ASICS Corporation Annual Report 2014/12
ASICS Corporation HEAD OFFICE
1-1, Minatojima-Nakamachi 7-chome, Chuo-ku, Kobe 650-8555, Japan
ht tp : // w w w.asics.com /
Annual Report 2014/12 Transitional nine-month period ended December 31, 2014
ASICS Corporation
Leading the Running Market Paris Marathon
Runners
Tokyo Marathon
40,000
Sponsored by ASICS
Runners
36,000
Since 2007
Sponsored by ASICS Since 2009
¥ 691.2 billion 26.7%
JAPAN
ASIA
MIDDLE EAST/ AFRICA Running market
ASICS Corporation
Founded:
September 1, 1949
Paid-in Capital:
Japan million ¥23,972
Global
Common Stock: Middle East/ Africa
7
Manufacture and sales of sports goods % % 1-1, Minatojima-Nakamachi 7-chome, Chuo-ku, Kobe 650-8555, Japan breakdown Tel : +81-78-303-2231 Asia Institute of Sport Science ASICS Institute: running 2-1, TakatsukadaiGlobal 6-chome, marketJapan size % Kobe 651-2271, Nishi-ku, Tel: +81-78-992-0810 trillion Number of Employees: 7,484 (consolidated basis) Principal Business: running Head Office: market
5
Running market
Running market
¥ 529.2 billion
¥ 140.4 billion
Market leader
¥ 205.2 billion
Market leader
Australia
Japan
17.8%
37.1%
Runners
38,000
President and CEO, Representative Director: Representative Director and Managing Executive Officer: Directors and Managing Executive Officers:
Contents
Mumbai Marathon
2 Financial Highlights 4 A Message from the President 8 Special Feature : Building our position in other sports to complement the running business
10 News
Sponsored by ASICS Since 2008
12 14 16 17 18
Management’s Discussion & Analysis Consolidated Balance Sheet Consolidated Statement of Income Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Net Assets
14,619 with other sports ¥3 trillion
¥2.8 trillion
Largest sports market Principal Shareholders:
Japan Trustee Services Bank, Ltd. (Trust Account)
8,763
¥1 trillion
Americas
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
7,858
44 %
Sumitomo Mitsui Banking Corporation
6,607 Tennis Baseball
Motoi Oyama Kousuke Hashimoto
Masao Hijikata Katsumi Kato Director and Executive Officer: Isao Kato Directors (external): Katsuro Tanaka Keiji Miyakawa Running market billion Kenji Kajiwara Takeshi Hanai Senior Executive Officers: Toshio Obata ASICS market share Toru Nishitani 12.5 % ( 2nd) Executive Officers: Kevin Wulff Alistair Cameron Ronald Pietersen Tsuyoshi Nishiwaki Yuichi Honma Itaru Yamane Megumi Ohta Yuji Mabuchi Audit & Supervisory Board Member: Mitsuhiko Inaba Audit & Supervisory Board Members (external): Hideaki Tanaka Runners Hideaki Mihara Yuko Mitsuya 25,000
AM ERI CAS
¥ 1,252.8
Sponsored by ASICS Major Consolidated ASICS LA Marathon Subsidiaries
(including treasury stock of 10,140,795 shares)
Number of Comparison Shareholders:
¥2 trillion
(As of April 1, 2015)
*Global running market size based on exchange rate of ¥108/USD Source: NPD data
facts Authorized.......790,000,000 shares
Shareholdings (Thousands)
¥ 2.8
Europe
20.2% ( 2nd) France
Corporate Name:
Running market size Issued.............199,962,991 shares
Quick Shareholder Information
Corporate Data
Board of Directors, Executive Officers and Audit & Supervisory Board 25 % Members
ASICS market share
Market leader
Worldwide (As of December 31, 2014)
19
EUROPE Running market
Corporate Information
*
Since 2012
• ASICS Italia S.p.A. • ASICS Japan Corporation *Title sponsor since 2013 • ASICS Deutschland GmbH • ASICS Sales Corporation • Sanin ASICS Industry Corp. • ASICS Iberia S.L. • ASICS Apparel Industry Corp. • ASICS UK Limited • ASICS Sverige AB ASICS Trading Co., Ltd. 19 • Consolidated Statement of Cash Flows • ASICS Oceania PTY. LTD. • ASICS America Corporation 20 Notes to Consolidated Financial Statements • ASICS China Trading Co., Ltd. • ASICS BRASIL LTDA 44 Independent Auditor’s Report • Asics Canada Corporation • ASICS Korea Corporation 45 Corporate Information • ASICS Europe B.V. • HAGLÖFS HOLDING AB • ASICS France S.A.S
Name
Running Soccer / Swimming Golf football
Basketball
Ownership* (%)
4.6 4.1
Rugby
3.5
The Master Trust Bank of Japan, Ltd. 6,310 3.3 (Trust Account) Interest in healthy lifestyles is growing worldwide. This Statetrend, Streetalong Bankwith andthe Trust Companyof running 6,068– anybody 3.2 accessibility Nippon Life Insurance Company 3.0 with a pair of running shoes can get5,756 started – means vastBank, numbers in running events Mizuho Ltd.of people now take part 5,568 2.9 all over the world. Running is far and away the largest The Minato Bank, Ltd. 4,208 2.2 sports market today. BNP Paribas SEC Services Luxembourg/ 3,819 2.0 JASDEC/Aberdeen Global Client Assets
Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension
3,433
1.8
ASICS: the first choice Breakdown of Shareholders: for serious runners
*Ownership ratios were calculated by deducting shares of treasury stock.
Number of Shareholders
ASICS market share Individuals and Others 10.91%
Non-Japanese Performance focused Companies 43.88%
Other Companies Design focused 7.95%
30-60Financial %* Institutions 36.32% Serious runners
RecreationalSecurities runners Companies 0.95%
We are leveraging the popularity of the ASICS brand among serious runners to expand our presence in the recreational runner market. *Ratio of marathon finishers wearing ASICS shoes (ASICS data)
ASICS Corporation
45
Worldwide Middle East/ Africa
Japan
Global running market breakdown
7% Asia
19 %
Running market size
Quick facts
Comparison with other sports
5%
¥2.8 trillion Global running market size
¥3 trillion
Largest sports market ¥2 trillion
¥ 2.8 trillion
¥1 trillion
Europe
Americas
25 %
44 %
Running Soccer / Swimming Golf football
Basket- Tennis Baseball Rugby ball
Interest in healthy lifestyles is growing worldwide. This trend, along with the accessibility of running – anybody
A M ER I C AS Running market
with a pair of running shoes can get started – means vast numbers of people now take part in running events all over the world. Running is far and away the largest
¥ 1,252.8 billion
sports market today.
ASICS market share
12.5 % ( 2nd)
ASICS: the first choice for serious runners ASICS market share
30-60 %*
Runners
25,000
ASICS LA Marathon
Sponsored by ASICS Since 2012
Performance focused
Serious runners
Design focused
Recreational runners
*
*Title sponsor since 2013
We are leveraging the popularity of the ASICS brand
19 20 44 45
Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Independent Auditor’s Report Corporate Information
among serious runners to expand our presence in the recreational runner market. *Ratio of marathon finishers wearing ASICS shoes (ASICS data)
ASICS Corporation
01
Financial Highlights ASICS Corporation and Consolidated Subsidiaries
(Millions of yen)
2010/3
2011/3
2012/3
2013/3
2014/3
2014/12
¥ 224,395
¥ 235,349
¥ 247,793
¥ 260,199
¥ 329,465
¥ 354,052
165,808
175,057
182,807
192,729
251,827
282,790
For the year:
Net sales
Sports shoes
Sportswear
42,576
43,685
46,838
49,460
57,198
54,215
Sports equipment
16,010
16,606
18,148
18,010
20,438
17,046
Cost of sales
130,169
132,226
140,244
146,361
185,097
198,864
Gross profit
94,226
103,123
107,549
113,838
144,368
155,188
Selling, general and administrative expenses
76,643
81,549
87,920
95,175
117,852
124,721
Operating income
17,582
21,574
19,629
18,663
26,516
30,467
Income before income taxes and minority interests
18,309
18,496
20,650
20,803
27,694
34,183
Net income
8,326
11,046
12,618
13,773
16,108
22,286
Net cash provided by operating activities
16,982
9,553
10,240
14,296
6,393
10,720
Net cash used in investing activities
(2,698)
(25,151)
(3,563)
(8,056)
(13,735)
(9,845)
Net cash provided by (used in) financing activities
(4,919)
10,549
(3,842)
(2,956)
27,647
(4,848)
¥ 109,664
¥ 106,369
¥ 115,315
¥ 138,078
¥ 159,567
¥ 201,941
184,774
200,790
212,344
244,725
317,528
355,837
5,357
5,604
5,906
5,937
6,585
7,484
¥ 43.90
¥ 58.26
¥ 66.55
¥ 72.65
¥ 84.96
¥ 117.40
At year-end:
Total net assets
Total assets
Number of employees
Per share of common stock (Yen):
Net income
Cash dividends
10.00
10.00
12.00
12.00
17.00
23.50
Total net assets
525.58
524.91
569.39
685.10
834.68
1,058.94
42.0
43.8
43.4
43.8
43.8
43.8
Ratios (%):
Gross profit ratio
Operating income ratio
7.8
9.2
7.9
7.2
8.0
8.6
Net income ratio
3.7
4.7
5.1
5.3
4.9
6.3
Return on assets (ROA)
4.6
5.7
6.1
6.0
5.7
6.6
Return on equity (ROE)
8.8
11.1
12.2
11.6
11.2
12.4
Shareholders’ equity ratio
53.9
49.6
50.8
53.1
49.9
56.5
Notes: 1. All the figures have been rounded off to the nearest million yen. 2. FY2014/12 was a nine-month period due to a change in the Company’s fiscal year-end.
02
ASICS Corporation
Net Sales
Operating Income / Operating Income Ratio
(Millions of yen)
(Millions of yen, %) Operating Income
Operating Income Ratio
6.3
8.6
8.0
7.9
7.8
(Millions of yen, %) Net Income Net Income Ratio
’13/3
’14/3
’14/12
Total Assets / Total Net Assets / Shareholders’ Equity Ratio 53.9 49.6
50.8
’13/3
’14/3
’14/12
ROE / ROA ROE
’10/3
’11/3
’12/3
’13/3
’14/3
53.1
(Yen)
ROA
56.5 11.1
12.4 11.2
6.1
6.0
’12/3
’13/3
6.6 5.7
4.6
66.55
5.7
72.65
8.8
58.26
201,941
43.90
’14/3
11.6
84.96
355,837 159,567
’13/3
12.2
49.9
’14/12
Net Income per Share
(%)
317,528
’12/3
’12/3
Shareholders’ Equity Ratio
138,078 244,725
106,369 200,790 ’11/3
115,315 212,344
109,664 184,774 ’10/3
’11/3
117.40
(Millions of yen, %) Total Assets Total Net Assets
’10/3
4.9
16,108
’12/3
5.3
13,773
’11/3
12,618
11,046
8,326
’10/3
5.1
3.7
18,663
19,629
17,582
21,574
26,516
260,199
235,349
224,395
247,793
4.7
22,286
7.2
30,467
329,465
354,052
9.2
Net Income / Net Income Ratio
’14/12
Cash Dividends per Share
’10/3
’11/3
’14/3
’14/12
Net Sales by Product
(Yen)
23.50
17,046 (4.8%)
’11/3
’12/3
’13/3
’14/3
’14/12
Net Sales by Reportable Segment
(Millions of yen)
Sports equipment
’10/3
(Millions of yen)
Sports shoes
East Asia
Other business
(79.9%)
Oceania/ SouthEast and South Asia
Japan
282,790
31,495 [3]
11,821 [9]
82,575 [14,268]
18,559 [52]
17.00 12.00
12.00
10.00
10.00
Sportswear
54,215 (15.3%)
’10/3
’11/3
’12/3
’13/3
’14/3
Europe
104,792 [7]
Americas
118,880 [1]
’14/12
Note:
Net Sales by Reportable Segment figures include the intersegment sales. The intersegment amount is indicated in [ ]. A dash indicates there were no intersegment sales. ASICS Corporation
03
A Message from the President
Motoi Oyama President and CEO, Representative Director
Philosophy - Founding Philosophy Anima Sana In Corpore Sano = “A sound mind in a sound body.”
- Corporate Philosophy 1. Provide valuable products and services through sport to all our customers 2. Fulfill our social responsibility and help improve conditions for communities around the world 3. Share profits brought by our sound services with our shareholders, communities and employees 4. Maintain a spirit of freedom, fairness and discipline, respectful of all individuals
04
ASICS Corporation
AG P 2015
ASICS Growth Plan 2015
Working toward our AGP 2015 goals, aiming for further growth Strong performances in all five regions, on track for net sales of ¥400 billion Under ASICS Growth Plan (AGP) 2015, our current Five-Year Strategic Plan, we are targeting consolidated net sales of ¥400 billion in the fiscal year ending December 31, 2015. In the fiscal year ended December 31, 2014, a transitional period due to a change in our fiscal year-end from March to December, we continued to actively strengthen and grow our running business and accelerate the opening of directly managed stores, which we are using to communicate the ASICS world view. These efforts paid off, with the Group performing well in all five of its operating regions – Japan, the Americas, Europe, Asia and Oceania.
Delivering further growth by addressing change in all regions worldwide We continue to position the vast Americas market as our priority operating region in order to achieve our AGP 2015 targets. However, the market environment in the United States is undergoing far-reaching change, such as the rapid growth of online shopping and a steep rise in the number of women taking up sport. Against this backdrop, we have delivered double-digit growth by offering high-quality products that consumers really want. Global sports trends tend to start in the United States, so achieving success there is often a model for success in other markets.
Group Management Targets (Fiscal 2015) Net Sales
¥400 billion or more
Operating income ratio ROE (Return on equity) ROA (Return on assets)
10 % or more
Basic Strategy Business domains
Continuously focus on three business domains
Products
Provide innovative values and integrate them to address customer needs
Organization
Establish a global organization
15 % or more 8 % or more
- Athletic sports business domain - Sports lifestyle business domain - Health/Comfort business domain
ASICS Corporation
05
A Message from the President
Our recent gains in the United States are therefore translating into growth in the Group’s consolidated earnings. We are aiming to deliver further growth in the United States by launching innovative new products in tune with the latest market trends and by creating a retail network that addresses changes in our business environment. In Brazil, our sales continue to rise strongly despite slowing growth in the wider economy. We plan to continue aggressively marketing our products to Brazilian consumers. Despite the sluggish economy, sales in Europe are also firm, supported by a high level of interest in healthy lifestyles and sport. We will continue to work on expanding sales and enhancing the value of our brand in Europe by increasing sponsorship activities in popular sports such as tennis and rugby, in addition to our core running business. In the fast-growing economies of Asia, sales in China are still modest in value terms but are growing at a triple-digit pace. Sales growth in Southeast Asian markets is in double digits. We plan to use these footholds to drive growth going forward. In China, we are using marathon sponsorships to put our running shoe business on the path to growth and are now shifting our focus to sales expansion. In Southeast Asia, we are putting the foundations for growth in place by strengthening our business base, centered on our main subsidiary in the region, ASICS ASIA.
Boosting earnings in Japan by channeling resources into strategic areas Sales in Japan are firm, despite a prolonged correction in demand after the hike in consumption tax. We are channeling business resources into areas that offer real prospects for growth, such as the running business and the Onitsuka Tiger brand, in order to strengthen the Group’s domestic earnings. Also, in September 2014, we opened a nursing care facility in Japan called Tryus GEL-NOOSA TRI 10
Nishinomiya, which provides functional exercise programs for the elderly. Our aim is to help enhance the quality of life for Japan’s aging population by leveraging our expertise in sports science to improve the motor functions of elderly people.
Relaunching the ASICS Tiger brand Interest in sport is growing worldwide, a trend that is not confined to advanced economies. Emerging economies are now also home to numerous marathon events and the number of people taking up sport for health reasons is growing in those countries. ASICS has built up its reputation by providing high-performance, high-quality products to the world’s leading athletes. We are now working to expand our customer base by offering
06
ASICS Corporation
Running
new products that retain that performance and quality while also being more fashionable. As part of those efforts, we have relaunched the ASICS Tiger brand, which was used on our footwear for competitive athletics from the 1980s until around 1990. ASICS Tiger is now a casual footwear brand positioned to complement our ASICS sports brand and our Onitsuka Tiger brand, which combines the qualities of Japanese craftsmanship and European sports luxury goods. ASICS Tiger brings together Japanese technology and street fashion in a range of footwear designed to attract the attention of sneaker fans worldwide. ASICS Tiger GEL-LYTE III
Creating a more global business and management structure We are making our operating structure and organization more global to support sustained growth. That process includes hiring highly skilled people regardless of nationality. We are also enhancing the skills of our domestic employees and changing the way they think so that they can interact with overseas ASICS employees on equal terms, enabling them to communicate better and realize their true potential. Reforms to personnel systems designed to achieve those aims have been completed and we have now started a training program for management-level employees.
Stepping up growth after AGP 2015 We have to strengthen our apparel business and reinforce the Group’s earnings capabilities to take the Group into a new era of growth. In the apparel business, we need to closely integrate product development and manufacturing functions so we can create a steady stream of highly competitive products. And to boost the Group’s earnings capabilities, we need to fundamentally restructure our domestic operations and optimize the global supply chain. We are already implementing measures to address these issues, aiming for concrete improvements in the current fiscal year. Our AGP 2015 sales target is in sight, but we have no intention of easing off on our expansion plans, as our aim is to take on the world’s leading sports companies. In 2015, we will finalize the Group’s strategic direction post-AGP 2015, but there will be no change to our basic approach of increasing corporate value by creating more points of contact with consumers through four core brands – ASICS, Onitsuka Tiger, ASICS Tiger and HAGLÖFS. We appreciate and look forward to your continued understanding and support. April 2015 Motoi Oyama President and CEO, Representative Director
More
ASICS Corporation
07
Special Feature
Building our position in other sports to complement the running business 2010
Sales of ASICS volleyball shoes
2011
Tennis
(Millions of yen)
2012 2013 2014 0
8,000
GEL-ROCKET 7
Volleyball is a hugely popular sport in Japan, which hosts major international competitions every year. ASICS has a long connection with volleyball, going back to 1952 when it first started selling volleyball shoes. ASICS continues to hold the top market Sponsored players Gaël Monfils (France)
Samantha Stosur
(Australia)
Sponsored national teams Brazil
Gaël Monfils
share in Japan, the United States, France, Germany and Italy.
Still the leader in Japan, Europe and the United States Sponsored national teams Italy South Korea Japan
Top market share in France and Spain Tennis has a large global base of players and is especially popular in Europe and Australia. Sales of ASICS tennis shoes have grown rapidly in Europe and Japan and ASICS now has the leading market share in France and Spain. Valentina Arrighetti
2010
Sales of ASICS tennis shoes
2011
(Millions of yen)
2012 2013 2014 0
08
ASICS Corporation
8,000
GEL-RESOLUTION 6
Volley -ball
From its early days in athletic sports, ASICS has relentlessly pursued innovation to create products that help athletes perform to the best of their ability. Today, ASICS is working to grow sales while building an even stronger ASICS brand by reinforcing its position in other sports where it has the potential to achieve a top three global market share or a top two regional market share. By helping athletes realize their full competitive potential and by raising brand visibility, we are using the power of the ASICS brand to take on other sports markets.
2010
Track and Field
Sales of ASICS rugby boots
2011
(Millions of yen)
2012 2013 2014 0
Sponsored players
GEL-LETHAL ULTIMATE IGS 11
The Southern Hemisphere and Europe are home to a large base
Christophe Lemaitre (100m, 200m) (France) Antoinette Djimou (heptathlon) (France) Alysia Montaño (800m) (United States) Queen Harrison (100m hurdles) (United States) Jared Tallent (race walking) (Australia) Kimberly Mickle (javelin) (Australia) Emma Green Tregaro (high jump) (Sweden)
of passionate rugby fans. ASICS has signed sponsorship contracts with two of the world’s top rugby teams – Australia and South Africa – providing them with sportswear, boots and other support to help them achieve their maximum potential.
Raising brand visibility
Sponsored national teams Japan France Italy
1,000
Germany Finland South Korea
in South Africa Christophe Lemaitre
Supporting national teams worldwide
Sponsored players
Footwear is the main sports equipment used in track and field
Israel Folau (Australia)
events, with competition and records almost entirely dependent
Tendai Mtawarira
on the performance of individual athletes. This is the area where
(South Africa)
ASICS has honed its technological skills over the years. ASICS
Sponsored national teams
provides footwear and sportswear to many national track & field
Australia South Africa
teams, which recognize the high quality of our products. In Japan, ASICS has the leading market share in sports shoes. 2010
Sales of ASICS track & field shoes
2011
(Millions of yen)
Rugby
2012 2013 Israel Folau
2014 0
2,500
SONICSPRINT ELITE ASICS Corporation
09
1
News
Targeting the global sports lifestyle market with the relaunched
ASICS Tiger brand
We have relaunched our sports shoe brand ASICS Tiger as a casual footwear brand. Popular among leading sports men and women from the 1980s until around 1990, ASICS Tiger also built up a strong following among consumers. The GEL-LYTE range, which featured thick shock-absorbing soles, sold particularly well when they were released in 1990. ASICS Tiger grew in popularity in Japan as well as overseas thanks to an eye-catching combination of performance and design. Our relaunched ASICS Tiger shoes retain the classic shape of their predecessors while using materials and colors in new ways to create designs with a US street fashion feel. We are using ASICS Tiger to create a new segment in the market, complementing our other two footwear brands, ASICS and Onitsuka Tiger.
GEL-LYTE III
10
ASICS Corporation
2 New ASICS STORE opened near New York’s Times Square
ASICS TIMES SQUARE, a new store mainly selling running shoes and apparel, opened in New York in October 2014. Based on the same concept as other ASICS STORES worldwide, the Times Square store has an interior design with a 1970s New York feel, including a real subway car as the centerpiece, which is used to display products. The store mainly stocks running products, Interior of ASICS TIMES SQUARE (partnered store)
including T-shirts with a New York theme. Customers can also buy shoes fitted for their specific running style thanks to the store’s ASICS Foot ID system, which creates highly accurate 3D foot maps and analyzes the form and movement of feet during running. We are using the store to further raise the visibility of the ASICS brand in the United States.
Subway car centerpiece
ASICS Corporation
11
Management’s Discussion & Analysis
Overview In the fiscal year ended December 31, 2014, business was steady in the sporting goods industry on the back of a high level of interest in sports owing to rising health consciousness, as well as a running boom. In the U.S., particularly, which is one of the highest priority areas for the ASICS Group (“the Group”), the footwear market and others continued to show steady growth. Under these conditions, the Group continued its efforts to reinforce and expand its business on a global scale based on the FiveYear Strategic Plan, “ASICS Growth Plan (AGP) 2015”. In the running business, the Group strove to expand the business further as the core business. The Group’s efforts to this end included launching various high-function running shoes, GEL-NIMBUS 16 and GEL-KAYANO 21, onto the market. The Group also carried out initiatives such as sponsoring marathon events held in different parts of the world, including the TCS New York City Marathon, which is one of the largest participated marathon events in the world, and events in Paris, Stockholm and Kobe. In the athletic sports business, the Group concentrated on activities to heighten the value of the ASICS brand. For example, the Group launched replica jerseys of both the South African and Australian national rugby teams. In addition, the Group supplied products to be used by wrestlers representing their countries (in total, six countries) at the 2014 World Wrestling Championship held in Uzbekistan. The Group also supplied products to be used by athletes representing their countries or region (in total, eight countries and one region) at the 17th Asian Games INCHEON 2014 held in the Republic of Korea. In the Onitsuka Tiger business, the Group strove to heighten the value of Onitsuka Tiger as an innovative and sophisticated brand. To this end, the Group launched models of shoes and apparel products designed in collaboration with famous designers from Japan and overseas, and carried out other activities such as participating in the Mercedes-Benz Fashion Week TOKYO. On the sales front, the Group worked on expanding sales through such measures as increasing directly managed sales venues. The Group pushed ahead with store openings around the world, including the opening of a large ASICS brand partner store, ASICS TIMES SQUARE, on 42nd Street in Manhattan, and openings of directly managed ASICS brand stores in Melbourne (Australia), Madrid (Spain), Hamburg (Germany) and Rio de Janeiro (Brazil). With these new stores, the number of ASICS’ directly managed sales venues came to more than 1,100 stores worldwide, including 381 directly managed stores and other partner stores. Furthermore, the Group started selling through ASICS’ own E-commerce websites at a shared global IT platform in Germany, France, Spain and Italy in addition to the four countries where the Group had already carried out such sales. In the apparel business, the Group worked on strengthening the
function of the global sourcing and development in order to expand sales and boost profitability. To this end, the Group centralized the production control function of each country’s apparel products in ASICS HongKong Apparel Limited in Hong Kong, and transferred parts of the materials procurement and quality control functions at the apparel business of ASICS to that company. In addition, the Group pressed ahead with transferring production facilities from areas in China to areas in Southeast Asia for the purpose of reducing costs. Also in this business, the Group worked on expanding running apparel business. In the new business, the Group worked on creating a service that contributes to people’s lives by starting the operation of “Tryus Nishinomiya” (Japan), a nursing care service facility specializing in functional training that provides exercise service programs utilizing the Group’s sports expertise. Furthermore, the Group worked on establishing a stable product supply system through the construction of a global logistics network. As part of this work, the Group established the “ASICS European Distribution Center” in Germany as its new logistics base in Europe, and started operations at the center. In addition, in order to strengthen its research and development capabilities with the aim of providing innovative products and value, the Group expanded the facilities of the ASICS Institute of Sports Science and improved the institute’s experimentation equipment as part of the Group’s efforts to enhance its research and development environment. The Group strove to strengthen fast-track development and hiring of professional talent on global and regional bases and to ensure the optimal placement of global talent. The Group introduced new human resources system to replace the traditional seniority system. In addition, the Group promoted diversity under the slogan “One Team” –– Stronger through Diversity, aiming that diverse employees feel fulfilled in the corporate culture and environment to let them perform at peak, and contribute sustainable growth of the business and the organization. In other activities, as part of a continuous support program for the Great Eastern Japan Earthquake, “A Bright Tomorrow Through Sport”, the Group supported the Tohoku Food Marathon & Festival 2014. The Group also held Tomorrow Ball Park in Fukushima, an event which provided opportunities for children to play with professional baseball players. Performance Analysis In the fiscal year ended December 31, 2014, consolidated net sales were ¥354,052 million. Domestic net sales were ¥68,991 million, overseas sales were ¥285,061 million, gross profit was ¥155,188 million, operating income was ¥30,467 million and net income was ¥22,286 million.
Operating Income
Gross Profit
Working Capital
(Billions of yen)
(Billions of yen)
(Billions of yen)
159.1
’14/3
’14/12
’11/3
’12/3
’13/3
’14/3
’14/12
’11/3
’12/3
112.7
83.1
ASICS Corporation
’13/3
92.5
18.7
19.6
21.6
12
’12/3
187.6
30.5
26.5
155.2
144.4
113.8
107.5
103.1 ’11/3
’13/3
’14/3
’14/12
Segment Information Business results by reportable segment were as follows. The fiscal year ended December 31, 2014 is a transitional period for the change in the fiscal year end. Therefore, the fiscal year ended December 31, 2014 has irregular settlement periods whereby the period of consolidation is nine months (April 1, 2014 to December 31, 2014) for the Company and those consolidated subsidiaries whose fiscal year end was on March 31, and 12 months (January 1, 2014 to December 31, 2014) for consolidated subsidiaries whose fiscal year end was on December 31. As a result, year-on-year ratios are not disclosed for the Japan area.
(an increase of 68.8% using the previous fiscal year’s foreign exchange rate) to ¥2,328 million, mainly due to the effect of increased sales at a subsidiary in China. (6) Other business Sales increased 9.4% (an increase of 5.8% using the previous fiscal year’s foreign exchange rate) to ¥11,821 million, due to the steady sales of outdoor wear under the HAGLÖFS brand and the effect of foreign exchange rates. Segment loss was ¥822 million mainly due to the recording of the temporary costs for business restructuring. Financial Condition As for consolidated financial position as of December 31, 2014, total assets increased 12.1% from the end of the previous fiscal year to ¥355,837 million, total liabilities decreased 2.6% from the end of the previous fiscal year to ¥153,896 million and net assets increased 26.6% from the end of the previous fiscal year to ¥201,941 million.
(1) Japan Area Sales were ¥82,575 million and segment loss was ¥715 million. (2) America Area Sales increased 25.8% (an increase of 14.9% using the previous fiscal year’s foreign exchange rate) to ¥118,880 million, due to the strong sales of running shoes and the effect of foreign exchange rates. Moreover, segment income increased 31.4% (an increase of 20.0% using the previous fiscal year’s foreign exchange rate) to ¥10,936 million, mainly due to the impact of the increase in sales and improvements of the cost of sales ratio.
Cash Flows As for cash flows as of December 31, 2014, cash and cash equivalents (hereinafter, “cash”) decreased ¥2,583 million from the end of the previous fiscal year to ¥51,051 million. The respective cash flow positions and main factors behind the changes are as follows. The fiscal year ended December 31, 2014 is a transitional period for the change in the fiscal year end. Therefore, the fiscal year ended December 31, 2014 has irregular settlement periods whereby the period of consolidation is nine months (April 1, 2014 to December 31, 2014) for the Company and those consolidated subsidiaries whose fiscal year end was on March 31, and 12 months (January 1, 2014 to December 31, 2014) for consolidated subsidiaries whose fiscal year end was on December 31. As a result, year-on-year ratios are not disclosed. Net cash provided by operating activities was ¥10,720 million. Major sources of cash were ¥34,183 million from income before income taxes and minority interests, and ¥6,412 million from a decrease in notes and accounts receivable-trade, while major uses of cash were ¥14,079 million for income taxes paid and ¥12,923 million for an increase in inventories. Net cash used in investing activities was ¥9,845 million. The major source of cash was ¥6,140 million from proceeds from withdrawal of time deposits, while major uses of cash were ¥7,526 million for purchases of property, plant and equipment, ¥4,335 million for purchases of time deposits, ¥2,248 million for purchases of intangible assets and ¥1,036 million for purchases of investment in securities. Net cash used in financing activities was ¥4,848 million. Major uses of cash were ¥3,226 million for cash dividends paid and ¥780 million for a net decrease in short-term bank loans.
(3) Europe Area Sales increased 22.9% (an increase of 13.0% using the previous fiscal year’s foreign exchange rate) to ¥104,792 million, due to the strong sales of running shoes and the effect of foreign exchange rates. However, segment income increased 14.7% (an increase of 5.4% using the previous fiscal year’s foreign exchange rate) to ¥8,653 million, mainly due to a fall in exchange rates of Russian Ruble and Norwegian Krone against the euro and an increase of purchasing cost. (4) Oceania/SouthEast and South Asia Area Sales increased 21.8% (an increase of 19.6% using the previous fiscal year’s foreign exchange rate) to ¥18,559 million, due to the steady sales of running shoes in Australia, the start of sales activities by a subsidiary in Singapore, and the effect of foreign exchange rates. However, segment income increased 1.9% (a decrease of 0.3% using the previous fiscal year’s foreign exchange rate) to ¥3,245 million, mainly due to the effect of foreign exchange rates on purchasing costs. (5) East Asia Area Sales increased 32.5% (an increase of 18.3% using the previous fiscal year’s foreign exchange rate) to ¥31,495 million, due to the strong sales of running shoes and Onitsuka Tiger shoes, in addition to the effect of foreign exchange rates. Moreover, segment income increased 85.8%
Long-Term Debt
Total Net Assets
(Billions of yen)
355.8
’14/12
’11/3
’12/3
244.7
’14/3
212.3
’13/3
200.8
’12/3
317.5
201.9
’11/3
159.6
’14/12
(Billions of yen)
138.1
’13/3
115.3
59.0
’14/3
106.4
58.6
24.2 ’12/3
27.3
23.2 ’11/3
Total Assets
(Billions of yen)
’13/3
’14/3
’14/12
ASICS Corporation
13
Consolidated Balance Sheet ASICS Corporation and Consolidated Subsidiaries December 31, 2014 and March 31, 2014
Thousands of U.S. dollars (Note 1)
Millions of yen
ASSETS
December 31, 2014
March 31, 2014
Current assets: Cash and deposits (Notes 6 and 17) �������������������������������������������������������������������������������������� ¥ 54,888 ¥ Short-term investments (Notes 6, 7 and 17) ��������������������������������������������������������������������������� 2,821 Notes and accounts receivable (Note 17): Trade���������������������������������������������������������������������������������������������������������������������������������� 80,992 Less allowance for doubtful receivables������������������������������������������������������������������������������� (3,899) Inventories (Note 8) ��������������������������������������������������������������������������������������������������������������� 100,412 Deferred income taxes (Note 15) ������������������������������������������������������������������������������������������� 5,520 Other current assets��������������������������������������������������������������������������������������������������������������� 24,235
58,862 2,179 83,169 (3,525) 81,090 5,936 12,601
$ 457,400 23,508 674,933 (32,492) 836,767 46,000 201,959
264,969
240,312
9,467 36,045 5,049 21,680 7,240 1,735 (39,107)
9,465 33,703 4,807 18,643 6,160 437 (35,641)
78,892 300,375 42,075 180,667 60,333 14,458 (325,892)
Property, plant and equipment, net (Note 22) ��������������������������������������������������������������������
42,109
37,574
350,908
Intangible assets: Goodwill (Note 22) ���������������������������������������������������������������������������������������������������������������� Other intangible assets�����������������������������������������������������������������������������������������������������������
5,166 14,425
6,133 14,413
43,050 120,208
Total intangible assets���������������������������������������������������������������������������������������������������������
19,591
20,546
163,258
Total current assets�������������������������������������������������������������������������������������������������������������
Property, plant and equipment (Note 9): Land��������������������������������������������������������������������������������������������������������������������������������������� Buildings and structures��������������������������������������������������������������������������������������������������������� Machinery, equipment and vehicles���������������������������������������������������������������������������������������� Tools, furniture and fixtures���������������������������������������������������������������������������������������������������� Leased assets�������������������������������������������������������������������������������������������������������������������������� Construction in progress�������������������������������������������������������������������������������������������������������� Less accumulated depreciation�����������������������������������������������������������������������������������������������
Investments and other assets: Investments in securities: Unconsolidated subsidiaries������������������������������������������������������������������������������������������������ Other (Notes 7 and 17) ������������������������������������������������������������������������������������������������������ Long-term loans receivable����������������������������������������������������������������������������������������������������� Assets for retirement benefits (Note 12) �������������������������������������������������������������������������������� Deferred income taxes (Note 15) ������������������������������������������������������������������������������������������� Other assets (Note 9) ������������������������������������������������������������������������������������������������������������� Less allowance for doubtful receivables���������������������������������������������������������������������������������� Less allowance for losses on investment in an unconsolidated subsidiary��������������������������������
101 10,433 412 523 996 17,073 (370) —
216 8,523 462 676 2,224 7,472 (403) (74)
Total investments and other assets�������������������������������������������������������������������������������������� 29,168 19,096 Total assets (Note 22) �������������������������������������������������������������������������������������������������������� ¥ 355,837 ¥ 317,528
14
December 31, 2014
ASICS Corporation
2,208,075
842 86,942 3,433 4,358 8,300 142,275 (3,083) — 243,067 $2,965,308
Thousands of U.S. dollars (Note 1)
Millions of yen
LIABILITIES AND NET ASSETS
December 31, 2014
Current liabilities: Short-term bank loans (Notes 10 and 17) ������������������������������������������������������������������������������ ¥ Current portion of long-term debt (Notes 10 and 17) ������������������������������������������������������������ Notes and accounts payable (Note 17): Trade���������������������������������������������������������������������������������������������������������������������������������� Construction����������������������������������������������������������������������������������������������������������������������� Accrued income taxes (Note 15) �������������������������������������������������������������������������������������������� Accrued expenses������������������������������������������������������������������������������������������������������������������� Allowance for sales returns����������������������������������������������������������������������������������������������������� Allowance for employees’ bonuses����������������������������������������������������������������������������������������� Asset retirement obligations (Note 11) ����������������������������������������������������������������������������������� Deferred income taxes (Note 15) ������������������������������������������������������������������������������������������� Other current liabilities�����������������������������������������������������������������������������������������������������������
March 31, 2014
14,667 ¥ 14,041 1,364 1,021
December 31, 2014
$ 122,225 11,367
27,264 2 1,915 15,842 595 844 8 2,176 12,671
30,665 80 4,294 15,028 894 1,968 31 54 13,102
227,200 17 15,958 132,017 4,958 7,033 67 18,133 105,592
Total current liabilities���������������������������������������������������������������������������������������������������������
77,348
81,178
644,567
Long-term liabilities: Long-term debt (Notes 10 and 17) ���������������������������������������������������������������������������������������� Liabilities for retirement benefits (Note 12) ���������������������������������������������������������������������������� Asset retirement obligations (Note 11) ����������������������������������������������������������������������������������� Deferred income taxes (Note 15) ������������������������������������������������������������������������������������������� Other long-term liabilities�������������������������������������������������������������������������������������������������������
58,972 8,241 852 6,074 2,409
58,602 8,586 773 4,092 4,730
491,433 68,675 7,100 50,617 20,075
Total long-term liabilities�����������������������������������������������������������������������������������������������������
76,548
76,783
637,900
23,972 17,490 134,641
23,972 17,490 115,295
199,767 145,750 1,122,008
Net assets: Shareholders’ equity (Note 13): Common stock: Authorized shares -790,000,000 shares at December 31, 2014 and March 31, 2014 Issued shares -199,962,991 shares at December 31, 2014 and March 31, 2014����� Capital surplus�������������������������������������������������������������������������������������������������������������������� Retained earnings (Note 23) ����������������������������������������������������������������������������������������������� Less treasury stock, at cost (10,140,795 shares at December 31, 2014 and 10,137,988 shares at March 31, 2014) �����
(7,658)
(7,652)
(63,817)
Total shareholders’ equity���������������������������������������������������������������������������������������������������
168,445
149,105
1,403,708
Accumulated other comprehensive income: Unrealized holding gain on securities (Note 7) �������������������������������������������������������������������� Unrealized deferred gain (loss) on hedges��������������������������������������������������������������������������� Revaluation reserve for assets of foreign subsidiaries����������������������������������������������������������� Translation adjustments������������������������������������������������������������������������������������������������������ Retirement benefits liability adjustments�����������������������������������������������������������������������������
3,168 14,646 129 14,548 74
2,351 (2,072) 194 9,076 (211)
26,400 122,050 1,075 121,233 617
Total accumulated other comprehensive income�������������������������������������������������������������
32,565
9,338
271,375
Stock acquisition rights (Note 13) ������������������������������������������������������������������������������������������ Minority interests�������������������������������������������������������������������������������������������������������������������
35 896
14 1,110
292 7,466
Total net assets��������������������������������������������������������������������������������������������������������������� 201,941 159,567 Total liabilities and net assets������������������������������������������������������������������������������������������ ¥ 355,837 ¥ 317,528
1,682,841 $2,965,308
See accompanying notes to consolidated financial statements.
ASICS Corporation
15
Consolidated Statement of Income ASICS Corporation and Consolidated Subsidiaries Nine months ended December 31, 2014 and twelve months ended March 31, 2014
Thousands of U.S. dollars (Note 1)
Millions of yen Nine months ended December 31, 2014
Twelve months ended March 31, 2014
Net sales (Note 22) ������������������������������������������������������������������������������������������������������������������ ¥ 354,052 ¥ 329,465 Cost of sales���������������������������������������������������������������������������������������������������������������������������� 198,864 185,097
$2,950,433 1,657,200
Gross profit����������������������������������������������������������������������������������������������������������������������������
155,188
144,368
1,293,233
Selling, general and administrative expenses (Notes 13 and 14) ����������������������������������������
124,721
117,852
1,039,341
Operating income (Note 22) ��������������������������������������������������������������������������������������������������
30,467
26,516
253,892
Other income (expenses): Interest and dividend income�������������������������������������������������������������������������������������������������� Interest expense��������������������������������������������������������������������������������������������������������������������� Exchange gain, net����������������������������������������������������������������������������������������������������������������� Gain on sales of investments in securities, net (Note 7) ���������������������������������������������������������� Loss on impairment of investments in securities (Note 7) ������������������������������������������������������� (Loss) gain on sales or disposal of property, plant and equipment and other, net�������������������� Loss on devaluation of investments in unconsolidated subsidiaries������������������������������������������ Loss on impairment of property, plant and equipment (Notes 9 and 22) �������������������������������� Loss on plant closure�������������������������������������������������������������������������������������������������������������� Other, net������������������������������������������������������������������������������������������������������������������������������
638 (764) 3,678 172 –
645 (718) 365 265 (20)
5,316 (6,367) 30,650 1,433 –
(79) (41)
748
(658)
(172)
– (42)
(342) (1,433)
– 284
(256) 191
– 2,367
3,716
1,178
30,966
34,183
27,694
284,858
12,554 (810)
11,314 (863)
104,617 (6,751)
11,744
10,451
97,866
22,439
17,243
186,992
Minority interests������������������������������������������������������������������������������������������������������������������� 153 1,135 Net income������������������������������������������������������������������������������������������������������������������������� ¥ 22,286 ¥ 16,108
1,275 $ 185,717
Income before income taxes and minority interests������������������������������������������������������������� Income taxes (Note 15): Current���������������������������������������������������������������������������������������������������������������������������������� Deferred��������������������������������������������������������������������������������������������������������������������������������� Income before minority interests�����������������������������������������������������������������������������������������
See accompanying notes to consolidated financial statements.
16
Nine months ended December 31, 2014
ASICS Corporation
Consolidated Statement of Comprehensive Income ASICS Corporation and Consolidated Subsidiaries Nine months ended December 31, 2014 and twelve months ended March 31, 2014
Millions of yen Nine months ended December 31, 2014
Twelve months ended March 31, 2014
Income before minority interests������������������������������������������������������������������������������������������ ¥ 22,439 ¥ 17,243 Other comprehensive income (loss) (Note 19): Unrealized holding gain on securities�������������������������������������������������������������������������������������� Unrealized deferred gain (loss) on hedges������������������������������������������������������������������������������� Revaluation reserve for assets of foreign subsidiaries�������������������������������������������������������������� Translation adjustments���������������������������������������������������������������������������������������������������������� Retirement benefits liability adjustments���������������������������������������������������������������������������������
817 16,718 (65) 5,560 285
32 (3,089) (93) 17,790 –
Thousands of U.S. dollars (Note 1) Nine months ended December 31, 2014
$ 186,992
6,808 139,317 (542) 46,333 2,375
Total other comprehensive income, net������������������������������������������������������������������������������ 23,315 14,640 Comprehensive income���������������������������������������������������������������������������������������������������������� ¥ 45,754 ¥ 31,883
194,291 $ 381,283
Comprehensive income attributable to: Shareholders of ASICS Corporation���������������������������������������������������������������������������������������� ¥ 45,512 ¥ 30,470 Minority shareholders of consolidated subsidiaries������������������������������������������������������������������ 242 1,413
$ 379,267 2,016
See accompanying notes to consolidated financial statements.
ASICS Corporation
17
Consolidated Statement of Changes in Net Assets ASICS Corporation and Consolidated Subsidiaries Nine months ended December 31, 2014 and twelve months ended March 31, 2014
Millions of yen Number of issued shares of common Common stock stock
Capital surplus
Retained earnings
Unrealized Treasury holding stock, gain at cost on securities
Balance at April 1, 2013������������ 199,962,991 ¥23,972 ¥17,183 ¥101,369 ¥(7,824) – – – (2,275) – Dividends������������������������������������� Reversal of revaluation reserve for assets of foreign subsidiaries������ – – – 93 – – – – 16,108 – Net income����������������������������������
Revaluation Unrealized reserve for Retirement deferred assets of benefits Stock gain (loss) foreign Translation liability subscription Minority on hedges subsidiaries adjustments adjustments rights interests
¥2,327 ¥ 1,050
¥287 ¥ (8,477)
Total net assets
¥ –
¥ –
–
–
–
–
–
–
¥8,191 ¥138,078 –
(2,275)
– –
– –
(93) –
– –
– –
– –
– –
– 16,108
Purchases of treasury stock����������
–
–
–
–
(11)
–
–
–
–
–
–
–
(11)
Sales of treasury stock������������������ Changes resulting from share exchanges�������������������������������� Other changes�����������������������������
–
–
0
–
0
–
–
–
–
–
–
–
0
–
–
307
–
183
–
–
–
–
–
–
–
490
–
7,177
–
–
–
–
24
(3,122)
–
17,553
(211)
14
(7,081)
Balance at April 1, 2014������������ 199,962,991 Cumulative effect of change in method of accounting���������������� – Balance as adjusted���������������������� 199,962,991 – Dividends������������������������������������� Reversal of revaluation reserve for – assets of foreign subsidiaries���� – Net income����������������������������������
23,972
17,490 115,295
(7,652)
2,351
(2,072)
194
9,076
(211)
14
1,110 159,567
– 23,972
– 222 17,490 115,517
– (7,652)
– 2,351
– (2,072)
– 194
– 9,076
– (211)
– 14
– 222 1,110 159,789
–
–
(3,227)
–
–
–
–
–
–
–
–
(3,227)
–
–
65
–
–
–
(65)
–
–
–
–
–
–
–
22,286
–
–
–
–
–
–
–
–
22,286
– – – – (6) Purchases of treasury stock���������� – – 0 – 0 Sales of treasury stock������������������ – – – – – Other changes����������������������������� Balance at December 31, 2014��� 199,962,991 ¥23,972 ¥17,490 ¥134,641 ¥(7,658)
–
–
–
–
–
–
–
(6)
–
–
–
–
–
–
–
0
817
16,718
–
5,472
285
21
(214)
23,099
¥129 ¥14,548
¥ 74
¥35
¥3,168 ¥14,646
¥ 896 ¥201,941
Thousands of U.S. dollars (Note 1)
Common stock
Capital surplus
Retained earnings
Treasury stock, at cost
Revaluation Unrealized Unrealized reserve for Retirement holding deferred assets of benefits Stock gain on gain (loss) foreign Translation liability subscription Minority securities on hedges subsidiaries adjustments adjustments rights interests
Balance at April 1, 2014��������������������������� $199,767 $145,750 $960,791 $(63,767) $19,592 $(17,267) Cumulative effect of change in method of – – 1,850 – – – accounting������������������������������������������� Balance as adjusted���������������������������������� 199,767 145,750 962,641 (63,767)
$(1,758)
$117
–
–
–
–
1,617
75,633
(1,758)
117
$9,250 $1,329,725 –
1,850
9,250 1,331,575
Dividends������������������������������������������������� Reversal of revaluation reserve for assets of foreign subsidiaries�������������������������� Net income����������������������������������������������
–
–
(26,892)
–
–
–
–
–
–
–
–
(26,892)
–
–
542
–
–
–
(542)
–
–
–
–
–
–
– 185,717
Purchases of treasury stock����������������������
–
–
–
–
–
–
–
–
–
– 185,717
(50)
–
–
–
–
–
–
–
(50)
– 0 – 0 – – Sales of treasury stock������������������������������ – – – – 6,808 139,317 Other changes����������������������������������������� Balance at December 31, 2014������������� $199,767 $145,750 $1,122,008 $(63,817) $26,400 $122,050
–
–
–
–
–
0
–
45,600
2,375
175
(1,784) 192,491
$1,075 $121,233
$ 617
$292
$7,466 $1,682,841
See accompanying notes to consolidated financial statements.
18
19,592 (17,267)
$1,617 $ 75,633
Total net assets
ASICS Corporation
–
Consolidated Statement of Cash Flows ASICS Corporation and Consolidated Subsidiaries Nine months ended December 31, 2014 and twelve months ended March 31, 2014
Thousands of U.S. dollars (Note 1)
Millions of yen
Operating activities: Income before income taxes and minority interests������������������������������������������������������������� Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities: Depreciation and amortization������������������������������������������������������������������������������������ Amortization of goodwill, net������������������������������������������������������������������������������������� Increase in allowance for doubtful receivables������������������������������������������������������������ Decrease in accrued retirement benefits for employees����������������������������������������������� Increase in liabilities for retirement benefits, net���������������������������������������������������������� Decrease in allowance for employees’ bonuses������������������������������������������������������������ Loss on impairment of investments in securities����������������������������������������������������������� Gain on sales of investments in securities, net������������������������������������������������������������� Interest and dividend income�������������������������������������������������������������������������������������� Interest expense���������������������������������������������������������������������������������������������������������� Exchange gain, net������������������������������������������������������������������������������������������������������ Loss (gain) on sales or disposal of property, plant and equipment and other, net��������� Other, net������������������������������������������������������������������������������������������������������������������� (Increase) decrease in operating assets: Notes and accounts receivable��������������������������������������������������������������������������������� Inventories��������������������������������������������������������������������������������������������������������������� Other operating assets��������������������������������������������������������������������������������������������� Increase (decrease) in operating liabilities: Notes and accounts payable������������������������������������������������������������������������������������ Accrued consumption taxes������������������������������������������������������������������������������������� Other operating liabilities����������������������������������������������������������������������������������������� Subtotal������������������������������������������������������������������������������������������������������������������ Interest and dividends received������������������������������������������������������������������������������������������� Interest paid����������������������������������������������������������������������������������������������������������������������� Income taxes refunded������������������������������������������������������������������������������������������������������� Income taxes paid�������������������������������������������������������������������������������������������������������������� Net cash provided by operating activities Investing activities: Increase in time deposits���������������������������������������������������������������������������������������������������� Proceeds from withdrawal of time deposits������������������������������������������������������������������������ Purchases of property, plant and equipment����������������������������������������������������������������������� Payments for disposal of property, plant and equipment���������������������������������������������������� Proceeds from sales of property, plant and equipment������������������������������������������������������� Purchases of intangible assets��������������������������������������������������������������������������������������������� Net increase in short-term investments������������������������������������������������������������������������������� Purchases of investments in securities��������������������������������������������������������������������������������� Proceeds from sales and redemption of investments in securities���������������������������������������� Purchase of shares of subsidiaries��������������������������������������������������������������������������������������� Net increase in short-term loans receivable included in other current assets����������������������� Long-term loans receivable made��������������������������������������������������������������������������������������� Collection of long-term loans receivable����������������������������������������������������������������������������� Other, net�������������������������������������������������������������������������������������������������������������������������� Net cash used in investing activities����������������������������������������������������������������������������� Financing activities: Net (decrease) increase in short-term bank loans���������������������������������������������������������������� Proceeds from long-term loans������������������������������������������������������������������������������������������� Repayment of long-term loans������������������������������������������������������������������������������������������� Proceeds from issuance of bonds with stock acquisition rights�������������������������������������������� Purchases of treasury stock������������������������������������������������������������������������������������������������� Proceeds from sales of treasury stock��������������������������������������������������������������������������������� Purchases of treasury stock by a subsidiary������������������������������������������������������������������������� Repayment of lease obligations������������������������������������������������������������������������������������������ Cash dividends paid to the shareholders of the Company��������������������������������������������������� Cash dividends paid to minority shareholders of consolidated subsidiaries�������������������������� Net cash (used in) provided by financing activities������������������������������������������������������ Effect of exchange rate changes on cash and cash equivalents������������������������������������� Net (decrease) increase in cash and cash equivalents������������������������������������������������������ Cash and cash equivalents at beginning of year�������������������������������������������������������������� Cash and cash equivalents at end of year (Note 6)�����������������������������������������������������������
Nine months ended December 31, 2014
Twelve months ended March 31, 2014
Nine months ended December 31, 2014
¥34,183
¥27,694
$284,858
6,288 992 115 – 569 (1,206) – (172) (638) 764 (3,071) 79 142
6,034 960 457 (7,515) 8,348 (438) 20 (265) (645) 718 (231) (748) 36
52,400 8,267 958 – 4,742 (10,050) – (1,433) (5,317) 6,367 (25,592) 658 1,184
6,412 (12,923) (3,281)
(3,747) (14,059) (3,582)
53,433 (107,692) (27,342)
(4,841) 1,039 432 24,883 630 (714) – (14,079) 10,720
276 (114) 3,713 16,912 658 (722) 951 (11,406) 6,393
(40,342) 8,659 3,600 207,358 5,250 (5,950) – (117,325) 89,333
(4,335) 6,140 (7,526) (53) 109 (2,248) (531) (1,036) 426 (684) (22) (2) 46 (129) (9,845)
(10,286) 10,771 (6,294) (31) 1,905 (1,048) (33) (725) 1,620 (9,037) (30) (76) 11 (482) (13,735)
(36,125) 51,167 (62,717) (442) 908 (18,733) (4,425) (8,633) 3,550 (5,700) (183) (17) 383 (1,074) (82,041)
(780) 100 (358) – (6) 0 – (572) (3,226) (6) (4,848) 1,390 (2,583) 53,634 ¥51,051
2,509 450 (2,279) 30,049 (11) 0 (0) (660) (2,275) (136) 27,647 996 21,301 32,333 ¥53,634
(6,500) 833 (2,983) – (50) 0 – (4,767) (26,883) (50) (40,400) 11,583 (21,525) 446,950 $425,425
See accompanying notes to consolidated financial statements. ASICS Corporation
19
Notes to Consolidated Financial Statements ASICS Corporation and Consolidated Subsidiaries December 31, 2014
1
Basis of Preparation The accompanying consolidated financial statements of ASICS Corporation (the “Company”) and consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan. Certain reclassifications of previously reported amounts have been made to conform the accompanying consolidated financial statements for the twelve months ended March 31, 2014 to the presentation for the nine months ended December 31, 2014. Such reclassifications had no effect on consolidated net income or net assets. The U.S. dollar amounts in the accompanying consolidated financial statements have been translated from yen amounts solely for convenience, as a matter of arithmetic computation only, at ¥120 = U.S.$1.00, the approximate rate of exchange prevailing on December 31, 2014. This translation should not be construed as a representation that yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.
2
Summary of Significant Accounting Policies (a) Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and significant companies which it controls directly or indirectly. All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if applicable. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain subsidiaries were excluded from the scope of consolidation because the effect of its sales, net income or loss, total assets and retained earnings on the accompanying consolidated financial statements was immaterial. (b) Foreign currency translation All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance sheet date and gain or loss on each translation is credited or charged to income. Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at the rates in effect at the respective transaction dates. Foreign exchange gain or loss is credited or charged to income in the period in which the gain or loss is recognized for financial reporting purposes. The financial statements of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at the balance sheet date, except that the components of net assets excluding minority interests are translated at their historical exchange rates. (c) Cash and cash equivalents For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash on hand, deposits with banks withdrawable on demand, and short-term investments which are readily convertible into cash subject to an insignificant risk of any change in their value and which were purchased with an original maturity of three months or less. (d) Securities Marketable securities classified as other securities are carried at fair value with any changes in unrealized holding gain or loss, net of the applicable income taxes, reported as a separate component of net assets. Cost of securities sold is determined by the moving-average method. Non-marketable equity securities classified as other securities are stated at cost determined by the moving-average method. Non-marketable debt securities classified as other securities are stated at net amortized cost. (e) Inventories Inventories are principally stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method. (f) Property, plant and equipment (except for leased assets under finance leases) The Company and its domestic consolidated subsidiaries compute depreciation of property, plant and equipment by the declining-balance method over the estimated useful lives of the respective assets, except that the straight-line method is applied to buildings (other than
20
ASICS Corporation
structures attached to the buildings) acquired on or subsequent to April 1, 1998. Foreign consolidated subsidiaries compute depreciation of property, plant and equipment by the straight-line method over the estimated useful lives of the respective assets. Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income as incurred. The principal estimated useful lives used for calculating depreciation are as follows:
Buildings and structures
3 to 50 years
Machinery, equipment and vehicles
2 to 14 years
Tools, furniture and fixtures
2 to 20 years
(g) Intangible assets (except for leased assets under finance leases) Expenditures relating to computer software developed for internal use are charged to income as incurred, unless the software is expected to contribute to the generation of future income or to cost savings, in which case such expenditures are capitalized as intangible assets and amortized by the straight-line method over their respective estimated useful lives, a period of five years. The Company and its consolidated subsidiaries have recorded intangible assets such as sales rights, customer base and brand as a result of revaluation of assets and liabilities of acquired companies at fair value because of business combination. Such intangible assets are amortized by the straight-line method over periods of 5 to 24 years. (h) Leased assets Finance leases, other than those that are deemed to transfer the ownership of the leased assets to the lessees, are depreciated using the straight-line method over the lease term with no residual value. (i) Goodwill
Goodwill is amortized by the straight-line method over periods of no more than 20 years.
(j) Allowance for doubtful receivables The Company and its domestic consolidated subsidiaries provide an allowance for doubtful receivables at an amount calculated based on their historical experience of bad debts on ordinary receivables plus an additional estimate of probable specific bad debts from customers experiencing financial difficulties. The overseas consolidated subsidiaries provide an allowance for doubtful receivables at an amount calculated based on probable specific bad debts from their customers. (k) Allowance for sales returns
Allowance for sales returns is provided at an amount calculated based on their historical experience of sales returns.
(l) Allowance for employees’ bonuses
Allowance for employees’ bonuses is provided at an expected payment amount of the bonuses to employees attributable to the fiscal year.
(m) Retirement benefits for employees Assets and liabilities for retirement benefits for employees are provided principally at an amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as of the balance sheet date. The retirement benefit obligation is attributed to each period by the straight-line method over the estimated remaining years of service of the eligible employees. Net retirement benefit obligation at transition is amortized by the straight-line method over a period of 15 years. Actuarial gain or loss is amortized principally in the year following the year in which the gain or loss is incurred by the straight-line method over a period which falls within the estimated average remaining years of service of the eligible employees. Certain consolidated subsidiaries amortize actuarial gain or loss in the year in which the gain or loss is incurred by the straight-line method over a period which falls within the estimated average remaining years of service of the eligible employees. Certain consolidated subsidiaries have calculated their retirement benefit obligation and retirement benefit expenses based on the amount which would be payable at the year end if all eligible employees terminated their services voluntarily (the “Simplified Method”).
ASICS Corporation
21
(n) Research and development costs
Research and development costs are charged to income as incurred.
(o) Income taxes Deferred income taxes are provided for temporary differences between the balances of assets and liabilities reported for financial purposes and the corresponding balances for tax reporting purposes. (p) Derivatives and hedging activities Derivatives positions are carried at fair value with any changes in unrealized gain or loss charged or credited to income, except for those which meet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as a component of net assets. Receivables and payables hedged by qualified forward foreign exchange contracts are translated at the corresponding foreign exchange contract rates (“allocation method”). Interest-rate swaps which meet certain conditions are accounted for as if the interest rates applied to the swaps had originally applied to the underlying debt (“special treatment”). The hedge effectiveness of forward foreign exchange transactions is assessed by considering whether the transactions qualify based on past experience and the probability of the forecasted transaction. The hedge effectiveness of interest-rate swaps is assessed based on a comparison of the cumulative changes in cash flows of the hedged items and those of the hedging instruments in the period from the start of the hedging relationship to the assessment date. However, the assessment of hedge effectiveness is omitted if a high level of hedge effectiveness is identified based on the terms of the contracts. (q) Distribution of retained earnings Under the Corporation Law of Japan (the “Law”), the distribution of retained earnings with respect to a given financial period is made by resolution of the shareholders at a general meeting held subsequent to the close of the financial period. The accounts for that period do not, therefore, reflect such distributions. Refer to Note 23.
3
Change in Method of Accounting Effective the nine months ended December 31, 2014, paragraph 35 of “Accounting Standard for Retirement Benefits” (Accounting Standards Board of Japan (“ASBJ”) Statement No.26, revised on May 17, 2012) and paragraph 67 of “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25, revised on May 17, 2012) were adopted. As a result of the adoption of these revised accounting standards, the method for calculating retirement benefit obligation and service cost has been revised. The method of attributing expected benefit to periods was changed from straight-line basis using a discount rate based on estimated average remaining years of service of the eligible employees to the plan’s benefit formula basis using a discount rate that is a single weighted average reflecting the projected benefit payment period and the projected payment per period. The effect of the adoption of these revised accounting standards was included in retained earnings as cumulative effect of change in method of accounting as of April 1, 2014 in accordance with transitional accounting treatments provided in the revised accounting standards. As a result of the adoption of these revised accounting standards, assets for retirement benefits and liabilities for retirement benefits decreased by ¥368 million ($3,067 thousand) and ¥713 million ($5,942 thousand), respectively, and retained earnings increased by ¥222 million ($1,850 thousand) as of April 1, 2014. In addition, the effect of this change on operating income, income before income taxes and minority interests for the nine months ended December 31, 2014 were immaterial. The effect of this change on net assets per share as of December 31, 2014 was immaterial.
4
Change in Fiscal Year The Company and its domestic consolidated subsidiaries changed their fiscal year end from March 31 to December 31. The change is to align the closing date of the Company and its consolidated subsidiaries in order to enhance the timely and accurate disclosure of corporate information and improve the efficiency of its business operations, the budgetary process and business performance management methods. As a result of this change, the fiscal year ended December 31, 2014 is an irregular settlement period whereby the period of consolidation is nine months (from April 1, 2014 to December 31, 2014) for the Company and its domestic consolidated subsidiaries whose fiscal year end was on March 31 while the settlement period is twelve months (January 1, 2014 to December 31, 2014) for overseas and the remaining domestic consolidated subsidiaries whose fiscal year end was already on December 31.
22
ASICS Corporation
The operating results from January 1, 2014 to March 31, 2014 for overseas and the other domestic consolidated subsidiaries, whose fiscal year end is on December 31, was adjusted on the consolidated statement of income for the nine months ended December 31, 2014. As a result, net sales, operating income and income before income tax and minority interest for the period from January 1, 2014 to March 31, 2014 amounted to ¥72,980 million ($608,167 thousand), ¥11,864 million ($98,867 thousand) and ¥11,903 million ($99,192 thousand), respectively.
5
Accounting Standards Issued but Not Yet Effective Accounting standards for business combinations “Accounting Standard for Business Combinations” (ASBJ Statement No.21), “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No.22), “Accounting Standard for Business Divestitures” (ASBJ Statement No.7),” “Accounting Standard for Earnings Per Share” (ASBJ Statement No.2), “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No.10) and “Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No.4) were revised on September 13, 2013. However, these accounting standards have not yet been adopted as of December 31, 2014. Under these revised accounting standards, major accounting changes are as follows: (1) Any differences arising from the movement of ownership interests in its subsidiaries shall be accounted for as changes in capital surplus as long as the parent company retains control over its subsidiary. (2) Acquisition-related costs shall be accounted for as expenses when incurred (3) “Income before minority interests” in the current period consolidated statement of income will be changed to “net income,” and “net income” in the current period consolidated statement of income will be changed to “net income attributable to shareholders of the parent company.” In addition, “minority interests” in the current period consolidated balance sheet will be changed to “non-controlling interests.” (4) If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report provisional amounts for the items whose accounting is incomplete in its financial statements (“provisional accounting”). Under these revised accounting standards, if accounting for a business combination is completed during the next fiscal year (the “completion period”) and consolidated financial statements for the completion period and those for the acquisition period are comparatively disclosed, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to the completed amounts and shall reflect new information on facts and circumstances that existed as of the acquisition date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date. The Company and its domestic subsidiaries will adopt these accounting standards effective January 1, 2016. However, provisional accounting will be adopted for business combinations conducted on or after January 1, 2016. At present, the Company is in the process of evaluating the impact on the consolidated financial statements of the adoption of these revised accounting standards.
6
Cash and Deposits The balances of cash and deposits reflected in the accompanying consolidated balance sheets at December 31, 2014 and March 31, 2014 were reconciled to the balances of cash and cash equivalents in the accompanying consolidated statements of cash flows for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 as follows: Millions of yen December March 31, 2014 31, 2014
Cash and deposits���������������������������������������������������������������������������������������������������������������������� Money management funds, included in short-term investments������������������������������������������������� Time deposits with original maturities in excess of three months, included in cash and deposits��������������������������������������������������������������������������������������������������� Cash and cash equivalents ��������������������������������������������������������������������������������������������������������
Thousands of U.S. dollars December 31, 2014
¥54,888 138
¥58,862 118
$457,400 1,150
(3,975) ¥51,051
(5,346) ¥53,634
(33,125) $425,425
ASICS Corporation
23
7
Short-Term Investments and Investments in Securities Information regarding other securities with determinable market value at December 31, 2014 and March 31, 2014 is summarized as follows: Millions of yen December 31, 2014 Carrying value
Securities whose carrying value exceeds their acquisition costs: Equity securities������������ Corporate bonds����������� Other���������������������������� Subtotal������������������������ Securities whose carrying value does not exceed their acquisition costs: Equity securities������������ Corporate bonds����������� Other���������������������������� Subtotal������������������������ Total���������������������������������
Thousands of U.S. dollars December 31, 2014
March 31, 2014
Acquisition costs
Unrealized gain (loss)
¥ 9,108 92 2,210 11,410
¥5,160 90 1,620 6,870
¥3,948 2 590 4,540
81 – 1,593 1,674 ¥13,084
86 – 1,593 1,679 ¥8,549
(5) – – (5) ¥4,535
Carrying value
Acquisition costs
Unrealized gain (loss)
Carrying value
¥ 7,055 91 1,419 8,565
¥4,134 90 1,020 5,244
¥2,921 1 399 3,321
214 – 1,754 1,968 ¥10,533
231 – 1,763 1,994 ¥7,238
(17) – (9) (26) ¥3,295
Acquisition costs
Unrealized gain (loss)
$ 75,900 767 18,417 95,084
$43,000 750 13,500 57,250
$32,900 17 4,917 37,834
675 – 13,275 13,950 $109,034
717 – 13,275 13,992 $71,242
(42) – – (42) $37,792
The total amounts of gain and loss on sales of other securities included in short-term investments and investments in securities for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are summarized as follows: Thousands of U.S. dollars
Millions of yen
Total sales���������������������������������������������������������������������������������������������������������������������������������� Gain on sales����������������������������������������������������������������������������������������������������������������������������� Loss on sales������������������������������������������������������������������������������������������������������������������������������
Nine months ended December 31, 2014
Twelve months ended March 31, 2014
Nine months ended December 31, 2014
¥317 172 –
¥1,989 414 62
$2,642 1,433 –
Loss on impairment of investments in securities is recorded for securities whose fair value has declined by 30% or more compared with the acquisition costs. The Company recognized loss on impairment of investments in securities of nil and ¥20 million for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014, respectively.
8
Inventories The following is a summary of inventories at December 31, 2014 and March 31, 2014: Millions of yen December 31, 2014
Merchandise and finished products�������������������������������������������������������������������������������������������� Work in process������������������������������������������������������������������������������������������������������������������������� Raw materials and supplies��������������������������������������������������������������������������������������������������������
24
ASICS Corporation
¥ 99,181 345 886 ¥100,412
March 31, 2014
¥79,895 295 900 ¥81,090
Thousands of U.S. dollars December 31, 2014
$826,508 2,875 7,384 $836,767
9
Loss on Impairment of Property, plant and Equipment The Company and its consolidated subsidiaries basically group their assets by retail store and individually group assets that are planned to be sold and idle assets. The assets are grouped by cash-generating units defined as the smallest identifiable groups of assets generating cash inflows. The Company and its domestic consolidated subsidiaries have written down idle assets and asset groups whose operating income has been continuously negative to their respective net recoverable value, and recorded related losses on impairment of property, plant and equipment. The recoverable value of the assets (or groups of assets) at retail stores are measured based on their respective estimated net selling value determined by the Company and its consolidated subsidiaries. The recoverable value of idle assets which are not expected to be utilized in the future are measured based on their respective estimated net selling value determined by the Company and its consolidated subsidiaries. The book value of leased assets is computed based on future minimum lease payments. The detail of loss on impairment of property, plant and equipment for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are as follows: Millions of yen
Use
Location
Classification
Retail stores
8 Retail stores (Kanto 5 stores, Kansai 2 stores and Shikoku 1 store)
Leased assets
Idle assets
Hokuriku
Total
Thousands of U.S. dollars
Nine months ended December 31, 2014
¥ 70
Other assets Building and structures
Tools, furniture and fixtures
$
583
13 89
108 742
0 ¥172
0 $1,433
Millions of yen
Use
Location
Classification
Twelve months ended March 31, 2014
Retail stores
6 Retail stores (Kanto 4 stores, Kansai and Hokkaido 1 store, respectively)
Leased assets
¥38
4 ¥42
Total
Other assets
ASICS Corporation
25
10
Short-Term Bank Loans and Long-Term Debt The average annual interest rates on short-term bank loans are 0.9% and 0.8% at December 31, 2014 and March 31, 2014, respectively. Long-term debt at December 31, 2014 and March 31, 2014 consisted of the following: Thousands of U.S. dollars
Millions of yen December 31, 2014
1.35% yen unsecured bonds, due 2016����������������������������������������������������������������������������������� 1.32% yen unsecured bonds, due 2016����������������������������������������������������������������������������������� 1.45% yen unsecured bonds, due 2016����������������������������������������������������������������������������������� 0.85% yen unsecured bonds, due 2017����������������������������������������������������������������������������������� 0.94% yen unsecured bonds, due 2017����������������������������������������������������������������������������������� 0.91% yen unsecured bonds, due 2017����������������������������������������������������������������������������������� Zero-coupon unsecured bonds with stock acquisition rights, due 2019������������������������������������ Unsecured loans primarily from banks, due 2015-2018 at interest rates ranging from 0.25% to 3.03%���������������������������������������������������������������������������������������������� Finance lease obligations���������������������������������������������������������������������������������������������������������� Current portion of long-term debt�������������������������������������������������������������������������������������������
December 31, 2014
March 31, 2014
¥ 5,000 3,000 3,000 2,000 1,500 1,500 30,125
¥ 5,000 3,000 3,000 2,000 1,500 1,500 30,148
$ 41,666 25,000 25,000 16,667 12,500 12,500 251,042
9,337 4,874 60,336 (1,364) ¥58,972
9,237 4,238 59,623 (1,021) ¥58,602
77,808 40,617 502,800 (11,367) $491,433
Zero-coupon unsecured bonds with stock acquisition rights with a gross issuance amount of ¥30,150 million ($251,250 thousand) were convertible into shares of common stock of the Company at ¥2,738.5 ($23) per share and are exercisable from March 17, 2014 to February 15, 2019. Information on the aggregate annual maturities of long-term debt subsequent to December 31, 2014 is presented in Note 17.
11
Asset Retirement Obligations (a) Outline of asset retirement obligations The Company and its domestic consolidated subsidiaries estimated the cost of restoration liabilities based on property lease agreements of certain domestic offices and retail stores and recognized them as asset retirement obligations. The Company and its domestic consolidated subsidiaries also estimated the disposal costs determined under the “Ordinance on Prevention of Asbestos Hazards” and “Act on Promotion of Proper Treatment of PCB Waste.” Certain overseas consolidated subsidiaries estimated restoration costs for certain overseas offices at the time of vacating the leased property and recognized them as asset retirement obligations. (b) Calculation method for asset retirement obligations Asset retirement obligations for the restoration liabilities based on the property lease agreements of certain domestic offices and retail stores were calculated using an estimated useful life of 5 to 20 years from the acquisitions of leasehold improvements and discount rates from 0.120% to 2.159%. Asset retirement obligations for the disposal costs determined under the “Ordinance on Prevention of Asbestos Hazards” and “Act on Promotion of Proper Treatment of PCB Waste” were calculated using an estimated useful life of 2 to 35 years from the acquisitions of leasehold improvements and discount rates from 0.156% to 2.301%. Asset retirement obligations for the restoration costs of certain overseas offices at the time of vacating the leased property were calculated using an estimated useful life of 10 to 15 years from the acquisitions of leasehold improvements and discount rates from 2.829% to 5.5%. (c) Changes in the balance of asset retirement obligations during the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are summarized as follows:
Balance at beginning of the period��������������������������������������������������������������������������������� Increase due to acquisition of property, plant and equipment����������������������������������������� Accretion expense����������������������������������������������������������������������������������������������������������� Decrease due to settlement of asset retirement liabilities������������������������������������������������� Other decrease��������������������������������������������������������������������������������������������������������������� Balance at end of the period�������������������������������������������������������������������������������������������
26
ASICS Corporation
Millions of yen
Thousands of U.S. dollars
Nine months Twelve months ended ended December March 31, 2014 31, 2014
Nine months ended December 31, 2014
¥804 77 10 (53) 22 ¥860
¥715 104 12 (48) 21 ¥804
$6,700 642 83 (442) 184 $7,167
Disclosure of detailed information on the asset retirement liabilities at December 31, 2014 and March 31, 2014 was omitted because the total amount of asset retirement liabilities at December 31, 2014 and March 31, 2014 were less than 1% of the amount of total liabilities and net assets.
12
Retirement Benefits The Company and its domestic consolidated subsidiaries have defined benefit pension plans, i.e., welfare pension fund plans (“WPFPs”) and lump-sum payment plans, covering substantially all employees who are entitled to lump-sum or annuity payments, the amounts of which are determined by reference to each retiree’s position and basic salary at termination, as well as length of service and certain other factors. Certain domestic consolidated subsidiaries have adopted a defined contribution pension plan or have joined the smaller enterprise retirement allowance mutual aid plan. The changes in the retirement benefit liabilities during the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are as follows: Millions of yen Nine months ended December 31, 2014
Retirement benefit obligations at April 1, 2014 and 2013���������������������������������������������������������� Cumulative effect of change in method of accounting��������������������������������������������������������������� Balance as adjusted�������������������������������������������������������������������������������������������������������������������� Service cost�������������������������������������������������������������������������������������������������������������������������������� Interest cost������������������������������������������������������������������������������������������������������������������������������� Actuarial loss����������������������������������������������������������������������������������������������������������������������������� Retirement benefits paid������������������������������������������������������������������������������������������������������������ Other����������������������������������������������������������������������������������������������������������������������������������������� Retirement benefit obligations of December 31, 2014 and March 31, 2014�������������������������������
¥14,992 (345) 14,647 699 115 47 (202) 39 ¥15,345
Twelve months ended March 31, 2014
¥14,601 – 14,601 682 288 93 (734) 62 ¥14,492
Thousands of U.S. dollars Nine months ended December 31, 2014
$124,933 (2,875) 122,058 5,825 958 392 (1,683) 325 $127,875
The changes in plan assets during the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are as follows: Millions of yen Nine months ended December 31, 2014
Plan assets at April 1, 2014 and 2013���������������������������������������������������������������������������� Expected return on plan assets��������������������������������������������������������������������������������������� Actuarial gain���������������������������������������������������������������������������������������������������������������� Contributions paid by the Company and a consolidated subsidiary��������������������������������� Retirement benefits paid������������������������������������������������������������������������������������������������ Other����������������������������������������������������������������������������������������������������������������������������� Plan assets at December 31, 2014 and March 31, 2014�������������������������������������������������
¥8,739 137 280 243 (142) 34 ¥9,291
Twelve months ended March 31, 2014
¥7,961 161 480 399 (315) 53 ¥8,739
Thousands of U.S. dollars Nine months ended December 31, 2014
$72,825 1,141 2,334 2,025 (1,183) 283 $77,425
The changes in retirement benefit liabilities calculated by the Simplified Method during the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are as follows: Millions of yen Nine months ended December 31, 2014
Liabilities for retirement benefits at April 1, 2014 and 2013������������������������������������������� Retirement benefit expenses������������������������������������������������������������������������������������������ Contributions paid by the Company and a consolidated subsidiary��������������������������������� Other����������������������������������������������������������������������������������������������������������������������������� Liabilities for retirement benefits at December 31, 2014 and March 31, 2014����������������
¥1,569 165 (40) (51) ¥1,643
Twelve months ended March 31, 2014
¥1,711 297 (341) (98) ¥1,569
Thousands of U.S. dollars Nine months ended December 31, 2014
$13,075 1,375 (333) (425) $13,692
ASICS Corporation
27
The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of December 31, 2014 and March 31, 2014 for the Company’s and the consolidated subsidiaries’ defined benefit pension plan: Thousands of U.S. dollars
Millions of yen December 31, 2014
Funded retirement benefit obligations���������������������������������������������������������������������������� Plan assets at fair value�������������������������������������������������������������������������������������������������� Unfunded retirement benefit obligations������������������������������������������������������������������������ Net liability for retirement benefits in the balance sheet������������������������������������������������� Liabilities for retirement benefits������������������������������������������������������������������������������������ Assets for retirement benefits���������������������������������������������������������������������������������������� Net liability for retirement benefits in the balance sheet�������������������������������������������������
¥17,464 (10,163) 7,301 417 7,718 8,241 (523) ¥ 7,718
December 31, 2014
March 31, 2014
¥16,908 (9,583) 7,325 585 7,910 8,586 (676) ¥ 7,910
$145,533 (84,691) 60,842 3,475 64,317 68,675 (4,358) $ 64,317
The components of retirement benefit expenses for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are as follows: Thousands of U.S. dollars
Millions of yen Nine months ended December 31, 2014
Service cost�������������������������������������������������������������������������������������������������������������������� Interest cost������������������������������������������������������������������������������������������������������������������� Expected return on plan assets��������������������������������������������������������������������������������������� Amortization of net retirement benefits at transition������������������������������������������������������ Amortization of unrecognized actuarial loss������������������������������������������������������������������� Net retirement benefit expenses calculated by the Simplified Method���������������������������� Retirement benefit expenses������������������������������������������������������������������������������������������
¥ 699 115 (137) 161 22 165 ¥1,025
Nine months ended December 31, 2014
Twelve months ended March 31, 2014
¥ 682 288 (161) 215 251 296 ¥1,571
$5,825 958 (1,141) 1,342 183 1,375 $8,542
Net retirement benefits at transition and actuarial loss included in other comprehensive income (before tax effects) for the nine months ended December 31, 2014 is as follows: Millions of yen
Thousands of U.S. dollars
Nine months ended December 31, 2014
Nine months ended December 31, 2014
¥161 22 ¥183
$1,342 183 $1,525
Net retirement benefits at transition������������������������������������������������������������������������������������������������������������������� Actuarial loss�����������������������������������������������������������������������������������������������������������������������������������������������������
Unrecognized net retirement benefits at transition and unrecognized actuarial (gain) loss included in accumulated other comprehensive income (before tax effects) as of December 31, 2014 and March 31, 2014 are as follows: Thousands of U.S. dollars
Millions of yen December 31, 2014
Unrecognized net retirement benefits at transition��������������������������������������������������������� Unrecognized actuarial (gain) loss����������������������������������������������������������������������������������
¥ 54 (178) ¥(124)
December 31, 2014
March 31, 2014
¥215 81 ¥296
$ 450 (1,483) $(1,033)
The fair value of plan assets, by major category, as a percentage of total plan assets as of December 31, 2014 and March 31, 2014 are as follows: December 31, 2014
Debt securities������������������������������������������������������������������������������������������������������������������������������������ Equity securities����������������������������������������������������������������������������������������������������������������������������������
Cash and deposits���������������������������������������������������������������������������������������������������������������������������������������������� General accounts controlled by insurance companies����������������������������������������������������������������������������������������� Other����������������������������������������������������������������������������������������������������������������������������������������������������������������� Total������������������������������������������������������������������������������������������������������������������������������������������������������������������
28
ASICS Corporation
55% 10 4 28 3 100%
March 31, 2014
56% 11 5 28 0 100%
The expected return on plan assets has been estimated considering the anticipated allocation to each asset class and the expected long-term returns on assets held in each category. The assumptions used in accounting for the above retirement benefit plans for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are as follows: Nine months ended December 31, 2014
Discount rates��������������������������������������������������������������������������������������������������������������������������������� 0.9% - 3.2% Expected rates of return on plan assets������������������������������������������������������������������������������������������� 2.0% - 2.7%
Twelve months ended March 31, 2014
1.0% - 4.2% 2.0% - 4.2%
Total contributions paid by the Company and its consolidated subsidiaries to the defined contribution pension plans for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 amounted to ¥797 million ($6,642 thousand) and ¥926 million, respectively.
13
Shareholders’ Equity The Law provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain conditions are met. The Company’s legal reserve included in retained earnings is nil at December 31, 2014 and March 31, 2014. Movements in common stock and treasury stock for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are summarized as follows:
April 1, 2014
Shares issued: Common Stock��������������������� Treasury stock: Treasury Stock����������������������
Number of shares Nine months ended December 31, 2014 Increase Decrease
December 31, 2014
199,962,991
–
–
199,962,991
10,137,988
2,837
30
10,140,795
The increase in treasury stock consists of 2,837 shares due to purchases of shares of less than one voting unit and the decrease in treasury stock consists of 30 shares due to sales of shares at the requests of shareholders who own less than one voting unit for the nine months ended December 31, 2014.
April 1, 2013
Shares issued: Common Stock��������������������� Treasury stock: Treasury Stock����������������������
Number of shares Twelve months ended March 31, 2014 Increase Decrease
March 31, 2014
199,962,991
–
–
199,962,991
10,137,988
6,102
241,601
10,137,988
The increase in treasury stock consists of 6,078 shares due to purchases of shares of less than one voting unit and 24 shares due to the acquisition of shares of less than one voting unit resulting from share exchanges to make one domestic consolidated subsidiary a fully-owned subsidiary during the twelve months ended March 31, 2014. The decrease in treasury stock consists of 72 shares due to sales of shares at the requests of shareholders who own less than one voting unit and 241,529 shares due to a share exchange using treasury stock with shareholders of a consolidated subsidiary that became a wholly-owned subsidiary during the twelve months ended March 31, 2014. Stock option plans Stock option costs included in selling, general and administrative expenses for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 amounted to ¥21 million ($175 thousand) and ¥14 million, respectively. A description of the stock option plan (the “2014 plan”) is as follows: Stock option plans
Date of approval at a meeting of the Board of Directors Individuals covered by the plan Directors other than outside directors Executive officers who are residents of Japan under the Income Tax Law of Japan
2014 plan
July 18, 2014 7
6
ASICS Corporation
29
Type and number of shares to be issued upon the exercise of the stock options
2014 plan
Common stock����������������������������������������������������� 26,500 Grant date������������������������������������������������������������ August 8, 2014 Service period������������������������������������������������������� Not defined Exercise period������������������������������������������������������ From August 9, 2017 to August 8, 2044
A description of the stock option plan (the “2013 plan”) is as follows: Stock option plans
2013 plan
Date of approval at a meeting of the Board of Directors Individuals covered by the plan Directors other than outside directors Executive officers who are residents of Japan under the Income Tax Law of Japan Type and number of shares to be issued upon the exercise of the stock options
July 19, 2013 7
5
2013 plan
Common stock����������������������������������������������������� 37,200 Grant date������������������������������������������������������������ August 6, 2013 Service period������������������������������������������������������� Not defined Exercise period������������������������������������������������������ From August 7, 2016 to August 6, 2043
Vesting conditions for the exercise of stock acquisition rights are as follows: 1) When individuals to whom the stock acquisition rights are granted (the “Holders”) cease to be a director or/and executive officer, the Holders can exercise the rights within five years following the date on which the Holders leave their positions with valid reasons as approved by the Company, such as the fulfillment of the service period. 2)
If the Holders forfeit stock acquisition rights, the stock options cannot be exercised.
3)
Other conditions are included in the contract entered into between the Company and the Holders.
The following table summarizes stock option activity under the stock option plans referred to above during the nine months ended December 31, 2014: 2014 plan
Number of stock options Unvested: Outstanding at the end of prior fiscal period��������������������������������������� Granted���������������������������������������������������������������������������������������������� Forfeited��������������������������������������������������������������������������������������������� Vested������������������������������������������������������������������������������������������������ Outstanding at the end of the fiscal period����������������������������������������� Vested: Outstanding at the end of prior fiscal period��������������������������������������� Vested������������������������������������������������������������������������������������������������ Exercised��������������������������������������������������������������������������������������������� Forfeited��������������������������������������������������������������������������������������������� Outstanding at the end of prior fiscal period���������������������������������������
2013 plan
– 26,500 1,400 – 25,100
37,200
34,700
– – – – –
– – – – –
2,500
Exercise price������������������������������������������������������������������������������������������ ¥ 1 ($0.01) ¥ 1 ($0.01) – – Weighted average exercise price������������������������������������������������������������� Weighted average fair value per stock at the grant date�������������������������� ¥ 2,135 ($ 18) ¥ 1,707 ($ 14) Valuation method for estimating fair value was the Black-Scholes model. The major assumptions used for the 2014 stock option plan were as follows: Major assumptions
Note
2014 plan
Estimated volatility
(a)
42.123%
Estimated remaining period
(b)
7.4 years
Estimated dividend
(c)
¥17 ($0.14) per share
Risk-free rate
(d)
0.297%
(a) Estimated volatility was computed by the closing stock prices of common stock in each trading day from March 8, 2007 to August 8, 2014. (b) Because adequate data was unavailable and it is difficult to reasonably estimate the exercise date, the remaining period was estimated as if stock options were exercised in the middle of the exercisable period.
30
ASICS Corporation
(c) The estimated dividend was calculated based on the actual dividend amount for the twelve months ended March 31, 2014. (d) The risk-free rate was determined based on the rate of Japanese government bonds, for which redemption dates corresponded to the estimated remaining period. Because it is difficult to reasonably estimate the number of stock options that will be forfeited in the future, the estimation reflects only the actual number of forfeited stock options.
14
Research and Development Costs Research and development costs included in selling, general and administrative expenses for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 amounted to ¥2,120 million ($17,667 thousand) and ¥804 million, respectively.
15
Income Taxes Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporation, inhabitants’ and enterprise taxes. The statutory tax rates in Japan for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are, in the aggregate, approximately 35.6% and 38.0%, respectively. A reconciliation of the statutory tax rate and the effective tax rate for the nine months ended December 31, 2014 has been omitted as the difference was less than 5% of the statutory tax rate. The effective tax rate reflected in the accompanying consolidated statement of income for the twelve months ended March 31, 2014 differed from the above statutory tax rate for the following reasons: Twelve months ended March 31, 2014
38.0% 0.3 (0.1) 3.8 (4.6) 0.4 (0.1) 37.7%
Statutory tax rate:����������������������������������������������������������������������������������������������������������������������������������������
Permanently non-deductible expenses����������������������������������������������������������������������������������������� Permanently non-taxable income������������������������������������������������������������������������������������������������� Change in valuation allowance���������������������������������������������������������������������������������������������������� Tax rate difference at overseas consolidated subsidiaries�������������������������������������������������������������� Decrease in deferred tax assets resulting from change in statutory tax rate���������������������������������� Other������������������������������������������������������������������������������������������������������������������������������������������ Effective tax rate�����������������������������������������������������������������������������������������������������������������������������
Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the corresponding amounts for income tax purposes. The significant components of the deferred tax assets and liabilities of the Company and consolidated subsidiaries at December 31, 2014 and March 31, 2014 are summarized as follows: Thousands of U.S. dollars
Millions of yen December 31, 2014
Deferred tax assets: Inventories������������������������������������������������������������������������������������������������������������������������� Allowance for doubtful receivables������������������������������������������������������������������������������������ Allowance for employees’ bonuses������������������������������������������������������������������������������������ Liability for retirement benefits������������������������������������������������������������������������������������������ Tax loss carry forwards������������������������������������������������������������������������������������������������������ Deferred loss on hedges���������������������������������������������������������������������������������������������������� Other�������������������������������������������������������������������������������������������������������������������������������� Gross deferred tax assets�������������������������������������������������������������������������������������������������������� Less valuation allowance��������������������������������������������������������������������������������������������������������� Total deferred tax assets��������������������������������������������������������������������������������������������������������� Deferred tax liabilities: Unrealized holding gain on securities��������������������������������������������������������������������������������� Valuation difference of consolidated subsidiaries��������������������������������������������������������������� Deferred gain on hedges��������������������������������������������������������������������������������������������������� Other�������������������������������������������������������������������������������������������������������������������������������� Total deferred tax liabilities����������������������������������������������������������������������������������������������������� Net deferred tax (liabilities) assets��������������������������������������������������������������������������������������������
March 31, 2014
December 31, 2014
¥3,793 1,105 575 2,785 771 267 2,543 11,839 (2,139) 9,700
¥3,532 923 823 2,655 910 1,353 2,266 12,462 (1,986) 10,476
$31,608 9,208 4,792 23,208 6,425 2,225 21,192 98,658 (17,825) 80,833
1,125 2,412 5,989 1,908 11,434 ¥(1,734)
743 2,486 – 3,233 6,462 ¥4,014
9,375 20,100 49,908 15,900 95,283 $(14,450)
ASICS Corporation
31
16
Leases The Company and its consolidated subsidiaries have entered into finance lease contracts which do not transfer the ownership of the leased assets to them. Main components of such finance lease are distribution center classified as land and buildings and computer software classified as intangible assets, which entered on or after April 1, 2008. Such finance lease contracts entered on or before March 31, 2008 were accounted for as operating leases and relevant disclosure information at December 31, 2014 has been omitted as they are immaterial. The Company and its consolidated subsidiaries also have entered into non-cancellable operating lease contracts. Future minimum lease payments subsequent to December 31, 2014 under non-cancellable operating leases are summarized as follows: Year ending December 31,
2015�������������������������������������������������������������������������������������������������������������������������������������������������������������� 2016 and thereafter ���������������������������������������������������������������������������������������������������������������������������������������
17
Thousands of U.S. dollars
Millions of yen
¥ 5,166 27,165 ¥32,331
$ 43,050 226,375 $ 269,425
Financial Instruments (a) Status of financial instruments In consideration of plans for capital investment, the Company and its consolidated subsidiaries (collectively the “Group”) raise funds mainly by bank borrowings and bonds issuance. The Group manages temporary fund surpluses principally through liquid financial assets. Furthermore, the Group raises short-term capital through bank borrowings. The Group uses derivatives for the purpose of reducing risk and does not enter into derivatives for speculative purposes. Trade receivables, notes and accounts receivables, are exposed to credit risk in relation to customers. In addition, the Group is exposed to foreign currency exchange risk arising from trade receivables denominated in foreign currencies, and forward foreign currency exchange contracts and others are arranged to reduce the risk. Marketable securities and investments in securities are exposed to market risk. Those securities are mainly composed of equity securities of companies with which the Group has business relationships. Substantially all trade payables, trade notes and accounts payable, have payment due dates within four months. Although a portion of payables are exposed to foreign currency exchange risk arising from those payables denominated in foreign currencies, forward foreign currency exchange contracts and others are arranged to reduce the risk. Loans, bonds and bonds with acquisition rights are taken out principally for the purpose of conducting business activities and making capital investments. The repayment dates of the long-term debt extend up to five years from the balance sheet date. Although a portion of the debt is exposed to interest rate fluctuation risk, the Group undertakes interest rate swap transactions as hedging instruments. Regarding derivatives, the Group enters into forward foreign currency exchange contracts and others to reduce the foreign currency exchange risk mainly on the payables denominated in foreign currencies resulting from importing products within the actual demand for foreign currency exchange. The Group also enters into interest rate swap transactions to reduce future fluctuation risk deriving from interest rates of long-term loans and bonds. Refer to “(p) Derivatives and hedging activities” in Note 2 “Summary of Significant Accounting Policies” for hedge accounting policy. Regarding trade receivables, each related division monitors the credit worthiness of their main customers periodically, and monitors due dates and outstanding balances by customer. In addition, the Group is making efforts to identify at an early stage and mitigate risks of bad debt from customers who have financial difficulties. In accordance with internal policies “Policies of Administrative Authority,” the Group only acquires debt securities held for investment purposes with high credit ratings. Accordingly, the Group believes that the credit risk deriving from such debt securities is immaterial. The Group also believes that the credit risk of derivatives is insignificant as the Group enters into derivative transactions only with international financial institutions with sound credit profiles. In conducting derivative transactions, the division in charge of each derivative transaction follows the internal policies “Policies on Derivative Transactions” and “Policies of Administrative Authority,” which set forth delegation of authority and segregation of duties related to derivative transactions. The Accounting and Financing Department conducts and manages derivative transactions and segregates duties of execution and management of transactions to separate personnel and management who are each responsible for transactions, positions and operations. Transaction data and other information are regularly reported to the executive board meeting by responsible executive officer. For short-term investments and investments in securities, the Group periodically reviews the fair value of such financial instruments and
32
ASICS Corporation
the financial position of the issuers. In addition, the Group continuously evaluates whether or not security investments should be maintained, taking into account their fair value and relationships with the issuers. Certain consolidated subsidiaries that enter into derivative transactions or buy/sell marketable securities and investments in securities also follow internal policies and base transactions are overseen and reviewed by management departments of these subsidiaries. Based on a report from each division, the Group prepares and updates its cash flow plans on a timely basis and maintains solvency to manage liquidity risk. The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in a different fair value. In addition, the notional principal amounts of derivative transactions in Note 18 “Derivatives and Hedging Activities” are not necessarily indicative of the actual market risk. (b) Estimated Fair Value of Financial Instruments Carrying value, estimated fair value and the difference between them for financial instruments on the consolidated balance sheets as of December 31, 2014 and March 31, 2014 are shown in the following table. The table does not include financial instruments for which it is extremely difficult to determine the fair value. Millions of yen Carrying value
Assets: Cash and deposits������������������������������������������ Notes and accounts receivable����������������������� Less allowance for doubtful receivables (*1)��� Short-term investments and investments in securities: Other investment securities������������������������ Total assets������������������������������������������������ Liabilities: Notes and accounts payable trade������������������ Short-term bank loans and current portion of long-term loans������������������������������������������� Bonds������������������������������������������������������������ Bonds with stock acquisition rights���������������� Long-term loans��������������������������������������������� Total liabilities�������������������������������������������� Derivative transactions (*2)��������������������������������
Fair value
¥ 54,888 ¥ 54,888 80,992 (3,899) 77,093 77,093
¥
– –
$ 457,400 $ 457,400 674,933 (32,492) 642,441 642,441
$
– –
13,084 13,084 ¥145,065 ¥145,065
¥
– –
109,033 109,033 $1,208,874 $1,208,874
$
– –
¥ 27,264 ¥ 27,264
¥
–
$ 227,200 $ 227,200
$
–
15,414 15,414 16,000 16,182 30,125 36,482 8,590 8,565 ¥ 97,393 ¥103,907 ¥ 20,976 ¥ 20,976
– 182 6,357 (25) ¥6,514 $ ¥ – $
Millions of yen March 31, 2014 Carrying value Fair value
Assets: Cash and deposits������������������������������������������ Notes and accounts receivable����������������������� Less allowance for doubtful receivables (*1)��� Short-term investments and investments in securities: Other investment securities������������������������ Total assets������������������������������������������������ Liabilities: Notes and accounts payable trade������������������ Short-term bank loans and current portion of long-term loans������������������������������������������� Bonds������������������������������������������������������������
Bonds with stock acquisition rights�����������
Thousands of U.S. dollars December 31, 2014 Difference Carrying value Fair value Difference
Long-term loans��������������������������������������������� Total liabilities�������������������������������������������� Derivative transactions (*2)��������������������������������
¥
10,533 ¥149,039
10,533 ¥149,039
¥
– –
¥ 30,665
¥ 30,665
¥
–
14,396 16,000
14,396 16,207
–
79,644
33,686
8,889 ¥103,843 ¥ (2,177)
– 1,517 52,974 (208) $54,283 $ –
–
¥ 58,862
8,881 ¥100,090 ¥ (2,177)
128,450 134,850 304,016 71,375 865,891 174,800
Difference
¥ 58,862 83,169 (3,525) 79,644
30,148
128,450 133,333 251,042 71,583 811,608 $ 174,800 $
– 207
3,538
8 ¥3,753 ¥ –
Notes: (*1) The amount of less allowance for doubtful receivables in the above table is related to notes and accounts receivable. (*2) The value of assets and liabilities arising from derivatives is a net value, and the amount in parentheses represents a liability position. Since cash and deposits, and notes and accounts receivable are settled in a short period of time, their carrying value approximates the fair value. The fair value of equity securities are based on quoted market prices. The fair value of debt securities is based on either quoted market
ASICS Corporation
33
prices or the prices provided by the financial institutions making markets for these securities. Since notes and accounts payable-trade, and short-term bank loans are settled in a short period of time, their carrying value approximates the fair value. The fair value of bonds are based on the present value of the total of principal and interest discounted by the interest rate determined taking into account the remaining period for each bond and the current credit risk. The fair value of bonds with stock acquisition rights is based on the prices provided by the financial institutions. The fair value of long-term loans is based on the present value of the total of principal and interest discounted by the interest rate to be applied if incremental borrowings were entered into. Regarding derivatives refer to Note 18. The carrying value of other securities without determinable market value at December 31, 2014 and March 31, 2014 is presented as follows: Thousands of U.S. dollars
Millions of yen December 31, 2014
¥170
Unlisted equity securities������������������������������������������������������������������������������������������������������������
December 31, 2014
March 31, 2014
$1,417
¥169
(c) Redemption schedule for monetary claims and investments by maturity date
The redemption schedule for monetary claims and investments by maturity date at December 31, 2014 is as follows: Millions of yen
Thousands of U.S. dollars December 31, 2014
Due after one year through five years
Due in one year or less
Cash and deposits ¥ 54,888 Notes and accounts receivable 80,992 Debt securities: – Corporate bonds Other���������������������������������������������������� 499 ¥136,379
Due after five years through ten years
Due after ten years
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
¥– –
¥– –
¥– $ 457,400 – 674,933
$– –
$ – –
$– –
– – ¥–
90 – ¥90
– – – 4,159 ¥– $1,136,492
– – $–
750 – $750
– – $–
(d) Payment schedule for short-term bank loans and long-term debt
The payment schedule for short-term bank loans and long-term debt by payment due date at December 31, 2014 is as follows:
Due in one year or less
Short-term bank loans and current portion of long-term loans�������������������������������������������� Bonds������������������������������������������������������������� Bonds with stock acquisition rights����������������� Long-term loans���������������������������������������������� Lease obligations�������������������������������������������� Total���������������������������������������������������������������
¥15,414 – – – 617 ¥16,031
Due in one year or less
Short-term bank loans and current portion of long-term loans�������������������������������������������� Bonds������������������������������������������������������������� Bonds with stock acquisition rights����������������� Long-term loans���������������������������������������������� Lease obligations�������������������������������������������� Total���������������������������������������������������������������
34
ASICS Corporation
$128,450 – – – 5,142 $133,592
Due after one year through two years
– ¥ 11,000 – 3,040 528 ¥14,568
Due after one year through two years
– 91,667 – 25,333 4,400 $121,400 $
Millions of yen December 31, 2014 Due after two Due after three years through years through three years four years
¥ – 5,000 – 1,550 408 ¥6,958
¥
– – – 4,000 269 ¥4,269
Thousands of U.S. dollars December 31, 2014 Due after two Due after three years through years through three years four years
$ – 41,666 – 12,916 3,400 $57,982
$
– – – 33,333 2,242 $35,575
Due after four years through five years
¥
– – 30,000 – 162 ¥30,162
Due after four years through five years
$
– – 250,000 – 1,350 $251,350
Due after five years
¥
– – – – 2,890 ¥2,890
Due after five years
$
– – – – 24,083 $24,083
18
Derivatives and Hedging Activities The outstanding currency-related derivatives positions not designated as hedging instruments at December 31, 2014 and March 31, 2014 are as follows: Millions of yen Contract value (notional principal amount)
Classification
Transaction
Over-the-counter transactions
Forward foreign exchange contracts: Buying USD RMB Total
¥22 22 ¥44
Contract value (notional principal amount)
Classification
Transaction
Over-the-counter transactions
Currency options: Selling USD Buying
USD Currency swaps: USD Forward foreign exchange contracts: Buying USD RMB Total
Thousands of U.S. dollars December 31, 2014 Contract value (notional Unrealized principal gain amount)
Portion in excess of 1 year in contract value
Estimated fair value
¥– – ¥–
¥3 2 ¥5
¥3 2 ¥5
Millions of yen March 31, 2014 Portion in excess of 1 year in contract Estimated value fair value
Unrealized gain (loss)
¥3,507
¥2,728
¥(134)
¥27
1,679
1,136
36
(79)
1,272
1,272
(12)
(12)
3,082 38
1,502 10
(45) (2)
(45) (2)
¥9,578
¥6,648
¥(157)
¥(111)
$184 183 $367
Portion in excess of 1 year in contract value
Estimated fair value
Unrealized gain
$– – $–
$25 17 $42
$25 17 $42
Fair value is based on the prices obtained from counterparty financial institutions. There are no outstanding interest-related derivative positions not designated as hedging instruments at December 31, 2014 and March 31, 2014. The outstanding currency-related derivatives positions designated as hedging instruments at December 31, 2014 and March 31, 2014 are as follows: Currency-related transactions Classification
Type of transaction
Hedged item
Millions of yen Contract value (notional principal amount)
Deferral hedge accounting
Portion in excess of 1 year in contract value
Thousands of U.S. dollars December 31, 2014 Contract Portion in value excess of 1 (notional year in Estimated principal contract Estimated value fair value fair value amount)
Currency options: Selling USD EUR GBP USD
Accounts payable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts payable (Forecasted transaction)
¥1,926
¥825
¥122
$16,050
$6,875
$1,017
204
–
0
1,700
–
0
124
–
–
1,033
–
–
1,926
825
188
16,050
6,875
1,567
ASICS Corporation
35
Currency-related transactions Classification
Type of transaction
Hedged item
Millions of yen Contract value (notional principal amount)
Accounts receivable (Forecasted transaction) Accounts receivable GBP (Forecasted transaction) Forward foreign exchange contract: Selling Accounts receivable USD (Forecasted transaction) Accounts receivable EUR (Forecasted transaction) Accounts receivable GBP (Forecasted transaction) Accounts receivable JPY (Forecasted transaction) Accounts receivable NOK (Forecasted transaction) Accounts receivable DKK (Forecasted transaction) Buying Accounts payable USD (Forecasted transaction) Subtotal Forward foreign exchange contract: Selling USD Accounts receivable Buying USD Accounts payable Total EUR
Allocation method for forward foreign exchange contract
¥
273
Portion in excess of 1 year in contract value
¥
–
Thousands of U.S. dollars December 31, 2014 Contract Portion in value excess of 1 (notional year in principal contract Estimated Estimated fair value amount) value fair value
¥
(17)
Type of transaction
EUR GBP NOK DKK
EUR GBP NOK DKK
36
ASICS Corporation
Accounts payable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts receivable (Forecasted transaction)
(142)
–
(175)
13
–
(0)
108
–
(0)
2,571
–
(121)
21,425
–
(1,008)
11,677
4,864
(938)
97,308
40,533
(7,817)
502
–
1
4,183
–
8
940
–
44
7,833
–
367
691
–
(19)
5,758
–
(159)
175,352
86,486
21,732
1,461,268
720,717
181,100
196,327
93,000
20,971
1,636,058
775,000
174,758
119
–
–
992
–
–
875 ¥197,321
– ¥93,000
– ¥20,971
7,292 $1,644,342
– $775,000
– $174,758
Millions of yen March 31, 2014 Portion in excess of 1 year in contract Estimated value fair value
¥
526 ¥
–
341
–
(8)
312
134
(15)
104
–
(1)
259
–
(12)
1,661
–
(17)
1,535
–
6
309
131
3
104
–
3
523
–
3
¥
1
Buying USD
$
1,067
Hedged item
Accounts payable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts receivable (Forecasted transaction) Accounts receivable (Forecasted transaction)
–
(21)
Currency options: Selling USD
$
–
Contract value (notional principal amount) Deferral hedge accounting
2,275
128
Currency-related transactions Classification
$
Currency-related transactions Classification
Type of transaction
Hedged item Contract value (notional principal amount)
Millions of yen March 31, 2014 Portion in excess of 1 year in contract Estimated value fair value
Currency swaps: Selling EUR
Accounts receivable (Forecasted transaction)
347 ¥
–
404
–
11
13
–
(0)
2,140
1,199
(33)
13,164
6,965
(366)
298
139
19
418
172
9
264
263
(8)
194,266
116,918
(1,612)
216,988
125,921
(2,021)
20
–
–
¥
¥
(4)
Buying Accounts payable (Forecasted transaction) Forward foreign exchange contract: Selling Accounts receivable USD (Forecasted transaction) Accounts receivable EUR (Forecasted transaction) Accounts receivable GBP (Forecasted transaction) Accounts receivable JPY (Forecasted transaction) Accounts receivable NOK (Forecasted transaction) Accounts receivable DKK (Forecasted transaction) Buying Accounts payable USD (Forecasted transaction) Subtotal Forward foreign exchange contract: Selling USD Accounts receivable Buying USD Accounts payable Total USD
Allocation method for forward foreign exchange contract
945 – ¥217,953 ¥125,921
– ¥(2,021)
The fair value of forward foreign exchange contracts that qualify for the allocation method is included in accounts payable. Fair value is based on the prices obtained from counterparty financial institutions.
ASICS Corporation
37
The outstanding interest-related derivatives positions designated as hedging instruments at December 31, 2014 and March 31, 2014 are as follows: Millions of yen
Method of hedge accounting
Transaction and major hedged items
Interest-rate swaps: Swap rates applied to Pay fixed / underlying debt Receive floating Long-term loans
Contract value (notional principal amount)
¥2,400
Portion in excess of 1 year in contract value
Thousands of U.S. dollars December 31, 2014 Contract value (notional Estimated principal fair value amount)
¥2,400
Portion in excess of 1 year in contract value
$20,000
¥–
$20,000
Estimated fair value
$–
Millions of yen
Method of hedge accounting
Transaction and major hedged items
Interest-rate swaps: Swap rates applied to Pay fixed / underlying debt Receive floating Long-term loans
Contract value (notional principal amount)
¥2,400
March 31, 2014 Portion in excess of 1 year in contract Estimated value fair value
¥2,400
¥–
The fair value of interest-rate swaps that qualify for special treatment is included in long-term loans.
19
Other Comprehensive Income (Loss) The following table presents the changes in the components of other comprehensive income (loss) for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014: Thousands of U.S. dollars
Millions of yen Nine months ended December 31, 2014
Net unrealized holding gain on securities: Unrealized gain arising during the period��������������������������������������������������������������������������� Net gain reclassified into income���������������������������������������������������������������������������������������� Subtotal ���������������������������������������������������������������������������������������������������������������������������� Less: deferred income taxes����������������������������������������������������������������������������������������������� Net unrealized holding gain on securities�������������������������������������������������������������������������������
¥ 1,411 (172) 1,239 (422) 817
Unrealized deferred gain (loss) on hedges:����������������������������������������������������������������������������� Net loss reclassified into income����������������������������������������������������������������������������������������� Subtotal����������������������������������������������������������������������������������������������������������������������������� Less: deferred income taxes������������������������������������������������������������������������������������������������ Unrealized deferred gain (loss) on hedges������������������������������������������������������������������������������
22,403 685 23,088 (6,370) 16,718
(4,628) 523 (4,105) 1,016 (3,089)
186,692 5,708 192,400 (53,083) 139,317
Revaluation reserve for assets of foreign subsidiaries�������������������������������������������������������������� Translation adjustments���������������������������������������������������������������������������������������������������������
(65) 5,560
(93) 17,790
(542) 46,333
Retirement benefits liability adjustments Realized during the period�������������������������������������������������������������������������������������������������� Net loss reclassified into income����������������������������������������������������������������������������������������� Subtotal����������������������������������������������������������������������������������������������������������������������������� Less: deferred income taxes������������������������������������������������������������������������������������������������ Retirement benefits liability adjustments��������������������������������������������������������������������������������
237 183 420 (135) 285
– – – – –
1,975 1,525 3,500 (1,125) 2,375
Total other comprehensive income, net����������������������������������������������������������������������������������
38
Nine months ended December 31, 2014
Twelve months ended March 31, 2014
ASICS Corporation
¥23,315
¥
274 (266) 8 24 32
¥14,640
$ 11,758 (1,433) 10,325 (3,517) 6,808
$194,291
20
Supplementary Information on the Consolidated Statement of Cash Flows Information on significant non-cash transactions The Company and its consolidated subsidiaries recorded leased assets of ¥839 million ($6,992 thousand) and ¥840 million and lease obligations of ¥876 million ($7,300 thousand) and ¥882 million under finance leases for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014, respectively. Assets corresponding to asset retirement obligations recorded for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 were ¥77 million ($642 thousand) and ¥104 million, respectively. Liabilities corresponding to asset retirement obligations recorded for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 were ¥88 million ($733 thousand) and ¥116 million, respectively.
21
Amounts per Share Amounts per share at December 31, 2014 and March 31, 2014 and for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are as follows: Yen
Net assets������������������������������������������������������������������������������������������������������������������������������ Net income: Basic���������������������������������������������������������������������������������������������������������������������������������� Diluted������������������������������������������������������������������������������������������������������������������������������� Cash dividends applicable to the period���������������������������������������������������������������������������������
U.S. dollars
December 31, 2014
March 31, 2014
December 31, 2014
¥1,058.94
¥834.68
$8.82
117.40 110.91 23.50
84.96 84.56 17.00
0.98 0.92 0.20
The amounts per share of net assets have been computed based on the number of shares of common stock outstanding at the period end. Basic net income per share has been computed based on the net income available for distribution to shareholders of common stock and the weighted-average number of shares of common stock outstanding during the nine months ended December 31, 2014 and the twelve months ended March 31, 2014, respectively. Diluted net income per share is computed based on the net income available for distribution to shareholders and the weighted-average number of shares of common stock outstanding during each the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 after giving effect to the dilutive potential of shares of common stock to be issued upon the exercise of stock options and bonds with stock acquisition rights. Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective fiscal period. The financial data used in the computation of basic net income per share and diluted net income per share for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 in the table above is summarized as follows: Millions of yen Nine months ended December 31, 2014
Information used in computation of basic net income per share: Net income�������������������������������������������������������������������������������������������������������������������������� Adjustment to net income�����������������������������������������������������������������������������������������������������
¥22,286 ¥ (14)
Twelve months ended March 31, 2014
¥16,108 ¥ –
Thousands of U.S. dollars Nine months ended December 31, 2014
$185,717 $ (117)
Thousands of shares
Weighted-average number of shares of common stock outstanding�������������������������������������� Increase in common stock:����������������������������������������������������������������������������������������������������� Bonds with stock acquisition rights������������������������������������������������������������������������������������ Stock acquisition rights������������������������������������������������������������������������������������������������������
Nine months ended December 31, 2014
Twelve months ended March 31, 2014
189,823 10,979 10,949 30
189,604 879 870 9
ASICS Corporation
39
22
Segment Information 1.
Outline of reportable segments
Reportable segments of the Group are components for which discrete financial information is available and whose operating results are regularly reviewed by the Executive Meeting of the Company to make decisions on the allocation of management resources and assess performance. The Company is mainly engaged in business management activities and research and development as the global headquarters. The Group is primarily engaged in the manufacture and sales of sporting goods. ASICS Japan Corporation, ASICS Sales Corporation and other subsidiaries in Japan are responsible for Japan. ASICS America Corporation is responsible for America. ASICS Europe B.V. is responsible for Europe, Middle East and Africa. ASICS Oceania Pty., Ltd. is responsible for Oceania, South-East Asia, and South Asia. Other local subsidiaries are responsible for relevant areas of East Asia. Local legal entities are independent management units and they set overall management strategy for their businesses and conduct separate business activities. The “Japan,” the “America,” the “Europe,” the “Oceania/Southeast and South Asia Area” and the “East Asia” segments primarily manufacture and sell sporting goods and the “Other business” segment manufactures and sells outdoor products under the “HAGLOFS” brand. On January 1, 2014, ASICS Asia PTE. LTD. changed its business form from a marketing company to a sales company. As a result of this change, the name of the reportable segment in which this company is included was changed from the “Oceania Area” segment to the “Oceania/Southeast and South Asia Area” segment. In line with this, the operating results of ASICS Asia PTE. LTD., which were included in adjustments, were transferred to the “Oceania/Southeast and South Asia Area” segment. The disclosed segment information for the twelve months ended March 31, 2014 is presented based on the above-mentioned reportable segment structure. 2.
Calculation method used for sales, gain or loss, assets, liabilities, and other items on each reportable segment
Accounting policies of the reportable business segments are almost the same as those noted in the “Note 2. Summary of Significant Accounting Policies.” The amount of income on reportable segments is based on operating income. Intersegment sales and transfers between segments are based on market price. 3.
Information on net sales, income or loss, assets, and other items by reportable segment
Reportable segment information for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 is as follows:
Japan
Net sales: Sales to customers Intersegment Total sales Segment income (loss) Segment assets Other items Depreciation and amortization Increases in property, plant and equipment and intangible assets
40
ASICS Corporation
¥68,307 14,268 ¥82,575 ¥ (715) ¥88,941
America
Europe
¥118,879 ¥104,785 1 7 ¥118,880 ¥104,792 ¥ 10,936 ¥8,653 ¥ 87,674 ¥87,479
¥ 1,085 ¥ 1,355 ¥ 1,788
273
Millions of yen Nine months ended December 31, 2014 Oceania / Southeast and South Asia Area East Asia Other business
2,950
2,464
¥18,507 52 ¥18,559 ¥ 3,245 ¥16,844
¥31,492 3 ¥31,495 ¥ 2,328 ¥15,908
¥289 ¥
448
Total
¥11,812 ¥353,782 9 14,340 ¥11,821 ¥368,122 ¥ (822) ¥ 23,625 ¥20,890 ¥317,736
Adjustments
Consolidated
¥ 270 (14,340) ¥(14,070) ¥ 6,842 ¥ 38,101
¥354,052 – ¥354,052 ¥ 30,467 ¥355,837
179 ¥
664 ¥
5,360 ¥
204
103
6,442
928 ¥ 6,288
2,828
9,270
Millions of yen
Net sales: Sales to customers�������������� Intersegment���������������������� Total sales��������������������������� Segment income (loss)������������ Segment assets����������������������� Other items Depreciation and amortization��������������������� Increases in property, plant and equipment and intangible assets��������������
Japan
America
Europe
¥ 99,688 20,108 ¥119,796 ¥ 2,938 ¥ 90,790
¥94,489 4 ¥94,493 ¥ 8,320 ¥63,693
¥85,235 – ¥85,235 ¥ 7,545 ¥64,795
¥15,101 138 ¥15,239 ¥ 3,186 ¥14,186
¥ 1,154 ¥ 1,155 ¥ 1,596 ¥
4,176
Japan
Net sales: Sales to customers�������������� Intersegment���������������������� Total sales��������������������������� Segment income (loss)������������ Segment assets����������������������� Other items Depreciation and amortization��������������������� Increases in property, plant and equipment and intangible assets��������������
Twelve months ended March 31, 2014 Oceania / Southeast and South Asia Area East Asia Other business
1,734
America
$569,225 $990,659 118,900 8 $ 688,125 $990,667 $ (5,958) $ 91,133 $741,175 $730,617
1,833
Europe
$873,209 58 $873,267 $ 72,108 $728,992
¥23,766 3 ¥23,769 ¥ 1,253 ¥12,579
¥10,803 – ¥10,803 ¥ (574) ¥21,503
Total
Adjustments
Consolidated
¥329,082 20,253 ¥349,335 ¥ 22,668 ¥267,546
¥ 383 (20,253) ¥(19,870) ¥ 3,848 ¥ 49,982
¥329,465 – ¥329,465 ¥ 26,516 ¥317,528
212 ¥
122 ¥
633 ¥ 4,872 ¥ 1,162 ¥ 6,034
401
284
171
Thousands of U.S. dollars Nine months ended December 31, 2014 Oceania / Southeast and South Asia Area East Asia Other business
$154,225 433 $154,658 $ 27,042 $140,367
$262,433 25 $262,458 $ 19,400 $132,567
8,599
Total
$ 98,432 $2,948,183 76 119,500 $ 98,508 $3,067,683 $ (6,850) $196,875 $174,082 $2,647,800
1,653
10,252
Adjustments
Consolidated
$ 2,250 $2,950,433 (119,500) – $(117,250) $2,950,433 $ 57,017 $253,892 $317,508 $2,965,308
$ 9,042 $ 11,292 $ 14,900 $ 2,408 $ 1,492 $ 5,533 $ 44,667 $ 7,733 $ 52,400
2,276
24,583
20,533
3,733
1,700
858
53,683
23,575
77,258
(Notes) 1. (1) Adjustments on segment sales consist of eliminations of intersegment transaction and sales recorded at companies, which are not included in the reportable segments. (2) Adjustments on segment income or loss consist of eliminations of intersegment transaction and income or loss recorded at companies, which are not included in the reportable segments. (3) Adjustments on segment assets are eliminations of intersegment debts or credit. 2. Segment income or loss is reconciled to operating income on the consolidated statements of income.
The Company and its consolidated subsidiaries are primarily engaged in the manufacture and sale of sporting goods in Japan and overseas. As most of the consolidated net sales were related to sports and leisure-related products, the disclosure of business segment information has been omitted. Net sales by geographical segment for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 are summarized as follows:
Japan
Net sales������������������������������������������������������������������������������������������
Net sales������������������������������������������������������������������������������������������
Millions of yen Nine months ended December 31, 2014 America Europe Other
¥68,991
¥119,017
Japan
Millions of yen Twelve months ended March 31, 2014 America Europe Other
¥100,355
¥94,501
¥110,932
¥91,521
¥55,112
¥43,088
Total
¥354,052
Total
¥329,465
ASICS Corporation
41
Thousands of U.S. dollars Nine months ended December 31, 2014 Japan
$574,925
Net sales������������������������������������������������������������������������������������������
America
Europe
$991,808
$924,433
Other
Total
$459,267
$2,950,433
(Note) Net sales are based on customer locations and classified by country and territory. Property, plant and equipment by geographical segment as of December 31, 2014 and March 31, 2014 are summarized as follows: Millions of yen December 31, 2014 Japan
America
¥25,697
Property, plant and equipment���������������������������������������������������������
¥8,802
Europe
Other
¥5,611
Total
¥1,999
¥42,109
Millions of yen Japan
Property, plant and equipment���������������������������������������������������������
America
¥25,338
Other
¥4,755
Total
¥1,808
Thousands of U.S. dollars December 31, 2014 America Europe Other
Japan
$214,142
Property, plant and equipment���������������������������������������������������������
¥5,673
March 31, 2014 Europe
$73,350
$46,758
¥37,574
Total
$16,658
$350,908
As there are no customers accounting for 10% or more of consolidated net sales, the disclosure of information on major customers has been omitted. Loss on impairment of property, plant and equipment by reportable segment for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 is summarized as follows:
Japan
Loss on impairment of property, plant and equipment���������������������
¥88
Japan
Loss on impairment of property, plant and equipment���������������������
¥42
Japan
Loss on impairment of property, plant and equipment���������������������
42
ASICS Corporation
$733
America
¥–
America
¥–
America
$–
Millions of yen Nine months ended December 31, 2014 Other Europe Oceania East Asia business
¥–
Europe
¥–
¥–
¥–
¥–
Millions of yen Twelve months ended March 31, 2014 Other Oceania East Asia business
¥–
¥–
¥–
Thousands of U.S. dollars Nine months ended December 31, 2014 Other Europe Oceania East Asia business
$–
$–
$–
$–
Total
¥88
Total
¥42
Total
$733
Adjustments
Consolidated
¥84
¥172
Adjustments
Consolidated
¥–
¥42
Adjustments
Consolidated
$700
$1,433
Amortization of goodwill for the nine months ended December 31, 2014 and the twelve months ended March 31, 2014 and the remaining balance of goodwill as of December 31, 2014 and March 31, 2014 by reportable segment are summarized as follows: Millions of yen Nine months ended December 31, 2014 Japan
Amortization������������������������������������ Remaining balance���������������������������
¥145 776
America
¥214 288
Europe
¥134 –
Oceania
¥– –
East Asia
¥236 –
Other business
¥ 264 4,102
Total
Adjustments
Consolidated
¥– –
¥ 992 5,166
Adjustments
Consolidated
¥– –
¥ 960 6,133
Adjustments
Consolidated
$– –
$ 8,267 43,050
¥ 993 5,166
Millions of yen Twelve months ended March 31, 2014 Japan
Amortization������������������������������������ Remaining balance���������������������������
¥43 920
Japan
Amortization������������������������������������ Remaining balance���������������������������
$1,208 6,467
America
¥209 492
America
$1,783 2,400
Europe
¥246 138
Oceania
¥– –
East Asia
¥206 –
Other business
¥ 256 4,583
Thousands of U.S. dollars Nine months ended December 31, 2014 Other Europe Oceania East Asia business
$1,117 –
$– –
$1,967 –
$ 2,200 34,183
Total
¥ 960 6,133
Total
$ 8,275 43,050
Information on gain on negative goodwill has been omitted as these are no applicable items to be disclosed for the nine months ended December 31, 2014 and due to its immateriality for the twelve months ended March 31, 2014.
23
Subsequent Event The following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial statements for the nine months ended December 31, 2014, was approved at a meeting of the shareholders of the Company held on March 27, 2015:
Cash dividends (¥23.50 = US$0.20 per share)����������������������������������������������������������������������������������������������������
Millions of yen
Thousands of U.S. dollars
¥4,461
$37,175
ASICS Corporation
43
Independent Auditor’s Report
The Board of Directors ASICS Corporation We have audited the accompanying consolidated financial statements of ASICS Corporation and its consolidated subsidiaries, which comprise the consolidated balance sheet as at December 31, 2014, and the consolidated statements of income, comprehensive income, changes in net assets, and cash flows for the nine months then ended and a summary of significant accounting policies and other explanatory information, all expressed in Japanese yen. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for designing and operating such internal control as management determines is necessary to enable the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. The purpose of an audit of the consolidated financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ASICS Corporation and its consolidated subsidiaries as at December 31, 2014, and their consolidated financial performance and cash flows for the nine months then ended in conformity with accounting principles generally accepted in Japan. Convenience Translation We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented for the convenience of readers, and, in our opinion, the accompanying consolidated financial statements have been properly translated on the basis described in Note 1.
March 27, 2015 Osaka, Japan
44
ASICS Corporation
Leading the Running Market Paris Marathon
Runners
Tokyo Marathon
40,000
Sponsored by ASICS
Runners
36,000
Since 2007
Sponsored by ASICS Since 2009
¥ 691.2 billion 26.7%
JAPAN
ASIA
MIDDLE EAST/ AFRICA Running market
ASICS Corporation
Founded:
September 1, 1949
Paid-in Capital:
Japan million ¥23,972
Global
Common Stock: Middle East/ Africa
7
Manufacture and sales of sports goods % % 1-1, Minatojima-Nakamachi 7-chome, Chuo-ku, Kobe 650-8555, Japan breakdown Tel : +81-78-303-2231 Asia Institute of Sport Science ASICS Institute: running 2-1, TakatsukadaiGlobal 6-chome, marketJapan size % Kobe 651-2271, Nishi-ku, Tel: +81-78-992-0810 trillion Number of Employees: 7,484 (consolidated basis) Principal Business: running Head Office: market
5
Running market
Running market
¥ 529.2 billion
¥ 140.4 billion
Market leader
¥ 205.2 billion
Market leader
Australia
Japan
17.8%
37.1%
Runners
38,000
President and CEO, Representative Director: Representative Director and Managing Executive Officer: Directors and Managing Executive Officers:
Contents
Mumbai Marathon
2 Financial Highlights 4 A Message from the President 8 Special Feature : Building our position in other sports to complement the running business
10 News
Sponsored by ASICS Since 2008
12 14 16 17 18
Management’s Discussion & Analysis Consolidated Balance Sheet Consolidated Statement of Income Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Net Assets
14,619 with other sports ¥3 trillion
¥2.8 trillion
Largest sports market Principal Shareholders:
Japan Trustee Services Bank, Ltd. (Trust Account)
8,763
¥1 trillion
Americas
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
7,858
44 %
Sumitomo Mitsui Banking Corporation
6,607 Tennis Baseball
Motoi Oyama Kousuke Hashimoto
Masao Hijikata Katsumi Kato Director and Executive Officer: Isao Kato Directors (external): Katsuro Tanaka Keiji Miyakawa Running market billion Kenji Kajiwara Takeshi Hanai Senior Executive Officers: Toshio Obata ASICS market share Toru Nishitani 12.5 % ( 2nd) Executive Officers: Kevin Wulff Alistair Cameron Ronald Pietersen Tsuyoshi Nishiwaki Yuichi Honma Itaru Yamane Megumi Ohta Yuji Mabuchi Audit & Supervisory Board Member: Mitsuhiko Inaba Audit & Supervisory Board Members (external): Hideaki Tanaka Runners Hideaki Mihara Yuko Mitsuya 25,000
AM ERI CAS
¥ 1,252.8
Sponsored by ASICS Major Consolidated ASICS LA Marathon Subsidiaries
(including treasury stock of 10,140,795 shares)
Number of Comparison Shareholders:
¥2 trillion
(As of April 1, 2015)
*Global running market size based on exchange rate of ¥108/USD Source: NPD data
facts Authorized.......790,000,000 shares
Shareholdings (Thousands)
¥ 2.8
Europe
20.2% ( 2nd) France
Corporate Name:
Running market size Issued.............199,962,991 shares
Quick Shareholder Information
Corporate Data
Board of Directors, Executive Officers and Audit & Supervisory Board 25 % Members
ASICS market share
Market leader
Worldwide (As of December 31, 2014)
19
EUROPE Running market
Corporate Information
*
Since 2012
• ASICS Italia S.p.A. • ASICS Japan Corporation *Title sponsor since 2013 • ASICS Deutschland GmbH • ASICS Sales Corporation • Sanin ASICS Industry Corp. • ASICS Iberia S.L. • ASICS Apparel Industry Corp. • ASICS UK Limited • ASICS Sverige AB ASICS Trading Co., Ltd. 19 • Consolidated Statement of Cash Flows • ASICS Oceania PTY. LTD. • ASICS America Corporation 20 Notes to Consolidated Financial Statements • ASICS China Trading Co., Ltd. • ASICS BRASIL LTDA 44 Independent Auditor’s Report • Asics Canada Corporation • ASICS Korea Corporation 45 Corporate Information • ASICS Europe B.V. • HAGLÖFS HOLDING AB • ASICS France S.A.S
Name
Running Soccer / Swimming Golf football
Basketball
Ownership* (%)
4.6 4.1
Rugby
3.5
The Master Trust Bank of Japan, Ltd. 6,310 3.3 (Trust Account) Interest in healthy lifestyles is growing worldwide. This Statetrend, Streetalong Bankwith andthe Trust Companyof running 6,068– anybody 3.2 accessibility Nippon Life Insurance Company 3.0 with a pair of running shoes can get5,756 started – means vastBank, numbers in running events Mizuho Ltd.of people now take part 5,568 2.9 all over the world. Running is far and away the largest The Minato Bank, Ltd. 4,208 2.2 sports market today. BNP Paribas SEC Services Luxembourg/ 3,819 2.0 JASDEC/Aberdeen Global Client Assets
Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension
3,433
1.8
ASICS: the first choice Breakdown of Shareholders: for serious runners
*Ownership ratios were calculated by deducting shares of treasury stock.
Number of Shareholders
ASICS market share Individuals and Others 10.91%
Non-Japanese Performance focused Companies 43.88%
Other Companies Design focused 7.95%
30-60Financial %* Institutions 36.32% Serious runners
RecreationalSecurities runners Companies 0.95%
We are leveraging the popularity of the ASICS brand among serious runners to expand our presence in the recreational runner market. *Ratio of marathon finishers wearing ASICS shoes (ASICS data)
ASICS Corporation
45
ASICS Corporation Annual Report 2014/12
ASICS Corporation HEAD OFFICE
1-1, Minatojima-Nakamachi 7-chome, Chuo-ku, Kobe 650-8555, Japan
ht tp : // w w w.asics.com /
Annual Report 2014/12 Transitional nine-month period ended December 31, 2014
ASICS Corporation