Annual Report 2018 Year Ended March 31, 2018
Annual Report 2018 Year Ended March 31, 2018
Fujikura Ltd. 5-1, Kiba 1-chome, Koto-ku, Tokyo 135-8512, Japan Tel: +81-3-5606-1030 Fax: +81-3-5606-1502 URL: http://www.fujikura.co.jp/eng “Tsunagu”
Printed in Japan Technology Fujikura Group Table of Contents Corporate Philosophy
Mission “Tsunagu” Technology...... 2 Fujikura’s History...... 4
The Fujikura Group’s mission is to create exceptional value for President’s Message...... 6 our customers around the world using “Tsunagu” At a Glance...... 8 (the Japanese word meaning “connecting”) technologies. Financial Highlights...... 10 We dedicate ourselves to providing exceptional products and solutions earning our customers’ trust and contributing to society. Progress of 2020 Mid-term Business Plan...... 12
Company Profile...... 16 Vision For the future...... 23 R&D Activity for Future Growth...... 24
Fujikura’s vision is to be the most trusted partner in our markets, to New Business Development...... 26 continuously develop innovative and relevant products and solutions, and to Open Innovation...... 28 positively impact our communities. We strive to become the leading player in our markets by utilizing our Sustainability Targeted by the Fujikura Group....30 “Tsunagu” technologies, tirelessly developing innovative and useful products Corporate Social Responsibility...... 32 and solutions. Each individual within the company will endeavor to become an essential Top Management...... 35 player, thus developing a team that can truly help Fujikura make its mark on Corporate Governance...... 36 the world stage. Risks...... 39
Financial Section...... 41
Core Values Management Discussion & Analysis...... 42
Financial Review...... 44 Customer Satisfaction “Are you doing enough to ensure customers are perfectly satisfied?” Global Network...... 74 Change for the Better Main Consolidated Subsidiaries/ “Are you willing to take up challenges to drive progress?” Investor Information...... 75 Collaboration “As a Fujikura associate, are you driven to work together with others to deliver the best possible result for our company?”
Behavior Standards
Always consider the customer first. Make customer satisfaction your highest priority. Consider what to accept and what to reject. Identify and demonstrate clear goals. “Tsunagu” Stay ahead of emerging technologies and connect people and solutions to the communities we serve. Technology Choose your actions based on facts. 2 Fujikura Annual Report 2018 Fujikura Annual Report 2018 3 1945 Complete destruction of 1992 The corporate name changed to Fukagawa plant in Tokyo Air Raid. Fujikura Ltd. 1949 Delivery of Japan’s first 24-core 1993 Delivery of 500 kV CV cables and TV camera cables to NHK (Japan Hokkaido-Honshu optical fiber Fujikura’s History Broadcasting Corporation). integrated submarine cables. 1957 Launch of wiring harness 1995 Development of super low loss manufacturing. multi-fiber optical connectors. 1958 First-time delivery of 154 kV OF 1998 Delivery of World’s largest 500 cables to Tokyo Electric Power kV DC OF submarine cables to In November 1883, Zenpachi and his brother went to see sector after the war. This achievement by Fujikura and other Co., Inc. Kansai Electric Power Co., Inc. Establishment of Tama Fujikura and J Power (Electric Power the arc light demonstration held on Nihonbashi-dori. They companies was recognized as an IEEE Milestone. Gakuen. Development Co., Ltd.) subsequently embarked on the electrical wire business after Contributing to the prosperity of society by supplying 1964 Development of equipment for Development of the first the manufacture of SZ-twisted recyclable, ecological electrical noticing the similarities in braiding technology for the hair highly reliable products to the world through innovative telecommunications cable. wire in the world. 2005 Adoption of corporate 1999 Development of a new signal ornaments in Zenpachi’s home business and the insulation technologies, and maintaining high product quality 1965 Launch manufacturing of printed philosophy: “MVCV (Mission, cable for the “Shinkansen” bullet circuits using a die stamp Vision, Core Value)” for electrical wire. through the unbroken succession of exacting standards of train. method. Establishment of Fujikura Dia Over the more than 130 years since then, Fujikura has monozukuri (craftsmanship) from our predecessors is what 1968 Relocation of head office to the 2000 Completion of a major urban Cable Ltd. in a joint venture with been the first to succeed in many things, both in Japan has ensured a relationship of trust between Fujikura and its period growth and high economic Postwar Kasumigaseki Bldg. redevelopment project on the Mitsubishi Cable Industries Ltd. site of the previous Fukagawa 2007 Shatters the critical current and worldwide. Fujikura was the first company in Japan to customers right up to the present. Plant, and opening of the record with an yttrium-based 1975 Joint optical fiber research “Fukagawa Gatharia” complex. manufacture of rubber insulation for wires and “Tokosen” This is the point from which Fujikura started and by newtech Globalization oxide superconducting wire. agreement signed by Nippon 2001 Commercialization and 2010 Completion of ‘Fukagawa electrical wire for aircraft prior to the war, then was the which it lives today. Telegraph and Telephone Public marketing of FTTH optical fiber Gatharia’ (Fukagawa re- Corporation, Furukawa Electric products. first to discover the ultra low-loss area of the optical fiber development project) Co., Ltd., Sumitomo Electric Development of a seat sensor for Open “Millennium Woods”, Industries, Ltd. and Fujikura. automobiles. Development of Japan’s first flat- Fujikura Bio-Garden. 2002 Live wire insulation diagnostic type elevator cables. 2011 Damage from floods in the device for high-voltage CV cables 1976 Development of world’s first Kingdom of Thailand. 1883 November 3 1923 Completion of the Fukagawa wins Shibusawa Award. long-wavelength/ultralow loss Delivery of cables for a deep- 2013 Introduction of in-house Zenpachi Fujikura goes to see a head office and plant. optical fiber in cooperation with demonstration of the arc light earth exploration vessel. company system through Total destruction of the Nippon Telegraph and Telephone organizational restructuring. on the balcony of the postal Fukagawa head office and plant Public Corporation. 2003 Development of dye-sensitized service and telegraph office by fire in the aftermath of the solar cells. 2015 Establishment of AFLIG, LLC, 1977 Relocation of the head office to a company in the U.S. that on Nihonbashi-dori with his Great Kanto Earthquake. 2004 Delivery of cables for ultra-high youngest brother, Tomekichi, and the Fujikura Bldg. in Gotanda. manufactures and sells optical 1925 Delivery of 1200 mm twisted speed elevators. takes an interest in electricity. 1979 Launch manufacture of FPCs for of major global competition Period fiber splicing products. pair cables made of domestically electronic devices. Beginning 1885 Zenpachi Fujikura begins manufactured insulated The VAD method is recognized as manufacturing silk and cotton World’s first transmission loss of a milestone by the IEEE. paper to the Department of only 0.27 dB/km achieved with insulated winding wires. 2016 Consolidation of all manufacture Communication. a low-loss single-mode optical 1890 Tomekichi Fujikura returns from and sale of industrial electrical 1886 Tomekichi Fujikura travels to 1930 Launch manufacturing of unit- fiber. USA. the USA. wire in Fujikura Dia Cable Ltd. type city cables. 1980 Development of single-mode 1893 Launch of manufacture of first 2017 Switch to a Company with an 1931 Launch manufacturing of optical fusion splicers. rubber-insulated wires in Japan. Audit & Supervisory Committee “Tokosen”, Japan’s first electric 1981 Development of heat pipes for 1901 Founder, Zenpachi Fujikura wire for aircraft. Structure. passes away (59). snow melting. Reorganization as an unlimited Development of Japan’s first partnership named Fujikura OPGWs (Optical Fiber Composite Electric Wire & Rubber Co., Ltd. Overhead Ground Wire). was founded. 1982 Development of semiconductor Representative: Tomekichi pressure sensors. Matsumoto Period of upheaval and hardships of upheaval Period Launch of membrane switch Capital: 25,000 yen manufacturing. 1903 Appointment of Fujikura plant as 1983 Delivery of optical fiber for the Restoration after the Earthquake and Fujikura of Technology of after the Earthquake and Fujikura Restoration a Japan’s first rubber-insulation Pan-Japan (longitudinal) optical factory by the Department of fiber transmission line. Communication. 1985 Development of the world’s first 1910 Establishment of Fujikura Electric core alignment fusion splicer. Establishment Wire Corporation. Representative: Tomekichi 1987 Successful fabrication of oxide Fujikura superconducting wires. Capital: 500,000 yen 1988 Development of world’s first CS 1916 Launch of copper refining, rolling trolley wires. and wiring operations. Development of world’s first multi optical fiber fusion splicers. The diversification and globalization of its business led Fujikura to establish many overseas locations from 1918 Acquisition of the patent for the 1980s to the present. The Fujikura Group currently operates 139 companies in 29 countries. multi-layered rubber-insulated 1990 Development of EDFA (erbium- doped optical fiber amplifier). Of particular note is Fujikura Electronics (Thailand) Ltd., which is part of the Electronics Business Company wires. and was established in 1984. Since that time, the Kingdom of Thailand has been one of Fujikura’s main 1919 Established “Fujikura Gakuen”, Completion of New Fukagawa manufacturing locations. It was damaged by flooding in 2011, but Fujikura succeeded in restoring a special facility for mentally- Head Office Building. operations within a short period of time. Founder, Zenpachi challenged children, on Oshima Fujikura’s Automotive Products Company has kept pace with the global expansion of our customers by Fujikura island. establishing and operating locations overseas.
4 Fujikura Annual Report 2018 Fujikura Annual Report 2018 5 To Our Shareholder, Since Fujikura was founded in 1885, we Bridge to have developed a strong awareness of contributing to the community through our business. We do this by contributing to the development of the infrastructure the future business in Japan and many countries and regions throughout the world, based on The value ascribed to compensation for solving social the “tsunagu” (connecting) technologies we have developed in our power and challenges through our business is the source of our profits. telecommunications systems businesses. The concept of contributing to growth Automotive Products Company is raised in the 2030 Vision, to strengthen strategy and the community through struggling, but I think that we can propose our response. This year we are taking a ESG is drawing interest, but the thought new solutions for the next-generation series of steps to build an innovation hub. process behind that concept is something electric vehicle (EV) market that will Stated differently, this means that we are that we have lived and breathed since the materialize in the near future through the working to change the mindset of the company’s founding, and it is stated in our combination of technologies derived from company itself. corporate philosophy. The value ascribed our base business in components, sensors, We have narrowed our focus to four to compensation for solving social optical communications technology, segments because we believe that we challenges through our business is the and other technologies that Fujikura cannot demonstrate Fujikura’s strengths in source of our profits. We work hard to earn has developed itself. We will focus on areas far removed from its existing areas those profits and use them to fund our developing technologies of value to all of of business. work as we take on new social challenges. our four in-house companies. (1) Energy & Industry The goal of management based on I would like to focus on increasing (2) Advanced Communication high earning power and the power of a our capabilities in proposing solutions (3) Life-Assistance strong reinvention, which I talk about to customers and entry into more (4) Vehicle incessantly, is to continuously increase business segments where Fujikura can This is an attempt to create new earning power. We cannot contribute to add a high degree of value. We will also businesses in these four segments by 2030 the community without earning power. manage with a focus on ROIC (return and we will accomplish this through open To achieve that we are working to on invested capital) in our existing innovation and stepping away from being increase the earning power of each businesses and I think it is essential to wholly self-sufficient. in-house company while keeping the engage in a thorough process of selection Our goal is to develop a corporate achievement of an operating margin of and concentration in businesses where culture that enables a continuous process of 7% or higher firmly in sight as one of the Fujikura’s standing has deteriorated selection and concentration and reinvention goals in the 2020 Mid-term Business Plan. significantly on a routine basis. of change. To give specific examples, our ability Meanwhile, I think the most urgent I ask all of our stakeholders to take a look President’s Message to build a strong relationship of trust challenge facing our company is the at the substantial change and growth that with customers through the provision of power of reinvention in the face of Fujikura is achieving through the 2020 Mid- I ask all of our stakeholders to take a look at the substantial change high value-added products such as SWR/ change. While we pride ourselves on term Business Plan and ask your continued WTC in the Power & Telecommunication the fact that we have been able to exist support. and growth that Fujikura is achieving through the 2020 Mid-term Systems Company and by improving and and prosper as a company for more than Business Plan and ask your continued support. maintaining high quality in the Electronics 100 years, Fujikura’s continued survival Business Company has given us the is not assured unless we respond to the opportunity to participate in business unprecedented speed of change in the Masahiko Ito from the launch of new models and to business and social environment brought President & CEO provide highly sophisticated products about by the proliferation of ICT. that add a high degree of value. We have been pursuing initiatives in The existing business in the open innovation since last year, a concept
6 Fujikura Annual Report 2018 Fujikura Annual Report 2018 7 At a Glance 10 Years of Business Trend billion Net Sales: ¥740 (Billions of yen) (Billions of yen) 45 800 740 Ratio of Operating Income to Net sales: 4.6% 678 40 700 661 653 34 34 35 590 32 600 574 521 30 504 509 491 500 25 Overseas Sales Ratio 25 20 400 18 16 20 300 15 13 200 10 6 20% 100 5 Japan: ¥277 billion 0 0 0 Asian countries: ¥174 billion 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net Sales 37% U.S.A: ¥141 billion Lehman Shock Earthquake in Japan Power & Telecommunication Power & Telecommunication Total Flood in Thailand Systems (Power Systems) Systems (Telecommunication Systems) 19% Others: ¥147 billion Electronics Business Automotive Products ¥740 billion Elec Others OP ms tron ste ics Sy Bu 24% on ¥ si ti 195 ne ica b s n illi s u on m n m io co ill le b e 1 A T 7 u 3 t & ¥ o r m
e o w Real Estate ¥ t o 1 iv P Business & 5 e 7 Other P ¥10 b r ¥14 billion b o n illi il llio on l d bi i 2 o u 2 n c ¥ t s e ¥ m o – c 3 s n I b e l g i n l a i l S t i a o t r n Real Estate Business & Other e e N p ¥4 billion O
8 Fujikura Annual Report 2018 Fujikura Annual Report 2018 9 Financial Highlights Net Sales (Billions of yen) Automotive Other Electronics Business (0.3) Thousands of Business +4.0 Millions of yen U.S. dollars Automotive Other E ect of E ect of Business +0.9 Forex Reorganization Power & Electronics of Domestic Business +18.0 Electric Telecommunication +27.2 E ect of Systems E ect of Wire & Cable Power & Telecommunication FY2013 FY2014 FY2015 FY2016 FY2017 FY2017 Rise in Business +35.6 (21.4) Rise in Sales Copper Price (1.3) Copper Price Company System Business E ect of +2.4 750.0 Forex +18.7 For the Year +14.3 740.0 (14.0) +12.0
Net Sales 590,980 661,510 678,528 653,795 740,052 $6,965,195 653.7 86.2 higher than FY2016 10.0 higher than FY2017
Operating Income 20,345 25,075 32,632 34,230 34,343 323,228 FY2016 FY2017 FY2018 Results Results Forecast Net Income Attributable to Owners of 3,328 12,201 11,317 12,900 18,359 172,791 Parent
Capital Expenditures 25,463 24,637 31,979 45,623 42,588 400,828 Operating Income R&D Expenditures 14,654 15,226 16,210 15,614 16,291 153,327 (Billions of yen)
At Year-End Electronics Automotive Change in Business Business Automotive depreciation Business Other +2.2 method Electronics +2.2 (1.4) Total Assets 537,281 577,567 552,678 588,626 638,055 6,005,224 E ect of (5.7) Business +2.5 Power & Forex Other E ect of Telecommunication +3.7 +1.4 (0.4) Forex Business Total Net Assets 207,242 234,527 217,981 224,546 241,961 2,277,280 (2.8) +2.9
39.0 Number of employees 53,409 52,452 54,114 56,961 58,422 34.2 34.3 0.1 higher than FY2016 4.7 higher than FY2017 Per Share Data
FY2016 FY2017 FY2018 Net Income (Loss)—Primary ¥9.99 ¥37.93 ¥36.98 ¥44.61 ¥64.36 $0.61 Results Results Forecast
Net Income—Fully Diluted – – – – – –
Cash Dividends 6.00 7.00 8.00 10.00 14.00 0.13 Rate of Return on Equity Net Income (Loss)-Primary Number of Employees
Net Sales Operating Income Overseas Sales Ratio 8.7% 64.36 yen 58,422 Japan Asian countries U.S.A Others (%) (Yen) (Billions of yen) (Billions of yen) (Billions of yen) 10 80 60,000 800 35 34.2 34.3XXX 800 740.0 32.6 70 50,000 700 678.5 700 8 661.5 30 653.7 147.0 60 590.9 89.5 95.5 40,000 600 25.0 600 114.8 50 25 6 75.8 500 118.4 148.8 141.3 40 30,000 20.3 500 20 90.0 124.4 4 30 20,000 400 400 168.9 164.5 174.3 20 15 153.5 158.5 2 300 300 10,000 10 10 200 200 0 0 0 FY2013 FY2014 FY2015 FY2016 FY2017 FY2013 FY2014 FY2015 FY2016 FY2017 2014 2015 2016 2017 2018 271.5 284.6 269.5 256.0 277.2 5 100 100 Japan Asia (excluding Japan) North & South America Europe & Africa 0 0 0 FY2013 FY2014 FY2015 FY2016 FY2017 FY2013 FY2014 FY2015 FY2016 FY2017 FY2013 FY2014 FY2015 FY2016 FY2017
10 Fujikura Annual Report 2018 Fujikura Annual Report 2018 11 Progress of 2020 Mid-term Business Plan
Third year of 2020 Mid-term Business Plan Ratio of Operating Income to Net Sales
Important year for determining the success of the 2020 Mid-term Business Plan (%) 8.0 2020 Mid-term Business Plan Results/FY2018 Forecast 7.0 Goals to be achieved in FY2020 7.0
6.2 6.2
6.0 Adjusted: • Ratio of operating income to net sales: 7.0% or higher 5.4 5.4 5.8% 5.6 5.0 4.9 • Net sales: 900 billion yen 4.7 4.4 4.0 • ROE: % or higher 10 3.0 1H 2H 1H 2H FY2019 FY2020 FY2017 FY2017 FY2018 FY2018
Forex rate Copper • D/E ratio: 40:60 (0.66 times) (JPY/USD) (JPY1,000/ton) 2020 Mid-term Business Plan 110 550 FY2018 plan 105 780
■■Developing deeper ties with strategic customers Developing deeper ties 1. Accelerate developing ties with customer by providing strategic products (SWR/WTC) --Work to achieve greater business growth 2. Win customer trust with differentiating quality with strategic customers --Seize new business opportunities
■■Strengthen the structure for promoting new business ■■ Accelerate new business Key areas 1. Strengthen products, technologies, and solutions for which automobiles are the platform --Automotive related creation --Industrial machinery 2. Work on the healthcare and fiber laser business --Medical devices
■■Supply the missing pieces of portfolios and value chains and create new 1. Open innovation that creates value value for customers Open innovation - Work with accelerators for start-up business ■■Speed up technology development, business development and business - Set up an innovation hub growth
■■Response to Corporate Governance Code 1. Transition to a company with an audit and supervisory committee Management reform & ■■Improve the quality and speed of decision-making in a diverse range of 2. Enhance diversity of members on the Board of Directors business structural reform businesses 3. Employ “Principles for Preventing Corporate Scandals” and full-fledged compliance ■■Strengthen the management base 4. Take ESG measures
12 Fujikura Annual Report 2018 Fujikura Annual Report 2018 13 Developing Deeper Ties with Strategic Customers Accelerate New Business Creation
SWR/WTC ▲ Strengthen development capabilities of products, technologies, and solutions for automotive ▲ Accelerate developing ties with customers by providing strategic products market ■ (Spider Web Ribbon/Wrapping Tube Cable) Companywide provision of products and technological solutions to customers • Secure further growth and pave way for the future • Establish automotive product R&D center in the Corporate R&D Unit • Upcoming opportunities for expansion in demand and become the defacto standard in the market • Establish Fujikura Technology Europe GmbH in Europe
■ Advancements in 5G and IoT and further accelerate FTTx, mainly in North America Fujikura automotive related products and technologies ■ Hyper scale data centers reaching a level of higher density ■ Solve lack of cable ducts and rise in requests for joint use of electrical poles Telecommunication Systems Power Systems ■ Redefine Fujikura’s core technologies Metal Cable Technologies ■ Propose total solutions responding to • Increase number of optical fiber cores Shipment volume converted from optical fiber core length Optical Fiber that can be installed in one cable duct Technologies customer needs • Effective use of existing facilities FY2017 sales volume rose 2.8x YoY ■ Collaborations beyond the boundaries of the Super Coil (no need for additional construction Market is steadily expanding AOC conductor technologies Fiber LASER Dye-sensitized businesses work) Storage & Power Device Solar Cell Millimeter Technologies Fast Charging • Thin, light weight cables ⇒ Easy Wave (60GHz) Connector for EV installation, can lay long lengths HV/EV Products DMFC of cable, compact drums (reduce module transport cost) FPC Application Heat sink System Power Supply and for Automotive Heatpipe Membrane Capacitive Sensing Sensor Accelerate and strengthen Printed Device Technologies Cable duct measures leading up to FY2016 FY2017 FY2018 Thermal Technologies Sensing next mid-term plan Electronics Business Technologies Automotive Products Comparison of cross section of optical cables
▲ Business activities in the medical field
Electronics ■
▲ Core technologies are imaging and miniaturizing
Aim to achieve sound growth by strengthening bond of trust with strategic customers Example: Direct imaging technology in the body • Continue to implement business operations with quality as its framework • Fujikura nearly covers all methods for invasive • In addition to converting fixed costs to variable costs to address fluctuations in demand, we implement imaging in detailed areas inside the body manufacturing innovations through automation and IoT ⇒ Recommend optimal solutions to customers (Small diameter CMOS imager, imaging fiber ■ Earn the trust of customers by preventing mixing of defective products optics, OCT, endoscopic ultrasound) ⇒ Moreover, improve profit margins by further enhancing internal quality • Extremely small diameter CMOS image sensor Example: CMOS endoscopy camera with extremely narrow diameter of φ1.3mm ■ Promote automation of manufacturing/inspections scope Improve productivity by manpower saving ⇒ ⇒ Further strengthen solution proposals Trend of high output *OCT=Optical Coherence Tomography Shipment volume converted from optical fiber core length 100 (pcs/MH) FY2016 average FY2017 average (*MH=man-hour) ▲ Fiber laser business activities ■ High output multi-mode fiber laser ⇒ High speed cutting, high quality cross sect Company A 10 Companies B & C • Succeeded in achieving the highest standard Maximum output levels
13% improvement Output kW for products put out on annual average for high power in the industry by other companies • Achieved competitive prices
April June August October December February April June August October December February 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2017 2018 1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
14 Fujikura Annual Report 2018 Fujikura Annual Report 2018 15 Company Profile Power & Telecommunication Systems Company New Product Initiatives
6,912- Optical Fiber Cable (SWR™/WTC™) Fujikura has developed Spider Web Ribbon™/Wrapping Tube Cable™ (SWR™/WTC™) with density highest in the world, small diameter, light weight and excellent workability. One WTC™ has 6,912 fibers which is the largest number ever in the world. 200 25,000 200μm fiber for 6,912 25,000 km of electrical cable ultra-high-Density WTC™ 6,912-fiber WTC™ developed for solar power generation (Wrapping Tube Cable™) shipped (in Japan) Launched Ultra-High-Density SWR™/WTC™ Wiring Solutions Together with ultra-high-density SWR™/WTC™, we lined up closures and patch panels which offer higher capacity while being compact and less time for installation.
Low Wind-Pressure Low-Loss Overhead Transmission Conductor The use of the polygonal structure reduces wind pressure and increases the aluminum cross-section. This reduces electrical
transmission loss and reduces the amount of CO2 generated from thermal power generation.
We will work to build a base capable of Net Sales and Ratio of Operating Targeting a Highly Profitable Business Structure rapidly meeting the robust demand for Income to Net Sales telecommunications systems and increase Net Sales Ratio of Operating Income to Net Sales (%) Fujikura is working to reallocate resources to high-growth areas and implement structural reform in its business to create a (Billions of yen) our earning power as we complete the 400 business structure that is highly profitable and has a powerful reinvention. During FY2018 we will begin to reap the benefits 366.5 371.7 362.6 349.6 of those efforts. structural reforms, product differentiation, 300 Investment in data centers, mobile, FTTx, and other types of telecommunications infrastructure was robust in FY2017 and and production technology development 6.1% 5.8% 6.0% demand for optical fiber grew, mainly in China and North America. We expect the global optical fiber shortage to persist in begun last fiscal year. 200 FY2018 as well, and are working to add capacity for optical fiber and optical cable in light of these trends in demand. 3.9% Rapid growth in the electrical infrastructure market is projected in Myanmar and other countries in Southeast Asia and 100 Brazil and neighboring countries in FY2018. Fujikura will work hand-in-hand with partners in each country to pursue EPC Hideyuki Hosoya Senior Vice President & Member of the Board 0 business (Engineering, Procurement, and Construction). FY2015 FY2016 FY2017 FY2018 Est.
16 Fujikura Annual Report 2018 Fujikura Annual Report 2018 17 Company Profile Electronics Business Company
New Product Initiatives
FPC for Daytime Running Lights (DRL) LED lights mounted on FPC take advantage of the flexibility of FPC and offer a superior sense of design for daytime running lights (DRL).
Board-to-Board Connectors for Vehicles and Mobile Devices Fujikura developed board-to-board connectors to meet the demand for electronic control and miniaturization in vehicles and is expanding the variety in the product line-up. These highly reliable connectors have a lock mechanism to withstand vibration and prevent disconnection, and enable a more compact board mounting space.
6 years Business has Digital Ultra-Low Pressure Sensors (AL4 Series) recovered to pre-flood Fujikura has developed a digital ultra-low pressure sensor. This product offers high-precision, ultra-low pressure detection have elapsed levels, and the number (10 kPa or less) and is also capable of withstanding high pressure. since the major of employees in It is used in respiratory medical equipment and industrial pneumatic equipment. floods in Thailand operations is at 1/2 in 2011. the peak level.
I assumed responsibility for the electronics Net Sales and Ratio of Operating Income to Net Sales Speed and Consistent Efforts business from this fiscal year. We will During FY2017, Fujikura achieved substantial growth in FPC and connector sales, mainly to smartphone manufacturers, which are key Net Sales Ratio of Operating Income to Net Sales (%) meet customer expectations through customers. We captured the stronger-than-expected demand in the first quarter, despite the fact that this is normally a slow period with (Billions of yen) 240 very low demand, and remained extremely busy until the fourth quarter, when the pace of demand decelerated. This resulted in full-year net even greater unification of manufacturing 214.0 195.9 sales of 195.9 billion yen and operating income of 10.4 billion yen, far outperforming the previous fiscal year. Analysis showed that the strong locations and working to improve 180 performance was not only due to growth in demand. It was also the result of labor-savings from the automation we have pursued to this competitiveness and speed in making 161.1 156.7 point and steady improvement in productivity, which led to small but continual incremental increases in earning power. 7.6% FY2018 is the middle year of the 2020 Mid-term Business Plan and we regard it as an important year to put the company on-track for management decisions. 120 6.5% 5.3% achieving the plan goals. We will work to improve yields and quality for FPC and connectors, and deepen customer relationships through 4.8% rapid response. In other segments of the electronic components business, we will proceed with a process of selection and concentration 60 to build a business structure capable of sustaining stable sales and profits, and will work to create products that will become the cornerstones of the next-generation. We will also actively pursue introduction of the latest technology, such as IoT and AI, and work to Ikuo Kobayashi 0 Senior Vice President & Member of the Board FY2015 FY2016 FY2017 FY2018 enhance our competitiveness and achieve our plan targets of 214 billion yen in net sales and 14.0 billion yen in operating income. Est.
18 Fujikura Annual Report 2018 Fujikura Annual Report 2018 19 Company Profile Automotive Products Company
New Product Initiatives
Large-size Aluminum Conductor Cables Fujikura has developed large-size aluminum conductor cables to reduce the weight of high-current circuits in EV/PHEV. We will start mass production of this cable from September 2018.
Ultrasonic Welding Terminals We have also developed ultrasonic welding terminals and a connection method to enhance the reliability of electrical connections between large size aluminum conductors and the copper terminals.
Seat Occupancy Sensors (for S-harness) 19 Countries The new seat occupancy sensor is installed on the spring located beneath the seat cushion material on top of the seat. It is more compact than existing sensors.
62 Locations Automotive Products Company will expand globally to 62 locations in 19 countries (38 plants, 24 offices and CSC) in fiscal year ending March 31, 2019. We will build a corporate structure and profit structure capable of swiftly meeting the needs of our customers.
We will work to achieve strong growth Net Sales and Ratio of Operating Strong growth in the harness business in the automotive products business, Income to Net Sales Net Sales Ratio of Operating Income to Net Sales (%) The automotive products business recorded net sales growth of 23.9 billion yen (up 18.0% YoY) over last fiscal year to 157 billion mainly in the wire harness business, (Billions of yen) 180 yen. The business had an operating loss of 3.1 billion yen as operating profit declined by 5.7 billion yen from last fiscal year, and will generate new businesses on 157.0 158.3 due to higher costs accompanying an increase in employee turnover at our plants in Eastern Europe during the first half. the automotive platform that will form 135.8 133.1 The establishment of the Automotive Electrical System R&D Center within Fujikura’s R&D division has enabled us to undertake a bridge to the future and contribute to 120 stable growth of the Fujikura Group. research that crosses beyond divisional boundaries. The center conducts research that is closely aligned with the customer 1.8% 1.9%
60 perspective to develop and commercialize next-generation automotive electrical systems. -0.7% -2.0% We expect net sales in fiscal year ending March 31, 2019 to be on par with last fiscal year, despite the impact from yen appreciation. Sales will be sustained by the launch of new vehicle models. We will work to improve productivity at our plants Akira Sasagawa 0 Senior Vice President & Member of the Board FY2015 FY2016 FY2017 FY2018 in Eastern Europe and all three regions will work as one team to achieve growth in operating income. Est.
20 Fujikura Annual Report 2018 Fujikura Annual Report 2018 21 Total office rental space: Operating Approximately margin: For the Future 2 107,000 m 44% Since it was founded in 1885, Fujikura has contributed to the development of society by providing highly reliable products to the world through advanced technology. Possessing technology developed by Fujikura itself is what first made it possible to create new functions and new value, and enabled Fujikura to become a leader in the field of “tsunagu We own a total of With an operating margin of approximately 107,000 m2 44%, this business will contribute (connecting)” technology. of rental office space in five to a higher profit margin for the Having said that, we do not intend to rely solely on self-sufficiency in a world where buildings, which is occupied by company as a whole, despite technology is rapidly changing. The pursuit of advanced R&D capabilities and open innovation over 10,000 office workers. the decline in revenue and profit projected in the plan for fiscal are essential to the sustainable growth of our company. year ending March 31, 2019. On the following pages, we describe initiatives that are aimed at the future and how we are approaching and pursuing R&D by Fujikura and open innovation. Please understand that both are essential and key to the sustainable growth of Fujikura.
Company Profile Real Estate Business Company
Maintaining a Structure that Provides Steady Income Growth
Our real estate business continues to achieve high occupancy rates and stable income owing to the advantage of locations that are near to central Tokyo. Fiscal year ended March 31, 2018 saw growth in both revenue and profit from the acquisition of one office building during the previous period. Operating income reached a record high of 5.5 billion yen. The plan for fiscal year ending March 31, 2019 projects a decline in both revenue and profit arising from temporary vacancies caused by the replacement of some tenants, but we expect results to rebound in fiscal year ending March 31, 2020 and beyond.
This year is the 18th anniversary since Net Sales and Ratio of Operating FUKAGAWA GATHARIA opened for business. Income to Net Sales Net Sales Ratio of Operating Income to Net Sales (%) We will utilize the operating experience we (Billions of yen) have accumulated over the years to improve 12 10.7 10.9 10.6 and maintain the value of our assets over 10.1
the medium to long-term. This business 8 will provide a steady source of support for 50.4% 50.2% Fujikura’s main business. 45.8% 4 44.3%
Tetsu Ito 0 Senior Vice President & Member of the Board FY2015 FY2016 FY2017 FY2018 Est.
22 Fujikura Annual Report 2018 Advanced Technology Laboratory R&D Activity for Future Growth The laboratory conducts cutting-edge research in the four areas of information and communications, energy, electronics, and automotive technology, and also in intermediate areas that overlap these. We continue to engage in research on new technologies The Fujikura Group is securing technical superiority in its “tsunagu (connecting)” for future generations and activities aimed at creating attractive technologies by strengthening and maintaining top world-class competitiveness products wanted by customers around the world. in the four underlying areas of technology that form the core technology base supporting its “tsunagu” technologies. These four areas consist of optical, wireless, electronic component, and electrical wire and cable technologies. We will work to expand our technology in areas peripheral to this core technology base and will develop new products and create new businesses that anticipate social Research Fields changes and customer needs and accelerate reinvention of these changes in the Low-loss optical fiber coupling for silicon photonic devices five business domains of telecommunications, electronics, energy, automotive Silicon photonics that enables high-precision integration of various kinds of optical components on a silicon substrate is drawing interest as a lower- products, and medical and industrial equipment. cost technology that will enable more miniaturization of higher performance components for optical communications. Fujikura has developed TEC fiber, a thin optical fiber that applies thermally expanded core (TEC) technology We are also working to build a global research structure that will enable us to connect silicon photonic devices and conventional single-mode optical fiber Silicon photonic Conventional waveguides TEC fiber single-mode fiber to engage in timely research and development targeted at global technological with low loss. TEC fiber reduces the loss caused by the lack of conformity between (MFD: 0.2 µm) (MFD: 4 µm) (MFD: 10 µm) trends and to actively pursue open innovation that makes maximal use of silicon waveguides and conventional single-mode fiber. The core expansion caused by electrical discharge during fusion splicing is able to reduce the loss external technology. Akira Wada due to attachment to conventional single-mode fiber. TEC fiber is drawing the We are pursuing these R&D activities through company-wide research at one interest of many people at academic conferences and other events in Japan Executive Vice President & Member of Spot Size Converter Thermal Fusion interface research institute facility and two research centers (materials technology and and overseas, in addition to the Optical Fiber Communication Conference and the Board (MFD: 4 µm) diffusion core Exhibition (OFC). automotive technology) and through the individual development activities of the R&D departments in each business division as we keep a broad perspective on the 60 GHz millimeter-wave RF Module with High-gain Phased Array markets and technologies we are targeting. Fujikura is working on development of an embedded wireless communication module that can transmit at high speeds over long distances in the 60 GHz band. The chief LCP substrate Radiator plate characteristic of this module is that it is capable of wide-area directional control of a high-gain, highly focused antenna beam by using a phased array beam forming function (technology that concentrates and beams radio waves in a specific direction). Research and Development The ability of this EHF RF module to direct an antenna beam of approximately 7.5° “Tsunagu” Technologies that make up the Expenses by Segment in width at any angle between ±45° has been experimentally verified. It consists of (Billions of yen) Antenna an array antenna driven by a high-power phased array IC with 16 high-gain receivers array Technology Platform and transmitters designed and installed on a multi-layer liquid crystal polymer (LCP) Automotive Products Signal circuits 1.4 substrate that offers both flexibility and low loss. Wireless Medical Industrial Ultra-Low-Power-Consumption Multihop Wireless Sensor System equipment Millimeter wave modules equipment NW-SYS sensors This system is an energy harvesting system consisting of dye-sensitized solar cells that offer superior generating power in low-light environments. It Electronics Business is installed in an autonomous power supply for sensor devices and the wireless component is equipped with a multihop function to simultaneously New markets New markets Optical Electronic 4.4 Total achieve multistage relay with ultra-low power consumption and a dramatically expanded coverage area, and greater redundancy by securing a Fiber lasers Components by-pass route for communication data. It provides a sensing system that costs little to install and maintain, and that can be used for many purposes Image fibers 16.2 Sensors where application has Heat pipes Telecommuni- Optical devices previously proven difficult, Optical fusion splicers Electronics cations Optical Wire Electrical wire Optical components such as for monitoring bridges Sensor station Sensor node fiber components in FPC Optical connectors systems electronic WABE* and other infrastructure, Optical cables equipment Connectors Power &Telecommunication for preventing disaster by Optical fiber Systems monitoring the slopes in Specified 10.3 mountainous areas, and making low-power radio
Existing markets Electrical & Wire Cable Automotive Existing markets Energy it possible to build zero energy products Industrial Coaxial High-temperature Automotive wire buildings (ZEBs) by monitoring wiring cables superconductors harnesses and controlling the temperature, humidity, and lighting in rooms. Wide-area coverage *Wafer and Board Level Embedded Package
24 Fujikura Annual Report 2018 Fujikura Annual Report 2018 25 Accelerating our ability to reinvention New Business Development Fujikura has been working on activities under the banner of our “power of a strong reinvention” growth strategy in our 2020 Mid-term Business Plan and we will accelerate the speed of new business creation even further. The New Business Development Center is working to build a framework to commercialize three areas and create new businesses. The commercialization is approaching about New Businesses Medical business, High-temperature superconductors, Cloud communications three fields, Superconductor, Cloud communications, and Medical Devices businesses. Fujikura has made substantial progress on manufacturing products that offer consistent quality in the superconductivity business, and we are steadily approaching our goal of commercialization. Due to the benefits of the integration of healthcare-related businesses, there is also momentum in expanding sales of the Medical Devices business. Medical devices Open innovation is a key means of building a framework for new business creation. Through detailed market research and analysis, we are Fujikura recognizes the importance of pursuing external partnerships, sharing our vision concentrating on the business of parts and functional modules for medical imaging and miniaturization for with relevant partners, and working to enter into and expand mutual partnerships. medical device. We believe that we can co-create value through collaboration that extends beyond Today, we build a framework from marketing to organizational and community boundaries to address many social challenges. We customers based on the medical devices quality management systems, and focus on new product therefore feel the need to build an ecosystem that is externally directed and will cooperate lines such as OCT, micro endoscope and IC embedded with people who share our vision of identifying problems and solving them. circuit, which strongly appeals to global medical device We are confident that we will be able to engage in even more robust action through manufacturers. Tomoharu Morimoto the BRIDGE Fujikura Innovation Hub, a new place created in 2018. We are certain that we Executive Officer will be able to solve the problems likely to confront society in the future and address the social challenges of the future through this place.
Development of Yttrium-based High-temperature Superconductive (HTS) Wire for Medical MRIs and Other Applications Fujikura has worked to develop mass production technology for long lengths of high-temperature superconducting wire for many years, and the company’s efforts have been highly appreciated in Japan and overseas. Yttrium-based high-temperature superconducting wire is promising for medical MRIs and other applications due the fact that it shows high performance in high magnetic fields without liquid helium. In fiscal year 2016, Fujikura was commissioned Advanced Communication Energy & Industry Life-Assistance Vehicle and subsidized the “Technology development to promote commercialization of HTS program” by the NEDO (New Energy and Industrial Technology Development Organization). We are working to develop technology that improves performance 2030 Vision and increases productivity of Yttrium-based HTS wire. Active Optical Cable (AOC) Contributes to Manufacturing Industry Innovation Fujikura sells the active optical cable (AOC) that connects industrial cameras used in machine vision. We are making progress on achieving higher definition and increasing the data capacity of industrial cameras used for inspecting products, image monitoring, etc. on manufacturing lines. We are also making progress on increasing the speed of transmission along with these advances. The Fujikura optical camera link cables Creation enable high-speed connection over long cable lengths Penetration & due to optical communications technology. This was & Leap forward previously impossible with the existing metal cables Sharing Expansion and is contributing the expansion of applications interests for industrial cameras sought after amid the trend of innovation in the manufacturing industry.
26 Fujikura Annual Report 2018 Fujikura Annual Report 2018 27 Open Innovation
The 2030 Vision talks about business development and solving future social challenges in four market segments. Open innovation is a useful way to achieve that. Fujikura will create new value and accelerate the company’s reinvention of changes through open innovation. Innovation Hub “BRIDGE” Established We are beginning new initiatives unfettered by existing constraints through collaboration with highly innovative partners.
Partners to Accelerate Open Innovation Fujikura is now aiming to address the social challenges of the future. The process of identifying challenges and resolving them is essential to achieving this. Fujikura is entering many partnerships to accelerate open innovation. How do we identify potential challenges in the world and find solutions to them? “Diversity” is the key. Creww We come from different cultures, possess different technologies, and have different styles. By combining the ideas that arise from these differences, we will begin to envision a future which we could not imagine.
BRIDGE is a venue where people can encounter new possibilities. It is a platform that enables people of all types and job Fujikura used Creww’s platform, the largest descriptions to connect in many ways, from relaxing in the café to using the co-working space that provides opportunities to open innovation platform in Japan, to share information with one another and work collaboratively, and using the event space for many different kinds of seminars launch an open innovation program called and other events. the Accelerator Program with startups via public solicitation. We are currently Meeting space working on experimental verification with four companies. Collective discussion space
Free event spaceLounge
Plug and Play Japan
Plug and Play supports startups in Silicon Co-working space Valley and worldwide. Fujikura has become a Japanese corporate partner and is taking on the challenge of creating Management office Cafe new businesses by partnering with many startups around the world.
28 Fujikura Annual Report 2018 Fujikura Annual Report 2018 29 Sustainability Targeted by the Fujikura Group
Takashi Takizawa, Senior Vice President in charge of Corporate Staff Unit
The Fujikura Group is aiming to make Creating Shared Value through corporate business activities and by great strides to become a company that “Tsunagu (Connecting)” creating shared value (CSV). creates value that will achieve a sustainable Technologies At Fujikura, we recognize that it is not society and ensure continuous growth of Harukichi Nakauchi, the younger brother of enough to meet the needs of stakeholders. the Fujikura Group. We aim to achieve this the founder, established Fujikura Gakuen, a We need to actively work to achieve a through creative business activities that facility for mentally challenged individuals, sustainable society through business contribute to the sustainability of the global and Fujikura has continued to support activities linked to this. We therefore community in which we do business. it for more than 100 years. In emerging positioned 2017 as the first year for It is based on these goals that we countries that we supply electrical and Fujikura CSV and are pursuing initiatives in established the basic policy of our 2020 communications infrastructure to, we are identifying and creating new value through Mid-term Business Plan, which is to ensure offering a scholarship system and technical open innovation. We are accelerating our responsible corporate governance while training for workers. evolution from an engineering group working on initiatives that contribute to Fujikura has achieved a certain degree focused on the existing product output the environment and society and working of recognition as a company that fulfills model to company that creates value by to increase the corporate value of the its responsibilities to society through CSR functioning as a platform for a sustainable Fujikura Group. We will earn the trust of activities like these. To find the optimal society, as we engage in ongoing dialog stakeholders and take concrete steps to solutions to the complex problems faced with stakeholders. build our community and value together. by the international community, though, Fujikura will continue to work to business. We also established a Nominating based on these priority targets, and we we must simultaneously achieve growth achieve a sustainable society and create Establishing a System of Advisory Committee and a Remuneration are taking on four challenges to reduce in income for our own company and solve shared value by providing “tsunagu Responsible Corporate Advisory Committee to strengthen the our impact on the environment as part the problems of society. We will accomplish (connecting)” solutions aimed at realizing
Governance supervisory function. A majority of the of this vision: 1) Zero CO2 emissions at this by working to achieve sustainability of a comfortable and sustainable society of To create a sustainable society, each members on these committees are outside plants by 2050, 2) Minimize use of water the global community through essential the future. company must respect the interests of directors. We continue to maintain a at plants and wastewater management, the stakeholders affected by its own high degree of transparency in business 3) Symbiosis between plant workers and business activities and exhibit a sense of activities to ensure accountability to nature, and 4) Effective use of resources Six SDG Targets Fujikura is Working Toward responsibility as a member of society. It is stakeholders under a governance system and the resource cycle. We have established from this perspective that governments that separates the management and Millennium Woods biotope gardens as and stock exchanges have established a supervisory functions. places that respect the importance of framework for monitoring fair business biodiversity and maintain a connection activities and ESG investment that Active Participation in with local communities by planting rare evaluates the non-financial aspects of a the United Nations Global plant species in gardens nearby or on the company’s value has become increasingly Compact grounds of the head office and its plant popular. Fujikura became a signatory to the United locations so the abundance of nature To meet such social needs, Fujikura Nations Global Compact in 2013. We have there will continue to speak to future transitioned to a “company with an audit committed to six priority targets in relation generations. and supervisory committee” organizational to the Sustainable Development Goals We are working to develop structure to strengthen corporate (SDGs), and are demonstrating creative environmentally friendly products that governance in 2017. Fujikura clarified leadership on problems faced by the excel in using fewer resources and less responsibilities, and delegated authority international community. energy over the lifecycle of the products. to executive directors in charge of the We have formulated the Fujikura In doing so, we assess the environmental management of each in-house company Group Long-term Environmental Vision performance over the entire process, from to ensure swift decision-making in each 2050, which looks 30 years into the future, production to distribution and disposal.
30 Fujikura Annual Report 2018 Fujikura Annual Report 2018 31 Corporate Social Responsibility
Fujikura Group Initiatives Aimed at Achieving SDGs Mapping SDGs and CSV Strategy as They Relate to the Value Chain Enhancing positive impacts SDG Priority Issues Specified
The three guidelines below were used to select six items for specification as priority issues: (1) Clarification of the relationship between the four priority areas and CSR Priority Measures 2020 set forth in the Fujikura Group CSR Basic Policy and the 17 Sustainable Development Goals (SDGs). (2) Use of the Materiality Matrix method to consider each SDG from two perspectives, the degree of social concern and the degree of impact on Fujikura’s business (3) Mapping analysis of supply chain SDGs Internal education and striving for profit growth
CSV strategy Creating Materials that targets R&D Manufacturing Sales customer Providing Solutions to Social Issues through Business Activities (CSV) procurement resolution of social issues value In the Fujikura Group, we are pursuing Shared Value Creation (CSV) as a strategy for achieving profit growth for the company and contributing to the achievement of SDGs. The group has consistently engaged in business activities designed to resolve social issues up to this point, but Fujikura designated 2017 as the first year for CSV, the year in which we began to pay serious attention to CSV. Minimizing negative impacts
Engaging in a Dialog on CSV
Fujikura designated 2017 as the first year for CSV, the year in which we began to take a fresh look and pay serious attention to business activities aimed at providing solutions to social problems. As the first step in this initiative, we invited an expert on CSV to help officers and other employees understand CSV, and held a lecture and workshop in August 2017.
Lector: Mr.Takashi Nawa Appointed Professor of The Graduate School of International Corporate Strategy (ICS), Hitotsubashi University
32 Fujikura Annual Report 2018 Fujikura Annual Report 2018 33 Top Management
Internal SDG Initiatives
The Fujikura Group provides internal education on SDGs by communicating information on the company’s Intranet and through internal dialog. To communicate information, we use our CSR blog for employees and strive to promote understanding of how daily activities relate to the SDGs by placing SDG icons on related articles in the blog. A number of internal dialogs have been held thus far. In the first, which was designed for middle and top management, we invited an external expert and engaged in a dialog on the CSV thought process and group initiatives. The rest were aimed at new employees and were in workshop form. Each group of participants selected SDGs and considered how each person could contribute to the achievement of those goals.
From left: Kenichiro Abe, Takashi Takizawa, Soichiro Sekiuchi, Hideyuki Hosoya, Ikuo Kobayashi, Akira Wada, Joseph E. Gallagher, Masahiko Ito, Yasuyuki Oda, Akira Sasagawa, Masaaki Shimojima, Yoshio Shirai, Takeaki Kitajima, Tetsu Ito
|Directors
President & CEO & Representative Director Director Full-time Audit & Supervisory Committee Member Masahiko Ito Yasuyuki Oda
Executive Vice President & Member of the Board Director (Outside director) Audit & Supervisory Committee Members Akira Wada Soichiro Sekiuchi Masaaki Shimojima Senior Vice Presidents & Members of the Board Kenichiro Abe Akira Sasagawa Tetsu Ito Yoshio Shirai Hideyuki Hosoya Joseph E. Gallagher Takeaki Kitajima Ikuo Kobayashi Integration with Management Strategy Takashi Takizawa
We formulated the Fujikura Group 2030 Vision in March 2017. This vision delineates how the group will carve out its own future amid |Executive Officers Other Than Members of the Board the unprecedented scale and pace of change in the world. Managing Executive Officers Executive Officers We will work to create new value through open innovation in the four market segments of Advanced Communication, Energy Masahiro Ikegami Masato Inaba Kiminori Sato Shigeo Sekikawa & Industry, Life-Assistance, and Vehicle, based on our corporate slogan, “The Fujikura Group provides “tsunagu” (Japanese for Teiji Suzuki Kenji Nishide Hideo Goto Daiichiro Tanaka “connecting”) technologies that will resolve problems to make our future society sustainable and pleasant, and will continue to Takeshi Sato Ryoichi Hara Masataka Mito Shigeo Ueki Yukihiro Nakayama Kinya Takimura Akira Saita Junji Fukuhara increase our corporate value.” Tomoharu Morimoto Koji Ueda |Global Executive Officers
Global Executive Officers Gordon Tan Takaaki Habu Jason Peng
34 Fujikura Annual Report 2018 Fujikura Annual Report 2018 35 (iv) Audit & Supervisory Committee Activities Committee members have the opportunity to exchange opinions Corporate Governance The Audit & Supervisory Committee consists of five committee with executive officers on a regular basis and also have opportunities members, four of which are outside directors. The members of to request information themselves. the Audit & Supervisory Committee elect a Full-time Audit & The Audit & Supervisory Committee gathers information Fujikura switched from the existing organizational structure of a that business to that executive director. Supervisory Committee Member from among themselves to ensure from the accounting auditors on and confirms the audit plans for company with a board of corporate auditors to a company with A Nominating Advisory Committee and a Remuneration Advisory the effectiveness of Audit & Supervisory Committee activities. accounting audits at the beginning of the year, and receives reports an audit and supervisory committee upon approval of the annual Committee have been established as advisory bodies to the Board Mr. Yasuyuki Oda, the Full-time Audit & Supervisory Committee from the accounting auditor concerning the results of the interim General Meeting of Shareholders on June 29, 2017. of Directors to ensure objectivity and transparency in nominating Member, possesses many years of experience in the Finance and and fiscal year-end audits based on that information. To facilitate directors and determining their remuneration. Accounting Division of our company. Mr. Masaaki Shimojima, an an adequate exchange of opinions, Audit & Supervisory Committee (i) Overview of Corporate Governance Structure Audit & Supervisory Committee Member, possesses many years members also hold discussions several times a year with accounting and the Reasons for Adopting this Structure (ii) System of Internal Controls of management experience in a key position in a major city bank. auditors to confer on details, the audit system, and other issues. Operation of the Company’s business is organized into three The system of internal controls consists of an internal audit division, Mr. Kenichiro Abe, an Audit & Supervisory Committee member, An Audit & Supervisory Committee Office has been in-house companies for each of its main businesses, the Power & a management division for the entire company, and management is a certified public accountant. All of these committee members established to support the Audit & Supervisory Committee and Telecommunication Systems Company, the Electronics Business divisions within each in-house company. These organizations possess considerable knowledge of finance and accounting. Outside an administrator to manage the office has been appointed. The Company, and the Automotive Products Company. An executive monitor the legality and appropriateness of the execution of Audit & Supervisory Committee member Soichiro Sekiuchi is also an Audit & Supervisory Committee Office reports directly to the director is assigned to oversee each of the in-house companies. The daily business. The retention and management of important attorney-at-law, has worked in corporate law for many years and has Audit & Supervisory Committee and maintains independence from businesses that each of the companies is responsible for handle management information is handled by specifying and following considerable knowledge of corporate law. executive officers within the company. It provides support to the a broad range of products and the customers and competitive rules on management of documents and electronic information. The Audits confirm that the execution of duties by the Board of Audit & Supervisory Committee as directly ordered by the Audit & environment of each company differs greatly. We therefore believe Company has also established a Risk Management Committee. This Directors complies with laws and regulations and the corporate Supervisory Committee. The Audit & Supervisory Committee has it necessary to build an agile structure that enables the executive committee is responsible for identifying common company-wide Articles of Incorporation and that company operations are being set up three-way conferences with the accounting auditor and the director in charge of each company to make decisions swiftly and risks, establishing a compliance structure, and operating an internal executed appropriately. This is accomplished by establishing a internal Audit Division to ensure effective implementation of audits. decisively. We also believe that a structure for making decisions whistleblowing system, among other duties. system of internal controls and monitoring and verifying the status These conferences are formal meetings that are held quarterly after sufficient deliberation that reflect the diverse knowledge To ensure proper operation of our subsidiaries, we have of operations and other aspects. Audits are conducted from the and were set up to replace the previous exchange of opinions as and independent perspectives of outside directors is necessary for established a system in which each group company is overseen perspectives of legality and appropriateness. This is accomplished needed. Participants in these conferences share information on the important matters that relate to the growth of the entire company by the in-house company or corporate division (hereafter, “in- by conducting onsite audits of each in-house company and Group operational status of the internal control system and the status of such as annual and mid-term business plans and large mergers and house company, etc.”) with which it is affiliated. Management of company, examining important documents, and attending key individual audits, and exchange opinions on how to mitigate the risk acquisitions, and these are designated as matters requiring approval these companies is within the scope of executive responsibilities meetings. of fraud. by the Board of Directors. defined for the head of the in-house company, etc. The specific The Audit & Supervisory Committee convenes once a month, This need for the abovementioned decision-making structure has responsibilities of each in-house company, etc. are: 1) to develop in principle, to report on and debate matters, based on the basic (v) Limited Liability Agreement led us to determine the most appropriate corporate management a system of reporting for business results, personnel and audit policy and audit plans formulated at the beginning of the year. As specified in Article 427, Paragraph 1 of the Companies Act, structure for our company to be that of a company with an audit and organizational matters, capital investment, product quality, and other Fujikura’s system also ensures that the Full-time Audit & Supervisory Fujikura concludes limited liability agreements with all outside supervisory committee because this system is agile and capable of important matters; 2) to develop a certain level of accountability Committee member can attend and voice his opinions at key directors. These agreements limit the liability of outside directors reflecting diverse knowledge and independent perspectives. and a system for provision of support and guidance by each in- meetings where management decisions on business operations to the minimum liability specified in Article 425, Paragraph 1 of the Specifically, this system will achieve the following: house company, etc. in regard to risk management; 3) to formulate a are discussed. The system also ensures that Audit & Supervisory Companies Act for indemnification of damages specified in Article (1) It will enable swift decision-making by narrowing the scope corporate group business plan, and manage reconciliation of results of matters requiring approval of the Board of Directors, which vs. the budget and human resources exchanges; and 4) to obligate General Meeting of Shareholders consists of nine directors who are not audit and supervisory each group company to appoint a compliance administrator and Appoint Appoint Appoint committee members and five directors who are audit and develop an official whistle-blowing system for each of the group Inquiry Supervision Nominating Advisory Committee supervisory committee members (four of which are outside companies overseen. Cooperation Board of Directors Report (Election of candidates for Directors) directors), to business plans and other important matters, Audit and Directors serving as Directors not serving as Supervisory Committee Inquiry thereby reducing the number of matters requiring deliberation. (iii) Internal Audits Audit and Supervisory Audit and Supervisory Remuneration Advisory Committee Committee Members Committee Members Supervision (Compensation to o cers) It will also enable the reflection of diverse, independent The Audit Division was set up as a dedicated internal audit entity. It Report Assistance Delegation of important business execution perspectives by taking advantage of the broad range of conducts audits of each division and group companies. In FY2017, Reporting/ Cooperation Audit and Supervisory experience possessed by the four outside directors (consisting of the Audit Division conducted audits of ten divisions and 14 group Committee O ce two outside directors with expertise in corporate management companies. Executive Directors in the financial and manufacturing sectors, one attorney, and one The Audit Division reports internal audit plans and the status of In-house Companies Audit Division Internal Audit C.P.A.). audits performed to the Audit & Supervisory Committee at least once
(2) It will also enable agile management by the executive director in a month, in principle. It also performs audit tasks at the direction of Accounting Auditors charge of a specific business by delegating decisions concerning the Audit and Supervisory Committee as necessary. Group Companies
36 Fujikura Annual Report 2018 Fujikura Annual Report 2018 37 423, Paragraph 1 of the same act, when duties are executed in good criteria for independence and is qualified to serve as an outside faith without gross negligence. director, which requires that he maintain an independent status. Risks Fujikura has reported Mr. Abe as an independent officer to the Tokyo (vi) Outside Directors Stock Exchange. Risks that could potentially have an adverse impact to the will not arise further out. We have product liability insurance The Company has four outside directors: Mr. Soichiro Sekiuchi, Mr. Mr. Yoshio Shirai has ample experience and knowledge as a business performance, share price, and financial health of the but there is no assurance that this policy will cover all of our Masaaki Shimojima, Mr. Kenichiro Abe, and Mr. Yoshio Shirai. All are manager through his career history as a senior managing officer of Fujikura Group are discussed below. It should be noted that liability costs in the end. Serious complaints and product directors who are Audit & Supervisory Committee members. Mr. Toyota Motor Corporation, president & CEO of Hino Motors, Ltd., and the risks involved with the forward-looking statements herein defects that lead to product liability cases trigger considerable Sekiuchi is an attorney, Mr. Shimojima has experience in corporate vice chairman of Toyota Tsusho Corporation. Mr. Shirai also possesses are those identified by the Fujikura Group in its securities costs and have a grave impact on how society evaluates the management (finance), Mr. Abe is a certified public accountant, and experience as an outside director from service as an outside director report filed with the Ministry of Finance (submitted on June Group. The adverse impact connected with this includes the Mr. Shirai has experience in corporate management (manufacturing and Audit & Supervisory Committee member for Seiko Epson 29, 2018). possibility of a decline in sales. industry). The backgrounds of each of these directors enable them to Corporation from FY2016. Purchase and sale transactions between utilize their extensive expertise at Board of Directors meetings and Fujikura, Ltd. and Toyota Motor Corporation, Hino Motors, Ltd., and (1) Demand Trends (5) Regulations voice a broad range of independent opinions. Toyota Tsusho Corporation, where Mr. Shirai formerly served as an Given that our products are mainly used in infrastructures The regulations in the markets in which we operate apply to Each of the outside directors audits the performance of duties by executive officer, amount to less than 1% of consolidated net sales. or are components used in finished consumer goods, our our business activities. There are a number of regulations, directors from the perspective of legality and appropriateness. They Mr. Shirai therefore meets Fujikura’s criteria for independence and business performance is, almost without fail, impacted by including government approval and authorization for accomplish this through onsite audits of each corporate division and is qualified to serve as an outside director, which requires that he economic cycles. In addition, capital expenditure trends businesses and investments, regulations and taxes on business group company, examining important documents, and attending maintain an independent status. Fujikura has reported Mr. Shirai as in various markets and changes in consumer purchasing transactions and trade, regulations controlling financial Board of Directors meetings. They communicate with the Full-time an independent officer to the Tokyo Stock Exchange. attitudes are also factors that impact our performance. transactions, and environmental restrictions. The Fujikura Audit & Supervisory Committee Member by reporting and discussing (Criteria for Independence of Outside Directors) Group carries out its business activities in compliance with their findings at monthly Audit & Supervisory Committee meetings. Fujikura has established the following criteria for determining the (2) Fluctuations in Foreign Exchange Rates these regulations. Going forward, the business activities of our Materials for Board of Directors meetings and Audit & Supervisory independence of outside directors. We carry out currency hedging strategies within the scope Group could potentially be limited, should it become difficult Committee meetings are also distributed in advance. Individuals who currently constitute one of the following, of actual demand to minimize, to the best of our ability, to comply with laws and ordinances after key revisions have Mr. Soichiro Sekiuchi, is an attorney-at-law with highly individuals who constituted one of the following during the past the negative impact that currency rate fluctuations have been made or if tougher restrictions are put in place. We specialized skills acquired over many years of working on corporate three years, and individuals who have a spouse or a relative within on foreign-currency denominated sales. There is possibility anticipate a rise in costs to remain in compliance with these legal matters. This has given him sufficient knowledge of corporate two degrees of kinship who constitutes or within the past three years of an adverse impact to earnings due to exchange rate regulations. This will potentially have an adverse impact on management. Mr. Sekiuchi is an attorney of Tokyo Yurakucho Law constituted one of the following do not qualify as independent. fluctuations, as we cannot always fully avert exchange rate Group earnings. Office. Fujikura transacts no business with this firm and Mr. Sekiuchi • A material business partner of the Fujikura Group*1 or executive risks. Moreover, Group operations include the manufacturing therefore meets the criteria for independence specified by Fujikura officer of such*2 and sales of products overseas, primarily in Asia. Accordingly, (6) Lawsuits, Legal Action by Regulatory and is qualified to serve as an outside director, which requires that he • An entity having Fujikura Group as a material business partner or the earnings, expenses, assets, and other items denominated Authorities, and Other Legal Procedures maintain an independent status. Fujikura has reported Mr. Sekiuchi an executive officer of such in local currencies, are translated into yen when we create our In performing our business activities, the Fujikura Group is as an independent officer to the Tokyo Stock Exchange. • A shareholder who holds 10% or more of total voting rights in consolidated financial statements. Depending on the foreign at risk of lawsuits, legal action by regulatory authorities, and Mr. Masaaki Shimojima has considerable knowledge in finance Fujikura or an executive officer of such exchange rates at the time, although these accounting items other legal issues. Potential risks include claims for damages, and accounting, derived from many years of experience in a key • An entity or the executive officer of such who received cash or retain their value in local currencies, there is a possibility value monetary assessments imposed by regulatory authorities, position at a major city bank. He is also well-versed in corporate other substantial remuneration*3 from Fujikura or a subsidiary of will be eroded after conversion into yen. and restrictions placed on business operations as a result of management. Mr. Shimojima was previously an executive officer at Fujikura, other than the remuneration received for serving as an lawsuits, legal action by regulatory authorities, other legal Sumitomo Mitsui Banking Corporation, which is one of Fujikura’s outside officer. (3) Fluctuations in Materials Costs issues,. Lawsuits, legal action by regulatory authorities, and main banks, but retired in June 2003. Mr. Shimojima therefore meets *1 Material business partner: Customers whose purchases from Copper is the main material used in Group products. Copper other legal procedures pose a potential risk to the Group’s the Fujikura’s criteria for independence and is qualified to serve as Fujikura account for 1% or more of the consolidated net sales of the prices fluctuate mainly depending on shifts in international businesses, earnings, and financial health. an outside director, which requires that he maintain an independent Fujikura Group and vendors for which Fujikura’s purchases account supply-demand trends. A sharp change in copper price cannot status. Fujikura has reported Mr. Shimojima as an independent officer for 1% or more of that vendor’s consolidated net sales. always be readily reflected in product prices. Consequently, there (7) Political and Economic Trends to the Tokyo Stock Exchange. *2 Executive officer: An executive director or employee who is a possibility that a pronounced upshot in copper prices could We conduct our Power & Telecommunication Systems Mr. Kenichiro Abe possesses highly specialized expertise as a reports directly to the executive director impact the Group’s business performance. Company, Electronics Business Company and Automotive certified public accountant and ample knowledge of corporate *3 Substantial remuneration: More than 10 million yen a year Products Company at home and abroad. Consequently, management gleaned from many years working as an accounting (4) Product Defects political unrest and other conditions, mainly in the countries auditor for numerous companies. We note that Mr. Abe was The Fujikura Group carries out the manufacturing of various in which we operate, could possibly have a negative impact on previously a Representative Partner at PricewaterhouseCoopers products in accordance with strict product quality control our business performance. Aarata, which is our accounting firm, but left the company in standards. Nonetheless, there is no guarantee that we will June 2012. He was not an audit partner for Fujikura while at never experience a product defect or that quality complaints PricewaterhouseCoopers Aarata. Mr. Abe therefore meets Fujikura’s
38 Fujikura Annual Report 2018 Fujikura Annual Report 2018 39 Financial Section
(8) Interest Rate Fluctuations (11) Disaster Risk Our financing takes into account a balance between the The Fujikura Group has a number of factories in Japan and demand for capital, the climate in financial markets, and overseas. In the event our production facilities are destroyed procurement methods. A rise in interest rates translates into due to a natural disaster at one of our factory locations, a rise in interest payments. Accordingly, we view the rise in including wind and water damage due to a large-scale interest rates as a potential risk to our business performance. earthquake or typhoon, it is likely that our capacity utilization 42 Management Discussion & Analysis would decline due to suspended operations and expenses (9) Intellectual Properties would increase due to reflecting facilities repairs. Natural 44 Financial Review We protect our proprietary technologies with patents and disaster would potentially have a negative impact on the other intellectual property rights. At the same time, we are Fujikura Group’s production system, its financial health, and 44 Consolidated Balance Sheets very cautious not to infringe on the intellectual property earnings. 46 Consolidated Statements of Income rights of a third party. However, during the diversification of product structure and manufacturing technologies, and 47 Consolidated Statements of Comprehensive Income the expansion of our business operations overseas, there is a 50 Consolidated Statements of Cash Flows possibility that our products could inadvertently breach the intellectual property rights of rival products. In this case, we 51 Notes to the Consolidated Financial Statements would inevitably have to halt sales and implement corrective measures, such as changing our product design. Also, a third 72 Independent Auditor’s Report party could infringe upon our intellectual property rights but due to the differences in laws in other countries, there is a possibility our rights would not be adequately protected. In light of this, we view this as another potential risk to our business activities and performance.
(10) Information Leak The Group possesses a substantial amount of private individual and sensitive information related to its business activities. We are doing our utmost to maintain the confidentiality of this information. However, we cannot rule out the possibility of this information being leaked externally due to some unexpected incident. This type of information leak would potentially damage our image and result in compensation for damages, which in turn would have a negative impact on Group earnings and financial health.
40 Fujikura Annual Report 2018 Fujikura Annual Report 2018 41 been any changes in your thinking concerning we intend to actively pursue M&A as well. Management Discussion & Analysis the capital investment and M&A in the 2020 Last year we presented our 2030 Vision, which is Mid-term Business Plan? based on open innovation and began planning for collaboration with venture firms. This year we also There is basically no change and we will move forward established an innovation hub in the Fukagawa according to the schedule set in the Mid-term Business district. This will provide a venue that will encourage Plan. I will outline the thought process again. open discussions by human resources who are We have set the goal of 200 billion yen in capital innovative and who represent a diverse range of people. investment over five years in the 2020 Mid-term Business Plan. While this is a considerable amount, we Q7 What is your view on shareholder return? also forecast cumulative depreciation of around 200 billion yen during the same period. Keeping balance in mind in the distribution of profits Capital investment will peak in FY2018. We will work to is the basis of shareholder return. We ultimately recover our investment from FY2019 onward and will want to increase earnings per share while investing also work to improve financial soundness. in growth and improving financial soundness, The investment in strategic growth areas will be and intend to tie these two aspects together. We mainly related to telecommunications in the Power & will target growth in dividends through growth in Telecommunications Systems Company and to earnings per share. development, automation, and other efforts to streamline The goal for the dividend payout ratio over the five operations in the Electronics Business Company. years of the 2020 Mid-term Business Plan is 20% or We are interested in actively pursuing M&A, but have more. We forecast net income of 23 billion yen for no specific plans at present. Please understand that FY2018. The number of shares outstanding excluding investment in M&A would be in addition to this amount. treasury shares is currently 285 million shares. A dividend of 16 yen per share would put the dividend Q5 What is the status of new businesses? payout ratio at 19.8%, or roughly 20%. A dividend of 16 yen per share represents a 2-yen increase compared We are strengthening marketing and product to FY2017. development in fiber laser, which was transferred to the Telecommunications Business in FY2016. While it Q8 What are your views on governance? appears that we are slightly behind schedule on the I recognize that ensuring transparency and fairness initial plan, we have succeeded in catching up to the last fiscal year and will increase capacity in China this are basic to governance and are extremely important. Q1 Please explain the reasons for your forecast of highest power level in the industry. fiscal year. The governance structure is not for appearances growth in FPC sales amid slowing demand for We are currently receiving many orders and aim to only. It is essential to fully implement the details. Last smartphones. make a contribution to profits as quickly as possible. Q3 Please explain the status of the automotive fiscal year, Fujikura made the transition to a company We are also injecting resources into the three key areas The reasons for the forecast of growth are that the business. with an audit & supervisory committee structure. We functions on end products are improving every year. relating to next-generation automotive products, We have revised our order strategy for locations in increased the number of outside directors from one The number of FPC points where the FPCs we supply industrial equipment (composite materials processing Europe where profitability has deteriorated and are to four outside directors and also strengthened the are used are increasing and customers are ordering equipment), and medical equipment in the current working on initiatives to implement a demand-based supervisory and oversight function and increased the highly sophisticated products (high value-added Mid-term Business Plan. location strategy and improve the health of the business. speed of decision-making by delegating authority products) to provide high quality as a marketing tool. Again, we intend to stick strictly with our policy of to the executive directors in charge of each in-house We are also working to develop the business for other Q6 What is the open innovation talked about as a focusing on profitability rather than pursuing scale. company. purposes such as FPC use in vehicles at a rapid pace. key measure in the Mid-term Business Plan? We are focusing on being diligent in maintaining our We also promoted a U.S. citizen to director for the first relationships with customers, improving productivity, We believe that our mission is not simply to sell time this fiscal year as part of our strategy to achieve Q2 Please explain the status of optical fiber. and being able to create products at a low cost and products, but how to respond to customers and greater diversity. Market demand is extremely strong and we are operating provide consistent quality. provide the value they seek. Recently, there have been a series of scandals in at full capacity at our plants in Japan and overseas. We aim to provide solutions from the entire Fujikura Consequently, if our value chain lacks something Japanese companies (relating to quality assurance We believe that we will see even greater growth in Group in the next-generation automotive products needed to provide value, we want to procure that from problems, and other matters). We have committed future demand for optical cable in the FTTx and DC segment, which is undergoing a once-in-a-century elsewhere and supply the missing piece in the value major mistakes in the past and are convinced that markets in North America and Europe, in particular. We transformation. These solutions will extend beyond chain. In other words, this means moving away from there would be no recovery from a second violation. have already released strategic products in the optical business boundaries, rather than being solutions the concept of self-sufficiency. We therefore intend to work even harder to strengthen cable business and they are highly popular. We also based in the Automotive Products Company alone. We do not intend to stick exclusively to self- compliance and believe that everyone in the Fujikura recognize the optical-related segment as a growth sufficiency in this day and age when technology is Group understands our group corporate philosophy market and are actively investing capital in it. Q4 Fujikura is considering major capital changing so rapidly. which consists of our Mission, Vision, and Core Values We worked to increase capacity at our plant in Japan investments this fiscal year as well. Have there M&A is one option for supplying missing pieces and (MVCV) is fundamental to achieving this.
42 Fujikura Annual Report 2018 Fujikura Annual Report 2018 43 Thousands of Consolidated Balance Sheets Millions of yen U.S. dollars (Note 3) Fujikura Ltd. and its Consolidated Subsidiaries Liabilities 2017 2018 2018 At March 31, 2017 and 2018 Current liabilities: Notes and accounts payable, trade (Note 8) ¥77,230 ¥77,166 $726,268 Thousands of Short-term borrowings (Note 6) 74,637 76,778 722,616 Millions of yen U.S. dollars (Note 3) Current portion of bonds (Note 6) 10,000 20,000 188,235 Assets 2017 2018 2018 Income taxes payable (Note 18) 3,671 2,612 24,584 Current assets: Provision for loss on guarantees - 1,593 14,993 Cash and deposits ¥31,785 ¥34,285 $322,682 Other provision 24 35 329 Notes and accounts receivable, trade (Note 8) 148,969 151,237 1,423,407 Other (Notes 6 and 7) 37,661 55,029 517,920 Finished goods (Note 12) 35,487 44,820 421,835 Total current liabilities 203,226 233,215 2,194,965 Goods in process (Note 12) 24,684 29,244 275,238 Raw materials and supplies (Note 12) 32,328 39,810 374,682 Deferred tax assets (Note 18) 3,766 4,066 38,268 Non-current liabilities: Other 20,366 25,476 239,774 Bonds (Note 6) 40,000 20,000 188,235 Allowance for doubtful accounts (864) (697) (6,560) Long-term borrowings (Note 6) 101,296 120,591 1,134,974 Total current assets 296,526 328,244 3,089,355 Deferred tax liabilities (Note 18) 126 115 1,082 Other provision 36 200 1,882 Non-current assets: Net defined benefit liability (Note 11) 8,184 8,479 79,802 Property, plant and equipment Other (Notes 6 and 7) 11,210 13,492 126,984 㻌㻌 Buildings and structures, net 89,993 92,019 866,061 Total non-current liabilities 160,854 162,878 1,532,969 㻌㻌 Machinery, equipment and vehicles, net 62,633 76,197 717,148 Total liabilities 364,080 396,094 3,727,944 Land (Note 6) 15,652 15,635 147,153 Leased assets, net 2,479 219 2,061 Contingent liabilities (Note 19) Construction in progress 14,736 16,014 150,720 Other, net 9,788 11,202 105,431 Thousands of Total property, plant and equipment 195,283 211,288 1,988,593 Millions of yen U.S. dollars (Note 3) Intangible assets Net assets 2017 2018 2018 Goodwill 7,123 4,236 39,868 Shareholders' equity: Other 9,962 9,857 92,772 Common stock 53,075 53,075 499,529 Total intangible assets 17,085 14,094 132,649 Capital surplus 30,012 29,989 282,249 Retained earnings 118,867 133,775 1,259,059 Investments and other assets Treasury stock (5,942) (6,388) (60,122) Investment securities (Note 5) 41,295 38,435 361,741 Total shareholders' equity (Note 21) 196,013 210,452 1,980,725 Net defined benefit asset (Note 11) 3,231 2,419 22,767 Deferred tax assets (Note 18) 12,484 12,490 117,553 Accumulated other comprehensive income (loss): Other (Note 5) 25,023 33,264 313,073 Valuation difference on available-for-sale securities 7,284 8,380 78,871 Allowance for doubtful accounts (2,266) (2,145) (20,188) Deferred gains (losses) on hedges 465 170 1,600 Allowance for investment loss (37) (37) (348) Foreign currency translation adjustments 4,459 5,519 51,944 Total investments and other assets 79,731 84,427 794,607 Remeasurements of defined benefit plans (5,500) (5,213) (49,064) Total non-current assets 292,100 309,810 2,915,859 Total accumulated other comprehensive income 6,709 8,856 83,351 Total assets ¥588,626 ¥638,055 $6,005,224 Non-controlling interests 21,823 22,651 213,186 㻌㻌Total net assets 224,546 241,961 2,277,280 The accompanying notes to the consolidated financial statements are an integral part of these statements. 㻌㻌Total liabilities and net assets ¥588,626 ¥638,055 $6,005,224
The accompanying notes to the consolidated financial statements are an integral part of these statements.
44 Fujikura Annual Report 2018 Fujikura Annual Report 2018 45 Consolidated Statements of Income Consolidated Statements of Comprehensive Income Fujikura Ltd. and its Consolidated Subsidiaries Fujikura Ltd. and its Consolidated Subsidiaries For the Years Ended March 31, 2017 and 2018 For the Years Ended March 31, 2017 and 2018
Thousands of Thousands of Millions of yen U.S. dollars (Note 3) Millions of yen U.S. dollars (Note 3) 2017 2018 2018 2017 2018 2018 Net sales ¥653,795 ¥740,052 $6,965,195 Profit ¥17,027 ¥21,134 $198,908 Cost of sales (Notes 10, 11 and 12) 525,150 606,544 5,708,649 Other comprehensive income Gross profit 128,644 133,508 1,256,546 Valuation difference on available-for-sale securities 1,600 1,048 9,864 Selling, general and administrative expenses (Notes 9, 10 and 11): Deferred gains (losses) on hedges 642 (554) (5,214) Packing and transportation expenses 16,946 18,513 174,240 Foreign currency translation adjustments (3,495) 1,394 13,120 Personnel expenses 39,814 42,438 399,416 Remeasurements of defined benefit plans, net of taxes 3,127 296 2,786 Other 37,652 38,212 359,642 Share of other comprehensive income of entities accounted for using equity method (359) 15 141 Total selling, general and administrative expenses 94,413 99,164 933,308 Other comprehensive income (Note 15) 1,516 2,200 20,706 Operating income 34,230 34,343 323,228 Comprehensive income 18,543 23,334 219,614 (Breakdown) Non-operating income: Comprehensive income attributable to owners of parent 14,645 20,512 193,054 Interest income 267 317 2,984 Comprehensive income attributable to non-controlling interests ¥3,898 ¥2,822 $26,560 Dividend income 1,128 1,660 15,624 Foreign exchange gains 746 1,307 12,301 The accompanying notes to the consolidated financial statements are an integral part of these statements. Share of profit of entities accounted for using equity method 1,046 1,504 14,155 Other 866 1,454 13,685 Total non-operating income 4,055 6,242 58,748 Non-operating expenses: Interest expenses 2,623 3,019 28,414 Loss on retirement of non-current assets 643 897 8,442 Product repair costs due to customers' claims 349 676 6,362 Other 2,114 1,870 17,600 Total non-operating expenses 5,730 6,464 60,838 Ordinary income 32,555 34,122 321,148 Extraordinary gains: Gain on sales of investment securities 465 1,073 10,099 Other 180 15 141 Total extraordinary gains 646 1,089 10,249 Extraordinary losses: Business structure improvement expenses (Note 13) 3,187 2,450 23,059 Provision for loss on guarantees - 1,593 14,993 Loss on valuation of investments in capital of subsidiaries and associates - 1,496 14,080 Impairment loss (Note 14) 27 775 7,294 Other 1,655 219 2,061 Total extraordinary losses 4,870 6,535 61,506 Income before income taxes 28,331 28,676 269,892
Income taxes (Note 18): Current 10,868 8,621 81,139 Income taxes for prior periods 2,764 - - Deferred (2,329) (1,078) (10,146) Total income taxes 11,303 7,542 70,984 Profit 17,027 21,134 198,908 Profit attributable to non-controlling interests 4,127 2,774 26,108
Profit attributable to owners of parent ¥12,900 ¥18,359 $172,791
The accompanying notes to the consolidated financial statements are an integral part of these statements.
46 Fujikura Annual Report 2018 Fujikura Annual Report 2018 47 Thousands of U.S. dollars (Note 3) Consolidated Statements of Changes in Net Assets Shareholders' equity Total Fujikura Ltd. and its Consolidated Subsidiaries Number of Common Capital Retained Treasury shareholders' For the Years Ended March 31, 2017 and 2018 shares issued stock surplus earnings stock equity Millions of yen Balance at March 31, 2017 295,863,421 $499,529 $282,466 $1,118,748 ($55,925) $1,844,828 Shareholders' equity Dividends paid - - (32,292) - (32,292) Total Profit attributable to owners of parent - - 172,791 - 172,791 Number of Common Capital Retained Treasury shareholders' Purchase of treasury stock - - - (9,769) (9,769) shares issued stock surplus earnings stock equity Disposal of treasury stock - 4,169 - 5,572 9,751 Change in ownership interest of parent due to transactions Balance at March 31, 2016 360,863,421 ¥53,075 ¥57,333 ¥108,553 (¥25,353) ¥193,608 - (4,376) - - (4,376) with non-controlling interests Dividends paid - - (2,636) - (2,636) Change of scope of equity method - - (179) - (179) Profit attributable to owners of parent - - 12,900 - 12,900 Net changes of items other than shareholders' equity - - - - - Purchase of treasury stock - - - (7,910) (7,910) Total changes of items during period - (207) 140,301 (4,188) 135,896 Retirement of treasury stock (65,000,000) - (27,320) - 27,320 - Balance at March 31, 2018 295,863,421 $499,529 $282,249 $1,259,059 ($60,122) $1,980,725 Change of scope of consolidation - - 51 - 51 Net changes of items other than shareholders' equity - - - - - Total changes of items during period - (27,320) 10,314 19,410 2,404 Balance at March 31, 2017 295,863,421 ¥53,075 ¥30,012 ¥118,867 (¥5,942) ¥196,013 Dividends paid - - (3,431) - (3,431) Thousands of U.S. dollars (Note 3) Profit attributable to owners of parent 18,359 18,359 - - - Accumulated other comprehensive income Purchase of treasury stock - - - (1,038) (1,038) Total Disposal of treasury stock - 443 - 592 1,036 Valuation Deferred Foreign Remeasurements accumulated Change in ownership interest of parent due to transactions difference on gains currency of defined Non-controlling Total net - (465) - - (465) other with non-controlling interests available-for- (losses) on translation benefit interests assets comprehensive Change of scope of equity method - - (19) - (19) sale securities hedges adjustments plans income Net changes of items other than shareholders' equity - - - - - Balance at March 31, 2017 $68,555 $4,376 $41,967 ($51,765) $63,144 $205,393 $2,113,374 Total changes of items during period - (22) 14,907 (445) 14,439 Dividends paid ------(32,292) Balance at March 31, 2018 295,863,421 ¥53,075 ¥29,989 ¥133,775 (¥6,388) ¥210,452 Profit attributable to owners of parent ------172,791 Purchase of treasury stock ------(9,769) Millions of yen Disposal of treasury stock ------9,751 Accumulated other comprehensive income Change in ownership interest of parent due to transactions Total ------(4,376) Valuation Deferred Foreign Remeasurements with non-controlling interests accumulated difference on gains currency of defined Non-controlling Total net Change of scope of equity method ------(179) other available-for- (losses) on translation benefit interests assets Net changes of items other than shareholders' equity 10,315 (2,776) 9,967 2,692 20,207 7,793 28,000 comprehensive sale securities hedges adjustments plans Total changes of items during period 10,315 (2,776) 9,967 2,692 20,207 7,793 163,906 income Balance at March 31, 2018 $78,871 $1,600 $51,944 ($49,064) $83,351 $213,186 $2,277,280 Balance at March 31, 2016 ¥5,607 (¥8) ¥8,010 (¥8,644) ¥4,964 ¥19,407 ¥217,981 Dividends paid ------(2,636) The accompanying notes to the consolidated financial statements are an integral part of these statements. Profit attributable to owners of parent ------12,900 Purchase of treasury stock ------(7,910) Retirement of treasury stock ------Change of scope of consolidation ------51 Net changes of items other than shareholders' equity 1,676 473 (3,550) 3,144 1,744 2,415 4,160 Total changes of items during period 1,676 473 (3,550) 3,144 1,744 2,415 6,564 Balance at March 31, 2017 ¥7,284 ¥465 ¥4,459 (¥5,500) ¥6,709 ¥21,823 ¥224,546 Dividends paid ------(3,431) Profit attributable to owners of parent ------18,359 Purchase of treasury stock ------(1,038) Disposal of treasury stock ------1,036 Change in ownership interest of parent due to transactions ------(465) with non-controlling interests Change of scope of equity method ------(19) Net changes of items other than shareholders' equity 1,096 (295) 1,059 286 2,147 828 2,975 Total changes of items during period 1,096 (295) 1,059 286 2,147 828 17,415 Balance at March 31, 2018 ¥8,380 ¥170 ¥5,519 (¥5,213) ¥8,856 ¥22,651 ¥241,961
The accompanying notes to the consolidated financial statements are an integral part of these statements.
48 Fujikura Annual Report 2018 Fujikura Annual Report 2018 49 Notes to the Consolidated Financial Statements Consolidated Statements of Cash Flows Fujikura Ltd. and its Consolidated Subsidiaries Fujikura Ltd. and its Consolidated Subsidiaries For the years ended March 31, 2017 and 2018 For the Years Ended March 31, 2017 and 2018
1. Basis of Presentation Accounting principles Thousands of The accompanying Consolidated Financial Statements of Fujikura Ltd. (the "Company") and its consolidated subsidiaries (together, the "Companies") Millions of yen U.S. dollars (Note 3) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects, application and 2017 2018 2018 disclosure requirements, from International Financial Reporting Standards, and are prepared by the Company as required by the Financial Cash flows from operating activities: Instruments and Exchange Act of Japan. The Company adopted the "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Income before income taxes ¥28,331 ¥28,676 $269,892 Statements" (Accounting Standards Board of Japan ("ASBJ") PITF No. 18, Mar 29, 2017) and "Practical Solution on Unification of Accounting Depreciation and amortization 27,589 26,870 252,894 Policies Applied to Associates Accounted for Using the Equity Method" (PITF No. 24, March 29, 2017) and made necessary adjustments Amortization of goodwill 3,545 2,618 24,640 for the preparation of the Consolidated Financial Statements. Increase (decrease) in provision 217 1,508 14,193 In preparing the Consolidated Financial Statements, certain reclassification and presentation adjustments have been made to the Consolidated Financial Statements filed with the Director of the Kanto Local Finance Bureau in Japan in order to present these Consolidated Financial Interest and dividend income (1,395) (1,977) (18,607) Statements in a form which is more familiar to readers of these Consolidated Financial Statements outside Japan. Interest expenses 2,623 3,019 28,414 Share of (profit) loss of entities accounted for using equity method (1,046) (1,504) (14,155) 2. Summary of Significant Accounting Policies Loss (gain) on sales of investment securities (465) (971) (9,139) (a) Consolidation and investments in affiliates The Consolidated Financial Statements include the accounts of the Company and all significant subsidiaries (97 subsidiaries at March 31, 2017 Loss on valuation of investments in capital of subsidiaries and associates - 1,496 14,080 and 98 subsidiaries at March 31, 2018). All significant intercompany transactions, accounts and unrealized intercompany profits are eliminated Business structure improvement expenses 2,405 2,016 18,974 in consolidation. Decrease (increase) in notes and accounts receivable, trade (7,463) (3,780) (35,576) The difference between the cost and the underlying net equity of the investment in consolidated subsidiaries at the time of acquisition is deferred Decrease (increase) in inventories (11,361) (22,089) (207,896) and amortized over a five-year period. Investments of 50% or less in companies over which the parent company does not have control but has the ability to exercise significant influence, and investments in unconsolidated subsidiaries are generally accounted by the equity method Increase (decrease) in notes and accounts payable, trade 6,363 2,089 19,661 (10 companies at March 31, 2017 and 9 companies at March 31, 2018) and included in Investment securities in the Consolidated Balance Sheets. Increase (decrease) in other current liabilities 3,068 1,387 13,054 When the accounts of subsidiaries and affiliates are not significant in relation to the Consolidated Financial Statements, they are carried at cost. Decrease (increase) in net defined benefit asset 1,340 1,272 11,972 The excess of the cost over the underlying net equity of investments in unconsolidated subsidiaries and affiliates accounted on an equity basis is deferred and amortized over a five-year period. Consolidated net income includes the Company's Equity in earnings of affiliates after elimination Increase (decrease) in net defined benefit liability (10) (3) (28) of unrealized intercompany profits. Other, net 1,928 (2,228) (20,969) Sub-total 55,670 38,399 361,402 (b) Translation of foreign currency transactions and accounts Interest and dividend income received 2,398 2,677 25,195 Foreign currency transactions are translated using the foreign exchange rates prevailing at the transaction dates. Receivables and payables Interest paid (2,681) (3,076) (28,951) denominated in foreign currencies are translated at the balance sheet date using current exchange rates. All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese Yen at current exchange rates at the respective balance sheet dates and all income Income taxes (paid) refund (11,764) (10,182) (95,831) and expense accounts of those subsidiaries are translated at the average exchange rate for the respective fiscal year then ended. Net cash provided by (used in) operating activities 43,623 27,818 261,816 Foreign currency financial statement translation differences are reported as a separate component of Net Assets in the Consolidated Balance Sheets. Cash flows from investing activities: Net decrease (increase) in time deposits (433) 361 3,398 (c) Consolidated Statement of Cash Flows For the purpose of reporting cash flows, cash and cash equivalents include all highly liquid investments, with original maturities of three months or Payments for purchase of property, plant and equipment and other assets (46,495) (40,950) (385,412) less, that are readily convertible to known amounts of cash and are so near maturity that they present only an insignificant risk of change in Proceeds from sales of property, plant and equipment and other assets 2,205 852 8,019 value because of changes in interest rates. Proceeds from sales of investment securities 550 5,008 47,134 Payments of loans receivable (11,774) (898) (8,452) (d) Valuation of Investment securities Securities held by the Companies have been classified into the following categories depending on the purpose for which they are held: Collection of loans receivable 3,626 2,181 20,527 Held-to-maturity debt securities: Purchase of long-term prepaid expenses (2,649) (1,291) (12,151) These securities are carried at amortized cost. Any premium or discount arising on acquisition is amortized and recognized as an adjustment Payments for transfer of business (4,120) - - to interest income/expense. Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation (Note 17) - 665 6,259 Other securities: These securities are investment securities expected to be held in the long term. Securities for which fair values are readily determinable Payments for investments in capital of subsidiaries and affiliates (1,477) - - are carried at fair value with unrealized gains and losses, net of applicable income taxes, being recorded in net assets. Securities for which Other, net (65) (295) (2,776) fair values are not readily determinable are recorded using the moving average cost. Net cash provided by (used in) investing activities (60,633) (34,367) (323,454) Cash flows from financing activities: (e) Derivatives Derivative financial instruments are measured at fair value, if determinable. Net increase (decrease) in short-term loans payable (2,673) 11,854 111,567 Net increase (decrease) in commercial papers (2,000) 2,000 18,824 (f) Inventories Proceeds from long-term loans payable 46,155 36,541 343,915 Inventories are valued at the lower of cost or market, cost being determined mainly using the weighted average method. Repayment of long-term loans payable (13,866) (26,709) (251,379) (g) Property, plant and equipment, Intangible assets Redemption of bonds (20,000) (10,000) (94,118) Property, plant and equipment are depreciated using the straight-line method over estimated useful lives. Proceeds from issuance of bonds 19,901 - - Intangible assets are amortized in line with the same method. Cash dividends paid (2,636) (3,431) (32,292) The estimated useful lives are as follows: Purchase of treasury stock (7,909) (2) (19) Buildings: mainly 50 years Machinery and equipment: mainly 7 years Dividends paid to non-controlling interests (558) (175) (1,647) Intangible assets: mainly 5 years Payments from changes in ownership interests in subsidiaries - (456) (4,292) that do not result in change in scope of consolidation (h) Lease assets Other, net - 0 0 Finance leases are depreciated using the straight-line method over their respective lease terms with no residual values. Net cash provided by (used in) financing activities 16,411 9,620 90,541 (i) Allowance for doubtful accounts Effect of exchange rate change on cash and cash equivalents (812) (199) (1,873) Allowance for doubtful accounts provides for estimated uncollectible accounts at amounts either specifically assessed or an amount Net increase (decrease) in cash and cash equivalents (1,410) 2,871 27,021 computed based on historical loss experience. Cash and cash equivalents at beginning of period 32,091 30,680 288,753 (j) Allowance for investment loss Cash and cash equivalents at end of period (Note 16) ¥30,680 ¥33,552 $315,784 Allowance for investment loss provides for anticipated losses due to the decline of values of investments in unconsolidated subsidiaries and affiliates, considering financial conditions, etc. The accompanying notes to the consolidated financial statements are an integral part of these statements. (k) Provision for loss on guarantees Provision for loss on guarantees provides for anticipated losses due to execution of guarantees, considering financial conditions in guaranteed companies.
(l) Accounting method for retirement benefits I. Attribution method for the estimated amount of retirement benefits In calculating retirement benefits obligations, the method to attribute the estimated amount of retirement benefits to a period until the end of the consolidated fiscal year is based on the plan’s benefit formula. II. Accounting methods for actuarial differences and prior service cost Prior service cost is accounted for according to the straight-line method as they are incurred for a certain number of years (principally fifteen years) within the average remaining years of service of employees at the time of incurring. Actuarial differences are charged to expenses from the fiscal year subsequent to the fiscal year when incurred using a straight-line method mainly based on determined years (principally fifteen years) within the average remaining years of service of employees when incurred.
50 Fujikura Annual Report 2018 Fujikura Annual Report 2018 51 (m) Accounting for long-term construction-type contracts . nited States Dollar Amounts he percenta e of completion method of accountin is applied for the construction contracts hich fulfill the conditions that the outcome of the Amounts in .S. dollars are included solely for the convenience of readers outside apan. The rate of exchange on March construction acti ity is reasonably estimated durin the course of the acti ity. ther ise the completed contract method is applied. ( . S . ) has been used for translation purposes. The inclusion of such amounts is not intended to imply that apanese en he cost to cost method is applied for estimatin the percenta e of completion. has been or could be readily converted reali ed or settled in .S. dollars at this rate or any other rate. (n) Hedge accounting he ompanies apply hed e accountin for certain deri ati e financial instruments hich include forei n currency for ard e chan e contracts . inancial nstruments interest rate s ap a reements and commodity futures contracts. he companies utili e these hed in instruments to hed e ris s of future chan es (a) Information on financial instruments in forei n e chan e rates interest rates and prices of ra materials ithin the normal course of the ompanies operations. orei n currency e chan e for ard contracts Policies he ompanies utili e forei n currency for ard e chan e contracts to limit e posure to chan es in forei n currency e chan e rates The Companies enter into financing arrangements (primarily through bank loans or corporate bonds) based on the planned capital expenditures on accounts recei able and payable and cash flo s enerated from anticipated transactions denominated in forei n currencies. of its businesses. The Companies invest in low risk financial assets using available cash finance their short-term working capital needs or forei n currency for ard e chan e contracts hich are desi nated as hed es the ompanies ha e adopted the accountin method here through commercial papers and bank loans. The Companies use derivative transactions within predetermined transaction volumes to limit the risk of forei n currency denominated assets and liabilities are measured at the contract rate of the respecti e forei n currency for ard e chan e contract. ith respect to such contracts for anticipated transactions the contracts are mar ed to mar et and the resultin unreali ed ains losses are significant fluctuations in foreign currency exchange rates interest rates and copper and aluminum prices. deferred and recorded in the income statement hen the e chan e ains losses on the hed ed items or transactions are reco ni ed. nterest rate s ap a reements The Companies do not enter into derivative transactions for speculative purposes. he ompanies utili e interest rate s ap a reements in order to limit the ompanies e posure ith respect to ad erse fluctuations in interest rates underlyin the debt instruments. he related interest differentials paid or recei ed under the interest rate s ap a reements are reco ni ed in interest e pense o er Details of financial instruments and related risks the term of the a reements. Trade notes and accounts receivable are exposed to customer credit risk. Also trade receivables denominated in foreign currencies which ommodity futures contracts are derived from the Company s global business expansion are exposed to fluctuations in foreign currency exchange rates however he ompanies utili e commodity futures contracts to hed e the ris of future price fluctuations in some ra materials. the exposure is mitigated by entering into foreign exchange forward contracts. (o) Goodwill ood ill is amorti ed usin the strai ht line method o er years. nvestment securities consist mainly of e uity securities which are exposed to market price fluctuation risks.
(p) Income taxes ncome ta es are computed usin the asset and liability approach. nder this approach deferred ta assets and liabilities are reco ni ed Trade notes and accounts payable have payment terms within one year. Also within these accounts there are foreign currency for the e pected future ta conse uences of temporary differences bet een the financial reportin basis and ta basis of assets and liabilities. denominated balances generated from the import of raw materials and therefore the balances are exposed to fluctuations in foreign currency aluation allo ances are recorded to reduce deferred ta assets hen it is more li ely than not that the ta benefits ill not be reali ed. exchange rates. owever such balances are typically less than accounts receivable balances denominated in the same currencies. he ompany files its ta return under the consolidated ta filin system for notional ta es. orrowings and corporate bonds are used primarily for capital expenditures and have maturity dates within mainly five years subse uent to the (q) Consumption tax balance sheet date. Certain borrowing contracts are based on variable or floating interest rates which are exposed to fluctuation risk and he ta e cluded method is used ith respect to consumption ta and local consumption ta es. are hedged via interest rate swap agreements.
(r) Appropriations of retained earnings Derivative transactions are comprised primarily of foreign exchange forward contracts hedging foreign currency exchange rate fluctuation ppropriations of retained earnin s reflected in the accompanyin onsolidated inancial tatements are recorded upon appro al by the shareholders. risk in trade receivables payables denominated in foreign currencies of interest rate swap agreements hedging interest rate fluctuation risk in bank loans and commodity forward contracts hedging the risk of copper and aluminum price fluctuation. (s) Other basis for presentation of Consolidated Financial Statements mounts less than million ha e been omitted. s a result the total sho n in the onsolidated inancial tatements and notes thereto do not necessarily a ree ith the sum of the indi idual account balances. Risk management over financial instruments ( ) Credit risk management (risk of customers default risk etc.) (t) Reclassification The Company periodically monitors ma or customers financial conditions and performs customer specific aging analyses. n addition ertain accounts in the onsolidated inancial tatements for the year ended arch ha e been reclassified to conform to the Company monitors doubtful accounts due to the current economic difficulties in accordance with the credit management policy. the presentation. The consolidated subsidiaries and affiliates are also re uired to conform with the credit management policy of the Company. (u) New Accounting Pronouncements and Changes in Accounting Policies han es to the depreciation method for property plant and e uipment and re isions to useful life n order to mitigate credit risks to the greatest extent possible with regards to derivative transactions the Companies counterparties are re iously the ompany and its domestic consolidated subsidiaries primarily used the declinin balance method of depreciation for its property plant financial institutions that maintain high credit ratings. and e uipment hile the o erseas consolidated subsidiaries used the strai ht line method. o e er startin from this fiscal year the ompany and its domestic consolidated subsidiaries ha e adopted the strai ht line depreciation method for the entire assets of property plant and e uipment. n consideration of the capital in estment plans in the id term usiness lan the u i ura roup reconsidered the depreciation method The financial assets exposed to credit risks recorded in the Consolidated alance Sheets represent the maximum exposure to credit risk for its domestic property plant and e uipment. onse uently the ompany reco ni ed that our production facilities ere not e posed to be rapid obsolescent as of March and March . either technolo ically or economically in li ht of the actual usa e. n addition the ompany anticipates stable operations o er the remainin period of the useful li es of these facilities. hus the ompany s itched to the strai ht line method hich allocates depreciation costs e enly o er the periods. ( ) Market risk management (risk of fluctuations in foreign currency rates interest rates etc.) in to this chan e the u i ura roup no uses the strai ht line method of depreciation. The Company and certain consolidated subsidiaries generally use foreign exchange forward contracts to limit foreign currency exchange n con unction ith the chan e to the depreciation method the ompany and its domestic consolidated subsidiaries also re ie ed the use of its property plant and e uipment. n accordance ith this the useful li es for a portion of its property plant and e uipment ere re ised to match the actual useful li es. rate fluctuation risk in trade receivables payables denominated in foreign currencies. Depending on the foreign currency market condition s a result in comparison ith the pre ious method operatin income increased by million thousand the Companies use foreign exchange forward contracts for trade receivables denominated in foreign currencies generated from highly probable and ordinary income and income before income ta es increased by million thousand respecti ely. forecasted export transactions. Also the Company and certain consolidated subsidiaries use interest rate swap agreements to limit interest ote that any impact to the se ment information is discussed under the section e ment nformation. rate fluctuation risk associated with bank loans.
(v) Additional Information (Stock-based compensation plan for the Company’s directors) n relation to investment securities the Companies continuously monitor the related market values and financial condition of the issuers n accordance ith a resolution passed at the th nnual eneral hareholders eetin held on une the ompany introduced a stoc based while also taking into consideration their business relationships with the issuers. compensation plan for Company’s Directors (limited to directors not serving as Audit and Supervisory Committee Members and excluding Outside Directors; hereinafter the same shall apply and ecuti e fficers hereinafter collecti ely referred to as irectors . he purpose of the plan is to clarify the correlation between the Company’s share price and Director compensation and to boost awareness of contribution to the improvement of corporate value by having n executing and managing the daily operations of derivative transactions the Companies regularly monitor transaction balances volumes the Directors share the benefits and risks of stock price fluctuation with shareholders—i.e. not only benefit when the share price rises but also shoulder the risk and profit loss status. Such information is periodically reported to the responsible management team and is audited by certain administration of a decline in share price. divisions. Prior approval by an Executive Officer of the Company is generally re uired to enter into significant transactions transaction The accounting procedures for this system conform with the Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc. modifications or applications for the use of new financial instruments. throu h rusts o. arch . . ransaction summary he ompany ill set up a monetary trust. his trust ill be used to ac uire common shares of the ompany. director shall be ranted points in ( ) i uidity risk management for financing activities (risk of inability to repay on the due date) each fiscal year accordin to the toc istribution e ulations set forth by the oard of irectors. he stoc based compensation ill be deli ered to The Company manages li uidity risk by preparing cash flow forecasts led by the finance division based on relevant information the irectors ia the trust. ote that in principle the irectors ill recei e deli ery of said shares at the time of retirement. reported from the respective divisions. . hares remainin in the trust he shares of the ompany that remain in the trust are recorded as treasury stoc under net assets at boo alue e cludin associated costs . he boo alue of these treasury stoc shares at the end of the fiscal year under re ie as million thousand and Supplementary information on the fair value of financial instruments there ere thousand shares. The fair value of financial instruments is based on market values as well as reasonably determined values in situations where the market fair value is unavailable. The determination of such values is based on certain assumptions which may result in different outcomes if other assumptions are applied.
52 Fujikura Annual Report 2018 Fujikura Annual Report 2018 53 (b) Fair values of financial instruments ote Method used to determine fair value of financial instruments securities and derivative instruments The book value of financial instruments in the Consolidated inancial Statements their fair value and net difference at March and respectively are shown below ( ) Cash and deposits Millions of yen The cost of cash and deposits approximate fair value due to their short term maturities. air ook value Difference value ( ) otes and accounts receivable trade ( ) Cash and deposits - The cost of notes and accounts receivable trade approximate fair value due to their short term maturities. or certain accounts receivables the Companies enter into foreign exchange forward contracts for which a simplified method of determining fair value is applied and allowable under AAP. ( ) otes and accounts receivable trade The fair values of such receivables are determined on an aggregate basis with the related foreign exchange forward contract. ess Allowance for doubtful accounts ( ) Total - ( ) nvestment securities The fair value of listed e uity securities are determined using uoted market prices for those securities. The fair value of debt securities are determined ( ) nvestment securities using uoted market prices or the prices provided by the counterparty financial institutions. ( ) otes and accounts payable trade - ( ) Short-term borrowings ( ) - ( ) otes and accounts payable trade ( ) Short-term borrowings and ( ) ncome taxes payable ( ) ncome taxes payable - The costs of these items approximate fair values due to their short term maturities. ( ) onds ( ) ( ) ong-term borrowings ( ) ( ) onds The fair value of bonds issued by the Company is determined using uoted market prices. ( ) Derivative nstruments ( ) on-hedge derivative instruments ( ) ( ) - Designated hedge instruments - ( ) ong-term borrowings The fair value of these items is determined based on the present value of the principal and interest discounted at the current interest rate ( ) million of the ong-term borrowings which mature within year and are recorded in Short-term borrowings charged for a similar borrowing. or long-term borrowings with a floating interest rate the Companies enter into interest swaps for in the consolidated balance sheets are included in ong-term borrowings above. which a simplified method is applied and allowable under AAP. Such long-term borrowings are combined with the related interest swaps and their fair ( ) million of the bonds which mature within year and are recorded in Current portion of bonds values are determined based on the present value of the principal and interest reflecting the swap discounted at the current interest rate charged for in the consolidated balance sheets are included in onds above. a similar borrowing. ( ) et receivables and (liabilities) related to the derivative transactions are presented net. ( ) Derivative instruments The Companies use a forward exchange rate for foreign exchange forward contracts. Commodity futures contracts fair values are calculated based on ME ( ondon Metal Exchange) and S E (Shanghai utures Exchange) official prices and current exchange rates. oreign exchange forward contracts Millions of yen Thousands of .S. dollars are accounted for combined with the accounts receivables designated as hedged items and their fair values are included in the related accounts receivable. air air ook value Difference ook value Difference nterest swaps for which a simplified method allowed under AAP is applied are combined with the long-term borrowings designated as hedged value value items and their fair values are included in long-term borrowings. ( ) Cash and deposits - -
ote inancial instruments for which estimation of fair value is extremely difficult ( ) otes and accounts receivable trade ess Allowance for doubtful accounts ( ) ( ) Total - - Millions of yen Description Amount recorded in consolidated
( ) nvestment securities balance sheets ( ) otes and accounts payable trade - - on-public companies ( ) Short-term borrowings ( ) - - ( ) ncome taxes payable - - ( ) onds ( ) ( ) ( ) ( ) ong-term borrowings ( ) ( ) ( ) Millions of yen Thousands of .S. dollars Description Amount recorded in consolidated Amount recorded in consolidated ( ) Derivative nstruments ( ) balance sheets balance sheets on-hedge derivative instruments ( ) ( ) - ( ) ( ) - Designated hedge instruments - - on-public companies
( ) million ( S thousand) of the ong-term borrowings which mature within year and are recorded in Short-term borrowings in the consolidated balance sheets are included in ong-term borrowings above. These items are not included in ( ) nvestment securities because it is extremely difficult to determine their fair value as ( ) million ( S thousand) of the bonds which mature within year and are recorded in Current portion of bonds there is no uoted market price for these companies available and it is difficult to estimate the future cash flows of these companies. in the consolidated balance sheets are included in onds above. ( ) et receivables and (liabilities) related to the derivative transactions are presented net.
54 Fujikura Annual Report 2018 Fujikura Annual Report 2018 55 ote The aggregate annual maturities of cash and deposits and receivables at March and are as follows . nvestment Securities
Millions of yen The aggregate cost gross unreali ed gains gross unreali ed losses and fair value of held-to-maturity investment securities Due after Due after at March and consisting primarily of e uity securities are as follows Due within Due after At March year through years through year years years years Thousands of Cash and deposits - - - Millions of yen .S. dollars otes and accounts receivable trade - - Total - - Cost ross unreali ed gains ross unreali ed losses ( ) ( ) ( ) Millions of yen air value Due after Due after Due within Due after At March year through years through year years years years Available-for-sale investment securities sold during the year ended March and are as follows Cash and deposits - - - otes and accounts receivable trade - - - Thousands of Total - - - Millions of yen .S. dollars nvestment securities Thousands of .S. dollars Sales amount Due after Due after Due within Due after ain on sales of investment securities At March year through years through year years oss on sales of securities - years years Cash and deposits - - - otes and accounts receivable trade - - - nvestments in unconsolidated subsidiaries and affiliates at March and are as follows Total - - - Thousands of Millions of yen .S. dollars nvestments securities ote The annual maturities of bonds and long-term borrowings at March and are as follows nvestments and other assets other
At March . Short-term orrowings ong-term borrowings onds Short-term borrowings at March and are as follows Millions of yen Thousands of ear ending March Millions of yen .S. dollars - oans principally from banks with weighted-average interest rates of - . and . per year at March and respectively. Commercial papers with weighted-average interest rates of ( . ) and thereafter per year at March . - ong-term borrowings Millions of yen ear ending March and thereafter
At March
onds Thousands of Millions of yen .S. dollars ear ending March - - - - - - and thereafter
ong-term borrowings Thousands of Millions of yen .S. dollars ear ending March and thereafter
56 Fujikura Annual Report 2018 Fujikura Annual Report 2018 57 ong-term borrowings at March and is as follows . Severance ndemnities and Pension Plans Thousands of Millions of yen .S. dollars (a) Outline of retirement and severance benefits plans adopted by the Companies The Company and its consolidated subsidiaries sponsor various defined benefit plans such as corporate pension plans and lump sum retirement plans for their employees. Certain consolidated subsidiaries also sponsor defined contribution plans. nsecured loans from banks and other financial institutions with maturity dates from to with weighted-average interest rates of . and . at March and respectively. (b) Defined benefit plan ease obligations The following tables present summaries of the benefit obligations for defined pension plans plan assets and the associated funded status recorded in the Consolidated alance Sheets. nsecured straight bonds issued from September to September ( ) enefit obligations at the beginning of the period and the end of the period (excluding those plans that adopt the simplified method as discussed in ( ) below) with interest rates ranging from . to . maturity dates September to September Thousands of Millions of yen .S. dollars alance at the beginning of the period ess current portion due within one year Service cost ong term borrowings ( ) ( ) ( ) nterest cost onds ( ) ( ) ( ) ease obligations ( ) ( ) ( ) Actuarial (gains) or losses ( ) Total ( ) ( ) ( ) etirement benefits paid ( ) ( ) ( ) Other ( ) ( ) ( ) alance at the end of the period
The Companies assets pledged as collateral for other interest-bearing debts at March and are as follows Thousands of ( ) Plan assets at the beginning of the period and the end of the period (excluding those plans that adopt the simplified method as discussed in ( ) below) Millions of yen .S. dollars Thousands of Millions of yen .S. dollars Carrying values of property plant and e uipment and alance at the beginning of the period Expected return on plan assets The Companies debt pledged as collateral for other interest-bearing debts at March and are as follows Actuarial (gains) or losses ( ) ( ) Thousands of Employer s contributions Millions of yen .S. dollars etirement benefits paid ( ) ( ) ( ) alance at the end of the period Carrying values of liabilities Current liabilities Other on-current liabilities Other ( ) Defined benefit liability at the beginning of the period and the end of the period for consolidated subsidiaries adopting the simplified method Thousands of The annual maturities of long-term borrowings are as follows Millions of yen .S. dollars Thousands of ong term borrowings Millions of yen .S. dollars alance at the beginning of the period ear ending March etirement benefit cost etirement benefits paid ( ) ( ) ( ) Annual contribution ( ) ( ) ( ) Other 㻙 alance at the end of the period Thousands of ease obligations Millions of yen .S. dollars ear ending March ( ) econciliation between the liabilities (assets) recorded in the Consolidated alance Sheets and the balances of defined benefit obligations and plan assets Thousands of Millions of yen .S. dollars etirement benefit obligations of the savings plans Thousands of Plan assets ( ) ( ) ( ) onds Millions of yen .S. dollars etirement benefits trusts ( ) ( ) ( ) ear ending March - - - - etirement benefit obligations of the non-savings plans et liabilities and assets recorded on the Consolidated alance Sheets - - et defined benefit liability et defined benefit asset ( ) ( ) ( ) et liabilities (assets) recorded on the Consolidated alance Sheets . Other ong-term iabilities Other than the loans and debts included in note interest-bearing debts which consisted of guarantee money received in the amounts of million and million ( S thousand) were recorded as a part of other long-term liabilities in the Consolidated alance Sheets as of March and respectively. ( ) Components of net periodic retirement benefits costs Thousands of Millions of yen .S. dollars . otes Maturing at the year end The Companies had otes receivable and payable which had a maturity date at March but were not settled until April due to a bank holiday. or accounting purposes these notes have been treated as settled. Service cost The amount of otes receivables was million ( S thousand) and otes payable was million ( S thousand) at March . nterest cost Expected return on plan assets ( ) ( ) ( ) ecogni ed actuarial (gains) or losses . Selling general and administrative expenses Amorti ation of prior service cost ( ) ( ) ( ) Selling general and administrative expenses for the years ended March and are as follows et retirement benefit costs of the plans adopting the simplified method Thousands of Millions of yen .S. dollars etirement benefit costs related to the defined benefit plans ote. Extra retirement payments for the years ended March and in the amount of million and million ( S thousand) Depreciation and amorti ation respectively are accounted for as usiness structure improvement expenses of Extraordinary loss. etirement benefit cost
. esearch and Development Costs esearch and development costs included in Selling general and administrative expenses and Cost of sales in aggregate for the years ended March and amounted to million and million ( S thousand) respectively.
58 Fujikura Annual Report 2018 Fujikura Annual Report 2018 59 ( ) emeasurements of defined benefit plans before deduction of deferred tax onsolidated Statements of omprehensi e ncome Thousands of or the ears nded arch and Millions of yen .S. dollars mount of reclassification and ta effect related to other comprehensi e income are summari ed as follows housands of nrecogni ed prior service cost illions of yen S dollars nrecogni ed actuarial (gains) or losses ( ) ( ) ( ) aluation difference on a ailable for sale securities Total ( ) ( ) ( ) 㻌㻌 mount arisin durin the year Reclassification ad ustment ( ) Accumulated other comprehensive income before deduction of deferred tax on defined retirement benefit plans efore ta effect ad ustment Thousands of a effect Millions of yen .S. dollars aluation difference on a ailable for sale securities nrecogni ed prior service cost ( ) ( ) ( ) eferred ains or losses on hed es nrecogni ed actuarial (gains) or losses 㻭 Total mount arisin durin the year Remeasurements of acquisition cost for asset efore ta effect ad ustment ( ) Plan assets consisted of the following a effect eferred ains or losses on hed es onds E uity securities orei n currency translation ad ustments Cash and deposits mount arisin durin the year eneral accounts Others Reclassification ad ustment Total orei n currency translation ad ustments ote. Employee retirement benefits trusts contributed to the company pension plan as of March and represent approximately and of Plan assets respectively . Remeasurements of defined benefit plans net of ta es mount arisin durin the year Reclassification ad ustment ( ) Method to establish a long-term expected return on plan assets efore ta effect ad ustment To determine the long-term expected return on plan assets the present and expected allocation of plan assets and the present and expected future returns from a variety of plan assets have been taken into account. a effect Remeasurements of defined benefit plans net of ta es ( ) The actuarial assumptions used Share of other comprehensi e income of associates accounted for usin equity method Discount rates Mainly . Mainly . mount arisin durin the year Expected long-term expected return on plan assets Mainly . Mainly . Reclassification ad ustment ump sum election rate Mainly . Mainly . Share of other comprehensi e income of associates accounted for usin equity method e-evaluation rate Mainly . Mainly . ther comprehensi e income
(c) Defined contribution plan Total annual contributions to the defined contribution plans for the years ended March and are million and million ( S thousand) respectively. Supplementary ash low nformation reconciliation of cash and cash equi alents in the onsolidated Statement of ash lows and account balances in the onsolidated . nventories alance Sheets at arch and are as follows nventories are valued at the lower of cost or market and the associated losses on inventory devaluation have been included in Cost of sales for the years ended March and in the amounts of million and million ( S thousand) housands of respectively. illions of yen S dollars . usiness Structure mprovement Expenses ash and deposits or the ear Ended March Millions of yen eposits with ori inal maturities of o er three months Extraordinary loss due to reorgani ation and li uidation of iscas Corporation ( iscas ) ash and cash equi alents Special retirement pay and other outlays paid to early retirees at overseas subsidiaries Total
Extraordinary loss due to reorgani ation and li uidation of iscas rea down of ssets and iabilities of ompanies which were no lon er onsolidated Subsidiaries due to the Sale of Shares in the ompany On April the Company and urukawa Electric Co. td. ( urukawa ) signed an agreement on the reorgani ation and li uidation of their durin the iscal ear oint venture iscas. On October in accordance with the agreement the Distribution and Overhead Transmission usinesses of iscas u iden o td is no lon er a consolidated subsidiary due to the sale of shareholdin s in the company were transferred to the Company and the nderground Transmission and Submarine Cable usinesses of iscas were transferred to urukawa. he brea down of assets and liabilities at the time of sale and the sellin price and re enue from the sale are as follows The extraordinary losses of million yen recogni ed in con unction with the reorgani ation and li uidation of iscas consist of a loss on the housands of transfer of businesses cost for the relocation and removal of facilities a loss on valuation of the investment and loss on the transfer of illions of yen S dollars ownership due to the li uidation and sale of iscas. urrent assets Thousands of on current assets or the ear Ended March Millions of yen .S. dollars urrent liabilities Special retirement pay in tandem with liquidation of a subsidiary’s site on current liabilities Retirement of assets in tandem with the liquidation of a subsidiary’s site on controllin interests Total aluation difference for other securities oss on sale of shares . mpairment loss Stoc sale alue rouping method The Companies grouped long-lived assets into asset groups by merchandise category. ccounts recei able dle assets are grouped on an individual asset basis. ash and cash equi alents ifference：Re enue on sale alue or the year ended March the Company has recorded impairment losses against the following asset groups
ocation u ikura td. (Moka Tochigi) se Connector manufacturing plant etc Type and etc Amount of impairment losses million ( S thousand)
The sale of the above real estate to a third party has been finali ed. Therefore the difference between the selling price and the book value was posted as impairment loss.
60 Fujikura Annual Report 2018 Fujikura Annual Report 2018 61 ncome a es et deferred ta assets liabilities included in the onsolidated alance Sheets are as follows he ompany and its domestic subsidiaries are sub ect to a number of different income ta es which in a re ate indicate a normal housands of statutory ta rate in apan of appro imately for the years ended arch and illions of yen S dollars reconciliation between the normal statutory income ta rate and the effecti e income ta rate in the accompanyin onsolidated Statements of ncome for the years ended arch and are as follows urrent assets eferred ta assets on current assets eferred ta assets urrent liabilities ther ormal statutory ta rate on current liabilities eferred ta liabilities ffect on ta rate resultin from permanent differences quity in losses of affiliates a e emption in forei n ta urisdiction ote Re isions to eferred a ssets and eferred a iabilities ue to han e in orporate ncome a Rate aluation allowance n the nited States the a uts and obs ct of was enacted on ecember ederal corporate ta es will be reduced startin from ffect of lower ta rates at o erseas subsidiaries fiscal years on and after anuary morti ation of oodwill As a result of this tax reform, the corporate tax rate imposed on the Company’s US subsidiaries will go from 35% to 21% ncome ta es for prior periods and deferred ta assets amount after deduction of deferred ta liabilities decreased by million S thousand orei n ta es included in deductible e penses and the ad ustment for corporate and other ta es increased by million S thousand respecti ely ther ffecti e income ta rate ontin ent iabilities housands of illions of yen S dollars he si nificant components of deferred ta assets and liabilities at arch and are as follows uarantees for loans borrowed notes issued by mployees housands of u i ura abos ara ner ia e elecomunica es tda illions of yen S dollars ro able ner ia e elecomunica es S ther unconsolidated subsidiaries and affiliates eferred ta assets et operatin losses carried forward et defined benefit liability llowance for doubtful accounts epreciation oss on aluation of in estment securities onus accrual mpairment losses orei n ta credit carried forward n entory de aluations limination of intercompany profits on fi ed assets ro ision for loss on uarantees nterprise ta es limination of intercompany profits on in entories ther ross deferred ta assets ess aluation allowance otal deferred ta assets
eferred ta liabilities nreali ed ains on in estment securities Retained earnin s of equity method affiliated company Special ta purpose reser e for deferred ain on sale of property ther otal deferred ta liabilities et deferred ta assets
62 Fujikura Annual Report 2018 Fujikura Annual Report 2018 63 2 eri ati e nstruments At arch 31, 2 1 illions of yen housands of U S dollars ore than one a eri ati e instruments not accounted for under hedge accounting ore than one otional air otional year of air 1 oreign forward exchange contracts year of otional amount alue amount otional alue At arch 31, 2 1 illions of yen amount 2 1 amount otional Accounted for combined with the accounts designated as hedged items allowed under AA amount to be otional air ain Accounts recei able, trade settled in amount alue loss Sell more than US 2 ,1 2 , 5 2 1 one year U 1,311 12,33 Sell US ,2 Accounted for by the method in the principle 3 Accounts recei able, trade 㻌㻌㻌㻌 thers 153 1 1 Sell US 11,223 2 352 1 5, 2 2,5 3,313 uy U 1,11 2 15 1 ,513 22 1 1 US 2 , 21 5 335 335 2 otal 3 , 2 3 33 3 , 2, 2 3,1 2 㻌㻌㻌㻌 thers 21 5 5 otal 2 ,3 5 5 3 3 2 nterest ate Swaps At arch 31, 2 1 illions of yen At arch 31, 2 1 illions of yen housands of U S dollars ore than one otional air year of otional otional otional amount alue amount to be amount to be amount otional air ain otional air ain 2 1 settled in settled in amount alue loss amount alue loss Accounted for by the simplified method allowed under AA more than more than nterest ate Swaps 2 1 one year one year ong term borrowings Sell ay ixed interest ec loating interest , 3 , 51 US , 3 2,522 32 32 otal , 3 , 51 1 1 1 2 㻌㻌㻌㻌 thers 1 2 2 1 1 uy At arch 31, 2 1 illions of yen housands of U S dollars ore than one US , 3 1, 1, ,2 1 , 2 1 , 2 ore than one otional air otional year of air 2 3, year of otional amount alue amount otional alue 㻌㻌㻌㻌 amount thers 53 3 3 5, 5 2 2 2 1 amount otal 55,5 5 1, 2 1, 2 522, 15, 31 15, 31 Accounted for by the simplified method allowed under AA nterest ate Swaps ong term borrowings 2 nterest ate Swaps ay ixed interest ec loating interest ,2 , 1 , 1 3 , At arch 31, 2 1 A otal ,2 , 1 , 1 3 , At arch 31, 2 1 A 3 Commodity utures Contracts At arch 31, 2 1 illions of yen 3 Commodity utures Contracts ore than one otional air At arch 31, 2 1 illions of yen year of otional amount alue otional amount amount to be otional air ain 2 1 settled in amount alue loss Accounted for by the method in the principle more than Commodity utures Contracts one year 2 1 aw materials Sell 2, 25 25 Sell 3, 3 3 uy 1, 3 11 11 otal 3, 3 3 otal , 3 1 1
At arch 31, 2 1 illions of yen housands of U S dollars ore than one At arch 31, 2 1 illions of yen housands of U S dollars ore than one otional air otional year of air otional otional year of otional amount alue amount otional alue amount to be amount to be amount otional air ain otional air ain 2 1 amount settled in settled in amount alue loss amount alue loss more than more than Accounted for by the method in the principle 2 1 one year one year Commodity utures Contracts Sell 3,1 5 3 , 1 aw materials uy , 1 1, 35 55 55 ,3 5 , 1 51 51 Sell ,125 12 , 1 1,2 5 otal , 13 1, 35 1 1 , 5 , 1 132 132 otal ,125 12 , 1 1,2 5
21 Supplementary nformation for the Consolidated Statements of Changes in et Assets b eri ati e instruments accounted for under hedge accounting or the ear nded arch 31, 2 1 1 oreign forward exchange contracts a ype and number of outstanding shares At arch 31, 2 1 illions of yen ear ended arch 31, 2 1 housands of shares otional alance at ncrease in shares ecrease in shares alance at amount to be otional air ype of shares beginning of year during the year during the year end of year settled in amount alue ssued stoc more than Common stoc 1 3 , 3 5, 2 5, 3 one year 2 1 otal 3 , 3 5, 2 5, 3 Accounted for combined with the accounts designated as hedged items allowed under AA reasury stoc Accounts recei able, trade Common stoc 1 2 1,32 1 ,2 5, 1 , 1 Sell otal 1,32 1 ,2 5, 1 , 1 US 2 , 2 1 he decrease of 5, thousand shares during the year is due to the retirement of treasury stoc U 2 reasury stoc increased due to the repurchase of 1 ,2 thousand shares
Accounted for by the method in the principle Accounts recei able, trade b i idends Sell 1 i idends paid to shareholders Amount Amount US 12, 1, 3 1 esolution ype of Shareholders ffecti e illions of per share U 1 122 ate of appro al appro ed by shares cut off date date yen en Accounts payable, trade une 2 , 2 1 Annual general meeting Common 1,1 arch une uy of shareholders stoc 31, 2 1 3 , 2 1 US 2 1 thers 1 ctober 2 , 2 1 oard of directors Common 1, 3 5 September ecember otal , 3 1, 1 2 stoc 3 , 2 1 2, 2 1
64 Fujikura Annual Report 2018 Fujikura Annual Report 2018 65 2 i idends with a shareholders cut off date during the current fiscal year but an effecti e date subse uent to the current fiscal year end 2 . e ment nformation Amount Amount ( e ment nformation) esolution ype of Shareholders ffecti e illions of aid from per share (a) ummary of reportin se ments ate of appro al appro ed by shares cut off date date yen en The roup s reportin se ments are components of the roup for hich separate financial statements are a ailable that are re ularly monitored arch une une 2 , 2 1 Annual general meeting Common 1, 2 etained 5 by the mana ement in decidin ho to allocate resources and in assessin performance. of shareholders stoc earnings 31, 2 1 3 , 2 1 The roup classifies its businesses into se ments, hich are o er Telecommunication ystems Company , lectronics usiness Company , utomoti e roducts Company , eal state usiness Company , considerin similarities in production methods, production process, applications and sales methods. or the ear nded arch 31, 2 1 a ype and number of outstanding shares efinitions of the four se ments for the years ended arch 1, 201 and 2018 are as follo s ear ended arch 31, 2 1 The o er Telecommunication ystems Company deals ith o er cables, Telecommunication cables, luminum ires, nameled ires, ptical fibers, ptical fiber cables, Telecommunication components, ptical components, iber optic equipment, et ork equipment, nstallation, etc. housands of shares The lectronics usiness Company deals ith le ible printed circuits, lectronic irin , components, arious kinds of connectors, etc. alance at ncrease in shares ecrease in shares alance at The utomoti e roducts Company deals ith utomoti e ire harnesses, ccessories nstallation, etc. ype of shares beginning of year during the year during the year end of year The eal state usiness Company deals ith eal estate rental, etc. ssued stoc Common stoc 2 5, 3 2 5, 3 (b) asis of calculation for sales, profits or losses, assets, liabilities and other items by reportin se ments otal 2 5, 3 2 5, 3 ccountin policy and method used for se ment information by reportin se ments are identical to those as described reasury stoc in 2. ummary of i nificant ccountin olicies abo e. rofits by reportin se ment are based on operatin income as stated in the Consolidated tatements of ncome. Common stoc 1 2 3 1 , 1 1, 5 1, 5 1 , 12 otal 1 , 1 1, 5 1, 5 1 , 12 ote Chan es to the depreciation method for property, plant and equipment and re isions to useful li es (*1) The 1,058 thousand share increase in common shares of treasury stock are mainly attributable to the increased acquisition of shares of the stock-based compensation plan for the Company’s directors. n accordance ith the e ccountin ronouncements and Chan es in ccountin olicies, startin from the fiscal year under re ie , e re ised our (*2) The 1,056 thousand share decline in common shares of treasury stock are mainly attributable to the sale of shares for the stock-based compensation plan for the Company’s directors. depreciation method for property, plant and equipment and re ie ed the useful li es for some of these property, plant and equipment. 3 he number of common shares of treasury stoc at the end of the fiscal year under re iew are included in the 1, 5 thousand shares of u i ura stoc held in the trust account for Takin this into account, in contrast ith our pre ious depreciation method, the increase in se ment profit in the fiscal year under re ie is as follo s the stoc based compensation plan for directors o er Telecommunication ystems Company 1,822 million ( 1 ,1 8 thousand), lectronics usiness Company million ( ,1 1 thousand), utomoti e roducts Company 1 2 million ( 1,2 2 thousand), eal state usiness Company 2 1 million ( 2,1 thousand), and ther 66 million ( 621 thousand). b i idends 1 i idends paid to shareholders (c) nformation on sales, profit or loss, assets, liabilities, and other items by reportin se ment Amount Amount Amount Amount esolution ype of Shareholders ffecti e illions of housands of per share per share ate of appro al appro ed by shares cut off date date or the year ended arch 1, 201 yen U S dollars en U S dollars une 2 , 2 1 Annual general meeting Common 1, 2 13, 21 5 5 arch une illions of yen o er of shareholders stoc 31, 2 1 3 , 2 1 lectronics utomoti e eal state Telecommuni- ther d ustment Consolidated usiness roducts usiness Total cation ystems (*1) (* 2, , ) total ctober 2 , 2 1 oard of directors Common 2, 1 , 1 September ecember Company Company Company eportin se ments Company stoc 3 , 2 1 , 2 1 ote he total di idend payout appro ed by the oard of irectors at the ctober 2 , 2 1 meeting includes million yen in di idends for the shares in the trust account for the stoc based ales to outside customers ,656 156, 1 ,10 10,18 ,111 65 , 5 - 65 , 5 compensation plan for directors nter-se ment sales 2 268 5 - 25 2 ( 2) - Total sales 50,0 8 15 ,005 1 ,1 10,18 ,1 65 ,56 ( 2) 65 , 5 2 i idends with a shareholders cut off date during the current fiscal year but an effecti e date subse uent to the current fiscal year end e ment profit (loss) 20, 66 ,55 2,56 ,661 ( 2 ) ,2 0 - ,2 0 Amount Amount Amount Amount e ment total assets 2 6,1 0 1 1,658 8 ,1 2,8 5,15 50 , 5 8 ,6 2 588,626 esolution ype of Shareholders ffecti e illions of housands of aid from per share per share ate of appro al appro ed by shares cut off date date yen U S dollars en U S dollars epreciation and amorti ation ,222 , 25 ,8 1,81 2 25,020 2,568 2 ,58 mpairment losses 1 25 - - - 2 - 2 une 2 , 2 1 Annual general meeting Common 2, 1 , 1 etained arch une ncrease in property, plant and equipment 31, 2 1 2 , 2 1 11, 5 15,06 ,500 8,5 5 68 2, 2,68 5,62 of shareholders stoc earnings and intan ible assets ote he total di idend payout appro ed by the Annual general meeting of shareholders at the une 2 , 2 1 includes million yen in di idends for the shares in the trust account for the stoc based compensation plan for directors otes (*1) ther includes ne businesses to launch hich are e cluded from the aforementioned se ments. (*2) d ustment of 8 ,6 2 million in e ment total assets represents common assets not allocated 22 n estment and ental roperty to each reportin se ment in the amount of 111,221 million and elimination of inter-se ment transactions in the amount of (2 ,5 ) million. Common assets mainly consisted of assets related to in estment securities, research and de elopment and administrati e di isions of the Company. he Companies own office buildings including land for rent in o yo and other districts rofits generated from these in estments (* ) d ustment of 2,568 million of epreciation and amorti ation represents depreciation and rental properties were , 2 million and 5, million US 51, 2 thousand for the fiscal years ended arch 31, 2 1 and 2 1 , respecti ely and amorti ation associated ith common assets not allocated to each reportin se ment. he ma ority of rental re enues were recorded in et sales and ma ority of rental costs were recorded in Cost of sales in the Consolidated Statements of ncome (* ) d ustment of 2,68 million of ncrease in property, plant and equipment and intan ible assets represents an increase in common assets oo alue, increase and decrease during the year and fair alue of the in estment and rental property at arch 31, 2 1 and 2 1 are as follows not allocated to each reportin se ment.
or the ear nded arch 31, 2 1 or the year ended arch 1, 2018 illions of yen illions of yen o er lectronics utomoti e eal state Amounts in the Consolidated alance Sheets 1 Telecommuni- ther d ustment Consolidated usiness roducts usiness Total alance at beginning ncrease and decrease in alance at end air alue at end cation ystems (*1) (* 2, , ) total Company Company Company of the year property during the year 2 of the year of the year 3 eportin se ments Company ,1 ,21 , 11 , 5 1 Amounts in the Consolidated alance Sheets are computed based on ac uisition costs after deducting accumulated depreciation and impairment charges ales to outside customers 1, 0 1 5, 82 15 ,055 10, 62 ,261 0,052 - 0,052 2 he primary increase in property during the year is the ac uisition of assets for rent in the amount of , million nter-se ment sales 5 0 255 - 8 8 8 (8 8) - 3 air alue at end of the year is primarily estimated by the Company based on eal state Appraisal Standards Total sales 2, 1 1 6,2 8 15 ,0 10, 62 ,26 0, 01 (8 8) 0,052 e ment profit (loss) 22, 0 10, 1 ( ,1 ) 5,501 (86 ) , - , e ment total assets 261,5 150,01 110,2 , 2 , 12 56 , 68,121 6 8,055 or the ear nded arch 31, 2 1 illions of yen epreciation and amorti ation , 50 10,2 , 5 1, 0 2 1 2 ,851 2,018 26,8 0 mpairment losses 2 8 2 - 0 5 - 5 ncrease in property, plant and equipment Amounts in the Consolidated alance Sheets 1 20, 10, 86 5, 5 2, 61 1 2 , 60 2,62 2,588 and intan ible assets alance at beginning ncrease and decrease in alance at end air alue at end of the year property during the year 2 of the year of the year 3 Thousands of . . dollars , 2, 3 ,5 1 , 33 o er lectronics utomoti e eal state Telecommuni- ther d ustment Consolidated usiness roducts usiness Total cation ystems (*1) (* 2, , ) total Company Company Company eportin se ments Company housands of U S dollars ales to outside customers , ,200 1,8 ,5 6 1, 8,165 10 ,1 2 0,10 6, 65,1 5 - 6, 65,1 5 Amounts in the Consolidated alance Sheets 1 nter-se ment sales 5,082 2, 00 05 - 5 , 81 ( , 81) - alance at beginning ncrease and decrease in alance at end air alue at end Total sales ,50 ,2 2 1,8 6, 6 1, 8,5 10 ,1 2 0,1 6, ,186 ( , 81) 6, 65,1 5 of the year property during the year 2 of the year of the year 3 e ment profit (loss) 211,200 8,268 (2 ,8 ) 51, (8,1 2) 2 ,228 - 2 ,228 ,155 2 , 3 1 , 3 1, 2 ,1 3 e ment total assets 2, 62,108 1, 11,88 1,0 ,8 0 ,8 1 , 8 5, 6 ,0 5 6 1,1 6,005,22 1 Amounts in the Consolidated alance Sheets are computed based on ac uisition costs after deducting accumulated depreciation and epreciation and amorti ation ,82 6,8 5 0,8 18, 2 2,551 2 ,8 2 18, 252,8 impairment charges mpairment losses 1 ,2 5 , 1 - 0 ,2 - ,2 2 he primary decrease in property during the year is the depreciation of office buildings for rent in the amount of 1, 2 million US 1 , 1 thousand ncrease in property, plant and equipment 1 ,120 , 51 56,2 5 2 ,162 1,80 6,0 2 , 25 00,828 3 air alue at end of the year is primarily estimated by the Company based on eal state Appraisal Standards and intan ible assets
otes (*1) ther includes ne businesses to launch hich are e cluded from the aforementioned se ments. (*2) d ustment of 68,121 million ( 6 1,1 thousand) in e ment total assets represents common assets not allocated to each reportin se ment in the amount of ,52 million ( 6,68 thousand) and elimination of inter-se ment transactions in the amount of ( 1, 01) million ( (2 5,5 ) thousand). Common assets mainly consisted of assets related to in estment securities, research and de elopment and administrati e di isions of the Company. (* ) d ustment of 2,018 million ( 18, thousand) of epreciation and amorti ation represents depreciation and amorti ation associated ith common assets not allocated to each reportin se ment. 有形無形調整 (* ) d ustment of 2,62 million ( 2 , 25 thousand) of ncrease in property, plant and equipment and intan ible assets represents an increase in common assets not allocated to each reportin se ment.
66 Fujikura Annual Report 2018 Fujikura Annual Report 2018 67 ( elated information) (a) eo raphical se ment information 2 . elated arties ( elated party transactions) ales The tables belo summari e the related party transactions ith unconsolidated subsidiaries and affiliated companies accounted for illions of yen usin the equity method for the year ended arch 1 201 apan . . China thers Total ales to e ternal customers 256,000 12 , 01 6, 1 1 6, 01 65 , 5 2017 ( illions of yen) hare of elations mount of inancial The fiscal year- ame of aid-in- escription of escription of elationship ocation otin ri hts ith related transactions statement end balance company Capital business transaction ( ) parties ( ote 5) line-item ( ote 5) roperty, plant and equipment illions of yen ffiliated C hina a a, o er irectly upply of ra upply of ra ther current 201 apan Thailand China thers Total company Corporation Tokyo Telecommuni o ned materials materials ith assets 10 ,2 2 roperty, plant and equipment , 21 50,880 1 , 6 26,505 1 5,28 ‐cation (50.0 ) from the char e ( ote ystems Company, 1) Company uarantees, uarantees 1 0 - - inancial ( ote 2) assistance ales oan on -term illions of yen Thousands of . . dollars ( ote ) - loans 8,0 1 2018 apan . . China thers Total apan . . China thers Total recei able ales to e ternal customers 2 ,26 1 1, 10 106,6 2 21 ,8 2 0,052 2,60 ,5 2 1, 2 , 6 1,00 ,68 2,021, 8 6, 65,1 5
2018 roperty, plant and equipment hare of elations mount of inancial The fiscal year- ame of aid-in- escription of escription of illions of yen Thousands of . . dollars elationship ocation otin ri hts ith related transactions statement end balance 2018 apan Thailand China thers Total apan Thailand China thers Total company Capital business transaction roperty, plant and equipment 112, 82 52,01 20,08 26,208 211,288 1,06 , 60 8 ,5 18 ,016 2 6,66 1, 88,5 ( ) parties ( ote 5) line-item ( ote 5) upply of ra o er materials upply of ra Telecommuni irectly (b) a or customer information nconsolidated T akura, from the materials ith This information has been omitted as there ere no customers to hom the roup indi idually recorded e ternal sales representin 10 or more of consolidated net sales for the years 8 million ‐cation o ned million - - subsidiaries nc. Chiba Company, char e ( ote ended arch 1, 201 and 2018. ystems ( .1 ) nterlockin 1) Company directorate (c) ood ill information o er roCable ner ia Telecommuni irectly , 8 nconsolidated 55, 5 uarantees or the year ended arch 1, 201 e Telecomunica ra il ‐cation o ned uarantees million - - subsidiaries thousand ( ote 2) es . . ystems (5 . ) ( ote ) illions of yen Company o er lectronics utomoti e eal state Telecommuni- o er usiness roducts usiness Total cation ystems Telecommuni irectly on -term Company Company Company ffiliated C inancial oan eportin se ments Company ta, Tokyo 10 million ‐cation o ned - loans 6, 6 million morti ation ,5 1 - - ,5 5 company Corporation assistance ( ote ) namorti ed ood ill ,11 - - ,12 ystems (50.0 ) recei able Company
or the year ended arch 1, 2018 2018 㻔Thousands of . . dollars) hare of elations mount of inancial The fiscal year- ame of aid-in- escription of escription of illions of yen elationship ocation otin ri hts ith related transactions statement end balance o er company Capital business transaction lectronics utomoti e eal state Telecommuni- ( ) parties ( ote 5) line-item ( ote 5) usiness roducts usiness Total cation ystems upply of ra Company Company Company o er eportin se ments Company materials upply of ra morti ation 2,61 - - 2,618 Telecommuni irectly nconsolidated T akura, from the materials ith namorti ed ood ill ,2 6 - - - ,2 6 ,602 ‐cation o ned , 6 - - subsidiaries nc. Chiba Company, char e ( ote ystems ( .1 ) nterlockin 1) Thousands of . . dollars Company o er lectronics utomoti e eal state directorate Telecommuni- usiness roducts usiness Total cation ystems o er Company Company Company eportin se ments Company roCable ner ia Telecommuni irectly nconsolidated uarantees , 8 morti ation 2 ,602 8 - - 2 ,6 0 e Telecomunica ra il 16, 80 ‐cation o ned uarantees - - subsidiaries ( ote 2) ( ote ) namorti ed ood ill ,868 - - - ,868 es . . ystems (5 . ) Company o er Telecommuni irectly on -term ffiliated C inancial oan ta, Tokyo ‐cation o ned - loans 6 , 2 company Corporation assistance ( ote ) ystems (50.0 ) recei able Company
Terms and conditions of the abo e transactions and the policy to determine the terms and conditions ( ote) 1. or supply of ra materials ith char e, terms and conditions ere determined ith consideration of market prices. 2. n the pre ious fiscal year, the Company pro ided uarantees for borro in s from banks and for fulfillment of contracts. n the current fiscal year, the Company pro ided uarantees for fulfillment of contracts. . Takin into consideration the year-end balance for debt uarantees, 1,5 million ( 1 , 2 thousand) as recorded to the reser e for ro ision for loss on uarantees. . The roup utili es a cash mana ement system to control treasury amon the roup companies. nly the balance at the end of the fiscal year is disclosed as it is difficult to calculate the total amount for each transaction usin the cash mana ement system. ote that interest rates are determined based on the market interest rates. 5. Consumption ta es are not included in the amount of transactions but are included in the fiscal year-end balance.
68 Fujikura Annual Report 2018 Fujikura Annual Report 2018 69 25. er hare nformation en . . dollars Per share: 201 2018 2018 et income per share- basic .61 6 . 6 0.606 et income per share- fully diluted (*1) - - - Cash di idends 10.00 1 .00 0.1 2 et assets per share 10.68 68.8 .2 6
(*1) s the Company does not ha e any instruments that ha e diluti e effect, the Company has not disclosed net income (loss) per share-fully diluted data.
ote In the fiscal year under review, the Company introduced a stock-based compensation plan by means of a trust for the Company’s directors. For the calculation of et assets per share, the 1,056 thousand shares held in the trust account ere included in the treasury stock and deducted from the total number of outstandin shares at the end of the fiscal year. n addition, for the calculation of et income per share, 0 thousand shares, hich as the a era e number of shares held in the trust account durin the fiscal year under re ie ere included in the treasury stock, hich are deducted hen calculatin the a era e number of outstandin shares durin the period.
Thousands of illions of yen . . dollars asis for computation of per share data 201 2018 2018
rofit attributable to o ners of parent 12, 00 18, 5 1 2, 1 rofit attributable to common shareholders 12, 00 18, 5 1 2, 1
Thousands of shares 201 2018 umber of ei hted a era e shares 28 ,205 285,251
26. ubsequent ents There are no si nificant subsequent e ents.
70 Fujikura Annual Report 2018 Fujikura Annual Report 2018 71 72 Fujikura Annual Report 2018 Fujikura Annual Report 2018 73 Global Network Main Consolidated Subsidiaries
As of March 31, 2018
Equity Ownership Paid-in Capital Company Name Percentage, Including Major Line of Businesses (Million) Indirect Ownership
Fujikura Dia Cable Ltd. 70.0% ¥5,400 Electric wires and cables
5 Nishi Nippon Electric Wire & 60.7% ¥960 Electric wires and cables and optical cables 1 4 Cable Co., Ltd. 2 7 6 f Shinshiro Cable Co, Ltd. 70.0% ¥333 Electric wires and cables 3 p ㉘ s OPGW, optical cables, optical fusion splicers, optical 8 i g AFL Telecommunications LLC. 100.0% US$3 o ㉙ connection parts and telecommunications related work y u t d a 9 e DDK Ltd. 99.8% ¥100 Connectors w 0 Fujikura Electronics (Thailand) Ltd. 100.0% THB11,552 FPCs and electronic components q r j Fujikura Electronics Shanghai Ltd. 100.0% RMB97 FPCs h Fujikura Automotive Asia Ltd. 100.0% ¥1,772 Wire harnesses for automobiles Fujikura Automotive Europe S.A.U. 100.0% EUR10 Wire harnesses for automobiles
Fujikura Automotive America LLC. 100.0% US$3 Wire harnesses for automobiles
EMEA i Fujikura Fiber-Home Opto-Electronics Material Technology Investor Information 1 Fujikura Europe Ltd. Co., Ltd. 2 Fujikura Automotive Europe GmbH o Fujikura (China) Co., Ltd. 3 Fujikura Automotive Europe, S.A.U. Fujikura Electronics Shanghai Ltd. ■■Head Office ■■Major Shareholders As of March 31, 2018 4 Fujikura Automotive Ukraine Lviv, LLC Fujikura Shanghai Optical Components Co., Ltd. 1-5-1, Kiba, Koto-ku, Tokyo 135-8512, Japan 5 Fujikura Automotive Russia Cheboksary LLC DDK (Shanghai) Co., Ltd. URL: www.fujikura.co.jp/eng Number of Ratio of 6 Fujikura Automotive Romania S.R.L. Fujikura Hengtong Aerial Cable System Ltd. Shares Held Shareholding ■■Year of Foundation (Thousands) (%) 7 Fujikura Automotive MLD S.R.L. Korea 1885 8 Fujikura Automotive Morocco Tangier, S.A. p Fujikura Korea Automotive Ltd. The Master Trust Bank of Japan, Ltd. (Trust Account) 26,769 9.35 Fujikura Automotive Morocco Kenitra, S.A. ■■Date of Incorporation India March 18, 1910 Japan Trustee Services Bank, Ltd. (Trust Account) 26,363 9.20 Thailand a Fujikura Automotive India Private Ltd. ■■Common Stock 9 Fujikura Electronics (Thailand) Ltd. Authorized: 1,190,000,000 shares Mitsui Life Insurance Company Limited 10,192 3.56 DDK (Thailand) Ltd. Americas Issued: 295,863,421 shares s Sumitomo Mitsui Banking Corporation 8,456 2.95 Fujikura Automotive (Thailand) Ltd. Fujikura America, Inc. Capital: ¥53,075 million d Fujikura Automotive Mexico S. de R.L. de C.V. Southeast Asia ■ The Shizuoka Bank, Ltd. 7,713 2.69 f Fujikura Automotive America LLC. ■Number of Shareholders 0 Fujikura Federal Cables Sdn. Bhd. 28,997 g America Fujikura Ltd. Japan Trustee Services Bank, Ltd. (Sumitomo Mitsui Trust Fujikura Asia (Malaysia) Sdn. Bhd. 6,777 2.37 h Fujikura Automotive Paraguay S.A. ■■Independent Auditors Bank, Limited Retirement Benefit Trust Account) q Fujikura Asia Ltd. j Fujikura Cabos Para Energia e Telecomunicacoes Ltda PricewaterhouseCoopers Aarata w Fujikura Fiber Optics Vietnam Ltd. Dowa Metals & Mining Co., Ltd. 6,563 2.29 ■ DDK VIETNAM Ltd. Japan ■Further Information For further information on this Annual Report, Fujikura Electronics Vietnam Ltd. ㉘ DDK Ltd. JP MORGAN CHASE BANK 385632 6,530 2.28 please contact the Investor Relations Group e Fujikura Automotive Vietnam Ltd. Fujikura Automotive Asia Ltd. at the Head Office. Fujikura Employees Shareholding Association 4,656 1.63 r PT Fujikura Indonesia ㉙ Nishi Nippon Electric Wire & Cable Co., Ltd. ■■Contact Japan Trustee Services Bank, Ltd. (Trust Account 5) 4,563 1.59 China Investor Relations Group t Fujikura Zhuhai Co., Ltd. Tel: +81-3-5606-1112 Notes: y Fujikura Automotive Guangzhou Co., Ltd. 1. The numbers presented in “Number of shares held” are based on the list of shareholders. Fax: +81-3-5606-1501 2. Although the Company owns 9,451,530 shares of treasury stock, this is excluded from the above table. u Fujikura Hong Kong Ltd. E-mail: [email protected] 3. The percentage values presented in “Percentage of total shares issued” are calculated excluding treasury stock.
74 Fujikura Annual Report 2018 Fujikura Annual Report 2018 75