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  • Summary of Consolidated Financial Results [Japanese GAAP] for Second Quarter of the Fiscal Year Ending May 31, 2011 December 24, 2010Listed company: Nippon Kayaku Co., Ltd. (URL http://www.nipponkayaku.co.jp/)Code No.: 4272Listed stock exchange: Tokyo Stock Exchange, First SectionRepresentative: (Position) President, (Name) Akira MandaiPerson in charge of inquiries: (Position) Member of the Board, Head of Financial Group (Name) Ryoichi Araki1. Consolidated Business Results for First Half of Fiscal Year Ending May 31, 2011 (June 1, 2010 – November 30, 2010) (Figures shown are rounded down to the nearest million yen.)(1) Consolidated Operating Results (Percentages indicate amount of change from the previous year.) Net sales Operating income Ordinary income Millions of yen % Millions of yen % Millions of yen % First half of fiscal year 73,907 6.2 10,566 43.7 9,927 45.8 ending May 31, 2011 First half of fiscal year 69,603 (5.9) 7,355 9.0 6,811 19.6 ended May 31, 2010 First-half diluted net First-half net income First-half net income per share income per share Millions of yen % Yen YenFirst half of fiscal year 4,809 30.6 26.51 26.51ending May 31, 2011First half of fiscal year 3,682 105.0 20.29 20.27ended May 31, 2010(2) Consolidated Financial Position Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen % Yen As of November 201,629 130,273 60.9 676.60 30, 2010 As of May 31, 2010 202,641 127,829 59.4 663.88Reference: Equity As of November 30, 2010: 122,723 million yen As of May 31, 2010: 120,441 million yen Equity consists of shareholders’ equity and valuation and translation adjustments.2. Status of Dividends Dividend amount per share End of first quarter End of second quarter End of third quarter End of year Total YenFiscal year ended May – 10.00 – 10.00 20.0031, 2010Fiscal year ending – 10.00May 31, 2011Fiscal year endingMay 31, 2011 – 10.00 20.00(forecast)Note: Corrections in this quarter to the expected dividend: None3. Consolidated Business Results Forecast for Fiscal Year Ending May 2011 (June 1, 2010 – May 31, 2011) (For the full year, percentages indicate amount of change from the previous year. For the first half, percentages indicate the change from the first half in the previous year.) Net sales Operating income Ordinary income Net income Net income per share Millions of yen % Millions of yen % Millions of yen % Millions of yen % YenFull year 151,000 7.1 19,500 21.9 19,000 18.4 11,500 16.5 63.40Note: Corrections in this quarter to the forecast consolidated business results: Yes This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan.
  • 4. Other (for details, refer to “Other Information” on page 3 of the Supplemental Information)(1) Significant changes in subsidiaries during the first quarter: None Note: This refers to whether or not there were changes in designated subsidiaries that result in changes in scope of consolidation during the second quarter under review.(2) Adoption of simplified accounting processes or special accounting processes: None Note: This refers to whether or not there was the adoption of simplified accounting processes or special accounting processes for creation of the quarterly consolidated financial statements.(3) Changes to accounting principles, procedures, and methods of presentation, or other items [1] Changes associated with revision of accounting standards or similar items: Yes [2] Changes other than [1]: None Note: This refers to whether or not there were changes in accounting principles and procedures, and methods of presentation, or other items adopted to prepare the quarterly consolidated financial statements, as described in the “Significant Changes in the Basis of Presenting the Quarterly Consolidated Financial Statements.”(4) Number of shares issued (common stock) [1] Number of shares issued at end of the fiscal period (including treasury stock) As of November 30, 2010: 182,503,570 shares As of May 31, 2010: 182,503,570 shares [2] Number of treasury stock shares at end of the fiscal period As of November 30, 2010: 1,120,786 shares As of May 31, 2010: 1,083,291 shares [3] Average number of shares during the first half of the current fiscal year First half of fiscal year ending May 31, 2011: 181,404,511 shares First half of fiscal year ended May 31, 2010: 181,512,316 shares* Information about quarterly review procedure execution:This report of quarterly financial results is outside the scope of the quarterly report review procedures under theFinancial Instruments and Exchange Act in Japan. At the time of the disclosure of this report, the quarterly reportreview procedures under the Financial Instruments and Exchange Act had not been completed.* Explanation related to appropriate use of the business results forecast, and other notesThe business results forecasts and other descriptions related to the future in this report are based on information thatwas obtainable as of the date this report was announced, and on assumptions pertaining to uncertain factors that canaffect future business results. The actual business results may vary greatly due to a variety of future factors. Fordetails on the business results forecast, refer to “(3) Qualitative Information Concerning Forecasts for ConsolidatedBusiness Results” under “1. Qualitative Information on Consolidated Financial Results” on page 3 of theSupplemental Information. This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan.
  • Supplemental InformationTable of Contents1. Qualitative Information on Consolidated Financial Results 2 (1) Qualitative Information Concerning the Consolidated Business Results 2 (2) Qualitative Information Concerning the Consolidated Financial Position 2 (3) Qualitative Information Concerning Forecasts for Consolidated Business Results 32. Other Information (1) Significant changes in subsidiaries during the first quarter 3 (2) Adoption of simplified accounting processes or special accounting processes 3 (3) Changes to accounting principles, procedures, and methods of presentation, or other items 4 (4) Important events affecting going concern assumption 43. Quarterly Consolidated Financial Statements 5 (1) Consolidated Balance Sheets 5 (2) Consolidated Profit and Loss Statement 7 (3) Consolidated Statement of Cash Flows 8 (4) Notes concerning going concern assumption 10 (5) Segment information 10 (6) Notes in case of significant changes in the amount of shareholders’ equity 12 This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―1―
  • 1. Qualitative Information on Consolidated Financial Results(1) Qualitative Information Concerning the Consolidated Business ResultsThe Japanese economy during the first half of this consolidated fiscal year (June 1, 2010 – November 30, 2010)continued on the path to recovery, supported by exports to China and other emerging nations. However, the pace ofimprovement was weakened by factors such as the high value of the yen and the end of government stimuluspackages, at the same time that sluggish personal consumption and increasingly fierce price competition due toprolonged deflation have made the economic future uncertain. Under such conditions, the Nippon Kayaku Group launched Phase I of its three-year mid-term business plan.Aiming for a stronger profit structure in addition to stronger overseas operations and optimal allocation of businessresources into priority business operations, the Group took steps to further reduce costs, restructure its productlineup, and optimize production sites. As a result, while first-half sales in the pharmaceuticals business were lower than in the same period in theprevious consolidated fiscal year due to the effects of a drop in drug pricing in April of this year, a recovery in thefunctional chemicals business and safety systems business helped generate net sales of 73.907 billion yen, anincrease of 4.304 billion yen (6.2%) from the same period in the previous consolidated fiscal year. Due to the strong performance of the functional chemicals business, operating income was 10.566 billion yen, anincrease of 3.211 billion yen (43.7%) from the same period in the previous consolidated fiscal year. Ordinary income was 9.927 billion yen, an increase of 3.116 billion yen (45.8%) from the same period in theprevious consolidated fiscal year. Net income for the first half of the consolidated fiscal year was 4.809 billion yen, an increase of 1.126 billionyen (30.6%) from the same period in the previous consolidated fiscal year.Performance by business segment is described below.[Functional chemicals business]In the functional materials business, although sales of epoxy resins for semiconductor encapsulation were downfrom the first quarter due to the effects of customer production adjustments, they were above the level of the firsthalf of the previous consolidated fiscal year. Sales of UV-curing resins were down from the level from the first halfof the previous consolidated fiscal year, and sales for the functional materials business as a whole were also downfrom the first half of the previous consolidated fiscal year. In the electronic materials business, although sales of films for plasma displays were lower than the first half ofthe previous consolidated fiscal year, sales of resins for optical disks, colors for inkjet printers, and LCD sealantswere higher. At Polatechno, sales of polarizing films for LCD displays were strong; as a result, sales exceeded thelevel from the first half of the previous consolidated fiscal year. Sales for the electronic materials business as awhole exceeded the level from the first half of the previous consolidated fiscal year. In the catalyst business, there was a recovery in demand for catalysts used in the production of acrylic acid andsales were higher than the first half of the previous consolidated fiscal year. In the color chemicals business, sales exceeded the level from the first half of the previous consolidated fiscalyear due to strong sales of textile dyes. As a result of the above, sales in the functional chemicals business were 35.846 billion yen, and operatingincome was 6.165 billion yen.[Pharmaceuticals business]In the area of pharmaceutical products for the Japanese domestic market, sales of anti-cancer drugs such as“BICALUTAMIDE Tab. NK,” “PACLITAXEL Inj. NK,” and “CARBOPLATIN Intravenous Inj. NK” were strongand exceeded the levels from the first half of the previous consolidated fiscal year. On the other hand, the effects ofcompetitor products and other factors resulted in lower sales of anti-cancer drugs such as “arterial-injection IACALL” and “RANDA Inj.” compared with the first half of the previous consolidated fiscal year. Sales ofpharmaceutical products for the Japanese domestic market as a whole were lower than the first half of the previousconsolidated fiscal year. In the area of exports, sales of “BLEO” (anti-cancer drug) were lower than in the same period of the previousconsolidated fiscal year, and exports as a whole were lower. In the area of active pharmaceutical ingredients for the Japanese domestic market, sales of raw materials fordrugs were up, and sales of active pharmaceutical ingredients for the Japanese domestic market as a whole alsoexceeded the level of the first half of the previous consolidated fiscal year. Sales of diagnostic agents exceeded the level from the first half of the previous consolidated fiscal year. As a result of the above, sales in the pharmaceuticals business were 24.861 billion yen, and operating incomewas 5.206 billion yen. This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―2―
  • [Safety systems business]Although the safety systems business was affected by the ending in September of the eco-car subsidy that had beenenacted in Japan, as a result of growing automobile sales in China and other emerging nations, sales of airbaginflators and micro gas generators for seatbelt pretensioners exceeded the levels of the first half of the previousconsolidated fiscal year. As a result of the above, sales in the safety systems business were 9.326 billion yen and operating income was733 million yen.[Others]In the agrochemicals business, both domestic sales and exports were down from the first half of the previousconsolidated fiscal year. Sales in real estate and other business were also down from the first half of the previous consolidated fiscal year. As a result of the above, sales in other business areas were 3.872 billion yen and operating income was 981million yen.(2) Qualitative Information Concerning the Consolidated Financial Position[1] Assets, liabilities, and net assetsTotal assets were 201.629 billion yen, a decrease of 1.012 billion yen from the end of the previous consolidatedfiscal year. Current assets increased by 1.339 billion yen, primarily due to an increase in cash and savings. Fixedassets decreased by 2.267 billion yen, due to decreases in tangible fixed assets and investment securities. Liabilities were 71.355 billion yen, a decrease of 3.456 billion yen from the end of the previous consolidatedfiscal year resulting primarily from repayment of loans. Net assets were 130.273 billion yen, an increase of 2.444 billion yen from the end of the previous consolidatedfiscal year. Despite a decrease in translation adjustments, this increase occurred due to an increase in retainedearnings and other factors.[2] Cash flowThe balance of cash and cash equivalents at the end of this first half was 34.530 billion yen, a decrease of 1.282billion yen from the end of the previous consolidated fiscal year. (The balance at the end of the first half of theprevious consolidated fiscal year was 33.115 billion yen.) The status of each cash flow is described below. Net cash provided by operating activities amounted to 8.105 billion yen. (Net cash provided during the first halfof the previous consolidated fiscal year was 10.031 billion yen.) Despite an increase in advance payments of 2.509billion yen, a decrease of reserve allowances of 1.007 billion yen, and an increase in notes and accounts receivableof 995 million yen, this positive cash flow was due to net income before income taxes of 8.918 billion yen anddepreciation and amortization of 4.283 billion yen. Net cash expended in investing activities totaled 3.467 billion yen. (Net cash expended during the first half ofthe previous consolidated fiscal year was 4.895 billion yen.) This was primarily due to payments of 3.128 billionyen for the purchase of tangible fixed assets and payments of 253 million yen for the purchase of intangible fixedassets. Net cash expended in financing activities was 5.494 billion yen. (Net cash expended during the first half of theprevious consolidated fiscal year was 6.830 billion yen.) This was primarily due to payments of 2.881 billion yen forrepayment of long-term loans, a 1.806 billion yen payment of dividends, and a 492 million yen repayment of theconstruction cooperation fund.(3) Qualitative Information Concerning Forecasts for Consolidated Business ResultsDespite the trend of recovery centering mainly on exports, the business environment that will surround the NipponKayaku Group in the future remains uncertain. The Group is working to construct a strong profit structure that isable to adapt to changes in the business environment, and in order to expand profits, we are accelerating our entryinto new growth markets through means such as research and development related to materials for environmentaland energy-saving purposes. The forecasts for the third quarter and later periods assume an exchange rate of 85 yen per U.S. dollar.2. Other Information(1) Significant changes in subsidiaries during the first quarter No items to report(2) Adoption of simplified accounting processes or special accounting processes No items to report This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―3―
  • (3) Changes to accounting principles, procedures, and methods of presentation, or other items The “Accounting Standards for Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and “Guidance on Accounting Standards for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008) have applied since the first quarter of the current consolidated fiscal year. As a result, operating income and ordinary income for the first half of the current consolidated fiscal year have decreased by one million yen respectively, while first-half net income before income taxes and minority interests has decreased by 70 million yen. Also, the change in asset retirement obligations due to the commencement of application of said accounting standards is 102 million yen. (4) Important events affecting going concern assumption No items to report This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―4―
  • 3. Quarterly Consolidated Financial Statements(1) Consolidated Balance Sheets As of November 30, As of May 31, 2010 2010 Millions of yen Assets Current assets Cash and savings 19,854 17,427 Notes and accounts receivable 47,682 47,181 Marketable securities 14,795 18,512 Merchandise and products 16,268 16,342 Work in process 1,954 1,927 Raw materials and stores 7,045 6,886 Other 11,366 9,439 Allowance for doubtful receivables (55) (145) Total current assets 118,912 117,572 Fixed assets Tangible fixed assets Buildings and structures, net 31,042 31,800 Machinery and transport equipment, net 14,661 15,957 Other, net 14,723 13,879 Total tangible fixed assets 60,427 61,637 Intangible fixed assets Goodwill 1,623 1,835 Other 2,373 2,442 Total intangible fixed assets 3,997 4,277 Investments and other assets Investment securities 13,475 13,896 Other 4,603 4,944 Allowance for doubtful receivables (125) (110) Total investments and other assets 17,952 18,730 Total fixed assets 82,378 84,646 Deferred assets 338 422 Total assets 201,629 202,641 This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―5―
  • As of November 30, As of May 31, 2010 2010 Millions of yenLiabilities Current liabilities Notes and accounts payable 14,723 14,531 Short-term loans payables 11,670 12,147 Corporation tax payable 3,337 2,055 Other 13,850 14,213 Total current liabilities 43,582 42,947 Fixed liabilities Long-term loans payable 8,640 11,672 Allowance for employee retirement benefits 4,011 4,584 Negative goodwill 567 643 Other 14,553 14,964 Total fixed liabilities 27,773 31,864 Total liabilities 71,355 74,812Net assets Shareholders’ equity Common stock 14,932 14,932 Additional paid-in capital 17,265 17,264 Retained earnings 91,608 88,613 Treasury stock (744) (713) Total shareholders’ equity 123,062 120,097 Valuation and translation adjustments Net unrealized gains on other securities 563 460 Translation adjustments (901) (116) Total valuation and translation adjustments (338) 343 Minority interests 7,549 7,387 Total net assets 130,273 127,829Total liabilities and net assets 201,629 202,641 This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―6―
  • (2) Consolidated Profit and Loss Statement First half of fiscal year First half of fiscal year ended May 31, 2010 ending May 31, 2011 Millions of yen Net sales 69,603 73,907 Cost of sales 42,063 43,997 Gross profit on sales 27,540 29,910 Selling, general and administrative expenses 20,184 19,343 Operating income 7,355 10,566 Non-operating income Interest income 91 51 Dividend income 215 198 Amortization of negative goodwill 39 76 Equity in earnings of affiliates 69 101 Other miscellaneous income 359 716 Total non-operating income 775 1,144 Non-operating expenses Interest expense 254 185 Exchange loss 822 1,321 Other miscellaneous losses 242 276 Total non-operating expenses 1,318 1,783 Ordinary income 6,811 9,927 Extraordinary income Income on sale of fixed assets 37 8 Total extraordinary income 37 8 Extraordinary loss Fixed asset disposal loss 177 274 Loss on valuation of investment securities 112 676 Loss on adjustment for changes of accounting – 68 standard for asset retirement obligations Total extraordinary loss 290 1,018 First-half net income before income taxes 6,558 8,918 and minority interest Corporation tax, inhabitant tax, and business tax 2,565 3,172 Income taxes deferred 237 525 Total income taxes 2,803 3,698 First-half net income before minority interests in income – 5,219 Minority interests in income 72 410 First-half net income 3,682 4,809 This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―7―
  • (3) Consolidated Statement of Cash Flows First half of fiscal year First half of fiscal year ended May 31, 2010 ending May 31, 2011 Millions of yen Cash flows from operating activities First-half net income before income taxes 6,558 8,918 and minority interests Depreciation and amortization 4,951 4,283 Increase (decrease) in reserve allowance (214) (1,007) Interest and dividend income (306) (250) Interest expense 254 185 Equity in (earnings) losses of affiliates (69) (101) Loss (gain) on sale of tangible fixed assets (37) (8) Loss (gain) on disposal of tangible fixed assets 177 274 Loss on adjustment for changes of accounting – 68 standard for asset retirement obligations Loss (gain) on sale of investment securities – (2) Loss (gain) on valuation of investment securities 112 676 (Increase) decrease in notes and accounts receivable (3,077) (995) (Increase) decrease in inventory assets 103 (516) (Increase) decrease in prepaid expenses (210) 34 (Increase) decrease in accrued revenue 614 191 Decrease (increase) in advance payments – (2,509) Increase (decrease) in notes and accounts payable 1,711 538 Increase (decrease) in accrued amount payable 715 (358) Increase (decrease) in accrued expenses 71 (334) Other 919 720 Subtotal 12,274 9,805 Interest and dividends received 334 281 Interest paid (271) (184) Income taxes paid (2,640) (1,804) Income taxes refund 334 7 Net cash provided by operating activities 10,031 8,105 This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―8―
  • First quarter of fiscal First quarter of fiscal year ended May 31, year ending May 31, 2010 2011 Millions of yenCash flows from investing activities Purchase of time deposits (57) (0) Proceeds from repayment of time deposits 53 0 Purchase of tangible fixed assets (3,561) (3,128) Proceeds from sales of tangible fixed assets 124 18 Purchase of intangible fixed assets (53) (253) Purchase of marketable securities (1,499) (1,998) Proceeds from redemption of securities 499 1,998 Purchase of investment securities (47) – Proceeds from sales of investment securities – 12 Payments for long-term prepaid expenses (29) (31) Removal loss of fixed assets (103) (284) Purchase of investments in subsidiaries (66) – (Increase) decrease in short-term loans receivable (125) 86 Other (28) 112 Net cash used in investing activities (4,895) (3,467)Cash flows from financing activities Purchase of treasury stock of subsidiaries in (3,443) – consolidation Increase (decrease) in short-term loans payable, net 84 (173) Proceeds from long-term loans payable 1,500 – Repayment of long-term loans (2,449) (2,881) Repayment of construction cooperation fund (492) (492) Dividends paid (1,815) (1,806) Dividends paid to minority shareholders (159) (98) Other (54) (41) Net cash provided by financing activities (6,830) (5,494)Effect of exchange rate changes on cash (251) (425)and cash equivalentsIncrease (decrease) in cash and cash equivalents (1,945) (1,282)Cash and cash equivalents at beginning of year 35,061 35,813Cash and cash equivalents at end of year 33,115 34,530 This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―9―
  • (4) Notes concerning going concern assumption No items to report(5) Segment informationa. Segment information by type of businessFirst half of the previous consolidated fiscal year (June 1, 2009 – November 30, 2009) Functional Pharma- Safety Other Eliminations chemicals ceuticals systems Total Consolidated businesses and corporate business business business Millions of yen Sales 32,021 25,116 8,354 4,111 69,603 – 69,603 (1) Sales to third parties (2) Intersegment sales and transfers 29 7 – 13 49 (49) – Total 32,050 25,123 8,354 4,125 69,653 (49) 69,603 Operating income (loss) 4,046 4,895 (108) 1,010 9,843 (2,488) 7,355 Note 1: The business segments are based on the sales summary classification. 2: Primary products in each segment Business segment Sales segment Primary products Functional Functional Epoxy resins, Epoxy resin curers, Combustion retardants for synthetic chemicals business materials resins, UV-curing type resins, Polyimide/polyamide resins, Advanced chemicals Electronic Components for LCD displays, LCD projector components, materials Components for X-ray analysis systems, Functional films, Resins for optical disks, Sealants for LCD displays, Functional colors, Colors for inkjet printers Catalysts Catalysts for the production of acrylic acid and methacrylic acid, Plant licensing business Color chemicals Disperse dyes, Cationic dyes, Acidic dyes, Reactive dyes, Direct dyes, Sulfur dyes, Fluorescent dyes, Functional chemicals for textiles and paper, Special dyes for non-textile applications Pharmaceuticals Pharmaceuticals Anti-cancer agents, Neurological agents, Circulatory system agents, business Digestive system agents, Metabolic agents, Antibiotics, Anti-inflammatory analgesic agents, Radiopharmaceuticals, Medical devices, Pharmaceutical API and intermediates, Food and food additives, Preservatives for food quality, Veterinary pharmaceuticals, Animal feedstuffs and feedstuff additives, Diagnostics Safety systems Safety systems Airbag inflators, Micro gas generators for seatbelt pretensioners, business Squibs Other businesses Others Insecticides, Herbicides, Fungicides, Acaricide, Public hygiene insecticides, Soil disinfectant, Animal repellents, Biological pesticides, Real estate business This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―10―
  • b. Information by geographic segmentFirst half of the previous consolidated fiscal year (June 1, 2009 – November 30, 2009) Japan Other regions Total Eliminations Consolidated and corporate Millions of yen Sales (1) Sales to third parties 60,854 8,748 69,603 – 69,603 (2) Intersegment sales and transfers 2,554 2,588 5,142 (5,142) – Total 63,408 11,337 74,746 (5,142) 69,603 Operating income (loss) 9,774 111 9,886 (2,531) 7,355 Note 1: The country and region segments are based on geographic proximity. 2: Primary countries and regions in segments other than “Japan” Other regions: USA, China, Czech Republicc. Overseas salesFirst half of the previous consolidated fiscal year (June 1, 2009 – November 30, 2009) Asia Other regions TotalI. Overseas sales (millions of yen) 13,901 8,690 22,592II. Consolidated sales (millions of yen) – – 69,603III. Percentage of consolidated sales occupied by overseas sales 20.0 12.5 32.5 Note 1: The country and region segments are based on geographic proximity. 2: Primary countries and regions in each segment (1) Asia: China, Hong Kong, Taiwan (2) Other regions: USA, Germany 3: Overseas sales are the sales by Nippon Kayaku and its consolidated subsidiaries in countries and regions outside of Japan.Segment information(Additional information)The “Revised accounting standard for disclosures about Segments of an Enterprise and Related Information” (ASBJstatements No. 17, March 27, 2009) and “Guidance on Accounting Disclosures about Standard for Disclosures aboutSegments of an Enterprise and Related Information” (ASBJ Guidance No. 20, March 21, 2008) have applied sincethe first quarter of the current consolidated fiscal year.[1] Summary of reportable segmentsThe reportable segments of the Nippon Kayaku Group are structural units of the Group for which separate financialinformation can be acquired. These segments are subject to be examined periodically by the Board of Directors inorder to evaluate business results and make decisions on the allocation of business resources. Groups are established by product for the reportable segments within the Nippon Kayaku Group. Each groupdevelops comprehensive domestic and overseas strategies for the products it handles, and introduces businessactivities accordingly. Therefore, the Nippon Kayaku Group primarily consists of product and service-specific segments that are basedon business divisions. The “functional chemicals business,” “pharmaceuticals business,” and “safety systemsbusiness” are three reportable segments. The types of primary products and services provided by the reportable segments are shown in the table below. This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―11―
  • Reportable segment Sales segment Primary products Functional Functional Epoxy resins, Epoxy resin curers, Combustion retardants for synthetic chemicals business materials resins, UV-curing type resins, Polyimide/polyamide resins, Advanced chemicals Electronic Components for LCD displays, LCD projector components, materials Components for X-ray analysis systems, Functional films, Resins for optical disks, Sealants for LCD displays, Resist for MEMS, Functional colors, Colors for inkjet printers, Thermal developers Catalysts Catalysts for the production of acrylic acid and methacrylic acid, Plant licensing business Color chemicals Disperse dyes, Cationic dyes, Acidic dyes, Reactive dyes, Direct dyes, Sulfur dyes, Fluorescent dyes, Functional chemicals for textiles and paper, Special dyes for non-textile applications Pharmaceuticals Pharmaceuticals Anti-cancer agents, Neurological agents, Circulatory system agents, business Digestive system agents, Vitamin compounds and other metabolic agents, Radiopharmaceuticals, Chemotherapeutics, Anti-inflammatory analgesic agents, In vitro diagnostic pharmaceuticals, Medical devices, Pharmaceutical API and intermediates, Food and food additives, Preservatives for food quality Safety systems Safety systems Airbag inflators, Micro gas generators for seatbelt pretensioners, Squibs business[2] Information on sales and income (loss) by reportable segmentFirst half of the current consolidated fiscal year (June 1, 2010 – November 30, 2010) Reportable segments Adjust- Consoli- Others Functional Pharma- Safety Total ments dated (Note 1) chemicals ceuticals systems Total (Note 2) (Note 3) business business business Millions of yen Sales 35,846 24,861 9,326 70,035 3,872 73,907 – 73,907 Sales to third parties Intersegment sales 12 14 – 27 13 41 (41) - and transfers Total 35,859 24,876 9,326 70,063 3,885 73,949 (41) 73,907 Segment income 6,165 5,206 733 12,105 981 13,087 (2,520) 10,566Note 1: “Others” indicates business segments that are not included in the reportable segments, including the agrochemicals business and real estate business.Note 2: The -2,520 million yen adjustment to segment income includes a -7 million yen elimination of intersegment transactions and -2,513 million yen corporate expense not allocated to the reportable segments. The corporate expense is mainly a general and administrative expense that is not attributed to the reportable segments.Note 3: Adjustments to segment income are made along with operating income from the quarterly consolidated profit and loss statement.(6) Notes in case of significant changes in the amount of shareholders’ equity No items to report This document is an English translation of parts of the Japanese-language original. All financial information has been prepared in accordance with generally accepted accounting principles in Japan. ―12―