Financial Highlights
Thousands of U.S. dollars
(Note 3)
Millions of yen
1999
1998
1999
1998
Net sales ......................................................................................
Income before income taxes ........................................................
¥170,453
¥180,497
$1,413,961
$1,497,279
7,632
8,133
63,310
67,466
Net income ...................................................................................
4,234
5,325
35,122
44,173
For the years ended March 31, 1999 and 1998
Thousands of U.S. dollars
(Note 3)
Millions of yen
1999
1998
1999
1998
Total assets ..................................................................................
Total shareholders’ equity ..........................................................
227,888
¥218,354
$1,890,411
$1,811,315
63,330
60,970
525,342
505,766
Number of employees ..................................................................
3,456
3,421
At March 31, 1999 and 1998
Note: The U.S. dollar amounts above and elsewhere in this annual report are translated from yen, for
convenience only, at the rate of ¥120.55 = US$1.
Net Sales
(Units: Millions of U.S. dollars)
1600
1400
1200
1000
0
1995
1996
1997
1998
1999
Sales Composition (for the year ended March 31, 1999)
In light of our new business, starting this term the number of our business segment has increased from three
to five (see below). In this report, the figures from the previous term are calculated within their respective
new divisions.
(Units: Millions of U.S. dollars)
Rubber
Latex
Chemicals
Information,
Environment
and Health
Others
Total
42
10%
13%
14%
21%
100%
$600
$141
$176
$196
$302
$1,414
New Structure (starting this term)
Former Structure (up to the prior term)
Synthetic Rubber Division
Synthetic Resin Division
Others
Synthetic Rubbers
Synthetic Latices
Chemicals
Specialty Chemicals
PVC Business
Medical Equipment
RIM Products
Information Materials
High Functional Resin
(Cyclo-olefin Polymer)
Environmental Materials
Others
Rubber Business
Synthetic Rubbers
Latex Business
Synthetic Latices
Chemicals Business
Chemicals
Specialty Chemicals
Information-related Materials
High Functional Resin
Information, Environment, Environmental Materials
and Health Business
RIM Products
Medical Equipment
Others
PVC Business
Technology Licensing
Others
Corporate Profile
Nippon Zeon Co., Ltd., was initially established in April 1950 with equity
participation from BF Goodrich Chemicals Co. of the United States
providing technical assistance, and three Japanese companies from the
Furukawa Group: Furukawa Electric Co., Ltd., Yokohama Rubber Co.,
Ltd. and Nippon Light Metal Co., Ltd. Originally founded to manufacture
polyvinyl chloride resins, the Company became the first Japanese
enterprise to produce synthetic rubbers in 1959. We developed an original
process for extracting butadiene, the main raw material for synthetic
rubbers, from C4 fraction in 1965, followed by the development of a
method for extracting isoprene from C5 fraction. Based on these
fundamental advances in our own technologies, we established a
complete production system starting from material production, ultimately
positioning Nippon Zeon as a world-class manufacturer of synthetic
rubbers. We currently command the top market share of oil-resistant
specialty rubbers for automobile components.
Driven by our comprehensive approach to C5 fraction applications, we
have conducted extensive research and development and opened markets
for a diverse range of products, such as thermoplastic elastomer SIS, C5
hydrocarbon resins, synthetic aroma chemicals, super-plasticizers for
concrete, epoxy resin hardening agents, cyclo-olefine polymers, and RIM
molding products. We take pride in our world-leading ranking in the
comprehensive use of C5 fraction, with virtually every product in this area
maturing into a major business concern.
In order to reinforce the international competitiveness of our initial
business in polyvinyl chloride resins, we transferred this business line in
1995 to the Shin Dai-Ichi Vinyl Corporation, a joint venture company.
As a result, our current business activities represent a powerful synergy of
petrochemical products, including basic materials revolving around C4
and C5, and new business lines representing interests in the fields of
health, the environment, and information-age materials. Our C4 business
line includes synthetic rubbers and synthetic latices, while the C5 business
features chemical products and specialty chemical products. Medical
equipment is at the center of our health-related business; environmental
materials and RIM moldings headline our environmental business; and
electronic materials, imaging materials, and cyclo-olefine polymers
(Zeonex) form the focus of activities in our information-related business
concerns. We also license selected components of our leading
technologies, including those related to manufacturing synthetic rubbers
and latices, extracting butadiene and butene, and drainage facilities.
Including non-consolidated companies, Nippon Zeon Co., Ltd. comprises
29 domestic and 12 foreign subsidiaries with 14 affiliates, including six
overseas. The Company’s production facilities consist of five plants in
Japan, one in Great Britain, three in the U.S.A., and four in Southeast Asia.
Table of Contents
Corporate Message to Stockholders . . .2
Review of Respective Businesses . . . . .4
The Future of Nippon Zeon . . . . . . . . .15
Financial Statements . . . . . . . . . . . . . . .16
Report of Independent Certified
Public Accountants . . . . . . . . . . . . . .31
Corporate Directory and Data . . . . . . .32
Corporate Message to Stockholders
The Japanese economy continued to seriously deteriorate during the current consolidated fiscal year
(hereinafter referred to as “the current term”), with individual consumption, housing, and capital
investments all remaining sluggish due to prolonged financial structural problems and an uncertain
economic outlook, along with decreased exports partly due to the turmoil in Asian economies. By
contrast, the U.S.A. enjoyed continued strong economic growth. The European economy has also
remained relatively buoyant on the whole, though the U.K.’s economy slowed due to a higher British
pound.
In such a business environment, the Company’s sales for the current term have decreased ¥10.04 billion
(5.6%) over the previous consolidated fiscal year (hereinafter referred to as “the previous term”) to
¥170.45 billion. Ordinary profit has also registered a decline of ¥1.87 billion (19.9%) from the previous
term, to ¥7.53 billion, resulting in a decreased net profit of ¥4.23 billion (down 20.5%, or ¥1.09 billion
from the previous term).
These sales results and the settlement of accounts in the current term resulted in distributable profits of
¥2.5 per share. Annual dividends, including intermediate allocations, are ¥5 per share, the same as in the
previous term with dividend disposition in the current term at 212.5%.
Sales activities of the main divisions are provided below.
In existing C4 and C5 businesses during the current term, under our time-honored policy of “developing
into the world leader by further reinforcing our strengths,” we have focused our efforts on the following
three objectives: to build a top-level, world-class operational structure in the oil-resistant specialty
rubbers field with the C4 line; to steadily promote the comprehensive utilization of C5 fractions; to
review PVC business.
In C4 business, Zeon Chemicals Inc. (U.S.) acquired NBR business in North America from DSM
Copolymer Corporation, U.S.A. in January 1999. As a result, the Company has increased its share in the
world market of NBR by 5% to 33%, reinforcing its status as the world’s leader and widening its lead
over the nearest competitor, Bayer (with a 21%share).
In C5 business, following approximately 25% increase in production capacity for various monomers
completed last spring, we have significantly expanded the production capacity for various induction
products of monomer products during the current term. Such efforts include: (1) The start of operations
of the C5 hydrocarbon resins plant of Zeon Chemicals (Thailand), with an annual production capacity of
20,000 tons, in May 1998. The plant is the first overseas C5 production site. In addition, the hydrocarbon
resins plant in Mizushima enhanced its capacity by 5,000 tons in April 1999, resulting in the Company’s
overall annual capacity of around 60,000 tons (third in the world’s C5 resins market); (2) With the
completion of a 10,000-ton expansion in the Mizushima SIS lines, its annual production capacity now
reaches 30,000 tons annually. The resulting increase in production will be allocated for export to the
United States, where demand for adhesive tapes, hotmelt adhesive agents, etc. remains strong. Along
with these expansions, the capacity of isoprene rubber has been enhanced by 17,000 tons, to 40,000 tons;
(3) A new line of synthetic aroma chemicals, with annual production of 350 tons, has been introduced to
the Mizushima plant in May 1999, as part of our efforts to achieve early annual sales of ¥10 billion in
Specialty Chemicals Division.
In addition to these developments, Zeonex, Zeonor, Zeorora and RIM, which all utilize C5 fraction as a
raw material, have increased overall demand for C5 fraction, leading to an even stronger standing for
the Company in the world market.
As for new business lines, the Company has striven to establish solid positions in the Information,
Environmental and Health fields based on our fundamental principal of never duplicating others and
never allowing ourselves to be duplicated, coupled with our own unique technology, and our
management policy of constantly aiming to become the leader in world markets, even small niche
markets. During the current term, we have made efforts to offset the deficits of these new ventures, but
in vain, due to further deterioration of the Japanese economy. We are, however, confident that they will
most likely become profitable by next term.
2
In the Information field, the following developments in the information materials business took place:
(1) The U.S. Environmental Protection Agency gave its 1998 Ozone Layer Protection Award to our
newly-developed fluoro-compounds, Zeorora H and ZFL-58. The production facility for these products
was completed in December 1998 in Takaoka (annual production: 250 tons), followed by a launch in the
market. Zeorora ZFL-58 has been acclaimed for its outstanding performance as an etchant gas for
semiconductor production and adopted by several leading manufacturers around the world; (2) In
polymerized toner business, the encapsulated low-temperature fusing toner was introduced and
registered impressive sales growth. Over the next term, we will continue to cut into the conventional
pulverized toner market by taking advantage of our low-temperature fusing technology.
As for our Specialty Plastics business, which also belongs in the information category, a new type of
cyclo-olefin polymer, Zeonor, was launched in September 1998. Although there is no “super-high”
quality for Zeonor as there is for Zeonex, this product has been priced at only half the price of existing
lines, due to its general-purpose status. Zeonor has rapidly come to be appreciated in the market for its
application to liquid crystal backlight and other diverse purposes, and has in fact been adopted for other
applications. We will develop Zeonor into a market of general-purpose transparent resins with annual
sales of several ten thousand tons in the near future. Meanwhile, new demand for Zeonex is expected to
develop as the material for information recording discs.
In our RIM business in the Environmental field, combined septic tanks for sewage have shown a
significant increase in sales. This business is expected to continue its outstanding growth over the next
term, benefitting from the voluntary regulation of the Septic Tanks Manufacturers Association to
discontinue production of single-unit septic tanks. Moreover, our efforts thus far to develop new
applications in the housing-facilities area have finally begun to bear fruit, showing very promising
prospects for the business.
Regarding our Medical Products business in the Health field, we successfully developed a PTCA
catheter jointly with Japan Lifeline Co., Ltd. and began its distribution to Japan Lifeline in April 1999.
The polyvinyl chloride (PVC) resins business, which constituted a part of our original business, was
transferred to a joint-venture company, the Shin Dai-Ichi Vinyl Corporation (established in July 1995),
with our 40% share, in order to make the business more competitive. Although Shin Dai-Ichi Vinyl has
since taken up stringent cost-cutting measures, its cumulative loss reached nearly ¥7 billion by the end
of March 1999. Therefore, we have decided to divest this business, as it is now out of our direct
management and is no longer our core business. As a result of negotiations with partner companies, we
should still incur some divestment-related costs in the next term, but will be completely discharged
from any financial support obligation to Shin Dai-Ichi Vinyl in fiscal year 2000 and thereafter. Thus a
solution to the PVC business problem, which has negatively affected our operation for years, has now
been scheduled.
Amid these operational objectives and challenges for the current term, planning of a global strategy for
the C4 and C5 businesses is nearly completed, and the timetable for a solution to the PVC business
problems has now been fixed. For fiscal year 1999, we intend the new businesses to turn a profit at an
earlier stage, while enhancing our competitive edge through implementation of the company-wide
austerity program, “ZΣ Campaign,” to achieve higher financial performance.
We would appreciate your continued support and cooperation in the
years ahead.
President
Katsuhiko Nakano
3
C
4
Business
Million yen
100,000
80,000
60,000
Synthetic Rubbers (Solid)
Left: Rubber Busienss sales
Center: Mississippi Plant,
Zeon Chemicals, Inc.
Right: R&D Center,
Zeon Chemicals, Inc.
40,000
20,000
0
’98
’99
Background
Nippon Zeon is the first commercial synthetic rubber producer in Japan. Rubber products developed
and manufactured by the Company, including oil-resistant specialty rubbers and general-purpose
rubbers used in tires, have made significant contributions to related industries, particularly the
automobile industry. Efforts in the area of synthetic rubbers have resulted in the development and mass
production of solution-polymerized, styrene butadiene rubbers with chemically modified chain ends,
which provide excellent fuel-savings and high-braking performance on both wet and dry surfaces. In
the area of oil-resistant rubbers, the Company has developed new nitrile rubbers and new
epichlorohydrin rubbers which contribute to environmental preservation.
Automobiles that incorporate these new rubbers produce significantly reduced levels of CO, HC, and
NOx emissions. The full-scale production of hydrogenated NBR also provides automakers with a means
of responding to the growing demand for products with extended operating lives, including the target
of 80,000 maintenance-free miles of operation.
Current Status
Domestic sales of synthetic rubbers declined by around 10% from the previous term in both volume and
sales amount. This decline is primarily due to the sluggish economy and higher unemployment, which
led to a significant decrease in auto sales and production cuts by major auto manufacturers.
Furthermore, sharp appreciation of the yen since last summer, coupled with soft natural rubber prices,
caused some tire manufacturers to resume use of imported synthetic rubbers and hike the utilization
ratio of natural rubbers in tire production.
Export sales also declined by about 15% from the previous term in both volume and amount, against a
backdrop of poor economic development and declining prices in Southeast Asia.
U.K. subsidiaries enjoyed increased sales volumes over the results from the previous term. But the sales
amounts decreased because of the strong appreciation in the value of the sterling pound.
U.S. subsidiaries showed excellent profits, with sales volumes and sales amounts far exceeding the
previous term’s results.
Future Prospects
Nippon Zeon is the leader in technology and development related to oil-resistant rubber (NBR, acrylic
rubber, epichlorohydrin rubber, and hydrogenated NBR) as well as the world’s leading producer of
NBR. In January 1999, Zeon Chemicals Inc. (U.S.A.), or ZCI, acquired NBR business in North America
(business interest worth nearly 10,000 tons and production rights of 16,000 tons, both per annum) from
DSM Copolymer in the U.S.A. The income from this acquisition should be reflected in ZCI’s results in
fiscal year 1999. As a result of this acquisition, Nippon Zeon increased its share in the world market of
NBR to 33%, reinforcing its status as the world’s leader as well as its lead over the nearest competitor,
Bayer (with a 21% share).
In the general-purpose rubbers business, last spring Nippon Zeon licensed its originally developed
production technogy of solution-polymerized SBR and BR to Dow Chemical Company in the U.S.A.
With this license, Dow Chemical is now building a new rubber production facility in Germany, which is
to be completed in mid-2000. We have concluded an agreement with Dow Chemical on distribution of
the products manufactured at this new plant. With this agreement, our company has successfully
established a product distribution base for the U.S.A. and European markets. Furthermore, at the
domestic facility in Tokuyama, the production capacity of solution-polymerized SBR should be
expanded by 25,000 tons by mid-1999. From these two distribution bases, we will develop our SBR
business in the world market. Our SBR is expected to take a dominant position as the raw material for
environmentally responsible, high-performance tires in near future.
4
Million yen
30,000
24,000
18,000
Synthetic Latices
12,000
6,000
Left: Latex Business sales
Right: Work gloves made of NBR latex
0
’98
’99
Background
Nippon Zeon manufactures and sells a variety of latices, such as SBR, BR, NBR and Acrylate, and has
the advantage of being able to meet various customer needs with a wide assortment of materials.
Synthetic latices have two major uses, in paper processing (mainly coated papers) and ABS resin
manufacturing, and other diversified applications, such as textile manufacturing (including carpet
backing, nonwoven fabrics, tire-cord treatment and others), road construction (asphalt modifier),
adhesive agents, foam rubbers, and others.
NBR latex, used for foam rubber in the manufacture of cosmetic puffs, is an especially noteworthy
product which has achieved success in world markets. As for the use of NBR latex in rubber gloves, the
allergy problem inherent to natural latex gloves resulted in a rapid shift from natural latex to synthetic
latex, which certainly contributed to the significant growth of NBR latex sales.
Nippon Zeon has been collaborating with Rohm and Haas Company in U.S.A. in the field of superior
hollow particle latices, used mainly as organic pigments for paper coatings. This has contributed to the
strong growth of this field, along with the reduced weight and enhanced performance of paper.
Latices for moisture-proof paper recycled from polyethylene-laminated paper have been growing
strongly, along with the Company’s commitment to environmental protection.
In this way, Nippon Zeon not only conducts research to improve existing products within large,
established markets, but also enthusiastically works to develop new markets by often introducing
unique and highly functional products, taking full advantage of advanced technologies which have
been cultivated over time, in order to meet the needs of niche markets.
Current Status
Although domestic sales declined compared to the previous term due to industry-wide production cuts
under economic recession, total sales registered an increase, since exports were significantly higher than
those in the previous term. Decline in domestic sales from the previous term’s level were felt only
slightly as higher demand in new areas, such as specialty chemical and hollow particle latices, partly
offset the reduced demand for latices for paper processing. However, sales of latices for ABS resins and
special applications decreased from the previous term, leading to an overall decline in domestic sales as
a whole. Export sales showed a significant increase over the previous term, since lackluster demand for
the main applications of tire cords was more than offset by the exceptionally strong growth of glove
applications (which were the focus of sales expansion) as well as an upturn in new users’ demand for
ABS resins.
Future Prospects
In the domestic market, severe circumstances are expected to persist, with demand remaining flat at the
current level in the first half of 1999. Under these circumstances, price pressure should increase
significantly in the paper-processing area, the largest market for latices, due to deterioration of paper
manufacturers’ earnings. We, however, expect favorable business growth with pivotal products, such as
superior hollow particles, which have demonstrated significant quality-enhancing effects, amid
intensified quality competition.
In the specialty latices area, with further acceleration of the trend toward environmental protection and
safety improvement, environmentally responsible new products, such as latices for recycling moistureproof paper*, will become widespread.
Continued growth in export sales are expected this year due to the rapid expansion of NBR latex for
application in work gloves.
* Conventional moisture-proof paper is polyethylene-laminated paper, which is not recyclable.
5
C
5
Business
Million yen
30,000
24,000
18,000
Chemicals
12,000
6,000
0
Chemicals Business sales
’98
’99
Background
Nippon Zeon has focused for 25 years on the full utilization of C5 fraction, which involves more than 30
types of chemicals. Our own GPI Process (Zeon Process of Isoprene) enables each chemical to be
efficiently extracted and separated from C5 fraction. This approach has earned us the top ranking in the
world in this field. Isoprene Rubber (IR), commonly referred to as synthetic natural rubber, is
manufactured with isoprene, one of the initial products of the GPI Process. This product is handled by
the Synthetic Rubber Division. Thermoplastic elastomer SIS, a block copolymer of styrene and isoprene,
is utilized as a base polymer of pressure-sensitive tapes and labels produced by a non-solvent process,
as well as hot-melt adhesives. Products from piperylene, which is also a result of this process, are
manufactured under the Quintone 100 series (aliphatic hydrocarbon resin) for use in traffic paints and
adhesives for pressure-sensitive tapes and labels. Products from piperylene, isoprene and maleic
anhydride (trademark: Quinhard) are used as epoxy resin hardeners. Dicyclopentadiene products are
marketed as the Quintone 1000 series (alicyclic hydrocarbon resin) for use in paints, inks and
automobile tire modifiers. Products from isoamylene with maleic anhydride (trademark: Quinflow) are
aqueous dispersants mainly used as water reducers for concrete.
Current Status
The growth rate of the global SIS market in 1998 was still high and we faced the possibility of a supply
shortage to our customers. Fortunately, we succeeded in meeting sales demand through our efforts to
improve productivity.
The hydrocarbon resin company in Thailand, Zeon Chemicals Thailand Co., Ltd., began commercial
production in May 1998 at below its maximum capacity (20,000 tons) under the circumstances which
Asian market was shrank.
Though the Japanese hydrocarbon resin market in 1998 was also flat, domestic sales increased slightly
over 1997.
Future Prospects
Although we expanded SIS production capacity by 50% in spring 1999, we will need 100% plant
operation throughout this year due to the remarkable growth of the global SIS market.
The Asian hydrocarbon resin market will return to rapid growth in 1999 and we expect greater sales in
Thailand, where production of resin was only 80% of production capacity. On the other hand, tough
competition in the domestic hydrocarbon resin business will continue as no future market growth in
Japan is anticipated.
Left: New SIS plant (Mizushima)
Center: Traffic paint
Right: Zeon Chemicals Thailand Co., Ltd.
6
Specialty Chemicals
New aroma chemicals plant (Mizushima)
Background
We began research and development in synthetic aroma chemicals about twenty years ago to improve
the Company’s comprehensive utilization of C5 fraction, and completed the construction of the synthetic
aroma chemicals facility at the Mizushima Plant and the marketing of synthetic aroma chemicals in the
early 1980s. Thereafter, we added the production of intermediates used in pharmaceutical and
agricultural materials and various other industrial chemicals. With this successful business expansion,
the Specialty Chemicals Division was spun off as an independent operation from the Specialty
Chemicals Department of the Chemicals Division in July 1996.
At present, synthetic aroma chemicals are the core business of the Specialty Chemicals Division, with
more than 30 varieties produced and sold. Green Notes, with its sense of freshness, and Jasmine Notes
are both notably successful. Leaf Alcohol, an especially popular green aroma, is produced from
2-Butyn in C5 fraction and used for fragrance and flavor. We are the world’s largest producer of Leaf
Alcohol, meeting more than half of the global demand. We also rank second in the world market for
methyl-dihydrojasmonate, which enjoys strong demand as a fragrance in such products as perfumes,
hair shampoos and hair conditioners, with the Jasmine Notes product line. We maintain business ties
with the top ten flavor & fragrance houses in the world and have established worldwide renown as a
synthetic aroma manufacturer.
Current Status
While growth remains healthy, it is not as robust as the previous term. Sales in the Specialty Chemicals
Division have fallen into a temporary lull as consumers in Asia and Latin America economize. Sales of
synthetic aroma chemicals, the main products, increased slightly from the previous term. While demand
from multinational flavor and fragrance houses as well as aroma compounders was extremely sluggish
in the second half of 1998, reflecting the global slow down stemming from the Asian crisis, signs of
recovery began to appear in the first quarter of 1999. Sales of our main products, both Green Notes and
Jasmine Notes aroma chemicals, have been recovering.
Sales of specialty chemicals as raw materials and intermediates for agrochemicals, industrial chemicals,
and aroma chemicals increased more than 10% from the previous term. Sales of C5-related products
such as cyclopentane, cyclopentanone, and cyclopentene and their derivatives increased, while the
ongoing development of new applications is beginning to bear fruit.
Sales of specialty chemicals as raw materials and intermediates for pharmaceuticals fell significantly
because two major products went off the market; however, other products, including those with new
applications, are ongoing.
Future Prospects
Products handled by this division tend to target niche markets but focus on the creation of new demand
and the attainment of world recognition as the top products in their categories. Therefore, although the
start-up of demand takes time, demand for several key products has already showed signs of growth
requiring increased investment in production capacity. In order to meet the increased demand for
specialty chemicals, we have already expanded production capacities for synthetic aroma chemicals and
will continue to do so, if necessary.
7
Information, The Environment, and Health
Million yen
30,000
24,000
18,000
Information
12,000
6,000
Information, Environment, and
Health Business sales
0
’98
’99
Highly Functional Resin Cyclo-olefin Polymer
We developed optical resins (hydrogenated cyclo-olefin polymer under the trademark Zeonex) and
started operating production facilities in Mizushima in November 1990 with an annual capacity of 1,000
tons. To meet the increasing demand, Nippon Zeon completed additional facilities to support an annual
production of 2,000 tons in November 1997. In 1996, we received the Chemical Technology Prize from
The Chemical Society of Japan for providing useful new optical transparent plastics in the optical parts
market. The raw material for this resin is DCPD, yet another of the many materials extracted from C5
fraction. The resin is used in the production of optical parts in place of glass, and takes advantage of
such features as high optical reliability, utilizing special features such as low water absorbency, heat
resistance, a low optical distortion property and minute moldability, which are not found in
conventional resins, such as methacrylate resins and polycarbonates. It has been very well-received for
uses in various types of precision optical parts, including optical lenses, prisms, optical cells, and optical
films. Since it contains fewer impurities and is readily incinerated for disposal, unlike glass, it is
therefore useful for such products as medicine containers and medical syringes. Significant growth is
expected in the medical market. In addition, we plan to diversify its application as a new plastic
material for electronic high-frequency parts utilizing a high electric insulation property and highdensity information recording media such as DVDs.
In the fall of 1998, we launched a new product called Zeonor, which enables us to explore yet another
market of cyclo-olefin polymers (COPs). Zeonor has properties which meet a wider range of heatresistance/resilience requirements and has been increasingly evaluated positively in the market for such
applications as materials for auto lamps, LCD light guide plates and backlight film, various types of
optical sheets, and pharmaceutical PTP films. Some of these applications have already been adopted.
While we expect that the supply of Zeonor can be covered by the excess capacity of existing facilities
during fiscal year 1999, capacity expansion is planned for fiscal year 2000, when its demand is likely to
grow well beyond the current level of capacity.
Electronic Chemicals
In the electronic chemicals business, the Company manufactures and distributes various resists and
developers which are used in the production of semiconductors and LCDs.
Electron-beam resists, which have been adopted for application in high-tech masks, are registering a
steady growth in sales. In addition, they have been adopted by the largest manufacturer of EB-writers
as their standard resist.
Chemically amplified EB resists are highly promising in their application to System LSI and precision
processing of ASIC (Application Specific Integrated Circuit).
Zeorora ZFL-58 has been adopted in the advanced semiconductor field as an etchant which provides
high selectivity for precision processing. At the same time, fluorinated cyclopentane, Zeorora H, has
been launched, which is noted for its zero-depletion potential and short atmospheric life span. Zeorora
H was granted the 1998 Stratospheric Ozone Protection Award by the U.S. Environmental Protection
Agency last year. In the LCD field, which is growing markedly, LCD resists exhibited strong sales
growth, especially in South Korea, Taiwan, and China.
8
Imaging Materials
In the imaging materials business, the Company manufactures and distributes toners for
printers/copiers and the binder resins which are used in production of magnetic tapes such as video
and audio cassette tapes.
As for the toner business, in 1993 we launched a polymerized toner for the first time in the world,
followed in March 1998 by the introduction of an encapsulated, low-temperature fusing toner which
utilized polymerizing technology. This low-temperature fusing toner brings significant energy- and
resource-saving effects by reducing fusing-to-paper temperature by nearly 30°C compared to
conventional pulverized toners, while enabling speedier printing. The superb properties of the new
product have boosted its sales to buoyant levels. At present, development of super-low-temperature
fusing toner, which will lower the fusing temperature even further, is under way as part of the
Company’s R&D efforts. Our ultimate goal in this business is to develop more environmentally friendly
toners which enable even higher-speed printing, while tapping new markets.
In binder resins for magnetic tapes, the Company has the top share of the worldwide market. Since
magnetic tapes are mature products, with no significant change in demand, sales volume and amount
have remained at relatively stable levels.
Left: LCD light guide plates and films
Center: Zeonex prism
Right: Microscope photos of polymerized
toner developed by Zeon (left) and
pulverized toner (right)
9
Information, The Environment and Health
Environment
Environmental & Civil Engineering Materials
Our business in this area involves the following four environmental materials:
1. Landscaping materials: Artificial plastic logs utilizing recycled plastics have become popular
landscaping materials in parks and other outdoor recreational facilities. Sales expansion has also
resulted from a series of advanced products, such as bridges, decks and pavillions, in addition to
traditional products such as fences and stairs. Furthermore, a new product which utilizes recycled
plastics is in the pipeline, with a launch scheduled for fiscal year 1999.
2. Civil engineering materials: This represents perhaps the most important of the four areas in this
business division. Geotextile materials for waste disposal, road construction and harbor facilities are not
only marketed as separate materials but also as components of complete systems. Soil reinforcement
materials and drainage materials, also benefiting from consistent demand, contributed to sales
expansion.
In addition to geotextile materials, we also sell such civil engineering materials as lightweight slope
protection frames using recycled plastics like artificial plastic logs and sheets.
3. Park materials: Sales of various types of public toilets, which were released in 1996, increased rapidly,
and they can be expected to reach the sales amount of four hundred million yen this fiscal year.
Moreover, as a part of our ongoing efforts to shore up our park materials’ lineup, we will begin
distribution of playing facilities/goods manufactured by Kompan Playscape Inc. of Denmark, in order
to help sales growth in this business.
4. Road materials: We sell asphalt modifiers (synthetic rubber latices, SIS, SBS) as road materials.
Growth in the demand remains at the same level as in the previous term.
In the fiscal year 1998, although harsh conditions continued for this business due to the delay of the
implementation of the Emergency Economic Package into the following year, sales increased slightly
over the previous term with some improvement in profit. In the fiscal year 1999, the Government will
implement its economic policies on a continuous basis, giving top priority to economic recovery, which
should improve the prospect for this business. Accordingly, sales are expected to substantially exceed
the results of fiscal year 1998.
Left: Artifical plastic logs
Right: Public toilets in park
10
RIM Products
The Company developed its RIM method—a technology for making large molding products—in 1989.
The Company entered the market with an integrated system extending from raw materials to finished
molding products. The raw materials and the catalyst are injected into a metal mold where they undergo
a chemical reaction at an ambient temperature and pressure. This makes it easy to create even a large,
thick molding product as a single unit, or an item with a complex shape; indeed, such products are used
as parts for construction and agricultural equipment, such as power-shovel bumpers, and lawn-tractor
hoods. Our RIM products are being used by all Japanese manufacturers of construction and agricultural
equipment, and the products’ range of uses continues to expand. RIM products substitute for fiberreinforced plastic or replace sheet metal and metal castings in such applications as truck bumpers and
commercial game-machine shells.
Combined septic tank for sewage: advances in RIM technologies have enabled the production of largescale plastic products which were previously not possible. At the same time, demand for combined
septic tanks for sewage has dramatically increased in response to national policies calling for expanding
the coverage of sewage facilities from 45% to 70% by the year 2000. Combined septic tanks for sewage
constructed of RIM materials are light, strong and secure from leakage. Moreover, the tanks are suitable
for thermal recycling; that is, if necessary, they can be collected, cut and incinerated.
The RIM compounding plant was completed in Yonezawa City in April 1998, representing a new
production base in eastern Japan to supplement the Mizushima Plant, the current production base in
western Japan. With the completion of the new plant, sales of RIM products can be expected to increase
in eastern Japan as well. A molding factory is planned for construction next to this plant in the near
future.
Against a backdrop of growing awareness of environmental issues, the Septic Tanks Manufacturers’
Association developed a voluntary scheme to discontinue production of single-unit septic tanks by the
end of March 1999. Nearly 90% of the Association’s members are participating in this scheme.
Accordingly, with a sharp decrease in production of single-unit septic tanks, the sales of combined
septic tanks are likely to increase significantly after April 1999. More than 40% of combined septic tanks
are made of RIM, while the shift from FRP to RIM has become more prevalent among manufacturers.
We believe the sales volume of RIM should expand significantly during fiscal year 1999.
Besides its use in septic tanks, RIM has come to be utilized more widely recently; other applications
include housing equipments and upholsters of medical equipment. Housing equipments, in particular,
have a significant market, and are likely to grow into one of the major applications for RIMs. The RIM
business is forecast to achieve 50% growth in earnings in fiscal year 1999 over the previous year and to
make a significant contribution to the Company’s earnings as a whole.
Left: Combined septic tank for sewage
Right: Sink basin
11
Information, The Environment and Health
Health
Medical Equipment
A strong medical devices product line, under the Xemex brand name, has been released onto the
market. Our ventricular assist device, the first officially approved unit in the world, is a groundbreaking product representing an integration of diverse technologies, involving material processing
technology, fluid technology and electric technology, as well as original antithrombotic technology.
We currently plan to expand our sales by concentrating on cardiovascular, digestive endoscopic, and
nutrition devices. This year, we have launched new devices into the market, the new driving console
‘908’ for IABP (Intra-Aortic Balloon Pumping) and the next generation bipolar polypectomy snare ‘BWave’. Strengthening our R&D activities and production facilities, we will continue to expand our
business lines.
We have withdrawn some products which are not in line with our current product group, though we
have kept sales revenues from the previous term.
Left: Intra-Aortic Balloon Pumping
Center: Bipolar polypectomy snare
Right: Takaoka Plant for medical equipment
12
Others
Million yen
50,000
40,000
30,000
PVC
20,000
10,000
0
Other Business sales
’98
’99
Background
Nippon Zeon’s polyvinyl chloride (PVC) business served as the basic line of business since the
establishment of our Company. In July 1995, we transferred this entire business to the Shin Dai-ichi Vinyl
Corporation, newly established by Sumitomo Chemical Co., Ltd., Sun Arrow Chemical Co., Ltd.,
Tokuyama Co., Ltd., and Nippon Zeon Co., Ltd.
Current Status
The Shin Dai-Ichi Vinyl Corporation (hereinafter “ZEST”) has carried out nearly ¥3 billion in cost savings
while substantial financial support has been provided by three controlling companies for the four years
since its inauguration. Nevertheless, the company’s cumulative loss reached nearly ¥7 billion, which is
almost equivalent to its paid-in capital, as of the end of March 1999.
Meanwhile, Japanese PVC manufacturers as a whole (eleven companies) also incurred a total loss of
around ¥15 billion in 1998, thus recording net losses for seven years in a row.
Through the creation of ZEST, we started to reinvigorate our PVC business while trying to enhance its
international competitiveness, in order to eventually bring about this business’s recovery. We have decided,
however, to transfer our controlling stake of ZEST to one of its parent companies, Tokuyama Co., Ltd., for
the following reasons. First, since neither ethylene nor chloride, two main constituents of PVC, are part of
our business, it was difficult for us to take the lead in improving cost competitiveness. Secondly, PVC is no
longer our core business, and the loss of it would be more than sufficiently compensated by new businesses.
Therefore, we have divested the entire PVC business, which was one of our original business lines.
Future Prospects
The paid-in capital of ¥7 billion of ZEST will be reduced entirely at the end of June 1999 to offset its
cumulative losses. New capital of ¥4 billion will then be paid in as of the same date, followed by an
additional capital increase of ¥4 billion at the end of March 2000. In addition, the ratio of equity
participation will be reshuffled. Tokuyama will increase its interest from the current 30% to 71%, while
Nippon Zeon and Sumitomo Chemical, now holding 40% and 30% respectively, will reduce their stakes
to 14.5% each at the end of March 2000.
Meanwhile, ZEST will discontinue production at one of its major facilities in Mizushima, located within
Nippon Zeon’s Mizushima plant, with an annual capacity of 120,000 tons. Consequently, Nippon Zeon is
now under negotiation with relevant business concerns on the closure of a plant operated by Sanyo
Monomer, a Nippon Zeon subsidiary (55% interest). The plant, with an annual vinyl chloride monomer
production capacity of 230,000 tons, has been the major supplier of vinyl chloride monomers to ZEST’s
Mizushima Plant.
Nippon Zeon’s financial support of ZEST, which amounted to ¥1.2 to ¥1.4 billion annually and negatively
affected the Company’s operation so far, will end in fiscal year 2000. We will, however, continue
consigned production of specialty PVC products at ZEST’s Takaoka Plant (located within our Takaoka
Plant and with an annual production capacity of 65,000 tons). Not only is the specialty PVC business
profitable, as suppliers we take our responsibility to users seriously.
Technology Licensing, Support-related Business and Others
Sales amount from technology licensing, support-related business and others was 1.94 billion yen,
including 505 million yen in revenues from licensing. This represented a decline of about 30% from
previous term.
We project sales amount of 1.6 billion yen from technology licensing, support-related business and others
in the next term, with licensing revenues of approximately 600 million yen.
13
Research and Development
Organization and Function
The Technology Development Division was newly formed by combining the R&D and the
Manufacturing Divisions in March 1999 in order to build up technology with low cost and high speed
from the early stages of R&D. The R&D Group consists of the R&D Center, Corporate Business
Development and Intellectual Property Department. The R&D Center houses over 350 technical staff
members who work in nine Product Research Laboratories and four Corporate Research Laboratories,
the latter being the center of new product and new technology development. The role of Corporate
Business Development is to conduct in-depth market studies and initial market development to
correctly lead the direction of R&D.
Research and Progress in 1998
As a part of C5 fraction utilization strategy, a new cyclo-olefin polymer (COP), ZEONOR series, has
been developed, in addition to its existing ZEONEX family. ZEONOR was designed to meet a need for
a low cost, large market. Its applications include automotive parts and lamps, LCD light guide plates,
various types of film, and so on. Furthermore, a type of COP was found to be useful in micro-electronic
applications as a low-k inter-layer insulator.
Another exciting development was the successful development of low-temperature fixing toner which
has made it possible to increase printing speed without increasing fixing temperature. The first
commercial printer using this type of toner has been put on the market last year.
Another new product from R&D, fluorinated cyclopentane (Zeorora H) and cyclopentene (Zeorora ZFL58), are now in the commercialization stage. Zeorora H is used as a solvent for lubricants for hard disk
coatings and precision cleaning solvent, and Zeorora ZFL-58 is used as etching gas for next generation
semiconductors. Zeorora H received the Stratospheric Ozone Protection Award from the U.S.
Environmental Protection Agency (EPA) in October 1998 for its low earth-warming property.
Future Prospects
The R&D Group continues to provide strong support to existing businesses and lead the way into new
product and technology development activities. One example is a new wave of metallocene catalysts
which are extensively influencing polymer industries. We are focusing on this subject in collaboration
with academia and governmental institutions. Another example is genetically engineered chicken
vaccines. An approval of at least three new recombinant vaccines by the U.S. Department of Agriculture
(USDA) is expected in the year 2001.
Left: Stratospheric Ozone Protection Award presented by
U.S. Environmental Protection Agency
Right: Auto lamp parts made of Zeonor
14
The Future of Nippon Zeon
Nippon Zeon 2000
The Company will celebrate its 50th anniversary in April 2000. We hope that by then the Company will
have steadily advanced as “Zeon, a dependable chemical company with abundant creativity and
individuality” consistent with its management concept of “Zeon, contributing to the preservation of the
Earth and the prosperity of the human race” and its management vision “to establish the Nippon Zeon
Group as worthy of the pride of every employee.” Moreover, we believe that the successful achievement
of our performance goals will unite our customers, shareholders, and local community residents in a
very joyful 50th anniversary celebration.
The foundation of the Company’s management strategy for existing businesses will be to further
capitalize on our strengths and cultivate a top-level, world-class enterprise. For instance, in our C4
business line in the field of oil-resistant specialty rubbers, though the Company boasts the largest
worldwide market share, with production bases in the three key locations of Japan, the U.S.A., and
Europe, we acquired the NBR business of DSM Copolymer Corporation of the U.S.A. in January 1999,
through our subsidiary, Zeon Chemicals Inc., to further reinforce our standing as the world leader. We
intend to continue building on our lead over our nearest competitor through our efforts to enhance
customer satisfaction and confidence in our company.
As for the C5 business line, in order to expand utilization of C5 fraction, which we can boast is the most
advanced in the world, the Company has carried out large-scale investment in capacity expansion since
fiscal year 1996. As for other future plans, construction of a large plant for the exclusive production of
Zeonor, cyclo-olefin polymers (COPs), is in the pipeline. Other capacity-expansion plans have been
completed on schedule or are near completion. At these newly completed plants, we are going to make
every possible effort, on a company-wide scale, to ensure “vertical start-up,” immediate full operation
and full distribution.
As for new business lines, the Company will establish solid positions in the information, environment
and health categories based on its own unique and exclusive technology. For example, in its information
businesses, the Company will cultivate highly functional resin cyclo-olefin polymer, polymerized toners,
environmentally friendly solvents and etching gases. In its environmental businesses, the Company will
focus on combined septic tanks for sewage, housing equipment, park materials, and civil engineering
materials for the construction of final disposal sites. An exciting array of promising products in response
to market needs, including PTCA catheters, is planned for its medical products business line. The
Company is determined to cultivate these new businesses as major pillars supporting the 21st-century
Zeon by achieving profitable results at the earliest possible stage of fiscal year 1999.
As for PVC business, its divestment required serious deliberation on our part, since it was one of our
original businesses. We, however, believe that it was a reasonable decision made in terms of “selection
and concentration.” The resources which used to be allocated to the PVC business will be redistributed
to the Company’s core businesses more intensively, to achieve higher earnings.
Countermeasures to the Y2K Problem
We recognize the seriousness of the Y2K problem and are dealing with it as one of our most important
management matters. We have established a permanent Information System Committee to deal with Y2K.
So far, we have finished safeguarding the Company’s basic business information system, and are
scheduled to complete preparations for the equipment and facilities in our plants by fall of this year,
during the plants’ holidays.
Our main products are chemical materials, which are unaffected by the millenium bug. The devices we
sell as a part of our business have been taken care of, and our customers have been informed. At the
same time we are currently analysing research data on the Y2K preparedness of our main business
partners, mainly our raw-materials providers.
In addition, we are working hard to create a troubleshooting manual for unexpected mishaps, to
minimize any harm to our business activities.
15
Consolidated Financial Statements
Consolidated Balance Sheets
At March 31, 1999 and 1998
Assets
Thousands of U.S. dollars
(Note 3)
Millions of yen
1999
1998
1999
1998
Current Assets:
Cash and cash equivalents ..........................................................
¥ 11,906
Short-term investments ..............................................................
Marketable securities (Note 7)....................................................
54
68
448
564
27,037
27,776
224,280
230,411
Notes and accounts ...............................................................
Unconsolidated subsidiaries and affiliates ..........................
39,987
43,342
331,705
359,535
8,346
8,067
69,233
66,918
Inventories (Note 4) .....................................................................
Other current assets ....................................................................
32,637
33,659
270,734
279,212
12,728
11,008
105,583
91,315
¥
6,163
$
98,764
$
51,124
Receivables, trade:
Allowance for doubtful accounts .................................................
(401)
(2,497)
(3,326)
132,394
129,682
1,098,250
1,075,753
Property, Plant and Equipment, at Cost (Notes 7 and 9):
Land..............................................................................................
10,681
10,456
88,602
86,736
Buildings and structures .............................................................
35,020
33,881
290,502
281,053
Machinery and equipment ..........................................................
144,433
138,169
1,198,117
1,146,155
Construction in progress .............................................................
9,817
5,777
81,435
47,922
199,951
188,283
1,658,656
1,561,866
Less accumulated depreciation ...................................................
16
(301)
Total current assets ..............................................................
(120,435)
(113,481)
(999,046)
(941,360)
Property, plant and equipment, net .......................................
79,516
74,802
659,610
620,506
Investments and Long-Term Loans (Note 5):
Unconsolidated subsidiaries and affiliates ................................
4,486
5,665
37,213
46,993
Other ............................................................................................
6,826
6,188
56,623
51,331
Allowance for doubtful long-term loans .....................................
Total investments and long-term loans ..................................
11,017
11,755
91,389
97,511
Intangible assets ..........................................................................
1,625
1,137
13,480
9,432
(295)
(98)
(2,447)
(813)
Deferred charges (Note 6) ...........................................................
1,276
699
10,585
5,799
Foreign currency translation adjustments .................................
Total assets ..............................................................................
2,061
279
17,097
2,314
¥227,889
¥218,354
$1,890,411
$1,811,315
Liabilities and Shareholders’ Equity
Thousands of U.S. dollars
(Note 3)
Millions of yen
1999
1998
1999
1998
¥ 39,735 $ 351,647
$ 329,614
Current Liabilities:
Short-term loans payable (Note 7) .............................................
Current portion of long-term debt (Note 7) ................................
¥ 42,391
9,253
11,155
76,757
92,534
29,310
37,131
243,136
308,013
4,163
3,751
34,533
31,116
Payables, trade:
Notes and accounts ..................................................................
Unconsolidated subsidiaries and affiliates ............................
Payables, other ............................................................................
3,442
3,315
28,552
27,499
Accrued income taxes ..................................................................
Accrued expenses .........................................................................
2,045
3,257
16,964
27,018
3,102
1,093
25,732
9,067
Other current liabilities ..............................................................
4,953
5,477
41,087
45,432
Total current liabilities ...........................................................
98,659
104,914
818,408
870,293
Long-term debt (Note 7) ..............................................................
Other long-term liabilities ..........................................................
59,525
45,872
493,779
380,523
852
336
7,067
2,787
Accrued severance indemnities (Note 11) ..................................
4,954
5,671
41,095
47,043
Total long-term liabilities........................................................
65,331
51,879
541,941
430,353
Minority interests ........................................................................
569
591
4,720
4,903
—242,075,556 shares ............................................
Capital surplus ............................................................................
24,211
24,211
200,838
200,838
18,336
18,336
152,103
152,103
Retained earnings ........................................................................
20,783
18,423
172,401
152,825
Long-Term Liabilities:
Contingent liabilities (Note 13)
Shareholders’ Equity:
Common stock:
Authorized—800,000,000 shares
Issued
Treasury stock, at cost:
139 shares (336 shares - 1998) ................................................
Total shareholders’ equity .......................................................
63,330
60,970
525,342
505,766
Total liabilities and shareholders’ equity ...............................
¥227,889
¥218,354
$1,890,411
$1,811,315
(0)
(0)
(0)
(0)
See accompanying notes to consolidated financial statements.
17
Consolidated Statements of Income
For the years ended March 31, 1999 and 1998
Thousands of U.S. dollars
(Note 3)
Millions of yen
Net sales .......................................................................................
Cost of sales .................................................................................
1999
1998
1999
1998
¥170,453
¥180,497
$1,413,961
$1,497,279
122,012
130,669
1,012,128
1,083,940
Gross profit
48,441
49,828
401,833
413,339
Selling, general and administrative expenses (Note 10) ...........
35,657
37,825
295,786
313,770
Operating income.....................................................................
12,784
12,003
106,047
99,569
639
740
5,301
6,139
(24,197)
(23,957)
Other income (expenses):
Interest and dividend income .................................................
Interest expense.......................................................................
(2,917)
Enquity in earnings (losses) of unconsolidated
subsidiaries and affiliates.....................................................
Other, net (Note 15) .................................................................
(6,918)
1,294
(2,040)
(1,878)
(16,923)
(15,579)
(5,152)
(3,870)
(4,273)
(32,103)
(2,888)
(834)
156
Income before income taxes and minority interests ..............
7,632
8,133
63,310
67,466
Income taxes ................................................................................
Income before minority interests ................................................
3,388
2,794
28,105
23,177
4,244
5,339
35,205
44,289
Minority interests in net income of consolidated subsidiaries ..
Net income ...................................................................................
(10)
(14)
¥ 4,234
Amounts per share:
¥ 5,325
(83)
$
35,122
(116)
$ 44,173
U.S. dollars
(Note 2)
Yen
Net income:
No dilution ...............................................................................
Cash dividends .............................................................................
¥
17.49
¥ 22.00
5.00
5.00
$
0.15
0.04
$
0.18
0.04
See accompanying notes to consolidated financial statements.
18
Consolidated Statements of Shareholders’ Equity
For the years ended March 31, 1999 and 1998
Thousands
Number of
Shares of
Common
Stock
Millions of yen
Common
Stock
Capital
Surplus
Retained
Earnings
Treasury
Stock
Balance at March 31, 1997 .........................................
¥242,076
¥24,211
¥18,336
¥ 14,133
Increase due to merger with non-consolidated
subsidiaries............................................................
—
—
—
225
—
Net income for the year ...........................................
—
—
—
5,325
—
Cash dividends paid .................................................
—
—
—
(1,210)
—
Bonuses to directors and statutory auditors ..........
—
—
—
(50)
—
Balance at March 31, 1998 .........................................
242,076
24,211
18,336
18,423
Increase due to merger with
non-consolidated subsidiaries .............................
—
—
—
¥32
—
Increase due to additions to consolidated subsidiaries
and affiliates under the equity method...............
—
—
—
67
—
Net income for the year ...........................................
—
—
—
4,234
—
Decrease due to additions to consolidated
subsidiaries and affiliates under the
equity method .......................................................
—
—
—
(701)
—
Decrease due to merger with
non-consolidatedsubsidiaries...............................
—
—
—
(22)
—
Cash dividends paid .................................................
—
—
—
(1,210)
—
Bonuses to directors and statutory auditors ..........
—
—
—
(40)
—
Balance at March 31, 1999 .........................................
¥242,076
¥24,211
¥18,336
¥ (0)
(0)
¥20,783
¥ (0)
Thousands of U.S. dollars (Note 3)
Common
Stock
Capital
Surplus
Retained
Earnings
Treasury
Stock
Balance at March 31, 1997 ...............................................................
$200,838
$152,103
$ 117,238
Increase due to merger with
non-consolidated subsidiaries ....................................................
—
—
1,866
—
Net income for the year .................................................................
—
—
44,173
—
Cash dividends paid.......................................................................
—
—
(10,037)
—
Bonuses to directors and statutory auditors ................................
—
—
(415)
—
Balance at March 31, 1998 ...............................................................
200,838
152,103
Increase due to merger with
non-consolidated subsidiaries ....................................................
—
—
Increase due to additions to consolidated
subsidiaries and affiliates under the equity method ................
—
Net income for the year .................................................................
$
152,825
$
(0)
(0)
265
—
—
555
—
—
—
35,122
—
Decrease due to additions to consolidated
subsidiaries and affiliates under the equity method ...............
—
—
(5,815)
—
Decrease due to merger with non-consolidated subsidiaries.......
—
—
(182)
—
Cash dividends paid .......................................................................
—
—
(10,037)
—
Bonuses to directors and statutory auditors ................................
—
—
(332)
—
Balance at March 31, 1999 ...............................................................
$200,838
$152,103
$172,401
$
(0)
See notes to consolidated financial statements.
19
Consolidated Statements of Cash Flows
For the years ended March 31, 1999 and 1998
Thousands of U.S. dollars
(Note 3)
Millions of yen
Cash Flows from Operating Activities:
Net income ................................................................................................
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................................
Provision for severance indemnities ....................................................
Loss on devaluation of marketable securities .....................................
Loss on devaluation of investment securities .....................................
Loss (gain) on disposal of property, plant and equipment, net ..........
Loss (gain) on sales of marketable securities..........................................
Gain on sales of investment securities ....................................................
Equity in losses (earnings) of unconsolidated subsidiaries
and affiliates .........................................................................................
Changes in operating assets:
Receivables, trade .................................................................................
Inventories ............................................................................................
Other current assets .............................................................................
Changes in operating liabilities:
Payables, trade .....................................................................................
Payable, other .......................................................................................
Accrued income taxes ...........................................................................
Accrued expenses ..................................................................................
Other current liabilities .......................................................................
Bonuses to directors and statutory auditors...........................................
Other, net ..................................................................................................
Net cash provided by operating activities ...............................................
1999
1998
1999
1998
¥ 4,234
¥ 5,325
$ 35,122
$ 44,173
10,210
211
1,393
41
338
25
(596)
834
9,847
1,171
2,764
—
(1,928)
(199)
(398)
(156)
84,695
1,750
11,555
340
2,804
207
(4,944)
81,684
9,714
22,928
(15,993)
1,651
(3,302)
6,918
(1,294)
—
3,367
1,341
(1,679)
895
(3,843)
(441)
27,930
11,124
(13,927)
7,424
(31,879)
(3,658)
(7,698)
(145)
(1,236)
1,982
(826)
(40)
(2,156)
9,600
(416)
813
(1,604)
(479)
(962)
(50)
251
10,590
(63,857)
(1,203)
(10,253)
16,441
(6,851)
(332)
(17,884)
79,635
(3,451)
6,744
(13,306)
(3,973)
(7,980)
(415)
2,082
87,847
(13,319)
783
(15,992)
3,759
(110,485)
6,495
(132,659)
31,182
(1,411)
(616)
(11,705)
(5,110)
778
87,026
(87,704)
994
14
(258)
(15,085)
239
61,349
(62,579)
(582)
1,983
508,909
(519,112)
(4,828)
(2,253)
(16,675)
6,454
721,908
(727,532)
(8,246)
116
(2,140)
(125,135)
(18,689)
(138,324)
Cash Flows from Financial Activities:
Increase (decrease) in loans payable .......................................................
Proceeds from issuance of long-term debt ...............................................
Repayment of long-term debt...................................................................
Cash dividends..........................................................................................
Net cash provided by financing activities ...............................................
492
29,407
(17,896)
(1,210)
10,793
(12,860)
21,028
(5,004)
(1,210)
1,954
4,081
243,940
(148,453)
(10,037)
89,531
(106,678)
174,434
(41,510)
(10,037)
16,209
Increase in cash and cash equivalents resulting from
initial consolidation of subsidiaries and merger with
non-consolidated subsidiaries ...................................................................
Net change in cash and cash equivalents .....................................................
Cash and cash equivalents at beginning of year ..........................................
435
5,743
6,163
506
(3,625)
9,788
3,609
47,640
51,124
4,197
(30,071)
81,195
Cash and cash equivalents at end of year .....................................................
¥ 11,906
¥ 6,163
$ 98,764
$ 51,124
Supplemental Cash Flow Disclosures:
Interest paid .............................................................................................
Income taxes paid .....................................................................................
¥ 2,811
4,600
¥ 2,742
4,375
$ 23,318
38,158
$ 22,746
36,292
Cash Flows from Investing Activities:
Purchase of property, plant and equipment ...........................................
Proceeds from sale of property, plant and equipment............................
Increase in investments in and long-term loans to unconsolidated
subsidiaries and affiliates .....................................................................
Decrease in investments in and long-term loans to unconsolidated
subsidiaries and affiliates .....................................................................
Proceeds from sale of marketable securities...........................................
Purchase of marketable securities...........................................................
Increase in deferred charges....................................................................
Decrease in short-term investments .......................................................
Other .........................................................................................................
Net cash used in investing activities.......................................................
—
—
See accompanying notes to consolidated financial statements.
20
Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Nippon Zeon Co., Ltd. (the “Company”) and its consolidated
subsidiaries have been prepared in accordance with accounting principles and practices generally accepted in Japan
and have been compiled from those prepared by the Company as required under the Securities and Exchange Law
of Japan.
Accordingly, the accompanying consolidated financial statements are not intended to present the consolidated financial
position, results of operations and cash flows in accordance with accounting principles and practices generally accepted
in countries and jurisdictions other than Japan. The Company has prepared consolidated statements of cash flows for
the purpose of inclusion in these consolidated financial statements, although such statements are not currently
required in Japan.
Certain reclassifications have been made in the 1998 consolidated financial statements to conform to the classifications
used in 1999.
2. Summary of Significant Accounting Policies
(1) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 11 significant
subsidiaries. All significant intercompany accounts and transactions have been eliminated on consolidation.
Investments in certain unconsolidated subsidiaries and significant affiliates (companies owned 20% to 50%) are
accounted for by the equity method. All significant unrealized intercompany items have been eliminated
on consolidation.
Investments in other affiliates and unconsolidated subsidiaries, not significant in amount, are carried at cost.
(2) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid debt instruments with a maturity of three months or less
when purchased.
(3) Marketable Securities and Investment Securities
Marketable securities are carried at the lower of cost or market, and investment securities are carried at cost. Cost is
determined by the moving average method.
(4) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided at an amount which is considered sufficient to cover estimated
future losses.
(5) Inventories
Inventories are stated generally at cost determined by the average method.
(6) Depreciation
Depreciation is computed generally by the straight-line method based on the estimated useful lives of the assets,
determined according to their type of construction and use. Maintenance and repairs, including minor renewals and
improvements, are charged to income as incurred.
(7) Deferred Charges
Bond issuance expenses are deferred and amortized by the straight-line method over three years. Discounts on bonds
are amortized over the life of the bonds on the straight-line method.
Certain research and development costs which are expected to produce future revenues are capitalized as deferred
charges and amortized on a straight-line basis over five years in accordance with the Japanese Commercial Code.
Other research and development costs are charged to expenses as incurred.
21
(8) Leases
Noncancelable lease transactions are primarily accounted for as operating leases (whether such leases are classified
as operating leases or finance leases) except that lease agreements which stipulate the transfer of ownership of the
leased assets are accounted for as finance leases.
(9) Accrued Severance Indemnities and Pension Plan
Employees who terminate their service with the Company and its domestic consolidated subsidiaries are, under most
circumstances, entitled to lump-sum severance payments determined by reference to their current basic rate of pay
and length of service. The Company and its domestic consolidated subsidiaries generally provides for this liability at
40% of the amount which would be required to be paid if all employees voluntarily terminated their service at the
balance sheet date. This amount represents the maximum amount allowable under the Japanese tax law. The
Company and its domestic consolidated subsidiaries also have a trusteed non-contributory pension plan which covers
substantially all of their employees. The pension plan entitles employees upon retirement to receive either a lumpsum payment or pension payments for life (up to a maximum of 12 years), in each case based on length of service and
number of years of participation in the pension plan. Payments to the pension fund, including the amortization of past
service cost, are charged to income when made.
Accrued severance indemnities also include provisions for lump-sum retirement allowances for directors and statutory
auditors of the Company and one domestic consolidated subsidiary determined by reference to their current rates of
emolument and length of service.
Foreign consolidated subsidiaries have defined benefit plans covering substantially all of their employees. The cost of
such benefits is currently funded or accrued. The accrued severance indemnities recorded in the balance sheet plus
the pension plan assets were sufficient to satisfy benefit obligations for employees’ service to the respective balance
sheet dates.
(10) Revenue Recognition
Generally, sales of products are recognized in the accounts upon acceptance by the customers.
(11) Income Taxes
Income taxes have been accrued on the basis of actual income tax liabilities and no provision has been made for the
deferred taxes arising from timing differences between financial and tax reporting, with the exception of certain
foreign subsidiaries.
(12) Foreign Currency Translation
Both current and non-current receivables and payables denominated in foreign currencies are translated at
historical rates.
The Company translates, except for shareholders’ equity, the assets, liabilities, income and expense accounts of its
foreign consolidated subsidiaries at the rate of exchange in effect at the balance sheet date. The components of
shareholders’ equity are translated at historical exchange rates. The resulting translation differences are shown as
“Foreign currency transaction adjustment” in the accompanying consolidated balance sheets.
(13) Appropriation of Retained Earnings
Cash dividends, transfers to the legal reserve and bonuses to directors and statutory auditors are recorded in the
financial year when such proposed appropriations of retained earnings are approved by the shareholders.
(14) Income per Share
The computation of non-diluted net income per share is based on the weighted average number of shares outstanding
during the respective years. Fully diluted net income per share was not applicable due to no potential common shares.
22
3. U.S. Dollar Amounts
The Company maintains its accounting records in yen. The U.S. dollar amounts included in the accompanying
consolidated financial statements and notes thereto represent the arithmetic results of translating yen to U.S. dollars
at ¥120.55=US$1, the rate of exchange prevailing on March 31, 1999. The inclusion of such dollar amounts is solely for
the convenience of the reader and is not intended to imply that assets and liabilities which originated in yen have
been or could readily be converted, realized or settled in dollars at that or any other rate.
4. Inventories
Inventories as of March 31, 1999 and 1998 consisted of the following:
Thousands of U.S. dollars
Millions of yen
1999
1998
1999
1998
Finished products .............................................................................
Work in process .................................................................................
¥ 23,968
¥ 24,360
$ 198,822
$202,074
1,908
2,202
15,827
18,266
Raw materials and supplies .............................................................
6,761
7,097
56,085
58,872
¥32,637
¥ 33,659
$ 270,734
$279,212
5. Investments and Long-Term Loans
Investments in and long-term loans to unconsolidated subsidiaries and affiliates as of March 31, 1999 and 1998
consisted of the following:
Millions of yen
Capital investments ..........................................................................
Long-term loans ................................................................................
Thousands of U.S. dollars
1999
1998
1999
1998
¥ 4,367
¥ 5,480
$ 36,226
$ 45,458
119
185
987
1,535
¥ 4,486
¥ 5,665
$ 37,213
$ 46,993
Other investments as of March 31, 1999 and 1998 consisted of the following:
Millions of yen
Thousands of U.S. dollars
1999
1998
1999
Non-marketable equity securities ....................................................
Bonds and other securities ...............................................................
¥ 1,177
¥ 1,182
1,041
45
8,635
373
Long-term prepayments ...................................................................
Other ................................................................................................
1,185
1,809
9,830
15,006
3,423
3,152
28,394
26,147
¥ 6,826
¥ 6,188
$ 56,623
$ 51,331
$
9,764
1998
$
9,805
6. Deferred Charges
Deferred charges as of March 31, 1999 and 1998 consisted of the following:
Millions of yen
1999
Research and development costs ......................................................
Other ................................................................................................
¥ 1,045
1998
¥
231
¥ 1,276
Thousands of U.S. dollars
¥
477
1999
$
8,668
222
1,917
699
$ 10,585
1998
$
3,957
1,842
$
5,799
23
7. Short-Term Loans Payable and Long-Term Debt
Short-term loans payable as of March 31, 1999 and 1998 were unsecured.
Long-term debt as of March 31, 1999 and 1998 consisted of the following:
Millions of yen
7.2% Japanese yen mortgage bonds due 1998.................................
6.5% Japanese yen mortgage bonds due 1998.................................
Thousands of U.S. dollars
1999
1998
—
¥ 3,000
¥
$
1999
1998
—
$ 24,886
—
3,000
—
24,886
5.8% Japanese yen mortgage bonds due 1999.................................
5.8% Japanese yen mortgage bonds due 1999.................................
2,000
2,000
16,591
16,591
2,000
2,000
16,591
16,591
2.05% Japanese yen unsecured bonds due 2002 .............................
10,000
10,000
82,953
82,953
2.5% Japanese yen unsecured bonds due 2004 ...............................
10,000
10,000
82,953
82,953
2.0% Japanese yen unsecured bonds due 2003 ...............................
10,000
—
82,953
—
Loans, principally from banks and
insurance companies ......................................................................
34,778
27,027
288,495
224,197
68,778
57,027
570,536
473,057
Less current portion ....................................................................
(9253)
¥59,525
(11,155)
¥45,872
(76,757)
$493,779
(92,534)
$380,523
As of March 31, 1999, the aggregate annual maturities of long-term debt subsequent to March 31, 1999 are
summarized as follows:
Year ending March 31
Millions of yen
Thousands of U.S. dollars
1999
¥ 9,253
$ 76,757
2000
8,520
70,676
2001
7,676
63,675
2002
14,685
121,817
2003
15,737
130,543
2004 and thereafter
12,907
107,068
¥68,778
$570,536
Assets pledged as collateral for long-term debt as of March 31, 1999 and 1998 consisted of the following:
Millions of yen
Marketable securities ..................................................................
Property, plant and equipment, at net book value ....................
Thousands of U.S. dollars
1999
1998
1999
1998
¥ 2,224
¥ 707
$ 18,449
$ 5,865
45,944
45,556
381,120
377,901
8. Supplementary Information to the Consolidated Balance Sheets
Balances with non-consolidated subsidiaries and affiliates at March 31, 1999 and 1998 were principally as follows:
Millions of yen
24
Thousands of U.S. dollars
1999
1998
1999
1998
Accounts receiveable – other ............................................................
¥2,330
¥2,185
$19,328
$18,125
Accounts payable – other..................................................................
41
88
340
730
Accrued expenses ..............................................................................
252
376
2,090
3,119
Other current liabilities....................................................................
496
498
4,114
4,131
9. Depreciation and Amortization
Depreciation and amortization for the years ended March 31, 1999 and 1998 were ¥10,210 million ($84,695 thousand)
and ¥9,847 million ($81,684 thousand), respectively.
10. Research and Development Expenses
Research and development expenses included in selling, general and administrative expenses for the years ended
March 31, 1999 and 1998 were ¥4,941 million ($40,987 thousand) and ¥5,078 million ($42,124 thousand), respectively.
11. Severance Indemnities and Pension Plans
Provisions for severance indemnities and pension expense for the years ended March 31, 1999 and 1998 were ¥1,096
million ($9,092 thousand) and ¥1,803 million ($14,956 thousand), respectively.
Accrued retirement and severance benefits for directors and statutory auditors have been provided. See Note 2 (9).
12. Income Taxes
The effective income tax rates on income before income taxes and minority interests in the accompanying consolidated
financial statements differ from the normal statutory rates in Japan. Such differences arise principally as a result of
(a) the accounting policy of not providing for deferred income taxes arising from timing differences between financial
and tax reporting, with the exception of certain foreign subsidiaries and (b) certain expenses which are not deductible
for income tax purposes.
13. Contingent Liabilities
Contingent liabilities as of March 31, 1999 and 1998 were as follows:
1999
Notes discounted and endorsed ........................................................
Guarantees ........................................................................................
Thousands of U.S. dollars
Millions of yen
¥ 1,185
6,410
¥
1998
1999
1998
1,691
$ 9,830
$ 14,027
4,341
53,173
36,010
14. Leases
Lease payments relating to finance lease transactions accounted for as operating leases amounted to ¥887 million
($7,358 thousand) and ¥659 million ($5,467 thousand) for the years ended March 31, 1999 and 1998, respectively.
Future minimum lease payments (including the interest portion) subsequent to March 31, 1999 for finance lease
transactions accounted for as operating lease are summarized as follows:
Millions of yen
Due within one year
Due after one year
Total
Thousands of U.S. dollars
¥ 759
$ 6,296
1,039
8,619
¥1,798
$14,915
Future minimum lease payments (including the interest portion) subsequent to March 31, 1999 for operating lease
transactions are summarized as follows:
Millions of yen
Due within one year
Due after one year
Total
¥ 61
Thousands of U.S. dollars
$ 506
233
1,933
¥294
$2,439
25
15. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 1999 and 1998 consisted of the following:
Thousands of U.S. dollars
Millions of yen
1999
Gain on sales of marketable securities ............................................
Loss on sales of marketable securities .............................................
¥
0
1998
¥
199
(25)
1999
$
0
—
1998
$
1,651
(207)
—
Gain on sales of investment securities ............................................
596
398
4,944
3,302
Rental income ....................................................................................
Gain on sales of property, plant and equipment .............................
157
256
1,302
2,123
2
2,376
17
19,710
Amortization of deferred charges .....................................................
(412)
(272)
(3,418)
(2,256)
Foreign exchange loss, net ...............................................................
(977)
(539)
(8,105)
(4,472)
Loss on devaluation of marketable securities .................................
Loss on disposal of property, plant and equipment ........................
(1,393)
(2,764)
(11,555)
(22,928)
(338)
(448)
(2,804)
(3,716)
Restructuring costs ...........................................................................
(155)
Loss on sales of investment securities .............................................
(44)
Other, net ..........................................................................................
549
¥ (2,040)
—
(1,286)
—
(365)
(1,084)
¥(1,878)
—
—
4,554
$(16,923)
(8,993)
$ (15,579)
16. Segment Information
The Company and its consolidated subsidiaries are primarily engaged in the manufacture and sale of products in
Japan and foreign countries. The Company and its consolidated subsidiaries have changed business segment in 1999.
The reportable segments have been changed from 3 segments to 5 segments, along with a change of titles for
these segments.
1999
Segmentation
Product
Rubber
Synthetic Rubbers
Latex
Synthetic Latices
Chemicals
Chemicals
Specialty Chemicals
Information, Environment and Health
Information-related Materials
High Functional Resin
Environment Materials
RIM Products
Medical Equipment
Others
PVC Business
Technology Licensing
Others
1998
Segmentation
26
Product
Synthetic Rubber
Synthetic Rubbers
Synthetic Latices
Synthetic Resin
Chemicals
Speciality Chemicals
PVC Business
Others
Information-related Materials
High Functional Resin
Environment Materials
RIM Products
Medical Equipment
Others
16. Segment Information (continued)
The business and geographical segments of the Company and its consolidated subsidiaries for the years ended
March 31, 1999 and 1998 are outlined as follows:
Business Segments
Rubber
Latex
Chemicals
¥17,050
¥ 21,217
I. Sales and operating income:
Year ended March 31, 1999
Information,
Others
Environment
and Health
Total
Eliminations Consolidated
and corporate
Millions of yen
Sales to third parties................ ¥72,291
¥23,556 ¥36,339
¥170,453
¥
—
170,453
Inter-group sales and transfers
2,654
771
496
459
4,612
8,992
(8,992)
—
Total ..........................................
74,945
17,821
21,713
24,015
40,951
179,445
(8,992)
170,453
Operating expenses ..................
66,172
15,792
17,969
25,717
41,033
166,683
(9,014)
157,669
Operating income (loss)............
¥8,773
¥ 2,029
¥3,744
¥ (1,702)
¥
(82) ¥ 12,762
¥
22
¥ 12,784
¥174,790 ¥53,099
¥227,889
II. Assets, depreciation and capital expenditures:
Total assets ............................... ¥80,575
¥13,840
¥23,694
¥28,102 ¥28,579
Depreciation..............................
4,204
1,103
822
2,385
935
9,449
338
9,787
Capital expenditures ................
4,151
541
1,748
2,401
943
9,784
713
10,497
Rubber
Latex
Chemicals
I. Sales and operating income:
Year ended March 31, 1998 (Restated)
Information,
Others
Total
Environment
and Health
Eliminations Consolidated
and corporate
Millions of yen
Sales to third parties................ ¥ 79,214 ¥ 16,584 ¥ 15,610 ¥ 23,011 ¥ 46,078
¥180,497
¥
—
¥ 180,497
Inter-group sales and transfers
3,052
827
4,859
5,682
2,227
16,647
(16,647)
—
Total ..........................................
82,266
17,411
20,469
28,693
48,305
197,144
(16,647)
180,497
Operating expenses ..................
71,019
16,614
17,510
31,909
48,095
185,147
(16,653)
168,494
Operating income (loss)............ ¥ 11,247
¥ 797
210
¥ 11,997
¥
6
¥ 12,003
¥185,717 ¥ 32,637
218,354
¥ 2,959 ¥ (3,216) ¥
II. Assets, depreciation and capital expenditures:
Total assets ............................... ¥ 82,999
¥15,308 ¥ 18,001
¥26,453 ¥42,956
Depreciation..............................
3,444
1,729
1,011
1,727
1,464
9,375
306
9,681
Capital expenditures ................
5,155
1,674
1,044
4,474
2,083
14,430
209
14,639
Rubber
Latex
Chemicals
Year ended March 31,1999
Information,
Others
Total
Environment
and Health
I. Sales and operating income:
Thousands of U.S. dollars
Sales to third parties ................ $599,676 $141,435 $ 176,002 $195,404 $301,444 $1,413,961
Inter-group sales
and transfers.........................
22,016
6,396
4,114
Total .......................................... 621,692
147,831
180,116
3,808
Eliminations Consolidated
and corporate
$
— $1,413,961
38,257
74,591
(74,591)
199,212 339,701
1,488,552
(74,591) 1,413,961
Operating expenses .................. 548,917 131,000 149,058 213,331 340,382 1,382,688
Operating income (loss)............ $ 72,775 $ 16,831 $ 31,058 $ (14,119) $ (681) $ 105,864
(74,774) 1,307,914
$
—
183 $ 106,047
II. Assets, depreciation and capital expenditures:
Total assets ............................... $668,395 $114,807 $196,549 $233,115 $237,072 $1,449,938 $440,473 $1,890,411
Depreciation..............................
34,873
9,150
6,819
19,784
7,756
78,382
2,804
81,186
Capital expenditures ................
34,434
4,488
14,500
19,917
7,822
81,161
5,915
87,076
27
16. Segment Information (continued)
Business Segments (continued)
Rubber
Year ended March 31, 1998 (Restated)
Chemicals Information,
Others
Total
Environment
and Health
Latex
I. Sales and operating income:
Eliminations Consolidated
and corporate
Thousands of U.S. dollars
Sales to third parties............. $657,105 $137,569 $129,490 $190,883 $382,232 $1,497,279 $
— $1,497,279
Inter-group sales
and transfers.......
25,317
6,860
40,307
47,134
18,474
Total .......................................
682,422
144,429
169,797
238,017
400,706
1,635,371 (138,092) 1,497,279
Operating expenses...............
589,125
137,818
145,251
264,695
398,963
1,535,852 (138,142) 1,397,710
Operating income (loss) ........ $ 93,297
$ 6,611
$24,546 $ (26,678)
138,092 (138,092)
$ 1,743 $
99,519
$
50 $
—
99,569
II. Assets, depreciation and capital expenditures:
Total assets............................ $688,503 $126,985 $149,324 $219,436 $356,333 $1,540,581 $270,734 $1,811,315
Depreciation ..........................
28,569
14,343
8,387
14,326
12,144
77,769
2,538
80,307
Capital expenditures.............
42,762
13,886
8,660
37,113
17,279
119,700
1,734
121,434
The business segment information of the former classification for the year ended March 31, 1998 was summerized
as follows:
Synthetic
rubbers
I. Sales and operating income:
Sales to third parties ............................
Year ended March 31, 1998
Others
Total
Eliminations
and corporate
Consolidated
Millions of yen
¥95,649
¥36,819
¥ 48,029
¥180,497
¥
—
Inter-group sales and transfers ............
3,937
961
13,772
18,670
(18,670)
Total .......................................................
Operating expenses ...............................
99,586
37,780
61,801
199,167
18,670
87,554
36,167
63,194
187,015
Operating income (loss) ........................
¥12,032
¥ 1,613
¥ (1,493)
¥ 12,152
II. Assets, depreciation and capital expenditures:
Total assets at end of year ....................
¥99,407
Depreciation ..........................................
Capital expenditures.............................
28
Synthetic
resin
¥
¥180,497
—
180,497
(18,521)
168,494
(149)
¥ 12,003
¥33,591
¥ 54,156
¥187,154
¥31,220
¥218,354
5,195
1,623
2,670
9,488
193
9,681
6,806
1,580
6,174
14,560
79
14,639
16. Segment Information (continued)
Year ended March 31, 1998
Synthetic
rubbers
Synthetic
resin
Others
Total
Eliminations
and corporate
Consolidated
Thousands of U.S. dollars
I. Sales and operating income:
Sales to third parties ............................
$793,438
$305,425
32,659
7,972
114,242
154,873
(154,873)
—
826,097
313,397
512,658
1,652,152
(154,873)
1,497,279
726,288
300,017
525,042
1,551,347
(153,637)
1,397,710
$ 99,809
$ 13,380
$ (12,384) $ 100,805
$
II. Assets, depreciation and capital expenditures:
Total assets at end of year ....................
$824,612
$278,648
$449,241 $1,552,501
$ 258,814 $ 1,811,315
Inter-group sales and transfers ............
Total .......................................................
Operating expenses ...............................
Operating income (loss) ........................
Depreciation ..........................................
Capital expenditures.............................
$398,416 $1,497,279
$
—
$1,497,279
(1,236)
$ 99,569
43,094
13,463
22,148
78,705
1,601
80,306
56,458
13,107
51,215
120,780
655
121,435
Geographical Segments
I. Sales and operating income:
Sales to third parties ............................
Japan
North
America
¥144,053
¥ 13,563
Year ended March 31, 1999
Europe
Asia
Total
Eliminations
and corporate
Consolidated
Millions of yen
¥12,596
¥ 241 ¥170,453
¥
— ¥170,453
Inter-group sales and transfers ............
3,047
7,446
279
193
10,965
(10,965)
—
Total.......................................................
Operating expenses ...............................
147,100
21,009
12,875
434
181,418
(10,965)
170,453
137,925
17,468
12,471
595
168,459
(10,790)
157,669
9,175
¥ 3,541
¥ 404
¥(161) ¥ 12,959
¥ 175 ¥ 12,784
¥151,845
¥27,891
¥9,003
¥2,135 ¥190,874
¥37,015 ¥ 227,889
Operating income (loss) ........................
II. Assets at end of year:
Total assets............................................
¥
North
America
Year ended March 31, 1998
Europe
Total
Eliminations
and corporate
¥153,487
¥14,733
¥12,277
¥180,497
3,016
7,653
215
10,884
(10,884)
—
156,503
22,386
12,492
191,381
(10,884)
180,497
149,569
18,338
12,135
180,042
(11,548)
168,494
Japan
I. Sales and operating income:
Sales to third parties ............................
Inter-group sales and transfers ............
Total .......................................................
Operating expenses ...............................
Operating income ..................................
II. Assets at end of year:
Total assets............................................
Consolidated
Millions of yen
¥
6,934
¥ 4,048
¥154,285
¥ 26,613
¥
¥
—
¥180,497
357
¥ 11,339
¥
664
¥ 12,003
¥ 9,554
¥190,452
¥27,902
¥218,354
29
16. Segment Information (continued)
Geograhical Segments (continued)
Year ended March 31, 1999
Japan
North
America
Europe
Asia
Total
Eliminations Consolidated
and corporate
Thousands of U.S. dollars
I. Sales and operating income:
Sales to third parties ............................. $1,194,965 $112,509 $104,488 $1,999 $1,413,961 $
— $1,413,961
.............
Inter-group sales and transfers
25,276
61,767
2,314
1,601
90,958 (90,958)
—
Total ........................................................ 1,220,241 174,276 106,802
3,600 1,504,919 (90,958) 1,413,961
Operating expenses ................................ 1,144,131 144,903 103,451
4,935 1,397,420 (89,506) 1,307,914
Operating income (loss) ......................... $
76,110 $ 29,373 $
II. Assets at end of year:
Total assets............................................. $1,259,602 $231,365
Japan
I. Sales and operating income:
Sales to third parties ............................
Inter-group sales and transfers ............
Total .......................................................
Operating expenses ...............................
3,351 $ (1,335) $ 107,499
$(1,452) $ 106,047
$76,683 $17,710 $1,583,360 $307,051 $1,890,411
North
America
Year ended March 31, 1998
Europe
Total
Eliminations
and corporate
Consolidated
Thousands of U.S. dollars
Operating income ..................................
$1,273,223
$122,215
25,019
63,484
1,783
90,286
(90,286)
—
1,298,242
185,699
103,624
1,587,565
(90,286)
1,497,279
1,240,722
152,119
100,663
1,493,504
(95,794)
1,397,710
$
57,520 $
33,580
$101,841 $1,497,279
$
2,961 $
94,061
$
$
—
5,508
$1,497,279
$
99,569
II. Assets at end of year:
Total assets............................................
$1,279,842
$220,763
$ 79,254 $1,579,859
Overseas Sales
Sales are analyzed geographically as follows:
Sales designated for:
1999
1998
Millions of yen
Japan
1998
Thousands of U.S. dollars
¥122,707
$1,015,330
$1,017,893
North America
19,185
19,972
159,146
165,674
Europe
10,570
19,234
87,681
159,552
Asia
17,041
17,364
141,360
144,040
1,259
1,220
10,444
10,120
¥170,453
¥180,497
$1,413,961
$1,497,279
Other
Total
30
¥122,398
1999
$231,456
$1,811,315
Report of Independent Certified Public Accountants
The Board of Directors
Nippon Zeon Co., Ltd.
We have examined the consolidated balance sheets of Nippon Zeon Co., Ltd. and consolidated subsidiaries as of March 31,
1999 and 1998, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then
ended, all expressed in yen. Our examinations were made in accordance with auditing standards, procedures and practices
generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen, present fairly the consolidated
financial position of Nippon Zeon Co., Ltd. and consolidated subsidiaries at March 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for the years then ended in conformity with accounting principles and
practices generally accepted in Japan consistently applied during the period expect for the change, with which we concur,
in the classification of the business segment as described in Note 16 to the consolidated financial statements.
The U.S. dollar amounts in the accompanying consolidated financial statements are presented solely for convenience. Our
examinations also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 3 to the consolidated financial statements.
Showa Ota & Co.
Tokyo, Japan
June 29, 1999
31
Nippon Zeon Co., Ltd. Corporate Directory and Data
Board of Directors and Statutory Auditors
President
.....................Katsuhiko Nakano
Senior Executive
Director ...............Hidetoshi Furuya
Senior Executive
Director ...............Kan Kawahara
Executive Director ...........Toshio Fukui
Executive Director ...........Kiichi Sasaki
Executive Director ...........Yutaka Ohtawa
Executive Director ...........Takao Fukushima
Executive Director ...........Naozumi Furukawa
Director .......................Masahiro Yamazaki
Director .......................Masanobu Inoue
Nippon Zeon Co., Ltd.
2-6-1 Marunouchi, Chiyoda-ku
Tokyo 100-8323, Japan
Export Sales
Telephone: 03-3216-2335
Fax:
03-3216-0503
International Operation
Telephone: 03-3216-1778
Fax:
03-3216-1790
Licensing
Telephone: 03-3578-7705
Fax:
03-3578-7748
Director .......................Mikio Shouhara
Director .......................Masaru Kagawa
Director .......................Hiroyuki Watanabe
Date of Establishment
Director .......................William C. Niederst
Director .......................Teruaki Hiramatsu
April 12, 1950
Director .......................Hideki Seki
Director .......................Yoichi Mishima
Director .......................Tadao Natsuume
Capital
Director .......................Yoshiyori Saitou
Standing Statutory
Auditor ...............Kouichiro Nakajima
Standing Statutory
Auditor ...............Hiroshi Fukushima
Statutory Auditor ............Yasuyuki Wakahara
Statutory Auditor ............Seiji Hagiwara
32
¥24,221 million (as of March 1999)
Number of Employees
2,642 (as of March 1999)
International Network
Principal Domestic Subsidiaries and Affiliates
Consolidated or accounted for by the
equity method
Principal Overseas Subsidiaries and Affiliates
Consolidated or accounted for by the
equity method
Percentage
(Consolidation)
Zeon Kasei Co., Ltd.
Zeon Engineering Co., Ltd.
Hokko Co., Ltd.
Zeon Yamaguchi Co., Ltd.
Owned
92.2
100.0
50.0
90.0
Percentage
(Consolidation)
Zeon Chemicals Incorporated
Owned
100.0
4100 Bells Lane,
Louisville, Kentucky 40211, U.S.A.
Telephone: 502-775-7600
Fax: 502-775-7714
Zeon Chemicals Europe Limited
100.0
Sully South Glamorgan
CF 64 5YU, United Kingdom
Telephone: 01446-731237
Fax: 01446-747988
Zeon Information System Co., Ltd.
100.0
Optes Inc.
100.0
Zeon Medical Inc.
100.0
Zeon Polymix Inc.
79.5
Zeon Chemicals (Thailand) Co., Ltd.
55.0
3 Soi G-14, Pakorn-Songkhrorad Road,
Tambol Huaypong, Ampher Muangrayong,
Rayong, 21150, Thailand
Telephone: 38-685973
Fax: 38-685972
Zeon Europe GmbH
Sanyo Monomer Co., Ltd.
Percentage
(Equity method)
Zeon Life Co., Ltd.
Zeon Analysis Center Co., Ltd.
Owned
70.0
Zeon International Sales, Inc.
0.0
Zeon Biomune Inc.
0.0
90.0
100.0
Percentage
(Equity method)
Shin Dai-Ichi Vinyl Corporation
81.5
Am Seestern 18 (Euro-Center)
D-40547 Düsseldorf, Germany
Telephone: 0211-52670
Fax: 0211-5267160
40.0
Owned
Malayan Electro-Chemical
Industry Co. Sdn Bhd.
Tokyo Zairyo Co., Ltd.
30.0
25.0
1416 Lorong Perusahaan Dua, Prai
Industrial Complex, 13600 Prai,
Province Wellesley, Penang, Malaysia
Telephone: 04-3907928
Fax: 04-3908419
Zeon Aroma Inc.
0.0
Zeon Deutschland GmbH
0.0
Other Main Overseas Subsidiaries
Percentage
Owned
Zeon Asia Pte Ltd.
100.0
331 North Bridge Road #20-01/02
Odeon Towers, Singapore 188720
Telephone: 65-3322338
Fax: 65-3322339
33
September 1999 Printed in Japan
0999020 (PR-MB)