Notice of the 35Thannual General Meeting of Shareholders
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The following documents are English translations of the USS Co., Ltd. Notice of the 35th Annual General Meeting of Shareholders (for the fiscal year ended March 31, 2015) as well as the Business Report, Consolidated Financial Statements, voting instructions, and information about the location of the shareholders meeting. Of the items that should be disclosed in the Business Report, the original Japanese text is accessible only via the Internet on the USS Web site (http://www.ussnet.co.jp) for the following items: “System to assure performance of duties by directors in compliance with laws and regulations and the Articles of Incorporation, and other systems to assure appropriateness of operations,” “Basic policy regarding control of policy decisions in respect of the Company’s finance and business,” “Notes on Consolidated Financial Statements” and “Notes on Non-consolidated Financial Statements.” USS is providing this translation solely for your convenience and does not make any guarantee that this document is accurate. (Securities code: 4732) USS Co., Ltd. 507-20 Shinpo-machi, Tokai, Aichi, Japan Notice of the 35 th Annual General Meeting of Shareholders May 25, 2015 Dear Shareholders: You are cordially invited to attend the 35 th Annual General Meeting of the Shareholders of USS Co., Ltd. (the “Company”), which will be held as per the schedule below. If you are unable to attend the meeting in person, you can cast your vote in writing or by electronic means (via the Internet, etc.). Please review the Reference Materials for the General Meeting of Shareholders presented herein and exercise your voting rights by no later than 5:00 p.m. on Monday, June 15, 2015. You can do this by indicating “for” or “against” for each agenda item shown in the enclosed Form for Exercising Voting Rights and returning it to us, or by accessing the website designated by the Company and entering “for” or “against” for each agenda item. For details of the procedure for exercising your voting rights by electronic means (via the Internet, etc.), please refer to “Procedure for Exercising Voting Rights Electronically (via the Internet, etc.)” (on pages 67-68). Sincerely, Yukihiro Ando President and Representative Director 1 1. Date and Time: Tuesday, June 16, 2015, at 11:00 a.m. 2. Venue: Head Office of the Company (the Nagoya Auction Site of the Company) 507-20, Shinpo-machi, Tokai, Aichi (Please refer to the access information on the last page) 3. Meeting Agenda: Items to be reported: 1. The contents of the Business Report, the contents of the consolidated financial statements, and the results of the audit of consolidated financial statements by accounting auditors and the Board of Corporate Auditors for the Company's 35th business term (from April 1, 2014 to March 31, 2015) 2. The financial reports for the Company's 35th business term (from April 1, 2014 to March 31, 2015) Items to be resolved: Item 1: Appropriation of retained earnings Item 2: Election of ten (10) directors Notes: 1. The reception desk opens at 10:00 a.m. 2. Please submit the attached Form for Exercising Voting Rights at the reception desk on the day of the meeting. 3. Any change in the Reference Materials for the General Meeting of Shareholders, financial statements or consolidated financial statements will be posted on our website (http://www.ussnet.co.jp). We would like you to confirm such information. 2 (Attached document) Business Report (From April 1, 2014 to March 31, 2015) 1. Matters relating to the current state of the Company Group (1) Results of Operations In the consolidated fiscal year ended March 31, 2015, the number of new car registrations amounted to 5,296 thousand, down 6.9% year on year, and that of used car registrations decreased to 6,704 thousand, down 5.6% year on year, in Japan’s vehicle distribution market. The major reasons for the decrease in sales of both new cars and used cars were a backlash from the last minute demand associated with the rise in the consumption tax rate implemented in April 2014 and sluggish consumer spending after the rise in the consumption tax rate. (Research by the Japan Automobile Dealers Association and the Japan Light Motor Vehicle and Motorcycle Association) In the auto auction market, although demand for the export of used cars continued to grow due to yen depreciation, the number of vehicles consigned, mainly due to the impact of the rise in the consumption tax, increased 0.5% year on year to 7,262 thousand, the number of vehicles contracted decreased 0.4% to 4,517 thousand and the contract completion rate decreased to 62.2% from 62.8% in the previous consolidated fiscal year. (Research by USEDCAR Co., Ltd.) In this environment, for the current consolidated fiscal year, the USS Group recorded a 0.7% year-on-year decrease in consolidated net sales to 67,466 million yen, operating income increased 2.2% to 33,411 million yen, ordinary income increased 2.3% to 34,027 million yen and net income increased 8.5% to 21,661 million yen. All three earning figures are all-time highs for the fourth consecutive year. Performance by business segment for the year ended March 31, 2015, was as follows. Auto Auction Business In the auto auction business of the USS Group, the number of vehicles consigned increased 2.1% year on year to 2,353 thousand, the number of vehicles contracted increased 0.3% to 1,545 thousand and the contract completion rate decreased from 66.8% in the previous fiscal year to 65.7%. The auction commission revenue increased mainly due to the increase in the number of vehicles consigned especially at large-scale auction sites. As for operating expenses, depreciation and sales promotion expenses decreased, while tax and dues and supplies expenses decreased which incurred temporarily in association with new construction and the relocation of the Nagoya Auction site in the previous fiscal year. As a result, net sales to external customers in this segment increased 1.6% to 50,281 million yen and operating income increased 3.2% to 32,116 million yen compared with the previous fiscal year. 3 Used Car Purchasing and Selling Business Rabbit used car buying shops recorded lower sales and earnings than in the previous fiscal year, reflecting a decrease in the number of vehicles purchased mainly due to the impact of the rise in the consumption tax and a decline in the unit sales price resulted from a rise in the purchase ratio of low-priced car models. The accident-damaged vehicles business recorded lower sales and earnings due to a plunge in the number of vehicles purchased. As a result, net sales to outside customers in this segment decreased 13.2% to 10,083 million yen and operating income decreased 35.8% to 464 million yen compared with the previous fiscal year. As of July 1, 2014, R&W Co., Ltd. (“R&W”), conducted an incorporation-type company split, thereby establishing Rabbit Car Network Co., Ltd., which operates the used car purchasing chain “Rabbit.” R&W changed its trade name to Reproworld Co., Ltd., as of January 1, 2015. Other Business In automobile recycling operations for end-of-life automobiles and other goods, sales increased but earnings decreased, primarily due to a plunge in ferrous scrap market prices after October 2014 and an increase in labor and other costs, while the handling volume of end-of-life automobiles increased. In scrap rubber recycling operations, sales and earnings decreased due to a decrease in the handling volume of colored elastic pavement, the principal product. The export procedure agency service for used cars recorded higher sales and earnings due to an increase in the handling volume of vehicles exported and shift of the inspection process to in-house operation. As a result, net sales to outside customers in this segment increased 3.7% to 7,100 million yen and operating income decreased 2.4% to 675 million yen compared with the previous fiscal year. (2) Capital Expenditures Consolidated capital expenditures totaled 3,020 million yen on an end-of-manufacturing base in the fiscal year ended March 31, 2015. A breakdown of the expenditures is as follows: 1) Major facilities completed during the consolidated fiscal year under review Classification Name of office Contents of facility Auto Auction Business Okayama Auction Site New construction and relocation of the auction site 2) Ongoing new establishment, extension and improvement of major facilities at the end of the consolidated fiscal year under review Not applicable (3) Financing Nothing noteworthy 4 (4) Important Issues As for our prospects, the vehicle distribution market is expected to recover gradually as consumer confidence improves along with an increase in wages, although the number of vehicles sold is predicted to decline with the impact of a higher tax on light motor vehicles and a review of the standards for the tax break for eco-friendly vehicles. The vehicle distribution market is expected to shrink over the medium to long term, however, for several reasons, including the declining birth rate and aging population, the decline in interest in car ownership among young people and people driving cars longer before trading them in. These trends could have a negative impact on the number of vehicles consigned at auctions. In response to these market conditions, the USS Group put forward the slogan, "Increasing our share in the auto auction market." The USS Group has also adopted “capital efficiency-focused management” as a management slogan. Considering the return on equity (ROE) to be an important management index, the Company has set an ROE of at least 15% on an ongoing basis.