017, include the accounts of the Company and its 61 (44 in 2016) consolidated subsidiaries (together, the “Group”). Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.
Investments in associated companies (1 in 2017, and 2 in 2016) are accounted for by the equity method.
Investments in the remaining associated companies are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
The difference of the cost of acquisition from the fair value of the net assets of an acquired subsidiary at the date of acquisition is recorded as goodwill and other intangibles and amortized on a pro rata basis over a certain period not exceeding 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also eliminated.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements — Under Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force (“PITF”) No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,” the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification—"FASB ASC”) tentatively may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through
other comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.
c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method — ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments,” requires adjustments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s financial statements are used in applying the equity method, unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.
d. Business Combinations — Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the
accounting for the business combination had been completed at the acquisition date. A parent’s ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus as long as the parent retains control over its subsidiary.
On November 14, 2016, Takara Shuzo Co., Ltd. (“Shuzo”), a consolidated subsidiary of the Company, subscribed the third-party allotment of shares by Mutual Trading Co., Inc. (“Mutual Trading”), an affiliate accounted for by the equity method of the Company, in which Shuzo had owed 45.4% of shares of Mutual Trading before the subscription. As a result, Shuzo became to own 51.0% of shares of Mutual Trading, and Mutual Trading became a consolidated subsidiary of the Company.
On January 17, 2017, Shuzo subscribed the third-party allotment of shares by Nippon Food Supplies Company Pty Ltd (“Nippon Food”). As a result, Shuzo acquired 51.0% of shares of Nippon Food and Nippon Food became a consolidated subsidiary company of the Company.
These acquisitions were accounted for by the purchase method of accounting (see Note 3).
e. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificates of deposit, trust fund investments, commercial paper, and trust beneficiary rights, all of which mature or become due within three months of the date of acquisition.
f. Marketable and Investment Securities — Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) held-to-maturity debt securities, for which there is the positive intent and ability to hold to maturity, are reported at amortized cost and (2) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method.
For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
g. Inventories — Inventories are mainly stated at the lower of cost, determined by the average method, or net selling value.
h. Property, Plant, and Equipment — Property, plant, and equipment are stated at cost. Depreciation is computed principally by the declining-balance method at rates based on the estimated useful lives of the assets. The range of useful lives is principally from 3 to 50 years for buildings and structures and from 4 to 15 years for machinery, equipment, and vehicles.
Pursuant to an amendment to the Corporate Tax Act, certain domestic consolidated subsidiaries adopted ASBJ PITF No. 32, “Practical Solution on a change in depreciation method due to Tax Reform 2016” and changed the depreciation method for building improvements and structures acquired on or after April 1, 2016, from the declining-balance method to the straight-line method.
The effect of the change is immaterial.
i. Long-Lived Assets — The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. j. Goodwill — The Company and its domestic and overseas consolidated subsidiaries amortize goodwill on a pro rata basis over a certain period not exceeding 20 years. Accounting for impairment of long-lived assets also applies to goodwill.
k. Retirement and Pension Plans — Each of the employee retirement benefit programs of the Company and certain consolidated subsidiaries consist of an unfunded lump-sum severance payment plan, a defined benefit corporate pension plan and a defined contribution pension plan as described in Note 9.
The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis. Actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within accumulated other comprehensive income, after adjusting for tax effects, and are recognized in profit or loss over 10 years no longer than the expected average remaining service period of the employees.
l. Allowance for Doubtful Accounts — The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding.
m. Accrued Sales Promotion Expenses — Accrued sales promotion expenses are stated at amounts considered to be appropriate based on the purchased quantities of finished products by retail stores, identified by Shuzo, multiplied by the past year actual unit cost of the relevant products.
n. Leases — Finance lease transactions are capitalized by recognizing lease assets and lease obligations in the balance sheet.
Lease assets related to finance lease transactions without title transfer are depreciated on a straight-line basis over the leased periods as their useful lives and with no residual value.
o. Income Taxes — The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.
The Group applied ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” effective April 1, 2016. There was no impact from the adoption of this guidance for the year ended March 31, 2017.
p. Foreign Currency Transactions — All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.
q. Foreign Currency Financial Statements — The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date, except for equity, which is translated at the historical rate. The resulting translation differences, less those attributable to noncontrolling interests, are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the average exchange rate. r. Derivative Financial Instruments — The Group uses derivative financial instruments, such as foreign currency forward contracts and foreign currency options, as a means of hedging exposure to foreign currency exchange rate risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: (1) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income and (2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
The foreign currency forward contracts are utilized to hedge payments of royalties and foreign currency import transactions. Payables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting.
Foreign currency options are utilized to hedge foreign currency exposures in the procurement of raw materials from overseas suppliers. These options, which qualify for hedge accounting, are measured at fair value at the balance sheet date and the unrealized gains or losses are deferred until maturity as another liability or asset.
s. Per Share Information — Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year.
t. Company Split — The Company resolved at the Board of Directors meeting held on February 16, 2017 that Shuzo will spin off
a part of its business through a company split (incorporation-type company split) and transfer it to a company to be established named Takara Shuzo International Co., Ltd. (“Shuzo International”). Shuzo International will allot and deliver all the shares issued in conjunction with the company split to Shuzo, while at the same time Shuzo will allocate all the shares allotted and delivered to the Company, the wholly owning parent company of Shuzo, as dividends of surplus. Consequently, Shuzo International will become a wholly owned subsidiary of the Company.
1. Form of the company splitIncorporation-type Company SplitShuzo will be the splitting company, and Shuzo International will be the succeeding company.
2. Split business and scaleBusiness: Management of foreign group companies, and export
and sale of alcoholic beverages, seasonings, etc.Scale of sales: ¥621 million ($5,544 thousand) as of March 31, 2017
3. Outline of the splitting company and succeeding company
4. Financial situation and performance for the most recent fiscal year of the splitting company
5. Effective date of the company split July 3, 2017 (scheduled)
6. Rights and obligations to be succeeded to the newly established companyThe newly established company will succeed the assets, liabilities, contracts and other rights and obligations that belong to the transferred business of the splitting company as of the date of the company split.
Splitting Company(As of June 29, 2017)
Newly Established Company(Schedule Date of Establishment:
July 3, 2017)
Company name
Head office location
RepresentativeBusiness
Paid-in Capital
Date of establishmentFiscal year endNumber of issued sharesMajor shareholders and shareholding ratio
Takara Shuzo Co., Ltd.
609 Takenaka-cho, Fushimi-ku, Kyoto Japan
Kenji Murata, PresidentMerchandise and sales of alcoholic beverages, seasonings, etc.
¥1,000 million ($8,928 thousand)April 1, 2002March 3120,000 shares100% owned by the Company
Takara Shuzo International Co., Ltd.20 Naginataboko-cho, Shijo-dori Karasuma Higashi-iru, Shimogyo-ku, Kyoto JapanMutsumi Kimura, PresidentManagement of group companies, and export and sale of alcoholic beverages, seasonings, etc.¥10 million ($89 thousand)July 3, 2017 (scheduled)March 31200 shares100% owned by the Company
Millions of YenThousands ofU.S. Dollars
20172017¥ 71,758123,239150,074
4,3293,619
$ 640,6961,100,3481,339,946
38,65132,312
. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
EquityNet assetsNet sales Operating incomeNet income
51 TAKARA HOLDINGS INC. Annual Report 2017 52TAKARA HOLDINGS INC. Annual Report 2017
u. Change in Reportable Segments — In the year ended March 31, 2017, the Group had three reportable segments, the Takara Shuzo Group, the Takara Bio Group, and Takara Healthcare Inc. As a result of the company split, splitting oversea business from Shuzo and the establishment of Shuzo International, the reportable
segments will be changed. The new reportable segments will be Takara Shuzo, the Takara Shuzo International Group, and the Takara Bio Group from the year ending March 31, 2018. Financial Information for the year ended March 31, 2017, which is prepared using the new segmentation, is as follows.
Business Combinations by Acquisitionsa. Acquisition of Shares of Mutual Trading Co., Inc.On November 10, 2016, the Board of Directors of Shuzo resolved to subscribe to the third-party allotment of shares by Mutual Trading, a Japanese food wholesaler in the United States. On November 14, 2016, Shuzo acquired the shares of Mutual Trading. Mutual Trading had been an affiliate accounted for by the equity method
3. BUSINESS COMBINATIONS
of the Company, in which Shuzo had owned 45.4% of its voting rights immediately before the acquisition. As a result of the subscription, the ownership ratio of its voting rights turned to be 51.0%, and therefore Mutual Trading became a consolidated subsidiary of the Company.
2. The term which is included into the consolidated financial statements of the GroupFor the period October 1, 2016 to December 31, 2016, Mutual Trading has been accounted for as a subsidiary by the acquisition/purchase method.For the period January 1, 2016 to September 30, 2016, Mutual Trading was accounted for as an affiliate by the equity method.
3. Acquisition cost of the acquired company and related details of each class of consideration for acquisition
Fair value of the shares of Mutual Trading owned by Takara Shuzo immediately before the acquisition
Cash paid for additional acquisitionTotal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
4. Expenses related to acquisitionMainly advisory fee: ¥83 million ($741 thousand)
5. The difference between acquisition cost and total of each transactions until acquisitionGain on step acquisition: ¥878 million ($7,839 thousand)
6. GoodwillGoodwill recorded in connection with the acquisition: ¥120 million ($1,191 thousand) It was wholly amortized in the year ended March 31, 2017 since it is immaterial.
7. The estimated fair values of the assets acquired and the liabilities assumed at the acquisition date were as follows:
Millions of Yen
Sales:Sales to external customersIntersegment sales or transfers
Total
Segment profitSegment assetsOther:
DepreciationAmortization of goodwillInvestment in equity method affiliateIncrease in property, plant, and equipment and intangible assets
Reportable Segment
Total Other Reconciliation ConsolidatedTakaraShuzo
Takara ShuzoInternational
GroupTakara Bio
Group
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
Notes: 1. “Other” represents operating segments that are not included in the reportable segments, and comprises other subsidiaries, including a printing business.2. Details of “Reconciliation” are as follows.
(1) Sales to external customers consist of income from business contracting recognized by the Company.(2) Segment profit includes eliminations of intersegment transactions of ¥61 million ($554 thousand), and income of the Company not allocated to
operating segments of ¥(11) million ($(98) thousand) as of March 31, 2017.(3) Segment assets include assets of the Company not allocated to operating segments of ¥47,963 million ($428,241 thousand), and other adjustment
(principally eliminations of intersegment transactions) of ¥(19,490) million ($(174,017) thousand) as of March 31, 2017. Assets attributed to the Company include surplus funds and long-term investment assets.
(4) Depreciation is the amount of depreciation which the Company recognized.(5) Investment in equity method affiliate is the cost of investment in an affiliate company not allocated to operating segments.(6) Increase in property, plant, and equipment and intangible assets comprises investment of the Company.
3. Segment profit has been reconciled with the operating income in the consolidated statement of income.
¥ 149,40844
149,452
5,07190,931
2,196
2,188
¥ 37,278262
37,540
3,18264,759
623424
763
¥ 28,529845
29,375
3,20267,143
1,722162
1,648
¥ 215,2161,152
216,369
11,456222,834
4,542586
4,600
¥ 18,97620,04139,017
2,16723,061
437
666
¥ 0(21,193)(21,193)
(72)28,472
191
1,407
1,391
¥ 234,193
234,193
13,551274,368
5,171586
1,407
6,658
Thousands of U.S. Dollars
Sales:Sales to external customersIntersegment sales or transfers
Total
Segment profitSegment assetsOther:
DepreciationAmortization of goodwillInvestment in equity method affiliateIncrease in property, plant, and equipment and intangible assets
Reportable Segment
Total Other Reconciliation ConsolidatedTakaraShuzo
Takara ShuzoInternational
GroupTakara Bio
Group
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
2017 2017
$1,334,000392
1,334,392
45,276811,883
19,607
19,535
$332,8392,339
335,178
28,410578,205
5,5623,785
6,812
$254,7237,544
262,276
28,589599,491
15,3751,446
14,714
$1,921,57110,285
1,931,866
102,2851,989,589
40,5535,232
41,071
$169,428178,937348,366
19,348205,901
3,901
5,946
$ 0(189,223)(189,223)
(642)254,214
1,705
12,562
12,419
$2,091,008
2,091,008
120,9912,449,714
46,1695,232
12,562
59,446 ¥ 3,414860
¥ 4,274
$ 30,4827,678
$ 38,160
Current assetsFixed assets
Total assets acquiredCurrent liabilitiesNon-current liabilities
Total liabilities assumed
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2017 2017
¥ 10,3035,610
¥ 15,913¥ 5,449
2,350¥ 7,799
$ 91,99150,089
$ 142,080$ 48,651
20,982$ 69,633
1. Outline of the business combination (1) Name and business outline of the acquired entity Entity name: Mutual Trading Co., Inc. (United States) Business description: Import and wholesale of alcoholic beverages, food products, and seasonings (2) Main purpose of business combination
To build and expand a Japanese food wholesale network overseas and to further expand the Group’s business and to increase our corporate value by spreading Japanese food culture around the world
(3) Date of the business combination November 14, 2016 (4) Legal form of the business combination Subscription of the third-party allotment of shares
(5) Entity name after combination No change in the entity name (6) Acquisition of the ownership ratio of its voting rights
The ownership ratio of its voting rights immediately before the acquisition: 45.4%Additionally acquired ownership ratio of its voting rights on the day of business combination: 5.6%The ownership ratio of its voting rights after the acquisition: 51.0%
(7) Basis for determining the acquiring companyShuzo came to own 51.0% of the voting rights of Mutual Trading by subscription to the third-party allotment of shares of Mutual Trading.
53 TAKARA HOLDINGS INC. Annual Report 2017 54TAKARA HOLDINGS INC. Annual Report 2017
The costs and aggregate fair values of marketable and investment securities at March 31, 2017 and 2016, are as follows:
Millions of Yen
Securities classified as: Available-for-sale:
Equity securitiesDebt securitiesOthers
Held-to-maturity
Unrealized Gains Unrealized Losses Fair ValueCostMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands of U.S. Dollars
Securities classified as: Available-for-sale:
Equity securitiesDebt securitiesOthers
Held-to-maturity
Unrealized Gains Unrealized Losses Fair ValueCostMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of Yen
Securities classified as: Available-for-sale:
Equity securitiesDebt securitiesOthers
Unrealized Gains Unrealized Losses Fair ValueCostMarch 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b. Acquisition of Shares of Nippon Food Supplies Company Pty Ltd
Shuzo resolved at its Board of Directors’ meeting held on January 16, 2017 to subscribe to the third-party allotment of shares by Nippon Food, a Japanese food wholesaler in Australia. Through the subscription to the third-party allotment of shares, Shuzo’s
ownership ratio of Nippon Food’s voting rights became 51.0%, and therefore Nippon Food became a consolidated subsidiary (specified subsidiary) of the Company.
2. The term which is included into the consolidated financial statements of the GroupThe results of operations for Nippon Food were not included in the Company’s consolidated statement of income as the Company consolidated only balance sheet of Nippon Food.
3. Acquisition cost of the acquired company and related details of each class of consideration for acquisition
Marketable and investment securities as of March 31, 2017 and 2016, consist of the following:
4. MARKETABLE AND INVESTMENT SECURITIES
Millions of YenThousands ofU.S. Dollars
Current: Debt securities Other
TotalNon-current:
Investment equity securitiesDebt securities
Total
2016 20172017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. If this business combination had been completed on April 1, 2016, the beginning of the current fiscal year, the unaudited condensed pro forma consolidated statement of income for the year ended March 31, 2017, would be as follows:
7. If this business combination had been completed as of April 1, 2016, the beginning of the current fiscal year, the unaudited condensed pro forma consolidated financial statement of income for the year ended March 31, 2017, is not disclosed since it is difficult to estimate.
The condensed pro forma financial information of the business combination is calculated assuming the integration was completed on April 1, 2016, the beginning of the current fiscal year ended March 31, 2017. It is the difference between the net sales and income, which are adjusted by intercompany transaction eliminations, reported between April 1, 2016 and March 31, 2017, and the net sales and income for the consolidated statement of income.
The above pro forma financial information has not been audited.
SalesOperating income
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2017 2017
¥ 20,187676
$ 180,2416,035
Consideration for acquisition - CashTotal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2017 2017¥ 1,372¥ 1,372
$ 12,250$ 12,250
4. Expenses related to acquisitionMainly advisory fee: ¥54 million ($482 thousand)
5. GoodwillGoodwill recorded in connection with the acquisition: ¥618 million (AUD 7,332 thousand, $5,517 thousand) It will be amortized on a straight line basis over 20 years.
6. The estimated fair values of the assets acquired and the liabilities assumed at the acquisition date were as follows:
Current assetsFixed assets
Total assets acquiredCurrent liabilitiesNon-current liabilities
Total liabilities assumed
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2017 2017
¥ 1,851170
¥ 2,021¥ 338
241¥ 580
$ 16,5261,517
$ 18,044$ 3,017
2,151$ 5,178
¥ 2,6912,330
¥ 5,021
¥ 24,08648
¥ 24,135
¥ 10,6066,931
¥ 17,537
¥ 20,30848
¥ 20,356
$ 24,02620,803
$ 44,830
$ 215,053428
$ 215,491
¥ 8,898698
2,3302,000
¥ 13,6940
¥ 07
¥ 22,592691
2,3302,000
¥ 9,079609
6,931
¥ 9,7400
¥ 561
¥ 18,764607
6,931
$ 79,4466,232
20,80317,857
$ 122,2670
$ 062
$ 201,7146,169
20,80317,857
1. Outline of the business combination (1) Name and business outline of the acquired entity Entity name: Nippon Food Supplies Company Pty Ltd (Australia) Business description:Import and wholesale of alcoholic beverages, food products, and seasonings (2) Main purpose of business combination
To build and expand a Japanese food wholesale network overseas and to further expand the Group’s business and to increase our corporate value by spreading Japanese food culture around the world
(3) Date of the business combination January 17, 2017
(4) Legal form of the business combination Subscription of the third-party allotment of shares (5) Entity name after combination No change in the entity name (6) Acquisition of the ownership ratio of its voting rights
51.0% (7) Basis for determining the acquiring company
Shuzo became to own 51.0% of the voting rights of Nippon Food by subscription of the third-party allotment of shares of Nippon Food.
55 TAKARA HOLDINGS INC. Annual Report 2017 56TAKARA HOLDINGS INC. Annual Report 2017
Inventories at March 31, 2017 and 2016, are as follows:
5. INVENTORIES
Millions of YenThousands ofU.S. Dollars
Finished products and merchandiseSemifinished productsWork in processRaw materials and supplies
Total
2016 20172017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Property to be sold(Production facilities)Property to be sold(Bachelors’ dormitory)Idle propertyGoodwill
The Group reviewed its long-lived assets for impairment and, as a result, recognized impairment losses for the following long-lived assets for the years ended March 31, 2017 and 2016.
6. LONG-LIVED ASSETS
Year Ended March 31, 2017 Impairment Loss
Millions of Yen
Available-for-sale:Equity securitiesDebt securities
Total
Proceeds Realized Gains Realized LossesMarch 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands of U.S. Dollars
Available-for-sale:Equity securitiesDebt securities
Total
Proceeds Realized Gains Realized LossesMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in equity instruments that do not have a quoted market price in an active market and securities without contractual maturities (for which the totals included in the consolidated balance sheets at March 31, 2017 and 2016, are ¥1,542 million ($13,767 thousand) and ¥1,592 million, respectively) do not have fair values because their fair value cannot be reliably determinable.
The impairment losses on marketable and investment securities recognized for the years ended March 31, 2017 and 2016, were as follows:
The information for available-for-sale securities which were sold during the years ended March 31, 2017 and 2016 is as follows:
Millions of Yen
Available-for-sale:Equity securitiesDebt securities
Total
Proceeds Realized Gains Realized LossesMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Millions of Yen
(1) Reason for recognizing impairment lossTakara Bio Inc. (“Bio”), a 60.91% owned subsidiary of the Company, recognized an impairment loss on property to be sold with net recoverable value was less than its carrying value as of March 31, 2017 due to the resolution of the Board of Directors of Bio on December 15, 2016. Bio recognized an impairment loss on idle assets that were not likely to be used in the future as of March 31, 2017 and 2016. As for the goodwill, the performance of Takara Bio Europe AB (“TBEAB”), a subsidiary of the Company, has been below the plan formulated at the time of acquisition in recent years. Based on the decline profitability of TBEAB, recognized an impairment loss for on amount of March 31, 2017.
(2) Method of calculating recoverable amount
In the fiscal year ended March 31, 2017, as for the property to be sold, the recoverable values were measured at the net selling price, which was based on the expected selling price. As for the idle property, the recoverable values were measured at the net selling price, which was based on the appraisal value of real estate or reasonable estimation of the value of the assets. As for the goodwill, the recoverable amount was measured based on the value in use, and the discount rate used was 10.0%
Millions of YenThousands ofU.S. Dollars
Marketable equity securitiesNon marketable equity securities
Total
2016 20172017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .¥ 16¥ 16
¥ 024
¥ 24$ 142$ 142
¥ 2891,604
¥ 1,893
¥ 400
¥ 40
¥ 00
¥ 0
$ 2,58014,321
$ 16,901
$ 3570
$ 357
$ 00
$ 0
¥ 29548
¥ 344
¥ 2730
¥ 273
¥
¥
¥ 27,4967,8041,2443,306
¥ 39,851
¥ 21,3578,3821,0773,401
¥ 34,218
$ 245,50069,67811,10729,517
$ 355,582
Takara Bio Inc.Otsu-shi, Shiga
Otsu-shi, Shiga
Otsu-shi, Shiga-
Total
Location Description
Buildingand
Structures
Machinery,Equipment,and Vehicles Others Land Goodwill Total
¥ 131
16
¥ 148
¥ 5
¥ 5
¥ 9
0
¥ 9
¥ 1
34
286
¥ 322¥ 181¥ 181
¥ 148
51
286181
¥ 667
. . . . . . . . . . . . . . . . . .Idle property
Year Ended March 31, 2016 Impairment Loss
Millions of Yen
Takara Bio Inc.Otsu-shi, Shiga
Location Description
Buildingand
Structures
Machinery,Equipment,and Vehicles Others
DismantlingCost Total
¥ 209 ¥ 0 ¥ 8 ¥ 63 ¥ 281
. . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Property to be sold(Production facilities)Property to be sold(Bachelors’ dormitory)Idle propertyGoodwill
In the year ended March 31, 2016, Bio moved its headquarters from Otsu City to Kusatsu City, Shiga Prefecture in August, 2015. The Company recognized impairment loss on the unutilized assets of the former headquarters at Otsu City. The recoverable amounts were measured by their value in use, and they were valued as zero since future cash flows were not expected from the use of those assets.
Impairment Loss
Thousands of U.S. Dollars
Takara Bio Inc.Otsu-shi, Shiga
Otsu-shi, Shiga
Otsu-shi, Shiga-
Total
Location Description
Buildingand
Structures
Machinery,Equipment,and Vehicles Others Land Goodwill Total
$ 1,169
142
$ 1,321
$ 44
$ 44
$ 80
0
$ 80
$ 8
303
2,553
$ 2,875$ 1,616$ 1,616
$ 1,321
455
2,5531,616
$ 5,955
57 TAKARA HOLDINGS INC. Annual Report 2017 58TAKARA HOLDINGS INC. Annual Report 2017
Short-term bank loans consisted principally of term loans with interest at annual rates ranging from 0.406% to 9.500% and from 0.463% to 9.500% at March 31, 2017 and 2016, respectively.
The Company made a commitment line contract with a financial institution for flexibility of financing. Unused balances of the credit based on the contract were ¥10,000 million ($89,285 thousand) at both March 31, 2017 and March 31, 2016.
Long-term debt at March 31, 2017 and 2016, is as follows:
Annual maturities of long-term debt as of March 31, 2017, for the next five years and thereafter are as follows:
7. SHORT-TERM BANK LOANS AND LONG-TERM DEBT 9. RETIREMENT AND PENSION PLANS
8. LIQUOR TAXES PAYABLE
Millions of YenThousands ofU.S. Dollars
Loans principally from banks, due serially to September 2026, with interest rates ranging from 0% to 5.15% (0% to 3.00% in 2016):
CollateralizedUnsecured
1.960% unsecured bonds, due September 20171.561% unsecured bonds, due May 20200.468% unsecured bonds, due April 20171.162% unsecured bonds, due April 2022Obligation under finance leases
TotalLess current portionLong-term debt, less current portion
2016 20172017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenYear Ending March 31Thousands ofU.S. Dollars
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At March 31, 2017, notes and accounts receivable of ¥2,468 million ($22,035 thousand), inventories of ¥4,260 million ($38,035 thousand), and property, plant, and equipment of ¥2,667 million ($23,812 thousand) were pledged as collateral for short-term bank loans of ¥3,550 million ($31,696 thousand), and long-term debt (including current portion of long-term debt) of ¥1,412 million ($12,607 thousand).
(1) The changes in defined benefit obligation for the years ended March 31, 2017 and 2016, are as follows:
Balance at beginning of year (as previously reported)Current service costInterest costActuarial loss (gain)Benefit paidOthers
Balance at end of year
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) The changes in plan assets for the years ended March 31, 2017 and 2016, are as follows:
Balance at beginning of yearExpected return on plan assets Actuarial gainContribution from the employerBenefit paidOthers
Balance at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) The components of net periodic benefit costs for the years ended March 31, 2017 and 2016, are as follows:
Service costInterest costExpected return on plan assetsAmortization of prior service costRecognized actuarial lossNet periodic benefit costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets as of March 31, 2017 and 2016, is as follows:
Defined benefit obligationPlan assets
TotalUnfunded defined benefit obligationNet liability arising from defined benefit obligation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability for retirement benefitsPrepaid benefit costNet liability arising from defined benefit obligation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
The Company and certain consolidated subsidiaries provide lump-sum payment plans, a defined benefit corporate pension plan, and a defined contribution pension plan.
Certain consolidated subsidiaries have enrolled in the Smaller Enterprise Retirement Allowance Mutual Aid System.Certain consolidated subsidiaries account for part of the defined benefit obligations and benefit costs for retirement lump-sum
payment using the simplified method.
Liquor taxes are calculated at various rates according to the quantities of categorized beverages containing more than 1% of alcohol when delivered from manufacturing lots or taken outside of the bonded area.
Liquor taxes are included in the cost of sales and inventories. Liquor taxes payable are to be paid by the end of the second month following the delivery or after being taken outside the bonded area.
Millions of YenThousands ofU.S. Dollars
2016 20172017
Millions of YenThousands ofU.S. Dollars
2016 20172017
Millions of YenThousands ofU.S. Dollars
2016 20172017
Millions of YenThousands ofU.S. Dollars
2016 20172017
Millions of YenThousands ofU.S. Dollars
2016 20172017
201820192020202120222023 and thereafterTotal
¥ 1,41210,4015,0005,0005,0005,0001,068
32,88211,106
¥ 21,776
¥ 12210,2065,0005,0005,0005,000
95931,288
321¥ 30,967
$ 12,60792,86644,64244,64244,64244,6429,535
293,58999,160
$ 194,428
¥ 11,106426
5,4395,289
16010,460
¥ 32,882
$ 99,1603,803
48,56247,2231,428
93,392$ 293,589
¥ 14,243793122392
(520)(225)
¥ 14,805
$ 127,1697,0801,0893,500
(4,642)(2,008)
$ 132,187
¥ 14,004810128(55)
(587)(57)
¥ 14,243
¥ 6,573134
(5)447
(188)(220)
¥ 6,740
$ 58,6871,196
(44)3,991
(1,678)(1,964)
$ 60,178
¥ 6,363141(85)458(251)
(54)¥ 6,573
¥ 6,050(6,740)
(689)8,755
¥ 8,065
$ 54,017(60,178)
(6,151)78,169
$ 72,008
¥ 5,839(6,573)
(733)8,403
¥ 7,670
¥ 8,961(896)
¥ 8,065
$ 80,008(8,000)
$ 72,008
¥ 8,544(874)
¥ 7,670
¥ 792122
(134)(285)280
¥ 776
$ 7,0711,089
(1,196)(2,544)2,500
$ 6,928
¥ 810128(141)(287)209
¥ 719
59 TAKARA HOLDINGS INC. Annual Report 2017 60TAKARA HOLDINGS INC. Annual Report 2017
(7) Plan assets as of March 31, 2017 and 2016a. Components of plan assets
Plan assets as of March 31, 2017 and 2016, consisted of the following:
(8) Assumptions used for the years ended March 31, 2017 and 2016, are set forth as follows:
Debt investmentsGeneral account of insurance companyEquity investmentsCash and cash in bankOthersTotal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rateExpected rate of return on plan assetsExpected rate of future salary increase
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2017 and 2016, are as follows:
Prior service costActuarial (gain) loss
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b. Method of determining the expected rate of return on plan assetsThe expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets.
The Company uses the compensation increase index determined in accordance with the Company’s human resources and wage policy as the expected rate of future salary increase.
(9) Defined contribution planThe amounts of contribution required for the defined contribution plan paid by the Company and its subsidiaries were ¥172 million ($1,535 thousand) and ¥164 million for the years ended March 31, 2017 and 2016, respectively.
10. EQUITY
12. RESEARCH AND DEVELOPMENT EXPENSES
(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company does not meet all the above criteria.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors, if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus, and retained earnings can be transferred among the accounts within equity under certain conditions upon resolution of the shareholders.
(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders, which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component equity.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.
11. RELATED-PARTY TRANSACTIONS
Net sales and purchases representing transactions of the Group with associated companies for the years ended March 31, 2017 and 2016, are as follows:
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:
Research and development expenses charged to income were ¥4,550 million ($40,625 thousand) and ¥4,608 million for the years ended March 31, 2017 and 2016, respectively.
Millions of YenThousands ofU.S. Dollars
2016 20172017
Unrecognized prior service costUnrecognized actuarial (gain)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2016 20172017
2017 2016
2017 2016
Net salesPurchases
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2016 20172017
(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2017 and 2016, are as follows:
¥ (295)(105)
¥ (400)
$ (2,633)(937)
$ (3,571)
¥ (290)181
¥ (108)
¥ 1,139(2,112)
¥ (973)
$ 10,169(18,857)
$ (8,687)
¥ 1,435(2,007)
¥ (572)
52%26120
10100%
52%24120
12100%
mainly 0.7%mainly 2.0%mainly 3.8%
mainly 0.7%mainly 2.0%mainly 3.3%
¥ 75871
¥ 1,17173
$ 6,767633
61 TAKARA HOLDINGS INC. Annual Report 2017 62TAKARA HOLDINGS INC. Annual Report 2017
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statements of income for the years ended March 31, 2017 and 2016, is as follows:
At March 31, 2017, the Company and certain consolidated subsidiaries have tax loss carryforwards aggregating approximately ¥2,250 million ($20,089 thousand), which are available to be offset against taxable income of such consolidated subsidiaries. These tax loss carryforwards, if not utilized, will expire as follows:
13. INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes, which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 31% for the year ended March 31, 2017 and 33% for the year ended March 31, 2016. Overseas consolidated subsidiaries are subject to income
Normal effective statutory tax rate in JapanExpenses not deductible for income tax purposesChange in valuation allowanceWithholding taxes in foreign countriesAmortization of goodwillUndistributed earnings of foreign consolidated subsidiariesRecognition of gain on step acquisitionsOther, netActual effective tax rate
20162017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
Deferred tax assets:InventoriesAccrued bonusesAccrued sales promotion expensesEnterprise tax payableDeferred gain or loss on derivatives under hedge accountingTax loss carryforwardsUnrealized profit on sale of inventoriesRetirement benefitsMarketable and investment securitiesDepreciationDefined retirement benefit plansImpairment lossesOther
SubtotalLess valuation allowance
TotalDeferred tax liabilities:
Unrealized gain on available-for-sale securitiesDeferred gain on fixed assetsDeferred gain on fixed assets inherited by a corporate divisionBasis difference of acquired intangible assetsBasis difference of acquired landOther
TotalNet deferred tax (liabilities) assets
2016 20172017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current deferred assetsNoncurrent deferred assetsNoncurrent deferred liabilities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2016 20172017
Millions of YenThousands ofU.S. Dollars
20182019202020212022 and thereafterTotal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ending March 31
taxes of the countries in which they operate.The tax effects of the significant temporary differences and
tax loss carryforwards, which resulted in deferred tax assets and liabilities at March 31, 2017 and 2016, are as follows:
14. SUPPLEMENTAL CASH FLOW INFORMATION
(1) Nippon Food Supplies Company Pty LtdThe Company subscribed to the third-party allotment of shares of Nippon Food. As the result, Nippon Food became a consolidated subsidiary during the year ended March 31, 2017 (See Note 3: BUSINESS COMBINATIONS).
The breakdown of assets and liabilities at the beginning of consolidation of Nippon Food and its subsidiaries as the result of the acquisition of shares and reconciliation between cash paid for the shares of Nippon Food and payment for the acquisition, net of cash and cash equivalents acquired, is as follows:
Current assetsFixed assetsGoodwillCurrent liabilitiesLong-term liabilitiesNoncontrolling interestsForeign currency translation adjustmentsCash paid for the sharesCash and cash equivalents of consolidated subsidiariesAcquisition of shares of Nippon Food, net of cash and cash equivalents acquired
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2017 2017¥ 2,000
264902
(469)(293)(706)
181,715(388)
¥ 1,327
$ 17,8572,3578,053
(4,187)(2,616)(6,303)
16015,312(3,464)
$ 11,848
(2) Mutual Trading Co., Inc.The Company subscribed to the third-party allotment of shares of Mutual Trading. As the result, Mutual Trading became a consolidated subsidiary during the year ended March 31, 2017 (See Note 3: BUSINESS COMBINATIONS).
The breakdown of assets and liabilities at the beginning of consolidation of Mutual Trading and its 14 subsidiaries as the result of the acquisition of shares and reconciliation between cash paid for the shares of Mutual Trading and payment for the acquisition, net of cash and cash equivalents acquired, is as follows:
Current assetsFixed assetsGoodwillCurrent liabilitiesLong-term liabilitiesNoncontrolling interestsForeign currency translation adjustmentsCash paid for the sharesAccumulated gain as of September 30, 2016Gain on step acquisitionsCash and cash equivalents of consolidated subsidiariesProceeds from purchase of shares of Mutual Trading, net of cash and cash equivalents acquired
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of YenThousands ofU.S. Dollars
2017 2017¥ 10,303
5,610120
(5,449)(2,350)(4,133)
1724,274
(2,535)(878)
(2,931)
¥ (2,070)
$ 91,99150,089
1,071(48,651)(20,982)(36,901)
1,53538,160
(22,633)(7,839)
(26,169)
$ (18,482)
¥ 323758588204
0688304
2,192438329283424
1,0867,623
(2,477)¥ 5,146
¥ (4,103)(402)(381)(486)(508)
(1,219)¥ (7,101)¥ (1,954)
¥ 261690579174199837227
2,186435346180283766
7,171(2,101)
¥ 5,069
¥ (2,858)(376)(395)(596)
(735)¥ (4,962)¥ 107
$ 2,8836,7675,2501,821
06,1422,714
19,5713,9102,9372,5263,7859,696
68,062(22,116)
$ 45,946
$ (36,633)(3,589)(3,401)(4,339)(4,535)
(10,883)$ (63,401)$ (17,446)
¥ 2,1121,496
(5,564)
¥ 2,0701,683
(3,647)
$ 18,85713,357
(49,678)
31.0%1.22.30.91.01.2
(1.9)0.7
36.4%
33.0%1.70.31.51.1
(0.1)
0.638.1%
¥ 438427336124528
¥ 1,856
$ 3,9103,8123,0001,1074,714
$ 16,571
63 TAKARA HOLDINGS INC. Annual Report 2017 64TAKARA HOLDINGS INC. Annual Report 2017
15. OPERATING LEASES
The Group leases certain buildings, machinery, computer equipment, and other assets.Total rental expenses for the years ended March 31, 2017 and 2016, were ¥2,465 million ($22,008 thousand) and ¥2,304 million, respectively. Obligations under operating leases as of March 31, 2017 and 2016, are as follows:
16. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Millions of YenThousands ofU.S. Dollars
Due within one yearDue after one yearTotal
2016 20172017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Group Policy for Financial InstrumentsThe Group invests in low-risk financial assets if it holds cash surpluses. The Group uses financial instruments, mainly bank loans and bonds, based on its capital financing plan. Derivatives are not used for speculative or trading purposes, but to avoid the risks described below.
Nature and Extent of Risks Arising from Financial Instruments and Risk Management for Financial Instruments
Credit risk and market riskAlthough receivables, such as notes and trade accounts, are exposed to customer credit risk, the Group manages due dates and account balances for every customer to identify doubtful receivables in the early stages and to mitigate default risk.
Although marketable securities, mainly certificates of deposit and held-to-maturity securities, are exposed to the credit risks of the bond issuers, the credit risk is kept extremely low by limiting funding to short maturities and high-credit rating bonds. Although investment securities, mainly stock, are exposed to the risk of market price fluctuations, the Group reviews the fair values quarterly if investment securities have market prices, and manages the financial condition of issuers regularly if they do not have market prices.
Payment terms of payables, such as notes and trade accounts, are less than three months. Although payables in foreign currencies, such as raw materials and merchandise, are exposed to the market risk of fluctuation in foreign currency exchange rates, those risks are hedged by using currency options and forward foreign currency contracts.
Bank loans and bonds are utilized for financing of business transactions and capital investments. Payment terms of bank loans and bonds are a maximum of nine years and seven years after the balance sheet date, respectively.
Derivative transactions entered into by the Group have been made in accordance with internal policies of the Finance Department, which regulates the authorization, purpose, credit limit amount, evaluation of the counterparties, and reporting procedures. Derivative transactions mainly include forward foreign currency
contracts and currency options for the purpose of hedging against the market risk of fluctuation in foreign currency exchange rates of transactions in foreign currencies. Although derivative transactions are exposed to the market risk of fluctuation in foreign currency exchange rates, these transactions are made only for the purpose of mitigating the risks of assets, liabilities, and transactions that become a hedged item. As the Group established a limit on contract amounts, the Group also believes that the effect of market risks on its business administration is not significant. As the Group manages its exposure to credit risk by limiting its funding to high-credit rating bonds, the Group recognizes that the exposure to credit risk is extremely low.
Information regarding the valuation method of hedged items and hedging instruments related to hedge accounting, hedge policies, and hedge effectiveness is included in Note 2.r.
Liquidity risk managementIn the Group, the Finance Department develops and updates a cash management plan pursuant to reporting by each department, and manages its liquidity risk by maintaining adequate volumes of liquid assets. In addition, consolidated subsidiaries also manage their liquidity risks in the same manner.
Supplementary explanation about matters related to fair values of financial instrumentsFair values of financial instruments are based on market prices in active markets or other rational valuation techniques if market prices do not exist. Fair values of financial instruments fluctuate as a result of adopting different preconditions because the calculation of fair values includes fluctuation factors. With respect to the contract amounts related to derivative transactions in Note 17, the amounts do not reflect market risks related to derivative transactions.
Concentration of Credit RiskAs of March 31, 2017, 19% of total receivables are from one major customer.
Cash and cash equivalentsTime depositsNotes and accounts receivable (Trade and associated companies)Marketable securities and investment securitiesTotalNotes and accounts payableShort-term bank loansCurrent portion of long-term debtLiquor taxes payableIncome taxes payableLong-term debtTotalDerivatives
Millions of Yen
CarryingValue Fair ValueMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value of Financial InstrumentsUnrealizedGain/Loss
Cash and cash equivalentsTime depositsNotes and accounts receivable (Trade and associated companies)Marketable securities and investment securitiesTotalNotes and accounts payableShort-term bank loansCurrent portion of long-term debtLiquor taxes payableIncome taxes payableLong-term debtTotalDerivatives
Thousands of U.S. Dollars
CarryingValue Fair ValueMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UnrealizedGain/Loss
Cash and cash equivalentsTime depositsNotes and accounts receivable (Trade and associated companies)Marketable securities and investment securitiesTotalNotes and accounts payableShort-term bank loansCurrent portion of long-term debtLiquor taxes payableIncome taxes payableLong-term debtTotalDerivatives
Millions of Yen
CarryingValue Fair ValueMarch 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UnrealizedGain/Loss
¥ 1,1065,551
¥ 6,657
¥ 608965
¥ 1,573
$ 9,87549,562
$ 59,437
¥ 58,7657,524
57,71727,614
¥ 151,621¥ 21,588
8,38911,106
7,5932,468
21,776¥ 72,910¥ (24)
$ 524,68767,178
515,330246,553
$ 1,353,758$ 192,750
74,90199,16067,79422,035
194,428$ 651,089$ (214)
¥ 58,7657,524
57,71727,614
¥ 151,621¥ 21,588
8,38911,189
7,5932,468
22,463¥ 73,680¥ (24)
¥ 82
686¥ 769¥
$ 732
6,125$ 6,866$
$ 524,68767,178
515,330246,553
$ 1,353,758$ 192,750
74,90199,90167,79422,035
200,562$ 657,955$ (214)
¥ 32,53616,55153,37536,302
¥ 138,764¥ 18,311
4,920321
7,8552,307
30,967¥ 64,683¥ (648)
¥ 32,53616,55153,37536,303
¥ 138,766¥ 18,311
4,920322
7,8552,307
32,084¥ 65,801¥ (648)
¥ 1¥ 1
¥ 0
1,117¥ 1,118¥
65 TAKARA HOLDINGS INC. Annual Report 2017 66TAKARA HOLDINGS INC. Annual Report 2017
Investments in equity instruments that do not have a quoted market price in an active market and securities without contractual maturities (the totals included in the consolidated balance sheets at March 31, 2017 and 2016 are ¥1,542 million ($13,767 thousand) and ¥1,592 million, respectively) do not have fair values because their fair value cannot be reliably determinable. Moreover, deposits from customers do not have fair values because their fair value cannot be reliably determinable.
Cash and cash equivalentsNotes and accounts receivable (Trade and associated companies)Marketable and investment securitiesHeld-to-maturity securities:
(1) Corporate bonds(2) Others
Available-for-sale securities with contractual maturities:(1) Government bonds and municipal bonds(2) Others
Total
Millions of Yen Thousands of U.S. Dollars
Due after One Yearthrough Five Years
Due in OneYear or LessMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Due after One Yearthrough Five Years
Due in OneYear or Less
Cash and cash equivalentsNotes and accounts receivable (Trade and associated companies)Held-to-maturity securities:
(1) Corporate bonds(2) Others
Available-for-sale securities with contractual maturities:(1) Government bonds and municipal bonds(2) Others
Total
Millions of Yen
Due after One Yearthrough Five Years
Due in OneYear or LessMarch 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17. DERIVATIVES
The Group enters into foreign currency forward contracts and foreign currency option agreements to hedge foreign currency exchange rate risk associated with certain liabilities denominated in foreign currencies.
All derivative transactions are entered into to hedge foreign currency exposures incorporated within the Group’s business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged liabilities.
Because the counterparties to these derivatives are limited to major international financial institutions, the Group does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with the Group’s policies, which regulate the authorization, purposes, credit limit amounts, evaluation of the counterparties, and reporting procedures.
Foreign currency forward contracts:Buying U.S. dollarBuying EuroBuying GB poundBuying Australia dollarBuying Japanese yenSelling Euro
Non-deliverable forward contracts:Selling Korean won
Foreign currency options:Buying put option Korean wonSelling call option Korean won
Total
Millions of YenContract Amount
Due after One YearContractAmount Fair ValueMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative Transactions to Which Hedge Accounting Is Not Applied
UnrealizedGain/Loss
Foreign currency forward contracts:Buying U.S. dollarSelling EuroSelling Chinese yuan
Non-deliverable forward contracts:Selling Korean won
Total
Millions of YenContract Amount
Due after One YearContractAmount Fair ValueMarch 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UnrealizedGain/Loss
Cash and cash equivalentsThe carrying value of cash and cash equivalents approximate fair value because of their short maturities.
Notes and accounts receivable (Trade and associated companies)The carrying value of notes and accounts receivable approximate fair value because of their short maturities. Allowance for doubtful accounts is deducted from the total amount of notes and accounts receivable by ¥236 million ($2,107 thousand) and ¥226 million in 2017 and 2016, respectively. Marketable securities and investment securities Marketable securities are bonds, trust beneficiary rights, and certificates of deposit. The fair value of bonds is measured at the quoted price obtained from the financial institution. The carrying value of trust beneficiary rights and certificates of deposit approximate fair value due to their short maturities. Investment securities are mainly stock and are measured at the market price. Moreover, information regarding the classification of securities is included in Note 4.
Notes and accounts payableThe carrying value of notes and accounts payable approximate fair value because of their short maturities.
Liquor taxes payableThe carrying value of liquor taxes payable approximate fair value because of their short maturities.
Income taxes payableThe carrying value of income taxes payable approximate fair value because of their short maturities.
Short-term bank loansThe carrying value of short-term bank loans approximate fair value because of their short maturities. Moreover, the fair value of the current portion of long-term bank loans is determined by discounting the cash flows related to the total of principal and interest at a reasonably estimated rate according to the remaining period.
Long-term debtBonds payable is included in long-term debt. The fair value of the current portion of long-term bonds and bonds is determined by discounting the cash flows related to the total of principal and interest at the rate in which the remaining period to maturity and credit risk is reflected.
The fair value of other long-term debt is determined by discounting the cash flows related to the total of principal and interest at a reasonably estimated rate according to the remaining period.
DerivativesFair value information for derivatives is included in Note 17.
¥ 58,765
57,717
2,000
6842,330
¥ 121,498
¥
¥
$ 524,687
515,330
17,857
6,10720,803
$ 1,084,803
$
$
¥ 32,536
53,375
8,0002,000
6096,931
¥ 103,451
¥
¥
¥ 4502222
09348
2
2828
¥ 699
¥
¥
¥ (3)00
(0)(4)0
(0)
(1)0
¥ (7)
¥ (3)00
(0)(4)0
(0)
(1)0
¥ (7)
Foreign currency forward contracts:Buying U.S. dollarBuying EuroBuying GB poundBuying Australia dollarBuying Japanese yenSelling Euro
Non-deliverable forward contracts:Selling Korean won
Foreign currency options:Buying put option Korean wonSelling call option Korean won
Total
Thousands of U.S. DollarsContract Amount
Due after One YearContractAmount Fair ValueMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UnrealizedGain/Loss
¥ 239107
51
47¥ 445
¥
¥
¥ (2)(0)(0)
(1)¥ (4)
¥ (2)(0)(0)
(1)¥ (4)
$ 4,017196196
0830428
17
250250
$ 6,241
$
$
$ (26)00
(0)(35)
0
(0)
(8)0
$ (62)
$ (26)00
(0)(35)
0
(0)
(8)0
$ (62)
67 TAKARA HOLDINGS INC. Annual Report 2017 68TAKARA HOLDINGS INC. Annual Report 2017
Foreign currency options:Buying call option U.S. dollar
Selling put option U.S. dollar
Foreign currency forward contracts:Buying U.S. dollar
Buying Euro
Total
Accounts payableAccounts payable
Accounts payableAccounts payable
Millions of YenContract AmountHedged Item
Contract AmountDue after One YearMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative Transactions to Which Hedge Accounting Is Applied
a. Foreign exchange derivatives
Fair Value
18. COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2017 and 2016, are as follows:
Millions of YenThousands ofU.S. Dollars
Unrealized gain or loss on available-for-sale securities:Gain (loss) arising during the yearReclassification adjustments to profit Amount before income tax effectIncome tax effect
TotalDeferred gain or loss on derivatives under hedge accounting:
Gain (loss) arising during the yearReclassification adjustments to profitAmount before income tax effectIncome tax effect
TotalForeign currency translation adjustments:
Adjustments arising during the yearReclassification adjustments to profit
TotalDefined retirement benefit plans:
Adjustments arising during the yearReclassification adjustments to profitAmount before income tax effectIncome tax effect
TotalShare of other comprehensive income in associates:
Gain arising during the yearTotal other comprehensive income
2016 20172017
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No interest rate derivative transactions were entered into in 2016.
19. NET INCOME PER SHARE
A reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2017 and 2016, is as follows:
For the year ended March 31, 2017:Basic EPS
Net income available to common shareholders
For the year ended March 31, 2016:Basic EPS
Net income available to common shareholders
Millions of Yen
Net IncomeWeighted-
Average Shares
. . .
. . .
Thousands ofShares Yen Dollars
EPS
Millions of Yen
Net IncomeWeighted-
Average Shares
Thousands ofShares Yen
EPS
EPS
Diluted net income per share for both the years ended March 31, 2017 and 2016 is not disclosed because there were no dilutive shares during these two fiscal years.
¥ 9,145
9,145
1,995
3
¥ 20,289
¥ 4,837
4,837
¥ 9,675
¥ (82)
42
10
(0)
¥ (28)
Fixed rate payment, floating rate receipt
Total
Accounts payable
Millions of YenContract AmountHedged Item
Contract AmountDue after One YearMarch 31, 2017
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b. Interest rate derivatives
Fair Value
¥ 598
¥ 598
¥
¥
¥ (16)
¥ (16)
Fixed rate payment, floating rate receipt
Total
Loans
Thousands of U.S. DollarsContract AmountHedged Item
Contract AmountDue after One YearMarch 31, 2017
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
$ 5,339
$ 5,339
$
$
$ (142)
$ (142)
Foreign currency options:Buying call option U.S. dollar
Selling put option U.S. dollar
Foreign currency forward contracts:Buying U.S. dollar
Buying Euro
Total
Accounts payableAccounts payable
Accounts payableAccounts payable
Thousands of U.S. DollarsContract AmountHedged Item
Contract AmountDue after One YearMarch 31, 2017
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
$ 81,651
81,651
17,812
26
$ 181,151
$ 43,187
43,187
$ 86,383
$ (732)
375
89
(0)
$ (250)
Foreign currency options:Buying call option U.S. dollar
Selling put option U.S. dollar
Foreign currency forward contracts:Buying U.S. dollar
Buying Euro
Buying Euro
Total
Accounts payable
Accounts payable
Accounts payable
Advanced paymentAccounts payable
Millions of YenContract AmountHedged Item
Contract AmountDue after One YearMarch 31, 2016
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value
¥ 9,064
8,985
2,499
258
3
¥ 20,811
¥ 5,220
5,214
¥ 10,435
¥ (251)
(268)
(113)
0
(0)
¥ (633)
$ 36,089(339)
35,741(11,089)
$ 24,642
$ 5,73244
5,776(1,785)
$ 3,982
$ (40,205)1,714
$ (38,482)
$ (3,535)(35)
(3,571)455
$ (3,107)
$ $ (12,955)
¥ 4,042(38)
4,003(1,242)
¥ 2,760
¥ 6425
647(200)
¥ 446
¥ (4,503)192
¥ (4,310)
¥(396)(4)
(400)51
¥(348)
¥ ¥ (1,451)
¥ (3,511)(0)
(3,511)1,235
¥ (2,276)
¥ (1,489)
(1,489)478
¥ (1,010)
¥ (2,300)
¥ (2,300)
¥ (30)(78)
(108)33
¥ (74)
¥ 4¥ (5,657)
¥ 8,480 201,224 ¥ 42.15
¥ 7,055 201,224 ¥ 35.06
$ 0.37
69 TAKARA HOLDINGS INC. Annual Report 2017 70TAKARA HOLDINGS INC. Annual Report 2017
20. SUBSEQUENT EVENTS
a. Appropriations of Retained EarningsOn May 9, 2017, the Board of Directors of the Company resolved to propose cash dividends of ¥13 ($0.11) per share to shareholders of record as of March 31, 2017, or a total of ¥2,615 million ($23,348 thousand), for approval at the general shareholders’ meeting to be held on June 29, 2017.
b. Issuance of Domestic Unsecured Straight BondsThe Company issued domestic unsecured straight bonds based on resolution of the Board of Directors of the Company on March 21, 2017. The use of proceeds is redemption of bonds and loan of working funds to subsidiaries.
c. Company Acquisition by Acquisition of SharesSignificant Subsequent Events(Company Acquisition by Acquisition of Shares)
On May 13, 2016, the Board of Directors of Bio resolved that Takara Bio USA Holdings Inc. (“TBUSH”), a wholly owned subsidiary of Bio, would acquire all shares of WaferGen Bio-systems, Inc. (“WaferGen”), and TBUSH entered into a merger agreement with WaferGen on the same day. Based on the agreement, TBUSH completed the acquisition on February 28, 2017 (US Pacific Standard Time). The fiscal year-end of TBUSH is December 31.1. Reason for the share acquisition
Bio Group supplies research reagents, scientific instruments, and contracted services to biotechnology researchers. Specifically, Bio Group focuses on development of reagent kits for next generation sequencers and reagent kits using SMART technology which efficiently amplifies genes from micro amounts of RNA samples under the brand name of Clontech®. Currently, Bio Group is developing reaction reagents optimized for automatic analysis devices targeted for use in the clinical field.
WaferGen provides devices and reagent kits for single-cell analysis, and their unique massively-parallel qPCR device for small amount samples, to biotechnology companies, pharmaceutical companies and clinical laboratories.
Bio Group expects synergies and increased sales of equipment and single-cell reagent kits from the combination of WaferGen technology including single-cell analysis and molecular biotechnology of Bio Group.
2. Outline of the business combination(1) Name of to be acquired company
WaferGen Bio-systems, Inc.(2) Name of counterparty to acquire shares
Affiliates of Sabby Management, LLC and other shareholders(3) Business description
Manufacturing and sales of research reagents and equipment(4) Consolidated financial position as of December 31, 2016 and consolidated operating results for the year then ended
(5) Date of business combinationFebruary 28, 2017 (US Pacific Standard Time)
(6) Legal form of business combinationAcquisition of shares
(7) Name of the acquired company after the combinationWaferGen Bio-systems, Inc.WaferGen merged with Takara Bio USA, Inc., a wholly owned subsidiary of TBUSH, on May 31, 2017 (US Pacific Standard Time).
(8) Ratio of voting rights acquired100%
(9) Basis for determining the acquiring companyIt is based on the fact that TBUSH acquired 100% of voting rights by means of share acquisition in consideration for cash.
3. Number and acquisition price of the shares to be acquired, and the ownership ratio after the acquisition(1) Number of shares held before the acquisition
- shares (Number of voting rights: - )(2) Number of shares acquired
Common stock: 3,798,112 shares(Number of voting rights: 3,798,112)
(3) Number of shares to be held after the acquisitionCommon stock: 3,798,112 shares(Number of voting rights: 3,798,112, Ownership ratio: 100%)
4. Fundraising methodThe transaction was funded by Bio Group’s funds on hand.
5. Acquisition cost of the acquired company and related details of each class of consideration for acquisition
6. Major acquisition-related costs
7. Amount of goodwill, reason of goodwill, and method/period of amortizationCurrently under review.
Total amount of issue
Issue priceClosing dateMaturity date Coupon rate
16th Series of Unsecured Bonds
(with Inter-Bond Pari Passu Clause)
. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
¥5,000 million($44,642 thousand)
April 25, 2017April 23, 2027
0.315% per share
15th Series of Unsecured Bonds
(with Inter-Bond Pari Passu Clause)
¥5,000 million($44,642 thousand)
100% of the principal amountApril 25, 2017April 25, 2024
0.220% per share
14th Series of Unsecured Bonds
(with Inter-Bond Pari Passu Clause)
¥5,000 million($44,642 thousand)
April 25, 2017April 25, 2022
0.100% per share
8. Details of assets acquired and liabilities assumed on the date of the business combinationCurrently under review.
On December 15, 2016, the Board of Directors of Bio resolved that TBUSH would acquire all shares of Rubicon Genomics, Inc. (“Rubicon”). TBUSH completed the acquisition procedure on January 17, 2017 (US Pacific Standard Time).1. Reason for the share acquisition
Bio Group is concentrating on developing next generation sequencing reagent kits that are used in a wide range of fields from basic research to industrial applications. As Rubicon joins Bio Group, Bio Group complements its sample preparation technology for ultra-trace DNA sequence analysis and sample preparation technology for ultra-trace RNA sequence analysis; therefore Bio Group will be able to provide a wide range of products and services in the field of ultra-trace nucleic acid analysis.
Additionally, Bio Group will be able to provide products and services to a wide range of fields from basic research to industrial application by adding WaferGen’s pre-processing system for next generation sequence analysis.
2. Outline of the business combination(1) Name of to be acquired company
Rubicon Genomics, Inc.(2) Counterparties to acquire shares
Management of the acquired company and other shareholders(3) Business description
Manufacturing and sales of research reagents(4) Consolidated financial position as of December 31, 2016 and consolidated operating results for the year then ended
(5) Date of business combinationJanuary 17, 2017 (US Pacific Standard Time)
(6) Legal form of business combinationAcquisition of shares
(7) Name of the acquired company after the combinationRubicon Genomics, Inc.Rubicon merged with Takara Bio USA, Inc., a wholly owned subsidiary of TBUSH, on March 31, 2017 (US Pacific Standard Time).
(8) Ratio of voting rights acquired100%
(9) Basis for determining the acquiring companyIt is based on the fact that TBUSH acquired 100% of voting rights by means of share acquisition in consideration for cash.
3. Number and acquisition price of the shares to be acquired, and the ownership ratio after the acquisition(1) Number of shares held before the acquisition
- shares (Number of voting rights: - )(2) Number of shares acquired
Common stock: 23,006,790 shares (Number of voting rights: 23,006,790)
(3) Number of shares to be held after the acquisitionCommon stock: 23,006,790 shares(Number of voting rights: 23,006,790, Ownership ratio: 100%)
4. Fundraising methodThe transaction was funded by Bio Group’s funds on hand.
5. Acquisition cost of the acquired company and related details of each class of consideration for acquisition
6. Major acquisition-related costs
7. Amount of goodwill, reason of goodwill, and method/period of amortizationCurrently under review
8. Details of assets acquired and liabilities assumed on the date of the business combinationCurrently under review(Appropriations of Retained Earnings)The following appropriation of retained earnings at March 31, 2017, was approved at Bio’s shareholders’ meeting held on June 23, 2017:
Thousands ofU.S. Dollars
Common stock and preferred stockNet assetsTotal assetsRevenueOperating loss
$ 123,716 49 10,980 10,733 (16,304)
. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands ofU.S. Dollars
Consideration for acquisitionAcquisition cost
Cash $ 35,908$ 35,908
. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands ofU.S. Dollars
Advisory fees and commissions $ 3,855. . . . . . . . . . . . . . . . . . . . .
Thousands ofU.S. Dollars
Common stockNet assetsTotal assetsRevenueOperating income
$ 13,2491,3974,940
12,5542,127
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands ofU.S. Dollars
Consideration for acquisitionAcquisition cost
Cash $ 74,426$ 74,426
. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands ofU.S. Dollars
Advisory fees and commissions $ 2,934. . . . . . . . . . . . . . . . . . . . .
Thousands ofU.S. Dollars
Year-end cash dividends, ¥4.00 ($0.03) per share $ 4,294
Millions of Yen
¥ 481. . . . . . . . . . . . .
71 TAKARA HOLDINGS INC. Annual Report 2017 72TAKARA HOLDINGS INC. Annual Report 2017
(4) Information about products and servicesMillions of Yen
Sales to external customers
Bio Health Foods Other TotalAlcoholic Beverages
and Seasonings
¥ 191,736 ¥ 28,818 ¥ 1,863 ¥ 2,945 ¥ 225,364
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
(5) Information about geographical areas
Millions of Yen(a) Sales
Other TotalJapan
¥ 179,079 ¥ 46,284 ¥ 225,364¥ 182,107 ¥ 52,086 ¥ 234,193
2017
Millions of Yen(b) Property, plant, and equipment
Other TotalJapan
¥ 46,865 ¥ 6,199 ¥ 53,065¥ 47,409 ¥ 11,764 ¥ 59,174
2017
Thousands of U.S. Dollars
Other TotalJapan
$ 423,294 $ 105,035 $ 528,339
2017
Thousands of U.S. Dollars
Other TotalJapan
$ 1,625,955 $ 465,053 $ 2,091,008
2017
Millions of Yen
Other TotalJapan
2016
Thousands of U.S. Dollars
Sales to external customers
Bio Health Foods Other TotalAlcoholic Beverages
and Seasonings
$ 1,794,205 $ 254,723 $ 15,750 $ 26,312 $ 2,091,008. . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
Millions of Yen
Sales to external customers
¥ 200,951 ¥ 28,529 ¥ 1,764 ¥ 2,947 ¥ 234,193
Bio Health Foods Other TotalAlcoholic Beverages
and Seasonings
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
Note: Sales are classified by country or region based on the location of customers.
Millions of Yen
Other TotalJapan
2016
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decisionmaker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
(1) Description of Reportable Segments The Group consists of the Takara Shuzo Group, the Takara Bio Group, Takara Healthcare Inc., and others. Takara Shuzo Co., Ltd. and Takara Bio Inc. are considered core companies of the Takara Shuzo Group and the Takara Bio Group, respectively, both of which were established when the Company became the holding company of the Group. All operating companies develop comprehensive business strategies, covering both domestic and overseas
21. SEGMENT INFORMATION
operations, for the products and services that they offer, and work to expand their business operations.
Accordingly, the Group has defined three reportable segments based on its operating segments, while taking into consideration the relationship of capital between each consolidated subsidiary, the scope of managerial responsibility, and the capacity to evaluate business performance. These three reportable segments are the Takara Shuzo Group, the Takara Bio Group, and Takara Healthcare.
The Takara Shuzo Group primarily engages in the manufacturing and sales of alcoholic beverages and seasonings. It also engages in logistics and other related businesses. The Takara Bio Group primarily engages in the manufacturing and sales of products such as research reagents, scientific instruments, and mushrooms. It also conducts contract research services. Takara Healthcare primarily engages in the sales of products such as health foods.
(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, and Other Items for Each Reportable SegmentThe accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of Significant Accounting Policies.”
(3) Information about sales, profit, assets, and other items is as follows.Millions of Yen
Sales:Sales to external customersIntersegment sales or transfers
TotalSegment profitSegment assetsOther:
DepreciationAmortization of goodwillInvestment in equity method affiliateIncrease in property, plant, and equipment and intangible assets
Reportable Segment
Total Other Reconciliation ConsolidatedTakara Shuzo
GroupTakara Bio
GroupTakara
Healthcare
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
¥ 200,951219
201,1719,755
166,697
3,191424
3,269
¥ 28,529845
29,3753,202
67,143
1,722162
1,648
¥ 1,7641
1,76612
715
4
12
¥ 231,2461,067
232,31312,970
234,556
4,919586
4,930
¥ 2,4843,4395,924
1405,848
59
333
¥ 462(4,507)(4,044)
44033,963
192
1,407
1,394
¥ 234,193
234,19313,551
274,368
5,171586
1,407
6,658
Millions of Yen
Sales:Sales to external customersIntersegment sales or transfers
TotalSegment profitSegment assetsOther:
DepreciationAmortization of goodwillInvestment in equity method affiliateIncrease in property, plant, and equipment and intangible assets
Reportable Segment
Total Other Reconciliation ConsolidatedTakara Shuzo
GroupTakara Bio
GroupTakara
Healthcare
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
¥ 191,736288
192,0258,410
150,773
3,252357
3,052
2,919
¥ 28,818910
29,7292,667
66,591
1,687181
2,090
¥ 1,8631
1,86564
712
3
5
¥ 222,4191,200
223,62011,142
218,077
4,944538
3,052
5,015
¥ 2,4843,3255,809
585,685
59
368
¥ 461(4,526)(4,065)
48029,490
175
1,322
620
¥ 225,364
225,36411,680
253,253
5,179538
4,375
6,003
Notes:
Thousands of U.S. Dollars
Sales:Sales to external customersIntersegment sales or transfers
TotalSegment profitSegment assetsOther:
DepreciationAmortization of goodwillInvestment in equity method affiliateIncrease in property, plant, and equipment and intangible assets
Reportable Segment
Total Other Reconciliation ConsolidatedTakara Shuzo
GroupTakara Bio
GroupTakara
Healthcare
. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
$1,794,2051,955
1,796,16987,098
1,488,366
28,4913,785
29,187
$254,7237,544
262,27628,589
599,491
15,3751,446
14,714
$15,7508
15,767107
6,383
35
107
$2,064,6969,526
2,074,223115,803
2,094,250
43,9195,232
44,017
$22,17830,70552,8921,250
52,214
526
2,973
$ 4,125(40,241)(36,107)
3,928303,241
1,714
12,562
12,446
$2,091,008
2,091,008120,991
2,449,714
46,1695,232
12,562
59,446
1. “Other” represents operating segments that are not included in the reportable segments, and comprises other subsidiaries, including a printing business.2. Details of “Reconciliation” are as follows.
(1) Sales to external customers consist of income from real estate rent recognized by the Company.(2) Segment profit includes eliminations of intersegment transactions of ¥62 million ($553 thousand) and ¥16 million, and income of the Company not
allocated to operating segments of ¥377 million ($3,366 thousand) and ¥464 million as of March 31, 2017 and 2016, respectively.(3) Segment assets include assets of the Company not allocated to operating segments of ¥49,681 million ($443,580 thousand) and ¥44,432 million,
and other adjustment (principally eliminations of intersegment transactions) of ¥(15,718) million ($(140,339) thousand) and ¥(14,941) million as of March 31, 2017 and 2016, respectively. Assets attributed to the Company include surplus funds and long-term investment assets.
(4) Depreciation is the amount of depreciation which the Company recognized.(5) Investment in equity method affiliate is the cost of investment in an affiliate company not allocated to operating segments.(6) Increase in property, plant, and equipment and intangible assets comprises investment of the Company.
3. Segment profit has been reconciled with the operating income in the consolidated statement of income.
73 TAKARA HOLDINGS INC. Annual Report 2017 74TAKARA HOLDINGS INC. Annual Report 2017
(7) Information about impairment lossesMillions of Yen
2017
(6) Information about major customers
KOKUBU GROUP CORP.
Related Segment NameMillions of Yen
SalesName of Customers
¥ 35,610 Takara Shuzo Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
KOKUBU GROUP CORP.
2017
KOKUBU GROUP CORP.
Related Segment NameThousands of U.S. Dollars
SalesName of Customers
$ 317,946 Takara Shuzo Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017
Related Segment NameMillions of Yen
SalesName of Customers
¥ 36,891 Takara Shuzo Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016
Impairment losses of assets
OtherElimination/Corporate Total
Takara ShuzoGroup
Takara BioGroup
TakaraHealthcare
¥ ¥ 667 ¥ . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) Information about amortization of goodwillMillions of Yen
2017
Amortization of goodwillGoodwill at March 31, 2017
OtherElimination/Corporate Total
Takara ShuzoGroup
Takara BioGroup
TakaraHealthcare
¥ 4245,412
¥ 1621,213
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands of U.S. Dollars
2017
Amortization of goodwillGoodwill at March 31, 2017
OtherElimination/Corporate Total
Takara ShuzoGroup
Takara BioGroup
TakaraHealthcare
$ 3,78548,321
$ 1,44610,830
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of Yen
2016
Amortization of goodwillGoodwill at March 31, 2016
OtherElimination/Corporate Total
Takara ShuzoGroup
Takara BioGroup
TakaraHealthcare
¥ 3575,334
¥ 1811,641
¥ 5866,626
$ 5,23259,160
¥ 5386,975
¥
$
¥
¥
$
¥
¥
$
¥ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of Yen
2016
Impairment losses of assets
OtherElimination/Corporate Total
Takara ShuzoGroup
Takara BioGroup
TakaraHealthcare
¥ ¥ 281 ¥ . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thousands of U.S. Dollars
2017
Impairment losses of assets
OtherElimination/Corporate Total
Takara ShuzoGroup
Takara BioGroup
TakaraHealthcare
$ $ 5,955
¥ 667
¥ 281
$ 5,955$ $
¥
¥
$
¥
¥
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
To the Board of Directors of Takara Holdings Inc.:
INDEPENDENT AUDITOR’S REPORT
We have audited the accompanying consolidated balance sheet of Takara Holdings Inc. and its consolidated subsidiaries as of March 31, 2017, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Takara Holdings Inc. and its consolidated subsidiaries as of March 31, 2017, and the consolidated results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.
Convenience TranslationOur audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in accordance with the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.
June 8, 2017
Member ofDeloitte Touche Tohmatsu Limited
Deloitte Touche Tohmatsu LLCShijokarasuma FT Square20, Naginataboko-choKarasuma-higashiiru, Shijo-doriShimogyo-ku, Kyoto 600-8008Japan
Tel: +81 (75) 222 0181Fax: +81 (75) 231 2703www.deloitte.com/jp
Stock and Investor Information
Stock Price Range on the Tokyo Stock Exchange (Yen)
A/StableA/Stable
a-1 J-1
46.91%2.32%
15.49%11.24%16.47%7.57%
Trade Name
Business
Head Office
Telephone
Takara Holdings Inc.
Holding company
20 Naginataboko-cho, Shijo-dori Karasuma Higashi-iru,Shimogyo-ku, Kyoto 600-8688, Japan
+81-75-241-5130
Established
Issued Capital
Company Representative
Website
September 6, 1925
¥13,226 million
Toshio Kakimoto, President
www.takara.co.jp/english
Common StockAuthorizedIssued and Outstanding
Number of Shareholders
Stock Listings(Common Stock)
Securities Code Number
Shareholder RegistryAdministrator
Inquiries to ShareholderRegistry Administrator
Annual Meeting ofShareholders
Independent Auditor
870,000,000 shares217,699,743 shares
20,631
Tokyo
2531
Mizuho Trust & Banking Co., Ltd.2-1, Yaesu 1-chome, Chuo-ku, Tokyo
Mizuho Trust & Banking Co., Ltd.Stock Agency Transfer Department8-4, Izumi 2-chome, Suginami-ku,Tokyo 168-8507, JapanTelephone: 0120-288-324(toll free, within Japan only)
The annual meeting of shareholdersof the Company is normally held inJune each year in Kyoto, Japan. Inaddition, the Company may hold aspecial meeting of shareholderswhenever necessary by giving atleast two weeks, advance notice toshareholders.
Deloitte Touche Tohmatsu LLC
1,500
1,000
500
0
Financial InstitutionsSecurities CompaniesOther Domestic CompaniesForeign InvestorsIndividual and OthersOthers
Principal Shareholders
Bond Ratings
Distribution of Ownership among Shareholders
Rating and Investment Information, Inc. (R&I)Japan Credit Rating Agency, Ltd. (JCR)
Long-TermRating
Short-TermRatingRating Institution
The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
Mizuho Bank, Ltd.
The Norinchukin Bank
Meiji Yasuda Life Insurance Company
Bank of Kyoto, Ltd.
KOKUBU GROUP CORP.
Trust & Custody Services Bank, Ltd. (Security Investment Trust Account)
Takara Group Employees’ Shareholding Association
Japan Alcohol Trading Co., Ltd.
Notes: (1) Number of shares is rounded down to the nearest thousand.(2) In addition to the shareholdings listed above, the Company held treasury stock
totaling 16,475,731 shares (equivalent to 7.57% of voting rights).
Number ofShares Held(Thousands)
Percentage ofShares HeldName (%)Name
4 5 6 7 8 9 10 11 12 1 2
2017/3
3
High
Low
4 5 6 7 8 9 10 11 12 1 2 3
2015/3
4 5 6 7 8 9 10 11 12 1 2
2016/3
3
Investor Information(As of March 31, 2017)
10.54
6.33
4.47
4.36
2.47
2.30
1.60
1.59
1.47
1.38
22,940
13,784
9,738
9,500
5,370
5,000
3,489
3,461
3,196
3,000
75 TAKARA HOLDINGS INC. Annual Report 2017 76TAKARA HOLDINGS INC. Annual Report 2017
20 Naginataboko-cho, Shijo-dori Karasuma Higashi-iru,Shimogyo-ku, Kyoto 600-8688, JapanTelephone: +81-75-241-5130
www.takara.co.jp/english
The method of printing this annual report was chosen to reduce its environmental impact.It is printed by offset printing using vegetable oil ink without the use of water.A portion of the printing costs for this printing paper is donated to the “Japanese Red Cross Society.”
Printed in Japan