Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
1
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Interview with the President
We will continue to provide world-first,
leading products and services that bring comfort,
excitement and joy to people throughout the world.
Please give us an overview of Unicharm’s performance
in fiscal 2012.
In fiscal 2012, ended March 31, 2012, Unicharm reported consolidated net sales of ¥428.3 billion and
operating income of ¥51.9 billion, record-high figures for the tenth and fifth consecutive fiscal years
respectively. We continued to enjoy strong growth in China, Indonesia and other Asian markets where
we have a sales presence, driving consolidated earnings. As a result, overseas sales accounted for a
record 46.9% of consolidated net sales. Fiscal 2012 marked the first year of our current three-year
Medium-Term Management Plan, which started in April 2011. Guided by this plan, we took a number of
steps during the year to reinforce our business base for the next decade. In December 2011 we
acquired The Hartz Mountain Corporation, which is the leading U.S. pet care brand in eight product
categories, and in September 2011 we acquired Vietnamese company Diana Joint Stock Company,
which is ranked second in the disposable baby diaper and feminine care product markets in Vietnam.
Takahisa Takahara
President and CEO
2
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Interview with the President
Please provide some more details about your long-term vision
for Unicharm and the steps you are taking to achieve this vision.
The business fields where Unicharm is active have considerable growth potential. We forecast that
the total market for our products will expand to ¥28 trillion in 2020, or 2.4 times larger than in
2008. By taking full advantage of these business opportunities, our goal is to capture the leading
share in the global market by 2020. To achieve this, we plan to actively expand our sales areas and
production capacity in the expanding markets of Asia and Middle East-North Africa (MENA) and
accelerate our expansion into other markets. We also intend to reinforce our health care and pet
care businesses in order to tap expanding demand in countries where societies are projected to
age over the medium- and long-term. This will be a key step toward achieving our vision of
becoming the leading company in the sector worldwide.
What is the outlook for your key market of Asia?
We plan to introduce our business model targeting middle-class consumers, which has already
proved successful in China and Indonesia, into other parts of Asia and accelerate market share
growth. At the same time, we will build new factories and close old ones in order to create an
optimized low-cost distribution system that ensures reliable supplies of our products. In China, our
most important market, we have expanded the sales area from coastal cities to regional inland
cities. This push inland has been underpinned by our disposable baby diapers aimed at middleclass
consumers, which we launched in 2010. In line with this sales area expansion, we opened a
new factory in Tianjin in 2012. This became our fourth production site in China. We are also looking
at the feasibility of supplying China from Vietnam using our Hanoi factory, which was part of the
Diana acquisition in September 2011. In order to boost cost competitiveness in China along with
increases in production capacity, we established a local site in 2012 to make nonwoven materials
for use in disposable diapers, ensuring we have access to reliable supplies of diaper materials. In
Indonesia, where Unicharm is the undisputed leader in the disposable baby diaper market, we plan
to start up a new factory in 2013 in response to market growth. We will actively expand our
production sites in Asia and boost their efficiency to ensure we are well-placed to capture business
opportunities afforded by rising demand in the region.
What is your outlook for other overseas markets?
Demand for disposable baby diapers is projected to expand in countries of the Greater Mekong
area, such as Myanmar, Laos and Cambodia. We plan to strengthen our product distribution
systems in Thailand and Vietnam to meet this demand and build an even stronger presence in the
Asia region. We also expect demand to grow in the emerging markets of MENA and Latin America
over the medium- and long-term. In response, we plan to open a new factory in Egypt in 2012 and
reinforce our operating base to take advantage of business opportunities in those regions.
3
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Interview with the President
What role can Unicharm play in societies where birthrates
are falling and populations are aging?
Our health care business is seeing its market share rise in Japan as the population ages. We will
work to strengthen our already dominant position in the domestic market by actively developing
new sales channels and reinforcing our marketing structure. Demand for incontinence care
products such as disposable adult diapers is also set to expand over the longer term in Asia.
Against this backdrop, we plan to transfer our Japanese product development approach and care
model to overseas markets. Unicharm is already well-known in the disposable baby diaper and
feminine care product markets. However, we want to extend our reach and contribute to key areas
associated with the unavoidable issue of societal aging. This also will include a long-term
commitment to helping the elderly lead ordinary lives.
What kind of organization does Unicharm need in order to
succeed on the global stage?
To succeed in highly competitive markets overseas, we need an organization that can make
decisions quickly in response to changes in the operating environment. We also need highly
talented people. In China, where the market continues to grow strongly and now accounts for over
10% of consolidated net sales, we have transferred some head office functions to a local holding
company and dispatched a large team of experienced personnel from our head office in Japan. This
has improved the speed and quality of local decision-making. We are also passing on Unicharm’s
corporate DNA to local staff through personnel training programs. In the future, we plan to transfer
this Chinese holding company model to other regions to drive further overseas expansion.
Finally, please tell us about your stance on shareholder returns.
To boost earnings, Unicharm is reinforcing its financial structure and aggressively increasing
business investment to drive continued growth, while at the same time maintaining a policy of
stable and sustainable dividend growth. We also plan to continue implementing share buybacks.
For fiscal 2012, we increased the dividend per share by ¥4.00 year on year to ¥32. This marks
the tenth consecutive fiscal year of dividend hikes since fiscal 2002.
Going forward, the Company will continue to work as one to actively extend Unicharm’s global
reach and expand its business while striving to meet the expectations of all shareholders and
investors.
December 2012
Takahisa Takahara
President and CEO
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Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Main Topics
Main Topics in 2012
5
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress1
Our main markets continue to grow at a rapid pace
The rate of market uptake for disposable baby diapers is rising rapidly in the Asia region on the back of
economic growth. Growth remains strong in our main markets of China, Thailand and Indonesia. In fiscal
2012, ended March 31, 2012, sales in Asia increased 22.6% year on year to ¥145.2 billion, supporting
steady growth in profits.
In our most important market of China, sales rose 25.9% year on year. This growth reflected our move into
regional inland cities, where demand is expanding, as well as continued demand in coastal cities, which
have been our main market driver until now. Sales in China have risen at an average rate of more than
30% in the last five years and the market now accounts for over 10% of Unicharm's consolidated net sales.
In Indonesia, where we have built a dominant market share, sales increased by more than 40% year on
year.
In other markets in Asia, we are steadily laying the foundations to support future growth. In Vietnam, which
continues to see strong economic expansion, we acquired a local company called Diana Joint Stock
Company in September 2011. Diana has the second largest market shares for disposable baby diapers
and feminine care products in Vietnam. In India, which has a population of more than 1.1 billion, our share
of the disposable baby diaper market continues to grow steadily after we began full-scale sales in 2009.
6
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress1
Stepping up growth with new products for middle-class consumers in China
Demand for disposable diapers has been growing rapidly in China due to rising income levels. As a result,
Unicharm's sales in the Chinese market have expanded at an average rate of more than 30% over the last
five years. In fiscal 2012, sales in China accounted for more than 10% of consolidated net sales and the
Chinese business is now driving Unicharm's growth.
In addition to coastal cities, our sales are now growing in regional inland cities after the launch of
disposable diapers aimed at middle-class consumers in 2010.
We plan to increase our overall share in the Chinese market by capturing more business in each city,
extending our distribution network to large and small retailers and reinforcing our online sales channel.
First-mover advantage in disposable diapers for middle-class
consumers has helped us build a dominant market share in Indonesia
Demand for disposable baby diapers has been increasing rapidly in Indonesia amid population growth and
rising incomes. Sales have risen more than 40% over the last two years, making it our fastest-growing
overseas market.
In Indonesia, we launched Mamy Poko Pants Standar disposable baby diapers for middle-class consumers
in 2007. These diapers have proved to be very popular and we have built dominant market shares in
feminine care products and in disposable baby diapers.
7
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress2
Opening new manufacturing sites and closing old ones
To maintain Unicharm's strength in the Asia region, we are actively adding production capacity in areas
where we expect demand to increase and closing aging factories to create an optimum manufacturing
network.
In China, currently our most important market, we started up a fourth factory in 2012 , allowing us to
reliably and efficiently supply products to northern China. We are also pushing ahead with plans to open
our first African factory in Egypt later in fiscal 2013 and start up our third factory in Indonesia in fiscal 2014.
In Japan, we have decided to shut our Ozu factory in 2012 and shift production to other domestic sites. In
Australia, we will close our aging disposable diaper manufacturing facilities in fiscal 2014 and switch to
imports from neighboring countries to supply the market.
8
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress3
The price of disposable diapers continues to decline in Japan. At the same time, consumers are calling for
even higher levels of quality. We have been working to revitalize the disposable baby diaper market in
Japan by leveraging the strengths of our two brands—Moony, which offers premium levels of quality, and
Mamy Poko, which offers an excellent balance between quality and price.
In 2010, we launched a new product in our Moony range that incorporates a new type of soft, stretchy
nonwoven fabric to give babies and infants the feel of wearing soft underwear. We followed this up in 2012
with another new Moony product featuring an entirely new type of nonwoven fabric. This material is soft on
the skin like silk but is also highly absorbent.
We added pants-type disposable diapers specifically designed for babies at the crawling stage to our
Mamy Poko lineup in 2011. We also pushed down the cost of our diapers further in response to falling
prices in the domestic disposable diaper market.
These initiatives led to an increase in the baby care business's overall market share of 1.6 percentage
points year on year in fiscal 2012.
9
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress4
In Japan, the target market for feminine care products continues to shrink, while diversifying lifestyles
mean women are looking for increasingly diverse value and functions from sanitary napkin products. In an
effort to boost profits, we have been rolling out new high value-added products centered on the growth
trends of skin care, nighttime use and design.
In the skin care category, we launched Sofy Hada Omoi sanitary napkins in 2007. These products
incorporated a new type of surface material that is kind on the skin like nonwoven fabric but also has
excellent absorbency like our existing mesh material. In 2011, we added a new product to our range called
Sofy Hada Omoi Ultra Super Slim, which is fifty percent slimmer than existing products, followed by further
products in 2012 specifically designed for lighter days. This has given us a wider range of products and
helped revitalize the market.
In the nighttime use category, we sell Sofy Super Sound Sleep Guard, which has proved very popular in
the market. Responding to the needs of consumers, we have also added more sizes to our sanitary napkin
range and launched a seasonal product called Sofy Super Sound Sleep Guard Suzuhada for hot summer
weather.
In the design-oriented segment, we have adopted stylish lace designs for the individual packaging and
back sheets of our Center-in Compact Slim products, which are so small they do not look like conventional
sanitary napkins. This range is aimed at the growing number of consumers who also focus on the design of
the product, not just quality.
Amid Japan's shrinking feminine care market, these initiatives supported an increase in the feminine care
business's overall market share of 2.4 percentage points year on year in fiscal 2012.
10
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress5
Our health care business continues to grow strongly
Since moving into the disposable adult diaper market in 1987, Unicharm has built dominant shares in both
the moderate and light adult incontinence markets and led the industry in promoting wider use of adult
incontinence products for nursing care. In 1988, we launched Lifree Incontinence Pads, the world's first
product in the moderate adult incontinence category with interchangeable absorbent pads. This product
ensured comfort and hygiene for those being cared, but also made diaper changing easier for carers and
substantially reduced diaper costs. As a result, Lifree Incontinence Pads went on to become the de facto
standard for incontinence care in Japan. In 1995, we introduced the concept of rehabilitation to the
incontinence care field with the launch of Lifree Rehabili-Pants, which played an important role in
encouraging care for the elderly that does not restrict them to bed.
We were also quick to identify needs in the light incontinence care market, launching our first product in
1994. This market mainly comprises elderly people and women that have had children who find it hard to
talk about their condition with others.
The health care business continues to report strong sales growth in line with Japan's aging society. We
expect the target market for our products to continue expanding. In fiscal 2013, we plan to boost capacity
at our three domestic factories, strengthen our sales network and launch high value-added products to
reinforce our already dominant position in the market.
11
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress5
Expanding our product lineup to encourage wider use
In recent years, there has been an increase in the number of elderly leading active social lives through
travel, shopping and other pastimes. To encourage wider use of our disposable adult diapers among this
group, we realized we had to develop diapers that were less bulky and more like normal underwear. In
September 2010, we launched Lifree Thin Type Pleasant Pants, which are around 50% thinner than our
previous products and offer the same level of comfort as underwear. These diapers are proving popular with
customers.
We also expanded our adult incontinence care range in January 2012 with the launch of three new Lifree
products aimed at people in nursing homes. These products, Lifree Protective Anshin Girdles, Lifree Anshin
Fit Shorts and Lifree Anshin Fit Pads, which are designed to aid rehabilitation and give more control over
incontinence , are now being sold to hospitals and nursing care facilities throughout Japan.
Transferring our Japanese care model to other Asian markets
Japan has a higher proportion of elderly people than elsewhere, but many countries around the world are
also expected to see a rapid increase in the number of elderly. The Asia region is currently aging at a
faster rate than Japan and the region's elderly population is projected to more than double over the next
two decades. Against this backdrop, we plan to leverage our strengths in the Japanese market to establish
our Lifree brand and develop our Japanese care model across Asia.
12
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress5
13
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress6
The pet care market is growing worldwide
The pet care market continues to expand worldwide. We estimate it will grow to be worth around ¥14
trillion in sales by 2020, comparable in size to the personal care market (retail sales basis). We forecast
growth in advanced economies such as Japan, the U.S. and Europe, but also in emerging markets in Asia,
particularly China, and in South America, where rising incomes and aging societies are likely to drive
market expansion.
14
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress6
Japan: Building on our already dominant market share by focusing
resources on five main trends
In Japan, Unicharm has focused resources on four main trends in the Japanese pet market—caring for
pets indoors, small-sized dogs, aging pets, and overweight pets. This has helped us secure the top
domestic market shares in both the pet toiletry and pet food categories. With pets now living longer, there
has been a rising number of cases of pet obesity and pet disorders such as diseases of the lower urinary
tract. In response, we have enhanced our lineup of high value-added pet products to target a fifth trend—
emphasis on pet health. We believe these products will also help us reinforce our leading position in the
domestic market.
In pet food products, we have enhanced our lineup with products tailored to different pet ages. These
aged-based products contain the right balance of nutritional ingredients and calories for the changing
bodies and appetites of aging dogs and cats.
In pet toiletry products, we have continued to develop products using the technologies cultivated in our
personal care business, resulting in a new market category of pet toilet products for small dogs.
In February 2012, we acquired shares in Peparlet Co., Ltd., a leading manufacturer and distributor of paper
cat litter. This share purchase will see Peparlet become part of the Unicharm Group, allowing us to
reinforce our lineup of pet toiletry products and secure more reliable supplies of paper cat litter by
transferring our expertise in manufacturing to this company.
China: Extending our sales reach from coastal cities
Demand for pet food is growing in China, mainly among wealthy consumers in coastal cities. We began
selling dried pet food for cats and dogs in Shanghai in 2010. As of the end of December 2011, we had
secured roughly 14% of the dried dog food market and 25% of the dried cat food market in Shanghai. With
pet ownership in China expected to rise, we forecast new demand of around ¥100 billion will emerge in the
pet care market by 2020. We plan to use our sales network for disposable baby diapers and feminine care
products to extend our sales reach to Beijing, Guangzhou and other major Chinese cities.
15
Annual Report 2012
Year Ended March 31, 2012
~ Strategy and Progress ~
Progress6
United States: Targeting significant expansion through synergies with Hartz
In the U.S. pet care market, which accounts for roughly 40% of the global market, we acquired 51% of
shares in The Hartz Mountain Corporation in December 2011. Hartz is the leading U.S. pet care brand in
eight product categories.
The U.S. pet care market is the world's largest, estimated to be worth around $30 billion. We forecast
continued strong growth in the market of around 4–5% annually.
Pet ownership in the country is seeing similar trends
to those we have identified in Japan, such as rising
ownership of small-sized dogs and caring for pets
indoors. Demand for premium pet food and indoor
pet toiletry products is also growing. We see
prospects for rapid expansion in our U.S. pet care
business by combining Unicharm's technological and
product development capabilities in pet toiletry
products and pet food products, which have already
proved popular with Japanese consumers, with
Hartz's brand power and marketing expertise.
16
Consolidated Balance Sheet
Unicharm Corporation and Subsidiaries
March 31, 2012 and 2011
Thousands of
U.S. dollars
(Note 1)
Millions of yen
ASSETS
Current Assets:
Cash and cash equivalents (Note 18)
Marketable securities (Notes 3 and 18)
Notes and accounts receivable (Notes 10 and 18):
Trade
Allowance for doubtful accounts
Inventories (Note 4)
Deferred tax assets (Note 14)
Other current assets
Total current assets
2012
¥
75,926
3,400
2012
2011
¥
113,008
702
$
925,928
41,463
50,405
(87)
33,661
12,751
14,582
190,638
46,038
(34)
22,393
11,453
11,160
204,720
614,693
(1,057)
410,501
155,499
177,825
2,324,852
Property, Plant and Equipment:
Land (Note 5)
Buildings and structures
Machinery and equipment
Furniture and fixtures
Leased assets
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
11,905
66,149
174,334
10,350
482
9,429
272,649
(155,828)
116,821
11,686
63,378
156,945
7,417
259
4,917
244,602
(146,212)
98,390
145,188
806,699
2,126,022
126,221
5,871
114,992
3,324,993
(1,900,346)
1,424,647
Investments and Other Assets:
Investment securities (Notes 3 and 18)
Investments in affiliates
Goodwill
Intangibles
Deferred tax assets (Note 14)
Prepaid pension cost (Note 8)
Other assets
Allowance for doubtful accounts
Total investments and other assets
Total
14,143
157
78,905
18,636
45,147
5,747
2,495
(191)
165,039
472,498
12,888
140
65,022
2,380
53,108
5,658
1,892
(182)
140,906
444,016
172,477
1,910
962,259
227,268
550,569
70,085
30,428
(2,329)
2,012,667
5,762,166
¥
¥
$
The accompanying notes are an integral part of these financial statements.
17
Thousands of
U.S. dollars
(Note 1)
Millions of yen
LIABILITIES AND NET ASSETS
Current Liabilities:
Short-term bank loans (Notes 6 and 18)
Current portion of long-term debt (Note 6)
Notes and accounts payable (Notes 10 and 18):
Trade
Others
Income taxes payable (Notes 14 and 18)
Accrued expenses
Provision for loss on disaster
Other current liabilities
Total current liabilities
2012
¥
Long-Term Liabilities:
Convertible bonds (Notes 7 and 18)
Long-term debt (Notes 6 and 18)
Provision for retirement benefits (Note 8)
Deferred tax liabilities (Note 14)
Other long-term liabilities
Total long-term liabilities
2011
5,439
2,828
¥
45,779
29,742
4,348
16,779
6,241
2,131
2012
$
66,332
34,488
1,447
106,362
37,991
28,423
1,953
11,748
640
1,016
90,143
17,644
1,297,097
80,585
35,220
2,754
1,365
3,005
122,929
80,643
47,354
2,624
688
2,931
134,240
982,746
429,502
33,588
16,647
36,642
1,499,125
15,993
18,802
238,568
15,993
18,802
217,112
195,032
229,297
2,909,369
(52,926)
(43,925)
(645,437)
4,180
(14)
3,277
(13)
50,980
(169)
(157)
(11,372)
213,074
959
29,174
243,207
472,498
(90)
(9,221)
201,935
289
17,409
219,633
444,016
(1,919)
(138,683)
2,598,470
11,688
355,786
2,965,944
5,762,166
-
558,275
362,708
53,030
204,620
-
Commitments and Contingent Liabilities (Notes 9 and 16):
NET ASSETS
Shareholders' equity (Note 20):
Common stock,
authorized: 827,779,092 shares in 2012 and 2011
issued: 206,944,773 shares in 2012 and 2011
Capital surplus
Retained earnings
Treasury stock—at cost, shares held:
22,697,728 in 2012 and
20,521,968 in 2011
Accumulated other comprehensive income
Net unrealized gains on available-for-sale securities,
net of tax (Note 3)
Net deferred losses on derivatives under hedge accounting,
net of tax
Land revaluation surplus, net of tax (Note 5)
Foreign currency translation adjustments
Total
Stock acquisition rights (Note 11)
Minority interests
Total net assets
Total
¥
¥
$
The accompanying notes are an integral part of these financial statements.
18
Consolidated Statement of Income
Unicharm Corporation and Subsidiaries
Years Ended March 31, 2012 and 2011
Net Sales
¥
Cost of Sales
Gross profit
Selling, General and
Administrative Expenses (Notes 11, 12, 15 and 22)
Operating income
Other Income (Expenses):
Interest and dividend income
Foreign exchange loss
Interest expense
Sales discount
Gain on sale of property, plant, and equipment
Gain on sale of investment securities
Gain on sale of investments in affiliates
Reversal of allowance for doubtful account
Loss on disposal of property, plant, and equipment
Loss on write-down of investment securities
Loss on sale of investment securities
Effect of application of the accounting standard for asset
retirement obligations
Loss on disaster
Business restructuring cost
Other—net
Other income (expenses)—net
Income Before Income Taxes and Minority Interests
Income Taxes (Note 14):
Current
Refunded
Deferred
Total income taxes
Net Income Before Minority Interests
Minority Interests In Net Income
Net Income
¥
Millions of yen
2012
428,391
¥
233,936
194,455
2011
376,948
203,395
173,553
Thousands of
U.S. dollars
(Note 1)
2012
$
5,224,282
2,852,878
2,371,404
142,554
51,901
126,992
46,561
1,738,468
632,936
1,014
(464)
(460)
(4,190)
8
9
(1,335)
(108)
-
868
(1,267)
(310)
(3,296)
1,012
1,214
905
(794)
(355)
(313)
(72)
12,360
(5,659)
(5,614)
(51,095)
99
109
(16,278)
(1,315)
-
(554)
(617)
369
(6,328)
45,573
(1,084)
227
(3,265)
43,296
(6,751)
(7,519)
4,498
(77,165)
555,771
7,835
(284)
7,324
14,875
30,698
3,716
26,982
65,648
(1,120)
(58,266)
6,262
37,034
3,474
33,560
95,547
(3,455)
89,317
181,409
374,362
45,318
329,044
¥
$
Yen
2012
Per Share of Common Stock (Note 20):
Net income
Diluted net income
Cash dividends applicable to the year
¥
144.95
130.05
32.00
U.S. dollars
2012
2011
¥
178.11
168.42
56.00
$
1.77
1.59
0.39
The accompanying notes are an integral part of these financial statements.
19
Consolidated Statement of Comprehensive Income
Unicharm Corporation and Subsidiaries
Years Ended March 31, 2012 and 2011
Net Income Before Minority Interests
¥
Millions of yen
2012
2011
30,698 ¥
37,034
Thousands of
U.S. dollars
(Note 1)
2012
$
374,362
Other Comprehensive Income (Note 17):
Net unrealized gains on available-for-sale securities, net of tax
Net deferred losses on derivatives under hedge accounting, net of tax
Foreign currency translation adjustments
Total other comprehensive income
903
(8)
(2,056)
(1,161)
476
(57)
(5,032)
(4,613)
11,021
(100)
(25,070)
(14,149)
Comprehensive Income
29,537
32,421
360,213
25,734 ¥
3,803
30,258
2,163
Total Comprehensive Income Attributable to:
Shareholders of the Company
Minority interests
¥
$
313,826
46,387
The accompanying notes are an integral part of these financial statements.
20
Consolidated Statement of Changes in Net Assets
Unicharm Corporation and Subsidiaries
Years Ended March 31, 2012 and 2011
Thousands
Outstanding
number of
shares of
common
stock
Balance, April 1, 2010
Net income
Cash dividends, ¥77.00 per share
Purchase of treasury stock
Net change in the year
Stock split
Balance, April 1, 2011
Net income
Cash dividends, ¥30.00 per share
purchase of treasury stock
Land revaluation difference
Net change in the year
Balance, March 31, 2012
62,929,076
(14,469,453)
137,963,182
186,422,805
(2,175,760)
184,247,045
Millions of yen
Common
stock
Capital
surplus
¥15,993
Retained
earnings
¥18,802
Treasury
stock
Net unrealized gains
on available-for-sale
securities, net of tax
Net deferred gains
(losses) on
derivatives under
hedge accounting,
net of tax
¥9
-
¥188,697
33,560
(4,845)
(300)
¥(36,330)
(7,595)
-
¥2,796
¥15,993
¥15,993
¥18,802
¥18,802
¥217,112
26,982
(5,593)
67
¥238,568
¥(43,925)
(9,001)
¥(52,926)
¥3,277
$2,647,701
329,044
(68,203)
827
$2,909,369
$(535,667)
(109,770)
$(645,437)
481
903
¥4,180
Land
revaluation
surplus
Foreign
currency
translation
adjustments
Total
Minority
interests
Stock acquisition
rights
¥0
Total
net assets
(22)
¥(618)
528
¥(5,460)
(3,761)
¥183,889
33,560
(4,845)
(7,595)
(3,074)
¥23,524
¥(13)
(1)
¥(14)
¥(90)
(67)
¥(157)
¥(9,221)
(2,151)
¥(11,372)
¥201,935
26,982
(5,593)
(9,001)
67
(1,316)
¥213,074
¥289
670
¥959
11,765
¥29,174
$(1,092)
(827)
$(1,919)
$(112,450)
(26,233)
$(138,683)
$2,462,618
329,044
(68,203)
(109,770)
827
(16,045)
$2,598,471
$3,521
$212,304
8,166
$11,687
143,482
$355,786
289
(6,115)
¥17,409
-
-
¥207,413
33,560
(4,845)
(7,595)
(8,900)
¥219,633
26,982
(5,593)
(9,001)
67
11,119
¥243,207
Thousands of U.S. dollars (Note 1)
Balance, April 1, 2011
Net income
Cash dividends, $0.37 per share
Purchase of treasury stock
Land revaluation surplus
Net change in the year
Balance, March 31, 2012
$195,033
$229,297
$195,033
$229,297
$39,959
11,021
$50,980
$(163)
(6)
$(169)
$2,678,443
329,044
(68,203)
(109,770)
827
135,603
$2,965,944
The accompanying notes are an integral part of these financial statements
21
Consolidated Statement of Cash Flows
Unicharm Corporation and Subsidiaries
Years Ended March 31, 2012 and 2011
Millions of yen
2012
Operating Activities:
Income before income taxes and minority interests
¥
Adjustments for:
Income taxes—paid
Income taxes—refunded
Depreciation
Amortization of goodwill
Income in provision for retirement benefit
Net loss on sales and revaluation of investment securities
Net loss (gain) on disposals and sales of property, plant and equipmen
Gain on sales of investments in affiliates
Increase in trade receivables
Increase in inventories
Increase in trade payables
Increase in other current liabilities
Other—net
Total adjustments
Net cash provided by (used in) operating activities
Investing Activities:
Proceeds from sale and redemption of marketable securities
Proceeds from sale of property, plant and equipment
Payment for purchase of marketable securities
Payment for acquisition of a property, plant and equipment
Purchase of time deposits
Proceeds from withdrawal deposits
Payment for purchase of investment securities
Payment for purchase of investments in affiliates
Proceeds from sales of investments in affiliates
Proceeds from sales and redemption of investment securities
Increase in other assets
Net cash used in investing activities
Forward
Financing Activities:
(Decrease) increase in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of convertible bonds
Cash dividends paid
Purchase of treasury stock
Cash dividends paid to minority shareholders
Paid-in capital from minority shareholders
Others
Net cash (used in) provided by financing activities
¥
(7,322)
3,063
13,257
3,899
177
99
1,327
-
(2,070)
(4,922)
3,989
6,520
(4,019)
13,998
59,571
-
\
258
(260)
(58,862)
709
\
(6,822)
8,398
1,702
(7,600)
(27,439)
(6,901)
16,842
(77)
(63,692)
4,947
4,784
(491)
(69,527)
(86,767)
(126)
(36,513)
(1,278)
(1,467)
(13,831)
-
(5,585)
(9,001)
(1,148)
-
¥
43,296
1,489
70,000
(21,749)
80,673
(4,845)
(7,595)
(1,182)
263
(82)
116,972
-
(37,082)
113,008
75,926
2012
2011
$
(79,288)
4,064
14,620
2,760
368
669
(217)
(1,214)
(5,630)
(2,875)
4,650
762
795
(60,536)
(17,240)
10,084
866
(12,299)
(26,137)
(6,300)
4,312
(1,041)
(28,345)
Foreign Currency Translation Adjustments on
Cash and Cash Equivalents
Net (Decrease) increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
45,573
Thousands of
U.S. dollars
(Note 1)
¥
28,738
84,270
113,008
555,771
(89,294)
37,353
161,671
47,552
2,156
1,207
16,179
-
(25,243)
(60,022)
48,644
79,511
(49,012)
170,702
726,473
122,971
10,564
(149,991)
(318,747)
(76,830)
52,591
(12,688)
(345,669)
-
$
3,151
(3,174)
(717,822)
8,651
(83,198)
-
(168,668)
-
(68,108)
(109,770)
(14,002)
-
(1,537)
(445,283)
(15,585)
$
(452,217)
1,378,145
925,928
The accompanying notes are an integral part of these financial statements.
22
Notes to Consolidated Financial Statements
Unicharm Corporation and Subsidiaries
Years Ended March 31, 2012 and 2011
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
the 2011 consolidated financial statements to conform to the
The accompanying consolidated financial statements have been
classifications used in 2012.
prepared in accordance with the provisions set forth in the
Japanese Financial Instruments and Exchange Act and its related
The consolidated financial statements are expressed in
Japanese yen, the currency of the country in which Unicharm
accounting regulations and in conformity with accounting
Corporation (the “Company”) is incorporated and operates. The
principles generally accepted in Japan (“Japanese GAAP”), which
translations of Japanese yen amounts into U.S. dollar amounts are
are different in certain respects as to application and disclosure
included solely for the convenience of readers outside Japan and
requirements of International Financial Reporting Standards.
have been made at the rate of ¥82 to $1, the approximate rate of
exchange at March 31, 2012. Such translations should not be
In preparing these consolidated financial statements, certain
construed as representation that the Japanese yen amounts could
reclassifications have been made to the consolidated financial
be converted into U.S. dollars at that or any other rate.
statements issued domestically in order to
present them in a form that is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Consolidation
The consolidated financial statements include the accounts of
the Company and its 40 (31 in 2011) subsidiaries (together, the
“Group”). A subsidiary is excluded from the scope of
consolidation for the year ended March 31, 2012 as mentioned
below.
Under the control or influence concept, 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.
The changes to the consolidation scope at March 31, 2012,
compared with the scope applicable at March 31, 2011 are as
follows:
Unicharm Brazil LTDA. and Unicharm (China) Co., Ltd.,
which were newly established, Diana Joint Stock Company with
its subsidiary, the Hartz Mountain Corporation with its subsidiary,
and Peparlet Co., Ltd. whose shares were newly acquired, are
included in the consolidation scope at March 31, 2012.
In addition, Ac-eight Corporation, which was a consolidated
subsidiary, was liquidated after the merger with Unicharm Kokko
Nonwoven Co., Ltd., a consolidated subsidiary effective on
January 17, 2012.
Hartz-B2E LLC is excluded from the scope of consolidation,
because it is a small sized company and the effect on the
accompanying consolidated financial statements would not be
material in terms of total assets, net sales, or net income
corresponding to the Company’s share and retained earnings
corresponding to the Company’s share of the company.
During the fourth quarter ended March 31, 2012, the Company
established Unicharm Nonwoven (Tianjin) Co., Ltd. and
Unicharm Packaging Material (Tianjin) Co., Ltd., through its
consolidated subsidiary, Unicharm China Co., Ltd. These
companies are not included in the scope of consolidation for the
year ended March 31, 2012, because those companies were
established in the fourth quarter and their fiscal closing date is
December 31, which is different from the fiscal closing date of
the Group.
Investment in two affiliates is accounted for by the equity
method.
The reporting period of other consolidated subsidiaries and
equity method affiliates is the same as the Company’s reporting
period. However, nineteen overseas subsidiaries and one
domestic subsidiary close accounts on December 31, one
domestic subsidiary close accounts on June 30 and one affiliate
accounted for by the equity method close accounts on September
30. In the consolidated financial statements, therefore, the
Company uses the financial statements of these subsidiaries as of
December 31, and adjusts for material transactions that occurred
during the three month period between December 31 and March
31. For other consolidated subsidiaries and an affiliate which
close accounts, pro forma financial statements as of March 31 are
used.
The difference between the cost of the Company’s investments
in subsidiaries and affiliates accounted for by the equity method
and its equity in the net assets at the respective dates of
acquisition, goodwill or negative goodwill, is amortized over the
effective investment period, calculated on an individual basis,
using the straight-line method up to a maximum of 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
eliminated.
All assets and liabilities of the consolidated subsidiaries are
measured at fair value as of the acquisition date.
23
b. Cash Equivalents
Cash equivalents are short-term investments that are readily
convertible into cash and that are exposed to insignificant risk of
changes in value.
Cash equivalents include time deposits, certificates of deposit,
commercial papers and bond funds, all of which mature or
become due within three months of the date of acquisition.
c. Inventories
Inventories held for sale in the ordinary course of business are
measured at the lower of cost determined mainly by the average
method, or net selling value, which is defined as the selling price
less additionally estimated manufacturing costs and estimated
direct selling expenses. The replacement cost may be used in
place of the net selling value, if appropriate.
d. Allowance for Doubtful Accounts
The allowance for doubtful accounts is determined based on
the historical experiences of the Company and its subsidiaries as
well as our best estimate of the amount of probable credit losses
in the outstanding receivables.
e. 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, which are expected to be held to
maturity with 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 the aforementioned securities, are
reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of net assets.
Non-marketable 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 adjusted to net realizable value through income.
f. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
of property, plant and equipment of the Company and its
domestic subsidiaries is computed by the straight-line at rates
based on the estimated useful lives of the assets.
The range of useful lives is principally from 2 to 60 years for
buildings and structures, from 2 to 40 years for machinery and
equipment and from 2 to 20 years for furniture and fixtures.
Capitalized lease assets are depreciated over their respective
contract periods using the straight-line method assuming no
residual value.
(Accounting change)
Prior to April 1, 2011, depreciation of property, plant and
equipment, except for lease assets, was computed by the
declining-balance method, while the straight-line method is
applied to buildings acquired after April 1, 1998 and the property,
plant and equipment of foreign subsidiaries. However, effective
from April 1, 2011, the straight-line method has been applied to
all property, plant and equipment.
This change aims to unify the Group’s accounting methods and
reflect its profit and loss figures more correctly based on the
actual business conditions.The change was triggered by
developments in the Group’s capital expenditure environment. In
April 2011, the Group formulated its eighth medium-term
management plan, “Blue Sky Plan,” and under this plan, the
Group expects to increase its overseas capital expenditures in the
efforts to capitalize on the acceleration of global business
development.
As a result, in order to carry out more appropriate cost
allocation, the Company judged that the actual business
conditions would be reflected more correctly by changing the
depreciation method of property, plant and equipment to the
straight-line method, as property, plant and equipment of the
Company and its domestic consolidated subsidiaries have been
stably operated within the useful life and stable profits are
expected from the products of the Group.
Due to this change, operating income and income before
income taxes increased by ¥3,612 million ($44,047thousand),
compared to the amount that would have been under the previous
accounting method.
The effect of this change on the segments is explained in Note
24 “SEGMENT INFORMATION.”
g. Software
Software is carried at cost less accumulated amortization,
which is calculated using the straight-line method. The useful
lives are principally 5 years.
h. Long-lived Assets
The Group reviews its long-lived assets for impairment
whenever events or changes in circumstance indicate the carrying
amount of an asset or asset group may not be recoverable. An
impairment loss 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.
i. Retirement and Pension Plans
The Company and certain consolidated subsidiaries have
contributory funded defined benefit pension plans and unfunded
retirement benefit plans for employees. Certain overseas
consolidated subsidiaries have defined contribution pension
plans.
The Company and certain consolidated subsidiaries account for
the provision for retirement benefits based on projected benefit
obligations and plan assets at the balance sheet date.
j. Research and Development Costs
Research and development costs are charged to income as
incurred.
k. Leases
All finance leases are capitalized and related lease assets and
lease obligations are recognized in the balance sheets.
24
l. Income Taxes
The provision for income taxes is computed based on the
pretax income included in the consolidated statements 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.
m. 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 income statement to the extent that they are
not hedged by forward exchange contracts.
n. Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign
subsidiaries are translated into Japanese yen at the exchange rates
in effect as of the balance sheet date except for equity, which is
translated at the historical rate.
Differences arising from such translation were presented as
"Foreign currency translation adjustments" in a separate
component of net assets.
Revenue and expense accounts of consolidated foreign
subsidiaries are translated into yen at the average exchange rates
prevailing during the year.
o. Derivatives and Hedging Activities
The Group uses derivative financial instruments to manage its
exposure to fluctuations in foreign exchange. Foreign exchange
forward contracts and currency options are utilized by the Group
to reduce foreign currency exchange 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: (a) 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 statements of
income and (b) for derivatives used for hedging purposes, if
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 and currency options
are utilized to hedge foreign currency exposures in procurement
of raw materials from import purchases. Trade payables
denominated in foreign currencies are translated at the contracted
rates if the forward contracts qualify for hedge accounting.
Forward contracts applied for forecasted transactions are
measured at fair value, and the unrealized gains/losses are
deferred until the underlying transactions are completed.
retroactively adjusted for stock splits.
The weighted-average number of common shares used in the
computation was 186,144,881 shares for 2012, and 188,421,882
shares for 2011.
Diluted net income per share reflects the potential dilution that
could occur if securities were exercised or converted into
common stock (including subsidiaries’ common stock). Diluted
net income per share of common stock assumes full conversion of
the outstanding convertible notes and bonds at the beginning of
the year (or at the time of issuance) with an applicable adjustment
for related interest expense, net of tax, and full exercise of
outstanding warrants.
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.
(Accounting change)
On June 30, 2010, the Accounting Standards Board of Japan
(“ASBJ”) issued revised ASBJ Statement No. 2, “Accounting
Standard for Earnings per Share” and revised ASBJ Guidance No.
4, “Guidance on Accounting Standard for Earnings per Share.”
The Company adopted this revised standard effective from the
year ended March 31, 2012. In accordance with the revised
accounting standard, the Company has changed the method of
computing diluted net income per share and added the fair value
of stock options which are related to the services provided to the
Company in future to the amount supposed to be paid upon
execution. There is no effect on previous fiscal year’s
information.
q. Provision for Bonuses
Provision for bonuses is stated at the estimated amount of the
bonuses to be paid to employees based on their services provided
for the fiscal year.
r. Provision for Loss on Disaster
The provision for loss on disaster is stated at the amount
considered to be appropriate based on estimation of expenses or
losses for the restoration of plants and equipment damaged by the
Great East Japan Earthquake.
s. Adoption of Accounting Standard for Accounting Changes and
Error Corrections
On December 4, 2009, the ASBJ issued ASBJ Statement No. 24
“Accounting Standard for Accounting Changes and Error
Corrections” and ASBJ Guidance No. 24 “Guidance on
Accounting Standard for Accounting Changes and Error
Corrections.” The new accounting standard has defined the
accounting treatment for retrospective applications to past
financial statements when changes in accounting policies,
changes in presentations and corrections of prior period errors are
made as well as the treatment for changes in accounting estimates.
Effective April 1, 2011, the Company adopted this new
accounting standard.
p. 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,
25
3. MARKETABLE AND INVESTMENT SECURITIES
Marketable and investment securities at March 31, 2012 and 2011 consisted of the following:
Thousands of
U.S. dollars
Millions of yen
2012
Current:
Government and corporate bonds
2012
¥900
2,500
¥702
-
$10,975
30,488
¥11,487
2,428
228
¥14,143
¥9,457
2,203
1,228
¥12,888
$140,090
29,604
2,783
$172,477
Negotiable certificates of deposit
Non-current:
Marketable equity securities
Government and corporate bonds
Trust fund investments and other
Total
2011
The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2012 and 2011 were as follows:
Millions of yen
March 31, 2012
Securities classified as:
Available-for-sale:
Equity securities
Debt securities and other
Held-to-maturity
Total
Cost
¥4,401
20,008
3,327
¥27,736
Unrealized
gains
Unrealized
losses
¥6,124
16
¥6,140
¥53
183
¥236
Fair
value
¥10,472
20,024
3,144
¥33,640
Millions of yen
March 31, 2011
Securities classified as:
Available-for-sale:
Equity securities
Debt securities and other
Held-to-maturity
Total
Cost
¥4,752
1,000
2,905
¥8,657
Unrealized
gains
Unrealized
losses
¥5,144
2
¥5,146
¥440
13
181
¥634
Fair
value
¥9,456
987
2,726
¥13,169
Thousands of U.S. dollars
March 31, 2012
Securities classified as:
Available-for-sale:
Equity securities
Debt securities and other
Held-to-maturity
Total
Cost
$53,670
244,000
40,579
$338,249
Unrealized
gains
$74,683
198
$74,881
Unrealized
losses
$652
2,234
$2,886
Fair
value
$127,701
244,198
38,345
$410,244
26
Available-for-sale securities and held-to-maturity securities whose fair value is not readily determinable as of March 31, 2012 and 2011
were as follows:
Carrying Amount
Thousands of
U.S. dollars
Millions of yen
Available-for-sale:
Equity securities
Debt securities and other
Held-to-maturity (Commercial paper)
Total
2012
2011
¥
¥
385
400
¥ 785
Proceeds from sales of available-for-sale securities for the
years ended March 31, 2012 and 2011 were ¥38 million ($464
thousand) and ¥3,906 million, respectively. Gross realized gains
and losses on these sales, as determined by the moving-average
cost, were ¥9 million ($109 thousand) and ¥0 million ($1
2012
366
15
400
¥ 781
$ 4,693
4,878
$ 9,571
thousand) respectively for the year ended March 31, 2012. Gross
realized gains and losses on these sales, as determined the moving
average cost, were ¥213 million and ¥525 million, respectively,
for the year ended March 31, 2011.
The carrying amounts of debt securities by contractual maturities for securities classified as available-for-sale and held-to-maturity at
March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars
Millions of yen
March 31, 2012
Availablefor-sale
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Held-to
maturity
¥¥-
Availablefor-sale
¥900
1,427
1,000
¥3,327
Held-to
maturity
$$-
$ 10,975
17,408
12,195
$ 40,578
Millions of yen
March 31, 2011
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Availablefor-sale
Held-to
maturity
¥¥-
¥905
1,000
1,000
¥2,905
4. INVENTORIES
Inventories at March 31, 2012 and 2011 consisted of the following:
Thousands of
U.S. dollars
Millions of yen
Merchandise and finished products
Work in process
Raw materials
Supplies
Total
2012
¥ 18,068
682
13,502
1,409
¥ 33,661
2011
¥ 11,724
359
9,202
1,108
¥ 22,393
2012
$220,335
8,322
164,656
17,188
$410,501
27
5. LAND REVALUATION
Under the “Act on Revaluation of Land,” promulgated on
March 31, 1998 and revised on March 31, 1999 and 2001, the
Company elected a one-time revaluation of its own-use land to
real estate appraisal value as of March 31, 2001.
The resulting “land revaluation difference” represents
unrealized appreciation of land and is stated, net of income taxes,
as a component of net assets. There is no effect on the
consolidated statements of income.
As of March 31, 2012 and 2011, the carrying amount of the
land, net of the above one-time revaluation exceeded the market
value by ¥267 million ($3,256 thousand) and ¥434 million,
respectively.
6. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2012 and 2011 consisted of
notes to banks and bank overdrafts. Short-term loans were made
under general security agreements with banks. Loans from banks
and municipal corporations are due serially to 2015 with interest
rates ranging from 0.4% to 13.5% in 2012 and 0.4% to 1.4% at
March 31, 2011, respectively.
Long-term debt at March 31, 2012 and 2011 consisted of the following:
Thousands of
U.S. dollars
Millions of yen
2012
Loans from banks and municipal corporations, due serially
to 2015 with interest rates ranging from 0.4% to 13.5% in 2012
and from 0.4% to 1.4% in 2011
Obligations under finance leases
Total
Less current portion
Long-term debt, less current portion
¥38,047
310
38,357
(2,945)
¥35,412
2011
2012
¥49,485
167
49,652
(2,221)
¥47,431
$463,989
3,779
467,768
(35,919)
$431,849
Annual maturities of long-term debt, excluding finance leases (see Note 16), at March 31, 2012 were as follows:
Years Ending March 31
2013
2014
2015
2016
2017 and thereafter
Total
Millions of yen
¥2,828
2,219
2,000
31,000
¥38,047
Thousands of
U.S. dollars
$34,488
27,063
24,390
378,048
$463,989
28
7. CONVERTIBLE BONDS
The Company has issued the bonds as follows:
Convertible bonds
due in 2013
Convertible bonds
due in 2015
Total
Issuance
date
September
24, 2010
September
24, 2010
Interest rate
Security
-
Unsecured
-
Unsecured
-
-
Millions of yen
2012
2011
Maturity
date
September
10, 2013
September
10, 2015
-
Thousands of
U.S. dollars
2012
¥34,585
¥34,643
$421,771
46,000
46,000
560,975
¥80,585
¥80,643
$982,746
(Note 1) The details of convertible bonds issued are as follows:
Bonds and notes
Type of stock
Issue price of
acquisition rights
Issue price of stock
Number of stocks subject
to acquisition rights
Total amount of issue
Total amount of stock
acquisition rights
exercised
Percentage of stock
acquisition right granted
Exercisable period
Convertible bonds due in 2013
Common stock
No cost
Convertible bonds due in 2015
Common stock
No cost
¥3,883.3
8,884,196
¥3,883.3
11,845,595
¥34,672,500,000
¥46,000,000,000
-
-
100.0
100.0
October 8, 2010 – September 10,
October 8, 2010 – September 10,
2013
2015
(at local time where the request
(at local time where the request
for exercise will be received)
for exercise will be received)
* Exercise of a stock acquisition right causes the corresponding bond to be cancelled in lieu of a cash payment of purchase of shares, and
the amount of the convertible bonds with stock acquisition rights is the same as the amount of issuance.
(Note 2)
Repayment schedule of convertible bond:
March 31, 2012
March 31, 2012
Due in one year
or less
-
Due after one
year through
two years
¥34,585
Millions of yen
Due after two
Due after three
years through
years through
three years
four years
¥46,000
Due after four
years through
five years
Due in one year
or less
-
Due after one
year through
two years
$421,771
Thousands of U.S. dollars
Due after two
Due after three
years through
years through
three years
four years
$560,975
Due after four
years through
five years
-
-
29
8. RETIREMENT AND PENSION PLANS
The Company and domestic subsidiaries have severance
payment plans for employees, directors and corporate auditors.
Under most circumstances, employees terminating their
employment are entitled to retirement benefits determined based
on the rate of pay at the time of termination, years of service and
certain other factors. Such retirement benefits are made in the
form of a lump-sum severance payment from the Company or
from certain subsidiaries and annuity payments from a trustee.
Employees are entitled to larger payments if the termination is
involuntary, by retirement at the mandatory retirement age, by
death, or by voluntary retirement at certain specific ages prior to
the mandatory retirement age.
The provision for employees’ retirement benefits at March 31, 2012 and 2011 consisted of the following:
Thousands of
U.S. dollars
Millions of yen
Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss
Unrecognized prior service cost
Prepaid pension cost
Provision for retirement benefits
2012
¥35,340
(27,288)
(10,890)
(155)
5,747
¥2,754
2011
¥30,693
(25,376)
(8,177)
(174)
5,658
¥2,624
2012
$430,980
(332,785)
(132,807)
(1,885)
70,085
$33,588
The components of net periodic benefit cost for the years ended March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars
Millions of yen
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Amortization of prior service cost
Net periodic benefit cost
2012
¥1,633
614
(600)
1,109
21
¥2,777
2011
¥1,674
538
(583)
1,216
17
¥2,862
2012
$19,912
7,486
(7,318)
13,523
263
$33,866
Assumptions used for the years ended March 31, 2012 and 2011 were set forth as follows:
2012
Discount rate*
Expected rate of return on plan assets
Amortization period of actuarial gain/loss
Amortization period of prior service cost
Amortization method of projected benefit obligation
2011
1.4%
3.0%
10 years
5 years
2.0%
3.0%
10 years
5 years
The straight-line method
The straight-line method
*As a result of reviewing the appropriateness of the discount rate, it turned out that the movement of the discount rate has a significant impact on the
Projected benefit obligation. Therefore, the discount rate as at March 31, 2012 has been changed to 1.4%, while the discount rate as at April 1, 2011 was
2.0%.
9. CONTINGENT LIABILITIES
Contingent liabilities at March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars
2012
Millions of yen
2012
2011
Guarantee for borrowings of a company other than
consolidated subsidiaries from the financial
institutions:
Co-operative Clean Plaza
¥
3
¥
9
$35
30
10. NOTES RECEIVABLE AND PAYABLE
March 31, 2012 falls on a bank holiday. The following notes receivable and payable matured on that date were accounted for as if they
were settled on that date:
Thousands of
Millions of yen
U.S. dollars
Notes receivable
¥214
$2,613
Notes payable
423
5,155
11. STOCK OPTIONS
The Company recognized and allocated share-based compensation costs for the years ended March 31, 2012 and 2011 was as follows:
Thousands of
U.S. dollars
Millions of yen
2012
Cost of sales
Selling, general and administrative expenses
Total
2011
¥217
424
¥641
¥90
199
¥289
2012
$2,644
5,171
7,815
The stock options at March 31, 2012 were as follows:
Unicharm Corporation
Meeting
date
September 16, 2010
(2010 Stock Option)
Persons
Number of
Date of
Conditions
Service
Exercisable
granted
options granted
grant
for vesting
period
period
9 company’s directors
Common stock
November 1, 2010
(*2)
From
From
1 subsidiaries’ director
2,594,700 shares
(*3)
November 1, 2010
October 1, 2012
1,651 company’s employees
(*1)
to September 30,
to September 30, 2016
2012
1,397 subsidiaries’
employees
(*1)The number of stock options is converted into the number of shares.
(*2) The market price of the Company’s common stock at the time of stock option exercise must be at least ¥4,800 (In the event that it becomes necessary to adjust this
value, the adjustment shall be conducted in a uniform and predetermined manner).
(*3) A Stock option rights holder must, at the time of the stock option exercise, hold a position within Unicharm or its affiliates as a director or employee. However,
Unicharm’s Board of Directors may approve the exercise of stock options by directors who have resigned due to the expiration of one’s term or employees who have
retired due to reaching the mandatory retirement age.
The activities of the stock option during the year ended March 31, 2012 were as follows:
Unicharm Corporation
2010 Stock Option
(Shares)
Non-vested
April 1, 2011—Outstanding
Granted
Forfeited
March 31, 2012—Outstanding
Vested
April 1, 2011—Outstanding
Exercised
Forfeited
March 31, 2012—Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date
2,589,300
28,200
2,561,100
¥3,287
($40)
¥51,300
($626)
31
12. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2012 and 2011 consisted of the following:
Thousands of
U.S. dollars
Millions of yen
Sales promotion
Advertising
Shipping and storage expenses
Employees’ salaries
Depreciation and amortization
Other
Total
2012
¥57,409
13,705
21,468
13,807
1,464
34,701
¥142,554
2011
¥49,778
12,628
19,711
12,129
1,373
31,373
¥126,992
2012
$700,109
167,139
261,799
168,380
17,856
423,185
$1,738,468
13. GAIN ON SALE OR LOSS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
Gain on sale of property, plant and equipment for the years ended March 31, 2012 and 2011 consisted of the following:
Thousands of
U.S. dollars
2012
Millions of yen
2012
2011
Gain on sale of property, plant and equipment
Buildings and structures
Machinery and equipments
Others
¥－
8
0
¥959
41
12
$－
94
5
Loss on disposal of property, plant and equipment for the years ended March 31, 2012 and 2011 consisted of the following:
Thousands of
U.S. dollars
2012
Millions of yen
2012
2011
Loss on removal of property, plant and equipment
Buildings and structures
Machinery and equipments
Removal costs
Others
Loss on sale of property, plant and equipment
Buildings and structures
Machinery and equipments
Others
¥64
753
43
59
¥19
722
16
21
$786
9,177
521
725
30
3
383
2
8
6
370
33
4,666
32
14. 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
40.7% for the years ended March 31, 2012 and 2011. Foreign
subsidiaries are subject to income taxes of the countries in which
they operate.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31, 2012 and 2011,
were as follows:
Thousands of
U.S. dollars
Millions of yen
2012
Deferred tax assets:
Accrued bonuses
Valuation loss on inventory
Accrued sales promotion expense
Undeductible account payable
Devaluation of securities
Pension and severance costs
Tax-deductible goodwill
Tax loss carryforwards
Other
Less valuation allowance
Total
Deferred tax liabilities:
Net unrealized gain on available-for-sale securities
Undistributed earnings of subsidiaries
Prepaid pension cost
Valuation difference due to application of purchase method
Depreciation of overseas subsidiaries
Other
Total
Deferred tax assets—current
Deferred tax assets— non-current
Deferred tax liabilities―current
Deferred tax liabilities—non-current
2011
2012
¥1,288
345
1,947
814
388
2,139
28,998
35,166
2,356
(8,612)
64,829
¥1,329
207
2,024
936
440
2,445
43,779
32,858
1,467
(16,384)
69,101
$15,711
4,207
23,744
9,923
4,733
26,087
353,629
428,854
28,735
(105,021)
790,602
1,906
680
2,085
1,310
1,446
926
8,353
¥12,751
¥45,147
(57)
¥(1,365)
1,755
572
2,394
507
5,228
¥11,453
¥53,108
¥(688)
23,250
8,294
25,422
15,971
17,639
11,295
101,871
$155,499
$550,569
(690)
$(16,647)
33
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statements of income for the years ended March 31, 2012 and 2011 was as follows:
2012
Normal effective statutory tax rate
Amortization of goodwill
Lower income tax rates applicable to income in certain foreign countries
Dividends
Valuation allowance
Income tax – refunded
Effects of the merger
Sale of investment in an affiliate
Corporate income tax credit
Effects of corporate income tax rate changes
Other
Actual effective tax rate
2011
40.7%
2.7
(10.3)
0.1
(14.8)
(0.7)
－
－
0.5
12.7
1.7
40.7%
2.6
(9.9)
0.5
38.2
(2.7)
(57.0)
1.2
－
－
0.8
32.6%
14.4%
On December 2, 2011, the “Act for Partial Revision to the Income Tax Act, etc. for the Purpose of Creating a Taxation System
Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing
Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117 of
2011) were promulgated. Consequently, the corporate tax rate will be reduced and a special recovery tax will be imposed. In accordance
with this tax reform, the effective statutory tax rate, which is used to measure deferred tax assets and deferred tax liabilities, has been
reduced from 40.7% to 38.01% for temporary differences that are expected to be eliminated during the period from April 1, 2012 through
March 31, 2015 and 35.64% for temporary differences that are expected to be eliminated on or after April 1, 2015. As a result, net
deferred tax assets (the amount after deducting deferred tax liabilities) decreased by ¥5,275 million ($64,329thousand) and income taxes –
deferred increased by ¥5,546 million ($67,634thousand).
In addition, as the tax loss carryforwards to be used will be limited to 80% of taxable income before deducting tax loss carryforwards
from the fiscal year beginning on or after April 1, 2012, deferred tax assets decreased by ¥7,392 million ($90,146thousand) and income
taxes －deferred increased by the same amount.
34
15. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥4,734 million ($57,727 thousand) and ¥4,954 million for the years ended
March 31, 2012 and 2011, respectively.
16. LEASES
Obligations under non-cancellable leases accounted for as operating leases subsequent to March 31, 2012 and 2011 were as follows:
Due within one year
Due after one year
Total
Millions of yen
2012
2011
¥ 524
¥ 2
1,981
3
¥2,505
¥ 5
Thousands of
U.S. dollars
2012
$ 6,386
24,159
$ 30,545
17. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the year ended March 31, 2012 were as follows:
Thousands of
Millions of yen
U.S. dollars
Net unrealized gains on available-for-sale securities:
Gain arising during the year
¥
1,477
$
18,013
Reclassification adjustment to net income
(13)
(161)
Amount before income tax effect
Income tax effect
Net unrealized gains on available-for-sale securities
Net deferred gains (losses) on derivatives under hedge accounting:
Loss arising during the year
Reclassification adjustment to net income
Amount before income tax effect
Income tax effect
Net deferred gains (losses) on derivatives under hedge accounting
Foreign currency translation adjustments:
Loss arising during the year
Amount before income tax effect
Foreign currency translation adjustments
Total other comprehensive loss
1,464
(561)
17,852
(6,831)
903
11,021
(21)
6
(254)
73
(15)
7
(8)
(181)
81
(100)
(2,056)
(25,070)
(2,056)
(2,056)
(25,070)
(25,070)
¥(1,161)
$(14,149)
35
18. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
1. Disclosure on Financial Instruments
(1) Policy for financial instruments
With respect to fund management, cash surpluses, if any, are invested in low risk financial assets. The Company determines which
way to fund through reviewing financial conditions and market circumstances and, based on these, puts them into practice.
Derivatives are used, not for speculative purposes, but to avoid the market risk of fluctuation in foreign exchange rates associated
with receivables and payables denominated in foreign currencies.
(2) Nature and risk of financial instruments and risk management system
Receivables such as trade notes and trade accounts are exposed to customer credit risk. With regard to such risk the sales
administration department monitors major customers periodically and controls the collection dues and outstanding balances per
customer in order to identify doubtful receivables resulting from deterioration of customers' financial positions at an early stage.
Furthermore trade receivables denominated in foreign currency due from overseas subsidiaries are exposed to currency risk. The
Company hedges the position, net of payables, using foreign exchange forward contracts, if necessary.
Investment securities held by the Company and certain consolidated subsidiaries, which consist of equity securities held for the
purpose of business or capital alliances and debt securities classified as available-for-sale securities, are exposed to the market risk
due to fluctuation in market prices.
With regard to the equity securities held for the purpose of business alliance, fair values are periodically reported at the board
meetings. The Company limits the debt securities included in investment securities to the highly rated bonds in accordance with the
Company's fund management policy; therefore, the credit risk associated with those securities is limited.
Payables—notes payable, accounts payable trade and accrued income taxes—mostly have payment due dates within one year. A
portion of the trade payables denominated in foreign currencies that is stemmed from importing of raw materials is exposed to
foreign currency exchange risk, while it is hedged through using forward foreign currency contracts when necessary. Long-term debt
and Convertible bonds are taken out principally for the purpose of investment and facilitation of funds. Debt with variable interest
rates is exposed to interest rate fluctuation risk. The Group manages its liquidity risk by holding adequate volumes of liquid assets
along with adequate financial planning made by Accounting Control & Finance Division based on reports from relevant
departments.
Derivative contracts employed by the Company and certain consolidated subsidiaries are foreign exchange forward contracts for
the purpose of hedging the market risk due to fluctuation in foreign exchange rates associated with the trade receivables and payables
denominated in foreign currencies. The derivative transactions are executed and controlled in accordance with the internal rule and
used for hedging actual transactions. For hedging instruments, hedged items, hedge method and hedge effectiveness of hedge
accounting, please see Note 19 “DERIVATIVES.”
(3) Supplementary explanation about fair value of financial instruments
Where no market price information is available, management uses certain assumptions to determine the fair value of those
financial instruments. Accordingly, the value of these instruments would vary if different assumptions were used. Note that contract
amounts of derivatives presented in Note 19 “DERIVATIVES” do not represent volume of underlying market risk of the derivative
transactions.
36
2.
Fair Value of Financial Instruments
Carrying amounts and fair values of financial instruments and their net differences as of March 31, 2012 and 2011 were as follows:
Note that the following table does not include fair values for financial instruments for which the fair value is difficult to determine.
March 31, 2012
Cash and cash equivalents
Notes and accounts receivable
Allowance for doubtful accounts (*1)
Deposit
Marketable and investment securities
Total assets
Short-term bank loans
Current portion of long-term debt
Notes and accounts payable:
Trade
Others
Income taxes payable
Convertible bonds
Long-term debt
Total liabilities
Derivative transactions (*2)
Hedge accounting is not applied
Hedge accounting is applied
Total derivative transactions
March 31, 2011
Cash and cash equivalents
Notes and accounts receivable
Allowance for doubtful accounts (*1)
Deposit
Marketable and investment securities
Total assets
Short-term bank loans
Current portion of long-term debt
Notes and accounts payable:
Trade
Others
Income taxes payable
Convertible bonds
Long-term debt
Total liabilities
Derivative transactions (*2)
Hedge accounting is not applied
Hedge accounting is applied
Total derivative transactions
Millions of yen
Fair value
¥75,926
Difference
¥ －
50,318
7,539
17,132
¥150,915
¥ 5,439
2,828
－
－
(183)
¥(183)
¥ －
－
45,779
29,742
4,348
80,585
35,220
¥203,941
45,779
29,742
4,348
95,666
35,220
¥219,022
－
－
－
(15,081)
－
¥(15,081)
¥ (2)
(19)
¥ (21)
¥ (2)
(19)
¥ (21)
¥ －
－
¥ －
Millions of yen
Fair value
¥113,008
Difference
¥ －
46,004
5,562
13,169
¥177,743
¥ 6,241
2,131
－
－
(179)
¥(179)
－
－
37,991
28,423
1,953
80,643
47,354
¥204,736
37,991
28,423
1,953
84,470
47,234
¥208,443
－
－
－
3,827
(120)
¥3,707
¥16
(36)
¥(20)
¥16
(36)
¥(20)
¥ －
－
¥ －
Carrying amount
¥75,926
50,405
(87)
50,318
7,539
17,315
¥151,098
¥ 5,439
2,828
Carrying amount
¥113,008
46,038
(34)
46,004
5,562
13,348
¥177,922
¥ 6,241
2,131
37
March 31, 2012
Cash and cash equivalents
Notes and accounts receivable
Allowance for doubtful accounts (*1)
Thousands of U.S. dollars
Carrying amount
Fair value
Difference
$925,928
$925,928
$ －
614,693
(1,057)
613,636
613,636
91,942
91,942
－
211,156
208,922
(2,234)
$1,842,662
$1,840,428
$(2,234)
$66,332
$66,332
$ －
34,488
34,488
－
Deposit
Marketable and investment securities
Total assets
Short-term bank loans
Current portion of long-term debt
Notes and accounts payable:
Trade
558,275
558,275
Others
362,708
362,708
Income taxes payable
53,030
53,030
Convertible bonds
982,746
1,166,661
Long-term debt
429,502
429,502
Total liabilities
$2,487,081
$2,670,996
Derivative transactions (*2)
Hedge accounting is not applied
$(23)
$(23)
Hedge accounting is applied
(230)
(230)
Total derivative transactions
$(253)
$(253)
(*1) Allowance for doubtful accounts corresponding to notes and accounts receivable is deducted.
(*2) Receivables and payables arising from derivative transactions are shown in net amount.
－
－
－
(183,915)
－
$(183,915)
$ －
－
$ －
(Note 1) Calculation method of the fair value of financial instruments and securities and derivative transactions
Asset:
“Cash and cash equivalents” and "Notes and accounts receivable”
The carrying amount is presented as the fair value since these balances are routinely settled in the short term, and as such the fair value
is considered to approximate the carrying value.
“Marketable and investment securities”
The fair values of equity securities are estimated based on quoted market prices for these instruments, and the fair values of debt
securities are determined based on the prices obtained from the financial institutions with which they are transacted.
For further information, please see Note 3 "MARKETABLE AND INVESTMENT SECURITIES."
Liabilities:
“Short-term bank loans,” “Notes and accounts payable” and “Income taxes payable”
The carrying amount is presented as the fair value since these balances are routinely settled in the short term, and as such the fair value
is considered to approximate the carrying value.
“Convertible bonds”
The fair value of bonds issued by the Company is measured at the quoted market price.
“Long-term debt”
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be
applied if similar new loans were entered into. However, the fair value of long-term debt with variable rates is based on the book value,
since the variable rates are renewed periodically, so the carrying amounts approximate the fair value.
38
Derivative transactions:
Please see Note 19 “DERIVATIVES.”
(Note 2) Carrying amounts of financial instruments for which fair value cannot be reliably measured were as follows:
Thousands of
Millions of yen
U.S. dollars
2012
2011
2012
Unlisted equity securities
¥385
¥366
$4,693
Investment in partnerships
－
15
－
Total
¥385
¥381
$4,693
These items are not included in above “Marketable and investment securities” since no market price is available and it is extremely
difficult to identify the fair value.
(Note 3) Repayment schedule of monetary receivables and securities with contractual maturities is as follows:
March 31, 2012
Cash and cash equivalents
Notes and accounts receivable
Marketable and investment securities:
Held-to-maturity debt securities:
Commercial paper
Debt securities
Total
March 31, 2011
Cash and cash equivalents
Notes and accounts receivable
Marketable and investment securities:
Held-to-maturity debt securities:
Commercial paper
Debt securities
Total
March 31, 2012
Cash and cash equivalents
Notes and accounts receivable
Marketable and investment securities:
Held-to-maturity debt securities:
Commercial paper
Debt securities
Total
Due in one year
or less
¥75,926
50,405
400
500
¥127,231
Due in one year
or less
¥113,008
46,038
400
505
¥159,951
Due in one year
or less
$925,928
614,693
4,878
6,097
$1,551,596
Millions of yen
Due after one
Due after five
year through
years through
five years
ten years
¥－
¥－
－
－
－
－
¥－
Due after ten
years
¥－
－
－
1,427
¥1,427
－
1,000
¥1,000
Millions of yen
Due after one
Due after five
year through
years through
five years
ten years
¥－
¥－
－
－
Due after ten
years
¥－
－
－
－
¥－
－
1,000
¥1,000
－
1,000
¥1,000
Thousands of U.S. dollars
Due after one
Due after five
year through
years through
five years
ten years
$－
$－
－
－
Due after ten
years
$－
－
－
－
$－
－
17,408
$17,408
－
12,195
$12,195
39
19. DERIVATIVES
The Group enters into foreign exchange forward contracts and
currency options to hedge foreign exchange risk associated with
certain assets and liabilities denominated in foreign currencies.
Most derivative transactions are entered into to hedge foreign
currency exposures incorporated with its business. Accordingly,
market risk in these derivatives is basically offset by opposite
movements in the value of hedged assets or liabilities. The Group
does not hold or issue derivatives for trading purposes.
It is also the Group’s policy to use derivatives only for the
purpose of mitigating market risks associated with investment
securities.
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 internal policies which regulate the
authorization and credit limit amounts.
Contract amounts, fair values, and gains and losses on derivative transactions were as follows:
a.
Derivatives to which hedge accounting is not applied:
Contract
amount
Foreign exchange forward contracts—
(Exchange-traded)
Selling USD
(Exchange-traded)
Buying USD
Total
Millions of yen
Thousands of U.S. dollars
2012
2012
Fair
value
Unrealized
gain/loss
Contract
amount
Fair
value
Unrealized
gain
¥150
¥0
¥0
$1,837
$7
$7
615
¥765
(2)
¥(2)
(2)
¥(2)
7,497
$9,334
(30)
$(23)
(30)
$(23)
Millions of yen
2011
Contract
amount
Foreign exchange forward contracts—
(Over the counter transactions)
Buying USD
(Over the counter transactions)
Buying EURO
(Exchange-traded)
Buying USD
(Exchange-traded)
Selling USD
(Exchange-traded)
Selling Yen
Total
Fair
value
Unrealized
gain/loss
¥354
¥15
¥15
1,198
2
2
71
0
0
500
(1)
(1)
3
¥2,126
0
¥16
0
¥16
The fair value is determined based on the prices presented from the financial institutions with which derivatives are transacted.
40
b. Derivatives to which hedge accounting is applied:
At March 31, 2012
Hedge accounting method
Deffered hedging accounting method
Deffered hedging accounting method
Deffered hedging accounting method
Deffered hedging accounting method
Type of derivatives
Foreign exchange
forward contracts:
Selling CAD
Foreign exchange
forward contracts:
Buying Yen
Currency option
contracts:
Buying USD
Currency option
contracts:
Buying EUR
Major hedged
item
Accounts payable
Millions of yen
Contract
Contract
amount due
amount
after one year
¥338
¥ －
Fair value
¥4
Accounts payable
90
－
(1)
Accounts payable
263
－
4
Accounts payable
990
－
(26)
－
¥(19)
Millions of yen
Contract
Contract
amount due
amount
after one year
¥168
¥ －
Fair value
¥(13)
Total
¥1,681
At March 31, 2011
Hedge accounting method
Hedge items are translated using the
forward contract rates
Deffered hedging accounting method
Deffered hedging accounting method
Deffered hedging accounting method
Type of derivatives
Foreign exchange
forward contracts:
Buying USD
Foreign exchange
forward contracts:
Buying Yen
Currency option
contracts:
Buying EURO
Currency option
contracts:
Buying USD
Major hedged
item
Accounts payable
Accounts payable
118
－
2
Accounts payable
365
－
(15)
Accounts payable
325
－
(10)
－
¥(36)
Thousands of U.S. dollars
Contract
Contract
amount due
amount
after one year
$4,120
$ －
Fair value
$46
Total
¥976
At March 31, 2012
Hedge accounting method
Deffered hedging accounting method
Deffered hedging accounting method
Deffered hedging accounting method
Deffered hedging accounting method
Type of derivatives
Foreign exchange
forward contracts:
Selling CAD
Foreign exchange
forward contracts:
Buying Yen
Currency option
contracts:
Buying USD
Currency option
contracts:
Buying EUR
¥
Major hedged
item
Accounts payable
¥
Accounts payable
1,096
－
(17)
Accounts payable
3,207
－
51
Accounts payable
12,081
－
(310)
Total
$20,504
$ －
The fair value is determined based on the prices presented from the financial institutions with which derivatives are transacted.
$(230)
41
20. PER SHARE INFORMATION
a. Basis for the computation of net asset per share at March 31, 2012 and 2011 was as follows:
At March31, 2012
Net asset
Stock acquisition rights
Minority interests
Number of treasury stock
Net asset attributable to common stock
At March31, 2011
Net asset
Stock acquisition rights
Minority interests
Number of treasury stock
Net asset attributable to common stock
Millions of yen
Thousands of
shares
Net asset
Number of shares
of common stock
¥243,207
959
29,174
213,074
Yen
U.S. dollars
Asset per share
206,945
22,698
184,247
¥1,156
Millions of yen
Thousands of
shares
Yen
Net asset
Number of shares
of common stock
Asset per share
¥219,633
289
17,409
201,935
206,945
20,522
186,423
$14.10
¥1,083
b. A reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2012 and
2011 was as follows:
Millions of yen
Year Ended March 31, 2012
Basic EPS—Net income available to common shareholders
Effect of dilutive securities—Adjustment of warrants of company
Diluted EPS—Net income for computation
Net income
¥26,982
(58)
¥26,924
Millions of yen
Year Ended March 31, 2011
Basic EPS—Net income available to common shareholders
Effect of dilutive securities—Adjustment of warrants of company
Diluted EPS—Net income for computation
Net income
¥33,560
(17)
¥33,543
Thousands
of shares
Weighted-average
shares
186,145
20,884
207,029
Thousands
of shares
Weighted-average
shares
188,422
10,734
199,156
Yen
U.S. dollars
EPS
¥144.95
$1.77
¥130.05
$1.59
Yen
EPS
¥178.11
¥168.42
42
21. SUBSEQUENT EVENTS
a.
Appropriations of Retained Earnings
The following appropriations of retained earnings at March 31, 2012 were approved at the Board of Directors of the Company meeting
held on May 31, 2012:
Thousands of
U.S. dollars
Millions of yen
Year-end cash dividends, ¥16 ($0.20) per share
¥2,948
$35,951
b.
Establishment of a significant subsidiary
The Company received approval and authorization to establish Unicharm Consumer Products (Jiangsu) Co., Ltd. in Yangzhou,
Jiangsu Province, China, and established it as follows:
(1) Objectives
The Company currently has factories in Shanghai and Tianjin, and as demand is expected to expand in the inland areas going
forward, the Company has decided to establish Unicharm Consumer Products (Jiangsu) Co., Ltd. in Yangzhou, Jiangsu Province in
order to build a stable supply system.
(2) Profile of the New Company
Corporate name:
Address:
Representative:
Business Operations:
Paid-in Capital:
Ownership:
Date of Establishment:
Unicharm Consumer Products (Jiangsu) Co., Ltd.
Annex of Development Building, 108 Weiyang Road, Yangzhou, China
Kennosuke Nakano
Manufacturing and sales of disposable diapers, sanitary products and the like
$30 million
Unicharm China Co., Ltd. (100%)
July 12, 2012
(3) Future Outlook
The impact on consolidated financial results for the fiscal year ending March 31, 2013 is expected to be minimal.
22. RELATED PARTY TRANSACTIONS
(1) Transactions of the Company with related parties for the years ended March 31, 2012 and 2011 were as follows:
a. Takahara Kosan K.K.
Takahara Kosan K.K. is directly owned 20.0% share by Mr. Takahisa Takahara, President and Chief Executive Officer of the Company,
1.0% by Mr. Keiichiro Takahara, Founder &Director of the Board of the Company, 44.5% directly owned by their close relatives, and
another 34.5% indirectly owned by their close relatives.
Thousands of
U.S. dollars
Millions of yen
2012
Insurance premium
Prepaid expenses
2011
¥40
0
2012
¥40
0
$484
5
b. Unitec Corporation
Unitec Corporation is directly owned 0.7% share by Mr. Takahisa Takahara, 1.5% by Mr. Keiichiro Takahara’s close relatives, and
another 97.8% indirectly owned by Mr. Keiichiro Takahara’s close relatives.
Thousands of
U.S. dollars
Millions of yen
2012
Rental expenses
2011
¥11
2012
¥11
$137
43
(2) Transactions of the consolidated subsidiaries of the Company with related parties for the year ended March 31, 2012 and 2011 were
as follows:
a. Takahara Kosan K.K.
Thousands of
U.S. dollars
Millions of yen
2012
Rental expenses
2011
¥119
¥69
2012
$1,451
b. Unitec Corporation
Thousands of
U.S. dollars
Millions of yen
2012
Rental expenses
2011
¥－
2012
¥50
$－
44
23. BUSINESS COMBINATION
For the year ended March 31, 2012
Business combination through acquisition: Diana Joint Stock Company
(1) Overview of business combination
1) Name and operations of acquired company
Name of acquired company: Diana Joint Stock Company (“Diana”)
Operations:
Manufacturing and distribution of feminine care products, baby diapers, adult diapers, tissues,
etc.
2) Main reason for business combination
To enhance our presence in the Vietnamese market by fusing Diana’s business base, i.e. its diverse experience in marketing
activities and sales capabilities in Vietnam, with the Uni-Charm Group’s technological strength, i.e. its manufacturing and
development capabilities and lean production system.
3) Business combination date
September 26, 2011 (share acquisition date)
September 30, 2011 (deemed acquisition date)
4) Legal form of business combination
Acquisition of shares for cash
5) Name of company after business combination
Unchanged
6) Percentage of voting rights acquired
95.0%
7) Basis of determination of acquiring company
Acquisition of shares for cash by Uni-Charm (Thailand), which is a subsidiary of the Company.
(2) Business term of the acquired company included in the consolidated statement of income for the year ended March 31, 2012 is from
October 1, 2011 through December 31, 2011
(3) Acquisition cost for the acquired company and breakdown thereof are as follows:
Millions of yen
Consideration for acquisition: Fair value of common stock of Diana acquired on the business combination date
Costs directly incurred in the acquisition: Advisory service fees, etc.
Acquisition cost
¥14,563
330
¥14,893
Thousands of
U.S. dollars
$177,604
4,023
$181,627
(4) Amount of goodwill incurred, reasons and amortization method
1) Amount of goodwill:
¥13,377 million ($163,135thousand)
2) Reason for goodwill:
The extra earning potential expected to be delivered through the future development of the business.
3) Amortization method:
Straight-line method over 20 years
(5) Assets acquired and liabilities assumed on the business combination date and their major breakdowns:
Millions of yen
Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
¥1,891
2,629
¥4,520
¥2,374
550
¥2,924
Thousands of
U.S. dollars
$23,060
32,062
$55,122
$28,956
6,701
$35,657
45
(6) Estimated effects on the consolidated statement of income for the year ended March 31, 2012 as if the business combination were
completed on April 1, 2011 and its calculation method are as follows:
Millions of yen
Net sales
Operating income
Income before income taxes and minority interests
Net income
Net income per share
¥4,438
(104)
(51)
(111)
(0.60)
Thousands of
U.S. dollars
$54,125
(1,266)
(623)
(1,359)
(0.01)
Estimated effects are based on the differences between net sales and profit or loss information computed as if the business
combination were completed on April 1, 2011 and net sales and profit or loss information included in the consolidated financial
statements of the acquired company.
46
Business combination through acquisition: The Hartz Mountain Corporation
(1) Overview of business combination
1) Name and operations of acquired company
Name of acquired company:
The Hartz Mountain Corporation
Operations:
Manufacturing and sales of pet care products
2) Main reason for business combination
To quickly expand pet care business in the United States of America by fusing Hartz’s business foundation, i.e. its diverse
experience in marketing activities and sales capabilities in the United States of America with the Uni-Charm Group’s
technological strength, product development capabilities and lean production system in the pet care business.
3) Business combination date
October 1, 2011 (deemed acquisition date)
December 30, 2011 (share acquisition date)
4) Legal form of business combination
Acquisition of shares for cash
5) Name of company after business combination
Unchanged
6) Percentage of voting rights acquired
51.0%
7) Basis of determination of acquiring company
Acquisition of shares for cash by the Company
(2) Business term of the acquired company included in the consolidated statement of income for the year ended March 31, 2012 is from
October 1, 2011 through March 31, 2012.
(3) Acquisition cost for the acquired company and breakdown thereof are as follows:
Millions of yen
Consideration for acquisition: Fair value of common stock of Hartz acquired on the business combination date
Costs directly incurred in the acquisition: Advisory service fees, etc.
Acquisition cost
¥13,176
97
¥13,273
Thousands of
U.S. dollars
$160,691
1,185
$161,876
(4) Amount of goodwill incurred, reasons and amortization method
1) Amount of goodwill:
¥3,879 million ($47,303thousand)
2) Reason for goodwill:
The extra earning potential expected to be delivered through the future development of the business.
3) Amortization method:
Straight-line method over 20 years
(5) Assets acquired and liabilities assumed on the business combination date and their major breakdowns:
Millions of yen
Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
¥10,079
20,710
¥30,789
¥9,454
2,914
¥12,368
Thousands of
U.S. dollars
$122,912
252,566
$375,478
115,294
35,530
$150,824
In the allocation of acquisition costs, main items other than goodwill, that have been allocated to intangible fixed assets are trade mark of
¥8,125 million ($99,084 thousand) and customer-related intangible assets of ¥7,128 million ($ 86,932thousand). Amortization periods for
these assets are individually set based on their useful lives.
47
(6) Estimated effects on the consolidated statement of income for the year ended March 31, 2012 as if the business combination were
completed on April 1, 2011 and its calculation method are as follows:
Millions of yen
Net sales
Operating income
Income before income taxes and minority interests
Net income
Net income per share
¥11,926
405
343
82
0.44
Thousands of
U.S. dollars
$145,435
4,934
4,188
1,004
0.01
Estimated effects are based on the differences between net sales and profit or loss information computed as if the business
combination were completed on April 1, 2011 and net sales and profit or loss information included in the consolidated financial
statements of the acquired company. Please note that this note has not been audited.
48
Merger of Unicharm PetCare Corporation
For the year ended March 31, 2011
(1) Overview of business combination
The Company resolved at the meeting of its Board of Directors held on April 30, 2010, to merge Unicharm PetCare Corporation
(“Unicharm PetCare”) through tender offer (“The Tender Offer”) into the Company. In addition, the merger was approved at the 50th
Annual Shareholders’ Meeting Unicharm held on June 24, 2010. Based on the resolution, the Company successfully completed The
Tender Offer in compliance with the Financial Instruments and Exchange Law for the period from May 6, 2010 to June 16, 2010. The
Company, as the merging company, executed the merger of had been executed the merger agreement at a meeting of its Board of
Directors held on April 30, 2010.
The Company, as the surviving company, completed the merger of Unicharm PetCare, as the merged company, effective September 1,
2010.
I. Purpose of the merger
The Company aimed to be more strongly positioned in the domestic market and to enhance the prospective overseas business of both
companies by enhancing managerial flexibility, optimizing managerial resources including human resources of both companies,
expanding the business through cooperative strategic investments, and achieving a more rapid synergy effect. In order to achieve these
goals, the Company reached the conclusion that both Companies should operate their businesses as one entity.
II. Summary information of the merger
1) Schedule
Effective date of the merger: September 1, 2010
Payment date of the consideration for the merger: October 29, 2010
2) Scheme
The merger was executed by absorption method. Unicharm PetCare was dissolved effective September 1, 2010.
3) Consideration
The Company paid in cash ¥3,825 per share (a total of ¥2,848 million for 744,651 shares) to the shareholders of Unicharm PetCare
registered or recorded in the final list of shareholders (excluding both companies) just before the merger was effective. Since the
merger consideration consists of cash, the Company neither issued new shares nor allocated treasury stock.
4) Description of the merged company (as of March 31, 2010)
Name:
Unicharm PetCare Corporation
Location:
3-5-27, Mita, Minato-ku, Tokyo
Representative:
President & CEO Gumpei Futagami
Business:
Production and sales of pet food and pet toiletry products
Common stock:
¥2,371 million
Founded:
October 6, 1979
Number of the shares issued:
29,360,000
Fiscal year end date:
March 31
(2) Accounting treatment
The merger was accounted for transaction under common control in accordance with ASBJ Statement No.21 “Accounting Standard for
Business Combinations” issued on December 26, 2008 and ASBJ Guidance No.10 “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” issued on December 26, 2008.
The goodwill derived from The Tender Offer is ¥51,675 million.
The goodwill derived from the merger is ¥3,841 million.
49
24. SEGMENT INFORMATION
1.
Overview of reportable segments
The Group’s reportable segments are components for which separate financial information is available, and whose operating results are
reviewed regularly by the Board of Directors in order to determine allocation of management resources and assess segment performance.
The Group’s reportable segments consist of Personal care business, Pet care business, and Other business. Each business segment
operates its own business with the comprehensive strategies including Japan and overseas business by segments.
Therefore, the Personal care business, the Pet care business and Other business constitute the Company’s reportable segments.
The Personal care business manufactures and sells baby care products, feminine care products, health care products and
clean-and-fresh products. The Pet care business manufactures and sells pet food products and pet toiletry products. The Other businesses
manufacture and sell industrial materials.
2.
Methods of measurement for the amounts of sales, profit (loss), assets, and other items for each reportable segment
The accounting policies for the reportable segments are basically the same as policies described in “Summary of Significant
Accounting Policies.” Intersegment sales and transfer prices are mainly based on current market price.
3.
Information about sales, profit (loss), assets, liabilities and other items is as follows.
Millions of yen
2012
Reportable segment
Sales to customers
Intersegment sales
Total sales
Segment profit (Operating profit)
Segment assets
Other:
Depreciation
Amortization of goodwill
Increase in tangible fixed assets and
intangible fixed assets
Personal care
¥362,885
¥362,885
¥48,215
¥332,205
Pet care
¥59,558
¥59,558
¥3,173
¥96,878
Others
¥5,948
21
¥5,969
¥487
¥25,147
Total
¥428,391
21
¥428,412
¥51,875
¥454,230
Eliminations or
Corporate
¥(21)
¥ (21)
¥26
¥18,268
Consolidated
¥428,391
¥428,391
¥51,901
¥472,498
¥11,920
833
42,588
¥1,213
3,066
26,785
¥124
126
¥13,257
3,899
69,499
¥-
¥13,257
3,899
69,499
Millions of yen
2011
Reportable segment
Sales to customers
Intersegment sales
Total sales
Segment profit (Operating profit)
Segment assets
Other:
Depreciation
Amortization of goodwill
Increase in tangible fixed assets and
intangible fixed assets
Personal care
¥322,994
¥322,994
¥40,130
¥276,028
Pet care
¥47,767
¥47,767
¥6,139
¥66,837
Others
¥6,187
22
¥6,209
¥269
¥23,108
Total
¥376,948
22
¥376,970
¥46,538
¥365,973
Eliminations or
Corporate
¥(22)
¥ (22)
¥23
¥78,043
Consolidated
¥376,948
¥376,948
¥46,561
¥444,016
¥13,742
710
26,487
¥656
2,050
56,084
¥222
¥14,620
2,760
82,656
¥-
¥14,620
2,760
82,656
85
50
Thousands of U.S. Dollars
2012
Reportable segment
Personal care
$4,425,432
$4,425,432
$587,983
$4,051,284
Others
$72,539
254
$72,793
$5,944
$306,662
Total
$5,224,282
254
$5,224,536
$632,627
$5,539,388
Eliminations or
Corporate
$(254)
$ (254)
$309
$222,778
Consolidated
Sales to customers
$5,224,282
Intersegment sales
Total sales
$5,224,282
Segment profit (Operating profit)
$632,936
Segment assets
$5,762,166
Other:
Depreciation
$145,369
$14,787
$1,515
$161,671
$$161,671
Amortization of goodwill
10,166
37,386
47,552
47,552
Increase in tangible fixed assets and
519,367
326,648
1,530
847,545
847,545
intangible fixed assets
Notes:
1. Corporate assets included in “Eliminations or Corporate” amount to ¥55,591 million ($677,939thousand) and ¥99,136 million for the year ended
March 31, 2012 and 2011, respectively. Such assets consist of cash and cash equivalents, marketable securities and investment securities held by the
Company.
2. Prior to April 1, 2011, depreciation of property, plant and equipment, except for lease assets, was computed by the declining-balance method, while
the straight-line method is applied to buildings acquired after April 1, 1998 and the property, plant and equipment of foreign subsidiaries. However,
effective from April 1, 2011, the straight-line method has been applied to all property, plant and equipment. The effect of this change was to increase
operating profit for the year ended March 31, 2012 of “Personal care,” “Pet care” and “Other” by ¥3,261 million ($39,773thousand), ¥286 million
($3,493 thousand) and ¥64million ($780thousand), respectively.
3.
Pet care
$726,311
$726,311
$38,700
$1,181,442
On January 17, 2012, Unicharm Kokko Nonwoven Co., Ltd., which is a consolidated subsidiary of the Company, implemented the
absorption-type merger with Ac-eight Corporation. As a result, “Sales,” “Profit,” “Assets” and “Other,” which were previously
included in the “Other” segment, are included in “Personal care” for the fiscal year ended March 31, 2012. Accordingly, the
information about sales, profit or loss, assets and liabilities and other items for the fiscal year ended March 31, 2011 are restated.
(Related Information)
1. Information on Products and Services
Information on products and services is omitted since the similar information is disclosed in above segment information.
2. Geographical Information
(1) Sales
Millions of yen
2012
Japan
China
¥229,083
Others
¥56,346
Total
¥142,962
¥428,391
Millions of yen
2011
Japan
China
¥217,299
Others
¥44,741
Total
¥114,908
¥376,948
Thousands of U.S. dollars
2012
Japan
China
Others
$2,793,699
$687,140
$1,743,443
Note: Sales are devided to each country on areas based on the customer's location.
Total
$5,224,282
51
(2) Tangible fixed assets
Millions of yen
2012
Japan
China
¥40,766
Others
¥25,337
Total
¥50,718
¥116,821
Millions of yen
2011
Japan
China
¥40,008
Others
¥18,764
Total
¥39,618
¥98,390
Thousands of U.S. dollars
2012
Japan
China
$497,146
3.
Others
$308,993
Total
$618,508
$1,424,647
Information about Major Customers
Information about major customers is omitted, since there is no particular customer to whom sales exceeds 10% of the total sales
recorded in the consolidated statements of income.
(Information about impairment loss on fixed assets by reportable segment)
There was no significant impairment loss to be reported for the years ended March 31, 2012 and 2011.
(Information about amortization and unamortized balance of goodwill by reportable segment)
Millions of yen
2012
Reportable segment
Amortization
Unamortized balance at end of the year
Personal care
¥833
24,274
Pet care
¥3,066
54,631
Others
¥-
Total
¥3,899
78,905
Eliminations or
Corporate
¥-
Consolidated
¥3,899
78,905
Eliminations or
Corporate
¥-
Consolidated
¥2,760
65,022
Eliminations or
Corporate
$-
Consolidated
$47,552
962,259
Millions of yen
2011
Reportable segment
Amortization
Unamortized balance at end of the year
Personal care
¥710
11,556
Pet care
¥2,050
53,466
Others
¥-
Total
¥2,760
65,022
Thousands of U.S. dollars
2012
Reportable segment
Amortization
Unamortized balance at end of the year
Personal care
$10,166
296,026
Pet care
$37,386
666,233
Others
$-
Total
$47,552
962,259
Note: Unicharm Kokko Nonwoven Co., Ltd., which is a consolidated subsidiary of the Company, implemented the absorption-type
merger with Ac-eight Corporation, which is also a consolidated subsidiary of the Company. As a result, “Goodwill” and
“Amortization of goodwill” for Ac-eight Corporation, which were previously included in the “Other” segment, are included in
“Personal care” for the fiscal year ended March 31, 2012. Accordingly, the information about amortization and unamortized
balance of goodwill by reportable segment for the year ended March 31, 2011 are restated based on the amounts reflecting the
change.
(Information about gain on negative goodwill by reportable segment)
There was no applicable matter for the years ended March 31, 2012 and 2011.
52
53
54