2016
Annual Report
YKK GROUP
for the year ended March 31, 2016
CONTENTS
Messages from the Chairman
1
Messages from the President
2
Our Business: Fastening Products
3
Our Business: Architectural Products
4
Our Business: Machinery & Engineering
5
Working Cooperatively with Communities
5
Financial Highlights
6
Key Financial Data and Trends
7
Overview of Business Performance
8
Issues and Outlook for the Fiscal Year Ahead
10
Business and Other Risks
11
Research and Development Activities
12
Corporate Governance
14
Consolidated Financial Statements
Consolidated Balance Sheets
20
Consolidated Statements of Income
22
Consolidated Statements of Comprehensive Income
23
Consolidated Statements of Changes in Net Assets
24
Consolidated Statements of Cash Flows
26
Notes to the Consolidated Financial Statements
27
Corporate Profile
33
2016 Annual Report
Messages from the Chairman
Opening New Horizons for Tomorrow through
Technological Development and Innovation
- Contributing to Society as a Creative Manufacturer of Value The Never-ending Pursuit of the Culture of Monozukuri*
The YKK Group has consistently taken on new challenges in
the spirit of our “Cycle of Goodness” corporate philosophy
and our management principle: “YKK seeks corporate value
of higher significance.” In fact, we have built the cornerstone
of our current businesses by addressing one challenge after
another. Even now, with our core fastening products and
architectural products businesses thriving in 71 countries and
regions all over the world, our basic stance remains the same.
Our business climate is now entering an era of dramatic,
global change. I believe we need to embrace these
transformations as opportunities, tackling new challenges
more boldly than ever before.
As the Fastening Products Group works to become more
cost-competitive and responsive, the Architectural Products
Business Group is generating new value in the architecture
industry, for everything from residential spaces to high-rise
buildings. By further bolstering our technological development
and innovation, we will strive to meet a diversifying range of
needs and give life to new value through the pursuit of the
spirit of monozukuri in our many manufacturing initiatives.
We will also continue to reduce our environmental impact
and protect nature and biodiversity across all of our
businesses. Contributing to the development of a sustainable
society is our guiding principle; carrying it out at a high level
is our responsibility for the future.
Tadahiro Yoshida
Chairman & CEO
YKK Corporation
Chairman & CEO
YKK AP Inc.
*The art, science and craft of making things with a dedication to continuous improvement, as well as an emphasis on the thing that is being made and the act of
making.
1
Messages from the President
Message from YKK Corporation President
Masayuki Sarumaru
Message from YKK AP President
Hidemitsu Hori
Growth Through Taking on New Challenges,
Product Appeal and Proposals Supported by
Technology: The Three Keys to Success
Pleasing customers with our ability to offer solutions
and products with strong appeal.
YKK seeks to achieve growth by continually taking on new
challenges. To ensure that we can achieve success in a market
environment rapidly changing at an unprecedented pace,
the most important challenge for us is the development of
innovative technology.
In order to open up new fields for YKK, we need not only to
reinforce the technical capabilities we have cultivated over the
years, but also to build on a stream of fresh, visionary ideas.
I believe that further developing YKK’s technical capabilities
through innovation will be the driving force to stay ahead of
the competition.
Building a solid foundation based on sound capabilities in
technology enhances YKK’s product appeal and proposal
capabilities. Going forward, there will be an even greater
need to see markets from a global perspective as well as
develop new business models. We will continue to provide
products that precisely meet the ever-changing, diversifying
needs of our customers.
With a continuous awareness of the importance of
“execution” and “speed” based on our shared core values,*
we will vigorously push forward to achieve success in our
many and varied endeavors.
*YKK Core Values
◦ Do not fear failure, experience builds success.
Create opportunities for employees.
◦ Insist on quality in everything.
◦ Build trust, transparency and respect.
At YKK AP, we create comfortable living spaces using our
windows and doors. And with our building Facades, we help
add beauty to the urban landscape. YKK AP stands at the
forefront of efforts to make daily living and urban spaces more
comfortable.
Under the objectives of our Fourth Mid-Term Management
Plan, starting from April 2013, YKK AP will work to achieve
sustained growth of our AP business by relying on our
strengths as a solution-oriented company and one that can
create products with strong consumer appeal. To maximize
product appeal, we must remember what it means to be a
manufacturer, and always try to see our products through the
eyes of potential users. To do this, we will work to enhance
product appeal by improving speed of development, quality,
and cost competitiveness. We also want to boost our ability
to suggest the right products based on the customer’s specific
needs because we want those who use our products to be
both happy and impressed.
For overseas markets, we are working to develop products
that are a good fit for the climates and natural features of
those countries. YKK AP will maintain its commitment to
community-based expansion, with the idea that products
manufactured in a particular country or region are best used
by the people who live there. Meanwhile, in Japan, demand
for new housing is trending downward and efforts to conserve
resources are on the rise, meaning we must do more to make
the best use of existing housing stock. YKK AP is working
with building material distributors around Japan to set up
retail outlets (“MADO SHOP”) and promote replacement
of old, inferior windows. The energy-related challenges we
face are not getting any easier, which is one reason that
energy conservation in the home has become such a key
concern. YKK AP is doing its part to help create eco-friendly,
comfortable living spaces through focused efforts to develop
products for the home and office that block heat, insulate or
promote ventilation to help users cut their energy usage. We
can also offer suggestions for incorporating our highly energyefficient windows and auxiliary products into your space.
YKK AP will maintain its commitment to maximize the
performance of architectural spaces. We’re working to
conserve energy by building better windows, helping to
promote a low-carbon economy and a better society.
Masayuki Sarumaru
President
YKK Corporation
2
Hidemitsu Hori
President
YKK AP Inc.
2016 Annual Report
Our Business: Fastening Products
Achieving Quantitative Expansion through
Further Sales Expansion and Supply
Capability Reinforcement
The Fastening Products Group was able to achieve solid
results in 2015. As garment manufacturing shifted from China
to other parts of Asia, we steadily built a production base in
Asia by enhancing our supply capabilities through aggressive
investment in the region, and succeeded in capturing the
change in demand. At the same time, our sales expansion
efforts, such as efforts to obtain the designation of global
buyers and strengthening approaches toward importers
handling apparel for volume retailer, were also effective. What
is more, the second phase expansion of the YKK Vietnam
Co., Ltd. Nhon Trach Plant, which is slated to be a major
production base to cater to export processors that deal mainly
with sports apparel, has been completed, and the expanded
facilities have been in operation since December 2015.
We will carry out quantitative expansion in 2016 by
promoting the expansion of target volume retailers in Japan,
Europe and the U.S.; further reinforcement of proposal efforts
by the Global Marketing Group; streamlining operations
in China; and continued
aggressive investment in
growing Asian markets. We
will steadily carry out the
finishing touches toward
the sale of 10 billion
zippers.
London Showroom Opens as a Source for
YKK Information
The YKK London Showroom opened in December 2015
in the city’s Shoreditch district. The showroom displays the
latest YKK fastening product collections and disseminates
information to the fashion industry. At the same time, on
sale at the showroom are EXCELLA® zippers as well as snaps
and buttons, with a service and equipment available for the
attachment of snaps and buttons.
The showroom is also involved in the vitalization of the
fashion industry by serving as a resource for students, who
are the industry’s future. Also shown are works from the
International Talent Support contest for students, which YKK
has been supporting since 2005.
The development of products with excellent design, such
as the EXCELLA® Blade, is being strengthened in the EMEA*
region. The EXCELLA® Blade was a 2015 winner of the Red
Dot Award in Product
Design and, in 2016, the
German Design Award. In
addition to strengthening
its function as a source of
information, the London
Showroom will respond
proactively to customer
needs in the high-fashion
YKK Europe Ltd.’s YKK London Showroom
field.
*EMEA: Europe, the Middle East and Africa
YKK Vietnam Co., Ltd.’s Nhon Trach Plant
Strengthening Development Bases to Enable
Swift Response to Customer Requests
YKK Furumido Plant was remodeled as a YKK R&D Center,
which will serve as the base for the accumulation and
exchange of technology and the nurturing of development
personnel. Meanwhile, a new building was completed at the
YKK Snap Fasteners Japan Co., Ltd.’s Ageo Plant in March
2016 as the base for the production and development of
snaps and buttons. We aim for a structure that enables
even speedier development and commercialization, from
marketing to shipment, through the continuous development
of products and production lines. YKK Fastening’s
development bases are currently situated in 20 locations
around the world with 698 employed. We plan to increase
this to 22 locations and approximately 780 employees by the
end of 2016. We will respond
swiftly to customer requests
by creating a foundation for
the further strengthening
of our development bases,
and carrying out product
development that is closely
YKK R&D Center (within the Kurobe
associated with regions.
Furumido Plant)
Environmental Responsiveness and the
Utilization of Renewable Energy
The Fastening Products Group perceives measures against
global warming as a societal challenge to be dealt with, and
is taking energy conservation measures as well as promoting
increased use of renewable energy. For example, a solar
generation system was installed at YKK (U.S.A.) Inc.’s Anaheim
Plant to generate power for consumption at the plant. In
operation since February 2016, the 521kW system will not
only meet almost all of the Anaheim Plant’s power needs, but
is also expected to reduce an approximate 900 tons of CO2
emissions per year. Meanwhile, a hybrid power-generation
system was installed at YKK Bangladesh Pte Ltd.’s plant. It
combines the use of solar energy and diesel to generate
power, with solar power generation prioritized during fair
weather. This system reduces fuel use by 90,000 liters and
CO2 emissions by 265 tons
on an annual basis. Going
forward, YKK will continue
to give consideration to
protecting the natural
environment of the regions
in which it operates
and promote the use of
Solar panels on the roof of YKK (U.S.A.)
renewable energy.
Inc.’s Anaheim Plant
3
Our Business: Architectural Products
Further Promotion of Vinyl Windows in Order
to Become a Leading Window Manufacturer
To respond to mandatory energy-conservation standards
that were put in place in 2013, and the increased demand
for highly insulating, energy-efficient windows through the
spread of zero-energy houses, YKK AP released the “APW
430 two action windows,” (tilt and turn windows) which
can be opened in two ways—tilted from the top or swung
inward from the side. Also released was the APW 431
sliding patio door which utilizes an original mechanism
developed by AP that allows it to be opened and closed with
very little force. The launch of these products offers further
variations in the vinyl window lineup. It is now possible to
use high-performance vinyl windows in all areas of a house.
Meanwhile, the APW Forum, being held since 2012, was held
at 21 venues across Japan.
These seminars, given by
a broad range of lecturers,
are continuing to promote
the understanding and
spread of the use of vinyl
windows.
Further Expansion of the Overseas
Architectural Product Business by Leveraging
Technology and Product Appeal
We established YKK AP (Thailand) Co., Ltd. in April 2015
as a part of our effort to bolster our proposal capability in
the ASEAN region through our core product, NEXTA. The
subsidiary will supply windows and doors for apartments
and detached houses, contributing to the improvement of
the housing environment in Thailand, which is seeing rapid
growth.
YKK AP also showcased its technology to the world by having
exhibits at the 13th China International Curtain Wall Expo
(Shanghai) and Fensterbau
Frontale 2016 (Nuremberg,
Germany) as the only
Japanese building-products
manufacturer in both cases.
YKK AP Booth at the Fensterbau Frontale
2016
APW 431 sliding patio door
Cultivating a New Market amid the Ongoing
Growth of the Remodeling Market
In reaction to the projected decrease in housing starts in the
coming years, we are proceeding with the development of
new, industry-leading products and construction methods for
the remodeling market, which is expected to grow in turn.
It includes “Kantan Door Remo (easy door remodeling),”
a product that simplifies the replacement of doors, and
SYSTEMA 31Br, a new window refurbishment method for
non-residential buildings.
In 2015, we entered the renovation field and are cultivating
a new market. Roughly 500 participants from renovation
companies, general
contractors, and
architectural design
offices attended our first
Renovation Forum 2015,
where we promoted the
importance of windows
and other openings in
renovations.
Renovation Forum 2015 (Tokyo venue)
4
YKK AP’s Product Appeal Earns High Regard
YKK AP’s product appeal earned high recognition from
various circles. The sliding louver “Open Louver” won two
awards: the Special Prize for Building Materials and Facilities
Grand Prize 2015 (awards given to superior building materials
and facilities; hosted by Nikkei Architecture and Nikkei Home
Builder magazines), and the Chairperson’s Award, EcoProducts Award Steering Committee for the 12th Eco Products
Awards (recognizes
products and services
that give consideration
toward the reduction of
environmental impact).
Meanwhile, the exterior
product series Lucias won
the Good Design Award
2015.
Open Louver
2016 Annual Report
Our Business: Machinery & Engineering
Enhancement of the Competitive Edge of
Group Businesses through the Reinforcement
of Engineering Development Capabilities
The YKK Group has achieved growth globally through an
integrated production system that encompasses materials,
manufacturing facilities and products.
The Machinery and Engineering Group supplies specialized
machinery to YKK Group plants in Japan as well as overseas.
It develops materials, machinery and equipment as well as
manufactures machine parts, with emphasis on its policy to
develop machinery and equipment that are adapted to the
manufacturing sites of the Fastening Products Group and the
Architectural Products Business Group.
To reinforce the elemental technology required to supply
specialized machinery, the Machinery
and Engineering Group will further
develop its in-house development of
technology in the medium- to long-term,
while also promoting the adoption of
external technology through collaboration
with academia as well as other
companies.
For each employee to think independently
and continue evolving
Full-scale operation began in April 2016 at the Slide Fastener
Machine Parts Plant which was completed in November 2015.
The Machinery & Engineering Group, which plays a role as
YKK Group’s technological development function, will continue
to stay up-to-date with advances in future manufacturing,
with Kurobe as the center of activities where employees will
think for themselves for continuous evolution. The new Slide
Fastener Machine Parts Plant will be designed for flexibility. It
will feature automated lines that look five to ten years ahead
into the future and can be improved, updated and evolved. At
the same time, advanced temperature, humidity and vibration
control that ensures stable manufacturing of precision machinery
parts will be realized. Active use of daylight for an environment
where employees can work in comfort will be introduced, and
the Group will tackle the
challenge of building a
precision machinery plant
with windows.
The aim is to shorten
production lead times by
50% and cut production
costs by 20 to 30 percent (as
compared with 2012 figures)
through operation of the new Slide Fastener Machine Parts Plant
plant.
Working Cooperatively with Communities
The In-House Tampopo Child Center Opens
Tampopo Child Center, the first such facility at a YKK business
location, opened in Passive Town (Kurobe, Toyama prefecture).
The YKK Group recognizes that in addition to preparing an
environment that enables employees to work for many years,
reforming our awareness related to working styles is also a
major challenge. The Group offers various related support
systems. They include those that facilitate the early return to
work by mothers after they have given childbirth and those
that offer a wide variety of working styles that help prevent
childrearing from becoming a disadvantage for workers. The
new daycare center will serve as a reassuring facility that can
also be used by the families of employees relocated to Kurobe
with the transfer of a
portion of the headquarters
functions there. The Group
will continue to prepare an
environment that meets the
needs of society and allows
its employees to work with
a peace of mind.
Tampopo Child Center exterior
<Origin of the Name and Symbol>
Tampopo, or dandelions, take root firmly and thrive anywhere,
blooming beautiful yellow flowers. Once they go to seed, the seeds
fly away widely and take root at a new location,
where they again bloom. The child center was named
Tampopo as a wish for the healthy growth of children
and their futures with the world as their stage.
Supporting of the festival, Festa e Exposição
do Kaki Fuyu in Piedade, Brazil
Piedade is a small municipality located about 150 km from
Sao Paolo (50 km from Sorocaba), which is home to many
Japanese-Brazilians. Settlement there began in 1935, and
the growing of Fuyu persimmons (Kaki in Japanese) began
in 1955. The wide difference in daytime and nighttime
temperatures in the area is suitable for growing persimmons
with high sugar content. Piedade is gradually starting to gain
prominence as a persimmon-growing region.
Since the beginning, YKK Do Brasil LTDA. has been
Supporting of festival, Festa e Exposição do Kaki Fuyu, which
is held every May. This year marked the 15th time that the
festival was held. It has
become a major event
visited by many Brazilian
tourists from Sao Paolo and
neighboring areas.
The YKK Group will
continue its activities
that link Japan and Brazil
by cooperating with
Brazil’s socioeconomic
development.
Award winners at the Festa e Exposição
do Kaki Fuyu
5
Financial Highlights
Net Sales
Operating Income
Billion yen
1,000
Billion yen
80
800
741.9
721.0
696.9
60
Operating Income Margin (%)
9.3
9.3
10.0
69.1
66.7
63.0
34.9
20
200
0
2013
0
2016
2015
2014
Total Assets/Net Assets
Total Assets
513.5
Net Assets
Billion yen
120
2014
Cash Flows from Operating Activities
954.0
946.2
883.3
471.2
2013
2.5
2015
2016
0.0
Cash Flows from Operating Activities
Billion yen
1,200
788.4
7.5
5.0
40
400
600
Operating Income
9.0
6.0
576.9
600
900
For years ended March 31
80
586.6
561.5
40
300
0
0
-40
Net Increase (Decrease) in Cash and Cash Equivalents
85.1
91.2
26.6
30.4
101.7
67.2
19.6
-6.4
2013
2014
2016
2015
Sales/Operating Income of Fastening Products
Sales (Billion yen)
400
288.6
300
224.2
49.8
200
100
0
Operating Income (Billion yen)
100
326.6
313.2
60.6
57.4
50
Sales (Billion yen)
600
450
300
150
2014
2016
2015
0
2014
2015
2016
Sales/Operating Income of Architectural Products
345.2
28.7
2013
2013
0
Operating Income (Billion yen)
60
403.3
402.4
29.4
408.2
25.1
24.3
18.6
2013
2014
2015
2016
Net Sales Breakdown by Region (Year ended March 31, 2016)
53.0
billion yen
58.8
109.4
billion yen
billion yen
North and Central America
Japan
EMEA
China
Asia
123.0
billion yen
Notes:
1. EMEA: Europe, Middle East and Africa
2. Sales are classified by country or region based on the location of customers.
6
388.3
billion yen
South America
9.1
billion yen
30
0
2016 Annual Report
Key Financial Data and Trends
(1) Consolidated financial data
Fiscal year
2012
2013
2014
2015
2016
March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016
Year ended
Net sales
Millions of yen
544,434
576,965
696,929
721,037
741,935
Ordinary income
Millions of yen
26,681
33,681
66,022
69,720
70,988
Net income
attributable to
owners of parent
Millions of yen
16,334
32,692
44,908
46,978
44,646
Comprehensive
income
Millions of yen
14,336
70,777
70,447
81,416
(20,695)
Net assets
Millions of yen
403,169
471,271
513,543
586,664
561,547
Total assets
Millions of yen
715,364
788,440
883,336
946,283
954,060
Net assets per share
Yen
328,395
384,171
417,986
477,438
456,991
Basic net income
per share
Yen
13,622
27,265
37,453
39,181
37,237
Diluted net income
per share
Yen
–
–
–
–
–
Equity ratio
%
55.0
58.4
56.7
60.5
57.4
Return on equity
%
4.2
7.7
9.3
8.8
8.0
Price earnings ratio
Times
–
–
–
–
–
Cash flows from
operating activities
Millions of yen
32,076
67,214
85,186
91,254
101,727
Cash flows from
investing activities
Millions of yen
(39,667)
(44,013)
(60,708)
(65,976)
(95,252)
Cash flows from
financing activities
Millions of yen
6,636
(11,719)
(3,784)
(4,379)
(4,359)
Cash and cash
equivalents
at the end of period
Millions of yen
96,891
116,510
143,131
173,558
167,229
Employees
The numbers in
square brackets
represent the
average number
of part-time
employees not
included in the
numbers of regular
employees.
Number
37,719
[7,127]
38,235
[7,123]
40,306
[6,828]
42,154
[5,738]
44,250
[5,390]
Notes:
1. Net sales are presented exclusive of consumption tax.
2. Diluted net income per share is not presented because the Company had no dilutive securities.
3. Price earnings ratio is not presented because the stock is not listed.
4. The scope of employees has changed from the year ended March 31, 2014, as the number of employees includes contractors, senior employees and other applicable
employees, which were previously included under the average number of part-time employees.
5. Effective from the current fiscal year, the former “Net income” has been presented as “Net income attributable to owners of parent” by applying accounting
standards such as ASBJ Statement No. 21, “Revised Accounting Standard for Business Combinations” (released on September 13, 2013).
*This document includes excerpts translated from the Yukashoken-Houkokusho filed with the Financial Services Agency, on which Ernst & Young ShinNihon LLC
expressed an unqualified audit opinion.
7
Overview of Business Performance
(1) Operating results
(Economic environment)
The Japanese economy recovered moderately in the
current fiscal year as corporate earnings and the job
market improved on the back of the government’s
fiscal policy and monetary easing by the Bank of
Japan.
Despite being dragged by weakness in emerging
Asian economies including China and lower oil
prices, the global economy grew moderately overall
as the US and Eurozone economies were strong.
(Consolidated performance in the current fiscal year)
Amidst these economic conditions, the YKK Group
(“the Group”) has maintained a concerted effort
towards implementation of its Fourth Mid-Term
Management Plan, which began in FY2014. YKK
Corporation (“the Company”), which includes the
Fastening Products Group and the Machinery and
Engineering Group, has adopted the approach
of “Evolution and technological innovation —
evolution of existing business & innovation for
increased sales volume” while YKK AP Inc., which
mainly focuses on the AP business, has adopted
the approach of “Product appeal and proposal
capabilities for sustainable growth of the AP Group”
as their respective Fourth Mid-Term Business Policy.
FY2016 was seen as the year to confirm the effect
and to generate outcomes from the preparatory
measures carried out during the first half of the
Fourth Mid-Term Management Plan, and to make
strenuous efforts to address the resolution of any
areas which did not align with the plan.
As a result, in the current fiscal year, net sales
increased 2.9% year-on-year to 741,935 million
yen, operating income increased by 3.6% yearon-year to 69,164 million yen, ordinary income
increased 1.8% year-on-year to 70,988 million yen
and net income attributable to owners of parent
decreased 5.0% year-on-year to 44,646 million yen
on a consolidated basis.
Net sales and operating income per business are
summarized as follows:
1 ) Fastening Products Group
Regarding the business environment
surrounding the Fastening Products Group,
the apparel industry expanded moderately
along with moderate economic growth led by
the US and Europe, but at the same time, the
pressure from the market to reduce product
prices reflecting lower prices in raw materials
including copper and zinc increased. In China,
although the sewn products market for export
business has contracted due to acceleration
in the migration of apparel manufacturing to
other Asian countries, the Chinese market is
expanding as domestic demand has grown on
steady individual consumption despite slowing
8
economic growth. Given this environment,
both the revenue and profits of the Fastening
Products Group increased as a result of
successful measures to win new customers
among volume retailers mainly in Japan, the
US and Europe, expand sales in the domestic
Chinese market and strengthen its supply
platform including the launch of copper alloy
wire and slider plants in Indonesia.
On a regional basis, sales in South America
declined due to the effects of softness in the
Brazilian economy, as well as in the EMEA
(Europe, the Middle East and Africa), where
stagnation in the Russian economy reverberated
within the region and sales of luxury goods
slowed as China increased taxes on them. In
Japan, sales grew on brisk sales to American
luxury bag customers, but profits declined
despite the increase in revenue as the supply
of materials to group companies decreased. In
North and Central America, strengthened R&D
led sales to expand mainly on gains in new
demand in the automotive sector. In China,
competition was intense due to the migration
of apparel manufacturing to other regions, but
revenue increased through the development
of new domestic customers. In the Asia region
(excluding China and Japan), strong sales
growth was maintained by steadily capturing
demand arising from increased production by
customer and strengthening supply systems in
the region to capture the migration of apparel
manufacturing as a result of strengthening
supply systems.
As a result, the Fastening Products Group’s net
sales (including intersegment sales) increased
4.3% year-on-year to 326,605 million yen.
Although rising personnel expenses in China
and Asia, increased fixed manufacturing costs
accompanying efforts to enhance supply
capacities in the Asia region and the costs
of strengthening the manufacturing and
development base ahead of the next mid-term
management plan were factors in reduced
operating income, operating income increased
5.7% year-on-year to 60,699 million yen
as a result of increased sales volumes and
continuous cost-cutting measures in addition to
declining raw materials costs.
2 ) AP Group
Regarding the business environment
surrounding the AP business, in Japan, the
impact of the consumption tax hike in April
2014 abated, leading to recovery after the
recoil in demand in the prior fiscal year, with
approximately 920,000 housing starts between
April 2015 and March 2016 (a 4.6% year-onyear increase). Overseas, the US experienced
moderate economic growth while the downturn
2016 Annual Report
in the real estate markets in China and Asia
continued. Given this business environment,
the AP Group drove its business forward
with an eye toward the “Product appeal and
proposal capabilities for sustainable growth of
the AP Group” set out in the Fourth Mid-Term
Business Policy, which began in FY2014.
In terms of “Expansion of the window
business,” the group released the “APW430
two action windows (Tilt and turn windows)”
in October 2015 as a means of developing
its vinyl windows business, and continuously
made further improvements to its vinyl window
proposals. The group also started offering
glazed vinyl windows in urban regions. The
group conducted “APW Forum 2015” over
21 cities in Japan in order to brief housing
industry representatives on the importance of
thermal insulation performance of windows
in homes and promote sales. With regard to
“Enhancement of the remodeling market,”
the group introduced “Kantan Door Remo
(easy door remodeling)” in April 2015, aiming
to stimulate demand for door replacements.
Towards “Enhancement of the range of
exterior items,” the group was able to increase
sales by expanding coordination proposals
for home exterior products placed around
doors, windows, etc., through its “LUCIAS”
series. With regard to “Enhancement of the
commercial products business,” the group
aimed to strengthen its proposal-based sales
by introducing the “EXIMA 31 Balance
Way,” the “EXIMA 31 Wind Catch,” and
the “Front Door with ventilation function”
as energy conservation (thermal insulation
and ventilation) proposal products. In the
remodeling segment, the group introduced
the “SYSTEMA 31 Br,” which uses a new
construction method, to strengthen its nonresidential remodeling and aimed to stimulate
remodeling demand in both housing complexes
and non-residential buildings through proposals
differentiated on “products” and “construction
methods,” respectively.
As a result, AP Group’s net sales (including
intersegment sales) increased 1.4% year-onyear to 408,215 million yen on increased sales
volume in Japan. Operating income improved
by measures including cost reductions in
manufacturing and price revisions, but
eventually decreased 3.2% year-on-year to
24,329 million yen overall due to increased
materials prices caused by a weak yen and
the recognition of a large loss on overseas
properties.
to 70,070 million yen, while operating income
decreased by 56.6% year-on-year to 705
million yen.
(2) Cash flows
Cash and cash equivalents at the end of the current
fiscal year decreased 6,328 million yen from
the balance at the end of the prior fiscal year to
167,229 million yen. Cash flows from each activity
are summarized as follows:
(Cash flows from operating activities)
Net cash from operating activities increased
10,473 million yen year-on-year to 101,727
million yen. This was mainly because notes and
accounts payable-trade increased 1,377 million yen
compared to a 2,983 million yen decrease in the
prior fiscal year.
(Cash flows from investing activities)
Net cash used in investing activities increased
29,276 million yen from the prior fiscal year to
95,252 million yen in the current fiscal year.
This was mainly caused by a 29,476 million yen
increase from the prior fiscal year in acquisitions
of property, plant and equipment. Purchases of
property, plant and equipment totaled 85,126
million yen in the current fiscal year.
(Cash flows from financing activities)
Net cash used in financing activities was 4,359
million yen in the current fiscal year, a decrease of
20 million yen compared to the prior fiscal year.
This was mainly due to a decrease in net increase
(decrease) in short-term loans payable of 444
million yen.
3 ) Other businesses
Other businesses consist of the domestic
real estate business and aluminum smelting
business.
Net sales (including intersegment sales) in
other businesses increased 9.7% year-on-year
9
Issues and Outlook for the Fiscal Year Ahead
FY2017 is the final year of the Fourth Mid-Term
Management Plan set out in FY2014. The Fastening
Products Group and AP Group developed their FY2017
business plans respectively focusing on expansion of the
Asian sewn products market and trends in China’s sewn
products market for the Fastening Products Group, and the
recovering market for new housing in Japan and overseas
markets which are expected to continue to grow for the AP
Group.
The Company set that the three indispensable elements to
succeed amidst a competitive business environment and
achieve the Fourth Mid-Term Management Plan as “Product
appeal and proposal capabilities” and the “Technology
capability” which supports them. The Company set midterm targets of reaching “8% operating income margin”
and “5% ROA” based on the respective Mid-Term Business
Policy set out by the Company and YKK AP, and strove to
fully realize the preparatory measures carried out in the first
half of the Fourth Mid-Term Management Plan.
1 ) Fastening Products Group
In the Fastening Products Group, the Company set
its Fourth Mid-Term Business Policy with the goal
of “Development of a brand new strategy for growth
(towards sales of 10 billion units of zippers)” and will
enhance efforts to increase sales in expanding in Asian
and Chinese markets. Under this Policy, the group has
taken steps toward establishing sales and manufacturing
bases by shortening standard delivery times in the fast
fashion segment, enhancing supply capacities through
active investment in Asia and promoting the introduction
of streamlined facilities in China. In FY2017, the last year
of the Fourth Mid-Term Management Plan, the group will
strive for further growth by leveraging these bases as it
adopts the approaches of “Further increase in sales volume”
and “Improve product appeal.”
Specifically, “Further increase in sales volume” will involve
continuing to increase and enhance global marketing
personnel, strengthening ties with operating companies
and further expanding sales to volume retailers and major
apparel manufacturers in Japan, the US and Europe.
“Enhancing product range” will consist of developing and
enhancing the “YKK R&D Center” in Japan — a nexus of
technology — as a hub for the accumulation and exchange
of technology and the cultivation of R&D personnel in
an effort to enhance and strengthen R&D centers. The
Company will improve its customer proposal capabilities
through unprecedented enhancement of R&D centers
across the world with the Japan center at the core and
improvement of an R&D platform able to promptly serve
customer needs.
The Fastening Products Group is planning its largest-ever
investments for FY2017 with approximately 50% of overall
investments planned in the Asia region. In Asia, with the
completion of “construction of an extension to the YKK
VIETNAM CO., LTD. Nhon Trach plant” the group will
further reduce costs and enhance its supply capacities in
the jacket segment. Additionally, the group will invest
actively ahead of the Fifth Mid-Term Management Plan,
including investments in growth markets such as the “YKK
INDIA PVT. LTD. Haryana plant expansion” and the
“YKK BANGLADESH PTE. LTD. Dhaka plant expansion,”
as well as the “YKK TAIWAN CO., LTD. Chungli plant
restructuring,” which is aimed at streamlining.
2 ) AP Group
In FY2017, the final year of the Fourth Mid-Term
Management Plan, AP Group will accomplish the following
six priority steps, which are based on the Fourth Mid-Term
10
Business Policy started from FY2014 (“Product appeal
and proposal capabilities for sustainable growth of the
AP Group”) under any business conditions, while flexibly
responding to changes in the business environment:
(1) “Expanding the window business,” (2) “Enhancing
remodeling market,” (3) “Enhancing the range of exterior
items,” (4) “Strengthening the Commercial Products
Business,” (5) “Expanding the overseas AP business,”
and (6) “Establishing the YKK AP FACADE brand,” and
thus establish a strong business foundation. In terms of
“Expanding the window business,” the group will seek
to differentiate itself by enhancing product appeal and
developing its supply systems, mainly in high thermal
insulation performance vinyl windows. In addition,
the group will strive to raise awareness about window
insulation performance, further improve visibility of
vinyl windows and expand its operations by holding the
“APW Forum 2016” in 50 cities across Japan. Towards
“Enhancing the remodeling market,” the group will release
“Kantan Mado Remo (easy window remodeling),” which
uses non-sealing cover construction, a first in the industry.
This will dovetail with “Kantan Door Remo (easy door
remodeling)” released in April 2015 to create new value by
enabling a comfortable lifestyle through easy remodeling.
Regarding “Enhancing the range of exterior items,” the
group will continue to enhance its product range through
coordination proposals covering the range from windows
and doors to exterior products, and improve the variety of
products in its “LUCIAS” and “XTIARA” series, introduced
in 2014 and 2015, respectively. Towards “Strengthening
the Commercial Products Business,” the group will
improve proposal-based sales as it aims to further increase
orders received. With regard to “Expanding the overseas
AP business,” in the US, the group will further develop
existing businesses and expand operations to the West
Coast. In China, it will increase sales in major cities that are
recovering economically, targeting the super luxury market.
In Taiwan, it will offer differentiation on watertightness
with its core product, “YRB-A.” In the ASEAN region, it
will enhance product items and strengthen proposal-based
sales with its core product, “NEXSTA.” The Group will also
reinforce its business foundation towards further expansion
of business overseas by reorganizing its business structure.
3 ) Technology capability supporting both Groups: the
Machinery & Engineering Group
The Machinery and Engineering Group serves as the core
for technology development functions which support
integrated production at the YKK Group and is committed
to, and drives measures related to, the “Development of
machinery and equipment that adapt to the production
site” and “Technology development from a mid to longterm perspective” as its key policies. Considering the
streamlining effect of the Group’s “Plant for manufacturing
machinery components for zippers” which became fully
operational on April 1, 2016, the last year of the Fourth
Mid-Term Management Plan, is viewed as the stage to
complete the “Establishment of technological development
base” and develop a base ahead of the next mid-term
management plan. As such, in order to build a base for
“Facility service functions,” the group will put structures
in place which reflect “Cost reductions in manufacturing
sites,” “Adoption in development of specialized machinery
and production lines” and “Preventative maintenance”
using manufacturing data from analysis of the overall
efficiency of equipment and revise the basic idea of
“Strategic development of technology personnel” based on
the “elemental technologies to be strengthened.”
2016 Annual Report
Business and Other Risks
The significant risks that may affect the financial
position and operational performance of the YKK Group
(YKK Corporation and its affiliated companies) can be
summarized under the following risk factors: Any future
forecasts included in the following descriptions are
based on the estimates or judgments of management as
of the end of the current fiscal year.
1 ) Latent risks in international activities and overseas
expansion
The Group has businesses in 71 countries, covering
the regions of North and Central America, South
America, Europe, the Middle East, Africa, Asia,
and Oceania. In these countries and regions, the
Company may be affected by political uncertainty,
terrorism, war and other factors. Each of these
factors could adversely affect the Group’s business
performance if any unfavorable events arise during
business expansion.
2 ) Economic factors
The Group’s business may be affected by economic
conditions such as market reductions or price
competition from manufacturing or sales-based
competitors in each country or region. Any sharp
increase in the price of raw materials, which
may be triggered by market supply and demand
forces, could adversely affect the Group’s business
performance.
3 ) Change in foreign currency exchange rates
As items such as sales, expenses and assets in local
currencies are translated to Japanese yen to prepare
the Group’s consolidated financial statements, any
changes in foreign exchange rates would affect the
Group’s financial position and profit or loss after the
translation.
4 ) Decline in price of shareholdings
A sharp decline in the price of listed stocks held
by the Group could adversely affect the Group’s
business performance by resulting in impairment
losses or valuation losses on shareholdings.
5 ) Employee retirement benefit expenses and
obligations
The amounts of the Group’s retirement benefit
expenses and obligations and related expenses are
calculated using actuarial assumptions. Differences
between the actual results and assumptions or
changes in the assumptions will affect the amount of
obligations and expenses recognized. In particular,
in the event of a decrease in the discount rate or
the projected rate of return on plan assets, there
could be an adverse impact on the Group’s business
performance and financial position.
restructuring, such as withdrawal from unprofitable
operations, promoting horizontal international
specialization systems and implementing cost
reduction measures. Extraordinary losses may be
incurred due to the restructuring.
7 ) Defective products
Although the Group manufactures products that
meet the Company’s strict quality control standards
in its plants around the world, if any defective
products are found and a significant product liability
is incurred, it may adversely affect the Group’s
business performance and financial position.
8 ) Government restrictions
The Group has obtained permission to conduct
business and investment activities in countries and
regions where it operates and in certain cases is
restricted by government regulations. The Group is
also subject to trade laws, antitrust laws, intellectual
property agreements, and consumer, taxation and
environmental regulations, which may limit its
activities. In case of any failure to comply with these
regulations, it could adversely affect the Group’s
business performance and financial position.
9 ) Natural disasters and infectious diseases
If natural disasters, such as earthquakes, damage
manufacturing bases and equipment, or if a health
epidemic occurs, there would be negative impact
on performance due to delays in manufacturing
and shipping caused by suspension of operations,
and furthermore, unexpected expenses may be
necessary for repair or replacement of the damaged
manufacturing bases.
10) IT risks
The Group designs and operates numerous
information systems.
Although the Company analyzes IT risks, ensures
appropriate allocation of authority, has established a
checking and oversight system, and takes measures
to protect itself from outside intrusion, unauthorized
access or a computer virus attack could result in a
leak of customer information, or loss or falsification
of data may occur.
Any leak, loss or falsification of important
information may adversely affect the Group’s
business performance.
6 ) Loss on business restructuring
The Group continues to improve its profitability and
increase its business value by conducting business
11
Research and Development Activities
YKK Group (YKK Corporation and its consolidated
subsidiaries) research and development (R&D) activities
are aligned into six regional bases; Japan (core
operations), North and Central America, South America,
Europe, the Middle East and Africa (EMEA), and Asia.
This alignment is also used for its business development.
R&D costs of the overall Group in the current fiscal year
amounted to 20,812 million yen.
The Group’s major accomplishments during the current
fiscal year can be summarized as follows:
(1) Fastening Products Group
The Fastening Products Group is committed to the
Fourth Mid-Term Business Policy of “Developing a
brand new growth strategy (selling 10 billion units
of zippers).” It aims to continue to improve product
development and proposal activities in the US and
European markets, enhance product development
capacities in the extensive Chinese market, as well
as the Asian market, which is expected to become
a sizable market in the future. Through these efforts,
the group aims to further enhance product values for
customers by establishing a system to produce services
or products that correspond to customers’ needs.
In addition to continuing to enhance product
development for luxury bags and apparel in Europe,
the Middle East and Africa (EMEA), the group made
efforts to promote development in the outdoor and
marine segment through its UK product development
office, and develop products and strengthen proposals
for zippers as well as snaps and buttons through its
Turkey office. In North and Central America, the group
has strengthened development of highly functional
products, and shifted R&D focus to automotive seat
fastening products and leased processing equipment.
In China and Asia, the group targeted increasing
product variation and reducing development lead
time, goals always sought after in the fast fashion
market. In addition, a project team was assembled
at SHANGHAI YKK ZIPPER CO., LTD. to further
improve R&D’s capability to quickly develop products
and high quality proposals. The group focused on
the challenge of establishing competitiveness in
large price-conscious markets in order to fulfill the
Mid-Term Business Plan. Under this policy, the
group developed new products and facilities which
address cost savings such as metal zippers and coil
zippers, cut production technology-based cost, made
progress on turnaround time reduction projects and
strengthened its competitiveness.
There have been significant accomplishments made
in the period. For zippers, new products including
metal, luxury cotton zippers that can be used on shoes
with dual sliders, thin and soft VISLON® products
for lightweight apparel, ease-of-use “assistance”
fastening components, metal plating plastic sliders for
jackets, waterproof VISLON® zippers, and metal-like
VISLON® zippers have been developed. For plastic
injected products, new products such as buckles for
backpacks and snap hooks were released. In snaps
12
and buttons, the group made efforts to reduce costs
through innovation in materials and technology. In
addition, they developed molds with new features,
designed assembly and attaching machines, and
enhanced product lineups and leased machines.
TFM (Transportation Fastening Material) group has
steadily increased sales by improving its CONCEAL®
zippers and POWER HOOK products, developing
new products and achieving cost reductions in the
automotive market such as hook components for seats.
The Fastening Products Group will continuously
strengthen its R&D centers across the world going
forward, fully capture customer needs in each region
and segment, and rigorously carry out one-to-one
development. It will achieve increases in the overall
speed of development by prioritizing improvements
in elemental technologies needed to carry out the
developments mentioned above. Research and
development costs related to this business stood at
8,320 million yen.
(2) AP Group
The AP Group pushed ahead on its priorities of
“Expansion of the window business,” “Enhancement
of the remodeling market,” “Enhancement of the range
of exterior items,” “Enhancement of the commercial
products business,” and “Expansion of the overseas AP
business.”
There were significant accomplishments made in the
period in this field as well. Towards “Expansion of the
window business,” the group released the “APW430
two action windows,” vinyl windows which integrate
the two functions of swinging and tilting inwards
into one handle. It also released the “APW 431 large
opening sliding windows,” vinyl windows which
require 90% less force to open and close and is
five times more airtight than previous models while
maintaining a large aperture area.
With regard to “Enhancement of the remodeling
market,” the group continues to enjoy a strong
reception for the release of “Kantan Door Remo,”
which makes door replacement quick and easy. It will
continue to energize the remodeling market with the
introduction of “Kantan Mado Remo,” which uses
non-sealing cover construction for the first time ever in
the industry.
In terms of “Enhancement of the range of exterior
items,” the group targeted not only the mid-range
segment but the high-end segment as well with the
release of its “XTIARA” series, which offers luxurious
design for home entrances, and its new “SHALONE”
series, which draws out the aluminum casting texture.
Towards “Enhancement of the commercial products
business,” the group released its “EXIMA 31 Balance
Way,” which allows for ventilation of an entire
building using natural wind. In the remodeling
segment, the group will tap into the market in nonresidential buildings with the release of its “SYSTEMA
31Br,” which employs a new frame cover construction
method to improve window energy conservation and
2016 Annual Report
functionality while preserving design and view prior to
the upgrade.
With regard to “Expansion of the overseas AP
business,” the group has developed products suited
to the climate and natural features of all countries and
regions, using its capabilities in product technology
as a base. In particular, in the US it will enhance its
hurricane and explosion-proof products as well as
energy conservation products.
The Group was honored with the “METI Minister’s
Award” for its “actions to develop and promote vinyl
windows” at the 25th Global Environment Award,
which is sponsored by METI, MOE, MEXT, MLIT, and
MAFF as it continued these development activities
while pursuing the “Co-existence of industrial growth
and the global environment.”
In addition, at the FY2016 Chubu Regional Invention
Awards, it won the Commissioner of the Patent
Office’s Award for its “Remodeling windows and
installation methods usable indoors (Patent No.
5303499).” This is a first for YKK AP as well as the
highest special award won by the YKK Group thus far.
Furthermore, YKK AP was able to demonstrate its
product range and technology capability to the public
as surveys by the magazines “Nikkei Architecture”
and “Nikkei Home Builder” showed that among 49
categories in the “Most desired building materials
and equipment maker ranking 2015” answered by
construction specialists, YKK AP won first place in
“Sashes for single-family houses” and “Sashes and
curtain walls for commercial buildings.”
Technology capability is crucial to further expansion
of the AP business. In April 2016, the group opened
the “YKK AP R&D Center” within the Kurobe Ogyu
Manufacturing Center in Kurobe, Toyama Prefecture.
In this way, by gathering technical experts from
different areas of specialization, it will improve the
productivity of development exhaustively through
putting into practice concurrent development and
further explore its technology capability and build up
relationships of mutual trust by strengthening points of
connection with pro users. Research and development
costs related to this business stood at 8,833 million
yen.
(3) Other businesses
The Machinery and Engineering Group is working
to further strengthen the technological development
functions shared with the YKK Group in order to
evolve as a provider of specialized machinery and
equipment for slide fasteners and window products.
The Group also strives to continue to strengthen and
maintain the philosophy of integrated production
system, the foundation of YKK Group’s operations,
by achieving two important policies; “Development
of machinery and equipment that adapt to the
production site” and “Technology development from a
mid to long-term perspective.”
There were significant accomplishments made in
the period in this field as well. In “Development
of machinery and equipment that adapt to the
production site,” with respect to technological
development related to the Fastening Products Group,
the group made efforts to increase stable operation and
production capacity at all company’s manufacturing
sites by developing and expanding base machines and
resolving production line issues in slider assembly,
thoroughly disseminate and implement the idea
of “overall efficiency of equipment” and develop
structures with the goal of streamlining and improving
manufacturing sites with all companies sharing a
common awareness about meaningful identification
of issues to be addressed. In FY2017, the group will
focus on the validation and expansion of finishing line
renewal equipment and change its design philosophy
with the goal of developing equipment that requires
less adjustment and can be assembled more easily.
Meanwhile, regarding technological development
related to the AP Group, the group strengthened AP
production technology capability, mainly in windows,
by launching a highly cost-competitive production
line to meet increased sales of its APW330 Fireresistant window at the Saitama MADO (window)
plant and by introducing extrusion lines and
equipment aimed at further expansion of labor-saving
equipment in glass lines, cutting vinyl and aluminum
processing costs, implementing energy conservation
initiatives and reducing machinery and line prices.
In FY2017, the group will continue to push ahead on
cutting manufacturing costs, implementing energy
conservation initiatives as well as reducing the price
of machinery and lines advanced thus far, improve
line efficiency including the launch of combined lines
planned for sale in FY2018 and system-integrated lines
and make efforts to develop elemental technology
ahead of the next mid-term.
In terms of “Technology development from a mid to
long-term perspective,” as technological development
of materials and processes, given the strong outlook
on development of new materials in metal zippers, the
group will enter these markets in FY2017 and make
efforts to develop elemental technology towards the
resolution of issues including those in new materials,
coating, paint work, etc., with the goal of production
differentiation. In addition, in analytic technology, the
group made progress on its response to various issues
in slider production and addressed the operational
stability of equipment using technology to analyze and
assess machine vibration, and it plans to expand these
into overseas plants in FY2017, and it will leverage
this to develop its technological base ahead of the Fifth
Mid-Term Management Plan starting in FY2018.
Furthermore, construction of the “Slide fastener
machine parts plant” was completed in November of
last year and is fully operational as of April 2016. The
Group will further push reductions in costs and lead
times and capture the effects of its investment.
The Company aims to introduce outside technologies
through collaboration with other companies and
universities, while continuing to work on in-house
development of element technologies necessary for
further improving its business competitiveness in these
areas. Research and development costs amounted to
3,658 million yen.
13
Corporate Governance
(1) Status of corporate governance
Basic corporate governance policy
The philosophy of the YKK Group (YKK Corporation
and its affiliated companies) is based on the
spirit of “Cycle of Goodness,” which means “No
one prospers unless he or she renders benefit
to others.” Under this spirit, being consistently
fair is the foundation for various management
activities. “The YKK Group seeks a corporate value
of higher significance,” a value that represents
the commitment, direction, and consistency of
management. As part of this philosophy, the Group
always strives to improve its corporate governance
practices for enhanced corporate value. YKK
Corporation has established several management
bodies to implement corporate governance
practices. The Board of Directors functions as an
executive decision making and monitoring body,
while the Audit & Supervisory Board provides
management oversight. For business operations and
promotion, YKK Corporation appoints Officers and
secures their commitment to fulfill all obligations
arising towards their duties.
Matters Regarding the Corporate Governance of
Filing Companies
1 ) Details of Company Bodies
YKK has adopted the Audit & Supervisory Board
system and implemented structural reform
of its management. As a result, the Board of
Directors was reformed and the Officer system
was adopted in June 1999. These initiatives
were aimed at ensuring faster decision-making
and operational execution by segregating
management and business operations.
(a) Directors and Board of Directors
• The Board of Directors sets forth
management policies, allocates
management resources, and oversees
operational execution by Officers, in
addition to performing the roles stipulated
in the Companies Act.
• The Articles of Incorporation prescribe that
the number of directors shall be 10 or less,
and that the term of office of directors shall
be one year, in order to ensure accurate
decisions based on active and thorough
discussions.
• To further strengthen the consolidated
management of the Group, the Board of
Directors was restructured in June 2003,
appointing executive vice presidents
from YKK AP Inc. and the Fastening
Products Group as members of the Board
of Directors. In the interest of stronger
corporate governance and further
improving practices, two external directors
were also appointed in June 2007.
In a bid to further improve the
management of the consolidated group,
14
YKK Corporation has elected internal
directors to make them responsible for
global management in the six major
geographical regions. It also appointed two
external directors to leverage their deep
insight, experiences and knowledge for the
improvement of management.
• While directors devote themselves
to achieving optimum performance
results for the entire Group, Officers are
committed to playing the crucial role of
achieving division targets by executing
business operations with responsibility and
authority based on the policies determined
by the Board of Directors.
• In April 2004, YKK Corporation
recognized that the maintenance of an
appropriate annual pension fund by
the parent company was an important
management issue and appointed a
Director in charge of Annual Pension
Policy.
• In April 2005, the Chief Financial Officer
(CFO) and Chief Risk Management Officer
(CRO) were appointed to further enhance
consolidated management.
• YKK Corporation has improved the
mechanisms for delivering information to
directors, including a system to provide
external directors with advance narrative
explanations of the agenda by the General
Administration Department, to ensure
that the deliberations and discussions
at the Board of Directors are carried out
efficiently and proactively.
• The Articles of Incorporation require that
a quorum of shareholders is necessary for
a vote on the election of directors to take
effect. A third or more of shareholders
who have voting rights in an election must
attend the general shareholders’ meeting,
and the majority of shareholders present
at the meeting must vote for the election.
The Articles of Incorporation also provide
that resolutions on the election of directors
shall not be made by cumulative votes.
(b) Introduction of the Group Officer System
While the YKK Group promotes Global
Business Management by centering on
Fastening Products and AP businesses
(its core businesses) and Machinery &
Engineering (a function to support consistent
production by the core businesses), it
also practices Regional Management in
each of six major geographical regions,
including Japan. To further increase the
corporate value of the YKK Group under
this consolidated management structure,
Group Officers were appointed effective
2016 Annual Report
April 2004, from among the Officers of the
core companies as well as from each of the
regional headquarters.
(c) Establishment of the Advisory Board
The Advisory Board has been in place since
July 2001 to bring together wisdom from
key external figures to help the Chairman
& CEO and President and other related
directors with general management issues
and specific matters of significance.
2 ) Development Status of the Internal Control
System and Risk Management System
The following is a description of the status
of the development and improvement of the
internal control system:
I. Internal control systems related to YKK
Group’s execution of operations
(a) System to ensure that the performance of
the Company’s directors and personnel and
subsidiary directors and personnel complies
with laws, regulations, ordinances and the
articles of incorporation.
• The Company’s directors strictly comply
with the Board of Directors’ regulations
and regulations pertaining to the
performance of directors’ duties for the
execution of business, and conduct
appropriate operations based on the
principle of segregation of duties.
• A director in charge of compliance is
assigned to develop the YKK Group
compliance system. The Corporate Legal
and Compliance Group were established
under the officer in charge of compliance,
and develop a compliance system in
cooperation with external compliance
advisors. This director reports the
development and conformity status of the
compliance structure to the other directors
and Audit & Supervisory Board Members.
• In addition to the compliance structure
above, in order to implement appropriate
compliance promotion activities from
the perspective of business operations,
the Company established a compliance
committee in April 2015 with the director
in charge of compliance appointed
as chairman, the officer in charge of
compliance appointed as vice-chairman
and compliance committee members
consisting of the head of the Fastening
Products Group, head of the Machinery
and Engineering Group, the CFO (Chief
Financial Officer) and head of the Internal
Auditing, which discusses the status
of implementation of the compliance
program and responses to compliance
issues, and recent legal trends.
• The Company’s directors regularly take
compliance training programs presented
by lawyers and others, and submit to the
Company a written oath to comply with
laws and regulations in executing their
duties as directors. (These programs have
been implemented since March 2006.)
• YKK Group companies have established
a YKK Global Criteria of Compliance
(YGCC) in April 2013 as a compliance
benchmark for the purpose of steadily
developing and implementing appropriate
and effective compliance programs, and
are maintaining and operating compliance
frameworks.
YKK Group companies are making efforts
to maintain and strengthen compliance
frameworks by conducting periodic
evaluations and improvement activities
based on compliance benchmarks.
• In January 2006, the YKK Group Internal
reporting system was established to
prevent violations of laws, regulations and
internal rules, and to protect those who
report such violations.
• YKK Group companies in Japan organized
their structures to prevent association
with criminal and antisocial bodies or
persons by preparing rules, designating
a department in charge, reviewing
contractual clauses and building
relationships with public authorities, such
as the police and related groups, and
cooperating with them as necessary.
• The Internal Auditing implements internal
audits on YKK Group companies from
the perspective of laws, regulations and
reasonableness, and periodically reports
the results to the President, Board of
Directors and others.
(b) System to store and control information
related to the execution of duties of the
Company’s directors
• The Company’s maintenance period for
important documents (including electronic
records) is determined based on internal
regulations, such as document control
regulations and confidential information
control regulations, in order to implement
appropriate document control.
• The Company’s relevant departments
prepare and maintain minutes of important
meetings such as meetings of the Board
of Directors and Management Meeting,
to provide accurate descriptions of the
proceedings, deliberation results, and
important statements in accordance with
the regulations applied to each meeting.
(c) Regulations and other systems to address
any risk of losses by YKK Group
• In April 2005, the Chief Risk Management
Officer (CRO) was appointed, and the
Quality Control Committee, Trade
15
Control Committee, Risk Management
Committee, Confidential Information
Control Committee, Committee for
Technology Protection, and IT Security
Committee were established, to promote
the Company’s management of risks to
which the YKK Group is exposed.
• In April 2005, the Chief Financial Officer
(CFO) was appointed to control financial
risks based on the YKK Group’s basic
policies on the management of such
financial risks. An investment council
chaired by the CFO was established in
February 2006 as a body that appropriately
manages the investment risks to which
the YKK Group is exposed. The CFO also
developed and promoted an internal
control system over financial reporting,
which has been in place since April 2008.
• The Company is committed to addressing
risks in the YKK Group adequately
and promptly in accordance with
the Guidelines for Addressing Risks
(developed in April 2005 and revised in
March 2010).
(d) System to ensure that the duties of the
Company’s directors and subsidiary directors
are effectively executed
• In June 1999 the Company introduced
the Officer System to enable a faster
execution of business and operations by
separating management and execution.
This allows directors to devote themselves
to the realization of the optimum results
of the entire Group. Officers execute
actions related to individual businesses
and operations with responsibility and
authority in accordance with the policies
determined by the Board of Directors.
• In July 2003 the Company established
the Management Meeting to increase
the efficiency of discussions held by
the Board of Directors. The directors at
the meeting thoroughly discuss the YKK
Group management philosophies, policies
and strategies, and important matters
to be resolved at the Board of Directors
meetings.
• The Company established the
Environmental Policy Promotion
Committee at the Management Meeting. Its
purpose is to determine the environmental
policies of the Company and monitor
whether those policies are actually
realized in the Company’s business
operations.
(e) System to report matters regarding the
execution of duties by the subsidiary
directors to the Company and other system
to ensure appropriate business operations in
the Company and the YKK Group
16
• With Group Officers appointed from
significant subsidiaries (core companies)
and regional headquarters in the six
major geographical regions, each regional
headquarters functions as a branch office
of the Company and oversees the business
operations of subsidiaries, under the
consolidated management structure of the
Group.
• Important matters in relation to the
operations of subsidiaries are subject to
discussion and resolution at the Board
of Directors based on the relevant
requirements of the Board of Directors.
• YKK Corporation monitors the business
performance and financial position of
subsidiaries by receiving and reviewing
a monthly report on the consolidated
performance results from the director in
charge, at the Board of Directors meeting.
II. Matters regarding the Audit & Supervisory
Board Members’ execution of duties
(a) If there is a request by the Company’s Audit
& Supervisory Board Members to assign
staff members to assist Audit & Supervisory
Board Members in fulfilling their duties,
matters regarding the staff members, their
independence from the Company’s directors
and ensuring the effectiveness of instructions
to the staff members given by the Company’s
Audit & Supervisory Board Members
• The Company organized the Auditors’
Secretariat effective as of April 1, 2007,
and staff members are assigned to
exclusively assist the Audit & Supervisory
Board Members in fulfilling their duties.
• Transfer and appraisal of the personnel in
the staff of the Auditors’ Secretariat require
the approval of the Company’s Audit &
Supervisory Board Members.
(b) System to report to the Company’s Audit
& Supervisory Board Members by the
Company’s directors and personnel, and
subsidiary directors, Audit & Supervisory
Board Members and personnel, or
individuals who receive reports from
such persons and other systems regarding
reporting to the Company’s Audit &
Supervisory Board Members
• The Company’s and its subsidiaries’ main
business operations and the status of the
development and improvement of the
internal control system shall be reported
to the Company’s Audit & Supervisory
Board Members on a timely and regular
basis. If any significant matter that
materially affects the Company arises, that
matter shall be promptly reported to the
Company’s Audit & Supervisory Board
Members.
2016 Annual Report
• The Company’s Audit & Supervisory
Board Members is also engaged in the
audit of (core) subsidiaries in Japan as
Audit & Supervisory Board Members of
those subsidiaries. Audit & Supervisory
Board Members and the internal audit
departments of subsidiaries in and outside
of Japan are required to report necessary
matters to the Company’s Audit &
Supervisory Board Members periodically
upon the latter’s request.
• When material violations of laws and
regulations are detected through the
internal reporting system, the “Secretariat
of the YKK Group Internal Reporting
System” will report the details of the report
and the result of the investigation to the
Company’s Audit & Supervisory Board
Members.
(c) System to ensure that persons reporting in
the previous paragraph will not be subject to
disadvantageous treatment as a result of said
reporting
• The Company prohibits disadvantageous
treatment towards persons reporting to
the Company’s Audit & Supervisory Board
Members as a result of said reporting.
(d) Procedures for prepayment or
reimbursement of expenses arising from the
execution of duties by the Company’s Audit
& Supervisory Board Members and other
matters regarding policies relating to the
processing of expenses or obligations arising
from the execution of applicable duties
• With regard to execution of duties by the
Company’s Audit & Supervisory Board
Members, when requests are made to
the Company by the Audit & Supervisory
Board Members for prepayment of
expenses, etc. in accordance with
Article 388 of the Companies Act, the
applicable expenses or obligations are
quickly processed after deliberation by the
department in charge, with the exception
of expenses or obligations recognized as
unnecessary in the execution of duties by
the Audit & Supervisory Board Members.
(e) Other system to ensure that Audit &
Supervisory Board Members effectively
implement the audits
• In addition to attending the meetings of the
Board of Directors, the Company’s Audit &
Supervisory Board Members are permitted
to attend all important meetings, such as
the meetings of the Officers.
• The Company’s Chairman & CEO and
President periodically exchange views
and opinions with the Company’s Audit &
Supervisory Board Members.
• The internal audit department has been
enhancing the practicability of audits
carried out by the Company’s Audit
& Supervisory Board Members by
periodically reporting the activities of the
internal audit department to the Audit &
Supervisory Board Members.
3 ) Details of compensation paid to directors and
Audit & Supervisory Board Members
Compensation paid to directors and Audit &
Supervisory Board Members at the Company
consists of monthly compensation and bonuses
(taking into consideration consistency with
the basic dividend policy, which is continuing
to provide stable dividends) as short-term
compensation, and retirement allowances as
long-term compensation.
The following chart shows the amount of
compensation paid to directors and Audit &
Supervisory Board Members for the current
fiscal year.
Classification
Amount of
compensation
No. of persons
paid
(Millions of yen)
Directors
9
(External Directors)
(2)
(24)
Audit &
Supervisory Board
Members
4
57
(External Audit &
Supervisory Board
Members)
(3)
(34)
Total
(External Directors
and Audit &
Supervisory Board
Members)
13
(5)
372
429
(59)
Notes: 1. The upper limit of compensation, decided by a resolution
of the general shareholders’ meeting, is 30 million yen
per month for directors (including adequate additional
compensation of an Officer’s salary, for directors who
also hold a post as an Officer) (resolved at the 70th
annual general shareholders’ meeting held on June 29,
2005). Audit & Supervisory Board Members’ monthly
compensation is 4 million yen (resolved at the 61st annual
general shareholders’ meeting held on June 27, 1996).
2. The above amounts include a 64 million yen provision
reserved for directors’ and Audit & Supervisory Board
Members’ retirement benefits, recognized as an expense
for the current fiscal year (including 2 million yen for
external directors and 3 million yen for External Audit&
Supervisory Board Members).
3. The above amounts include the following estimated
amounts of bonuses to directors and Audit & Supervisory
Board Members, which will be put forward for resolution
at the 81st annual general shareholders’ meeting on June
29, 2016.
- 83 million yen for 9 directors (including 8 million yen for
2 external directors)
- 17 million yen for 4 Audit & Supervisory Board
Members (including 12 million yen for 3 External Audit &
Supervisory Board Members)
17
4 ) Status of internal audit and audit by Audit &
Supervisory Board Members
(a) Audit by Audit & Supervisory Board
Members
• The number of Audit & Supervisory
Board Members is four, while the number
of External Audit & Supervisory Board
Members is three.
• Each Audit & Supervisory Board Member
complies with audit standards for Audit &
Supervisory Board Members set forth by
Audit & Supervisory Board; complies with
audit policy and segregation of duties;
attends important meetings, such as the
meetings of the Board of Directors; holds
regular meetings with the Chairman &
CEO and President to exchange views
and opinions; collects information and
improves the audit environment through
liaisons with the internal audit department;
and thereby audits the execution of duties
by directors.
• The Audit & Supervisory Board Members
strive to improve the efficiency and
effectiveness of their audit practices
by receiving a report from the Internal
Auditing and the risk management
committees, which details the action plan
and the implementation results of internal
audits.
• The Audit & Supervisory Board Members
hold regular meetings with accounting
auditors to receive reports on their
execution of duties and to mutually
exchange views and opinions.
(b) Internal audit
• In April 2003 the Internal Auditing was
established as an internal audit section.
Currently, 12 members work for this office.
• In addition to the statutory audit
performed by four Audit & Supervisory
Board Members, the Internal Auditing
implements internal audits such as
operational audits, compliance audits
and internal control audits, and thereby
achieves more effective auditing practices.
• Internal auditing is effectively conducted,
not only by the Internal Auditing, but also
in cooperation with staff members of other
divisions.
5 ) Relationships among YKK and external
directors and External Audit & Supervisory
Board Members
There are no business relationships between the
external directors, Mr. Keinosuke Ono and Mr.
Yoshio Osawa, and the Company.
One External Audit & Supervisory Board
Member, Mr. Satoshi Kawai, is a partner at
the law firm of Mori Hamada & Matsumoto.
18
The firm provides legal services to YKK
Corporation, but they are limited to routine
services. This does not mean that the External
Audit & Supervisory Board Member has a
direct personal interest in the Company. Two
other External Audit & Supervisory Board
Members, Mr. Hiroshi Akiyama and Mr. Naoki
Yanagida, are partner lawyers of Yanagida &
Partners. The firm provides legal services to
YKK Corporation, but they are limited to routine
services. This does not mean that the External
Audit & Supervisory Board Member has a direct
personal interest in the Company.
6 ) Status of accounting audits
Hiroaki Kosugi, Osamu Sakanaka, and
Toshikatsu Sekiguchi, Certified Public
Accountants (CPAs) from Ernst and Young
ShinNihon LLC, provide the Company’s
accounting auditing services. They also conduct
timely audits at the year-end, and during the
year. In all, 16 CPAs, 11 accountant assistants
and 33 other staff members are engaged in the
accounting auditing services for the Company.
7 ) Exemption from liability of directors and Audit
& Supervisory Board Members
Pursuant to Article 426, Paragraph 1 of the
Companies Act, the Articles of Incorporation
of YKK Corporation provide that any directors
and Audit & Supervisory Board Members who
fail to fulfill their duties may be exempted from
liability based on a resolution by the Board of
Directors, to the extent of the limits prescribed
by the said Act. The objective of this provision
is to enable directors and Audit & Supervisory
Board Members to fulfill their duties at the
level at which they purport to be fulfilling their
duties.
8 ) Requirement for a special resolution at the
general shareholders’ meeting
The Articles of Incorporation of YKK
Corporation provide that the resolution
prescribed in Article 309, Paragraph 2 of the
Companies Act shall be approved by the votes
of two-thirds or more of shareholders present
at the general shareholders’ meeting, attended
by shareholders holding one-third or more of
voting rights. The objective of the requirements
is to achieve smooth operation of the general
shareholders’ meeting by lowering the quorum
required for special resolutions.
2016 Annual Report
(2) Fees for audit engagement
1 ) Fees for auditing by certified public accountants, and others
For the prior fiscal year
Division
Fees for audit and
attest engagements
(Millions of yen)
For the current fiscal year
Fees for non-audit
engagements
(Millions of yen)
Fees for audit and
attest engagements
(Millions of yen)
Fees for non-audit
engagements
(Millions of yen)
Filing company
76
0
80
0
Consolidated
subsidiaries
19
–
19
–
Total
96
0
100
0
2 ) Other significant fees
For the prior fiscal year
The consolidated subsidiaries of the Company,
including YKK Corporation of America and YKK
U.S.A., paid fees of 319 million yen for audit
and attest engagements and 28 million yen
for non-audit attest engagements to Ernst and
Young member firms, companies that are within
the same network of firms as the accounting
auditor engaged in services for the Company.
For the current fiscal year
The consolidated subsidiaries of the Company,
including YKK Corporation of America and YKK
U.S.A., paid fees of 357 million yen for audit
and attest engagements and 59 million yen
for non-audit attest engagements to Ernst and
Young member firms, companies that are within
the same network of firms as the accounting
auditor engaged in services for the Company.
3 ) Non-audit engagements provided by auditing
certified public accountants to the filing
company
For the prior fiscal year
Advisory services on the annual reports
preparation and other similar services.
For the current fiscal year
Advisory services on the annual reports
preparation.
4 ) Decision-making policy regarding fees for
audit engagements
N/A. However, fees are determined in
consideration of the number of days of the
engagement.
19
Consolidated Balance Sheets
(Millions of yen)
Prior Fiscal Year
(As of March 31, 2015)
Current Fiscal Year
(As of March 31, 2016)
Assets
Current assets:
Cash and deposits
170,669
181,078
Notes and accounts receivable - trade
182,315
177,733
16,746
5,865
136,097
132,390
9,726
7,687
Other
21,718
21,529
Allowance for doubtful accounts
(2,180)
(2,136)
535,093
524,148
384,578
402,815
Accumulated depreciation
(265,608)
(261,790)
Buildings and structures, net
118,970
141,025
Machinery, equipment and vehicles
543,415
536,142
(425,276)
(413,609)
118,138
122,533
Land
64,984
65,939
Construction in progress
20,316
13,459
Other
84,418
84,344
(69,725)
(68,234)
14,692
16,109
337,102
359,066
21,763
20,810
26,196
21,125
7,697
12,508
Other
20,384
18,257
Allowance for doubtful accounts
(1,954)
(1,857)
52,324
50,034
Total noncurrent assets
411,190
429,911
Total assets
946,283
954,060
Securities
Inventories
Deferred tax assets
Total current assets
Noncurrent assets:
Property, plant and equipment:
Buildings and structures
Accumulated depreciation
Machinery, equipment and vehicles, net
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets:
Investment securities
Deferred tax assets
Total investments and other assets
20
2016 Annual Report
(Millions of yen)
Prior Fiscal Year
(As of March 31, 2015)
Current Fiscal Year
(As of March 31, 2016)
Liabilities
Current liabilities:
Notes and accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Current portion of bonds
Income taxes payable
Deferred tax liabilities
Provision for bonuses
Deposits received from employees
Other
Total current liabilities
Noncurrent liabilities:
Bonds payable
Long-term loans payable
Deferred tax liabilities
Net defined benefit liabilities
Provision for directors’ retirement benefits
Other
Total noncurrent liabilities
Total liabilities
65,606
4,913
1,075
–
6,546
518
17,024
32,797
58,205
186,686
66,342
4,860
1,013
9,999
6,459
613
13,403
33,544
62,030
198,268
19,998
1,433
1,987
139,061
697
9,755
172,933
359,619
10,000
1,015
1,431
172,100
761
8,935
194,244
392,513
11,992
34,938
522,357
(10)
569,277
11,992
35,215
563,512
(11)
610,708
6,371
596
30,358
(34,160)
3,165
14,220
586,664
946,283
5,033
(264)
(4,150)
(63,407)
(62,788)
13,626
561,547
954,060
Net assets
Shareholders’ equity:
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
21
Consolidated Statements of Income
(Millions of yen)
Prior Fiscal Year
(From April 1, 2014
To March 31, 2015)
Current Fiscal Year
(From April 1, 2015
To March 31, 2016)
Net sales
721,037
741,935
Cost of sales
461,278
471,645
Gross profit
259,758
270,290
Selling, general and administrative expenses
193,015
201,125
66,743
69,164
2,229
2,337
Dividends income
432
416
Foreign exchange gains
181
–
Miscellaneous income
3,406
3,240
Total non-operating income
6,251
5,993
1,049
824
–
798
2,225
2,546
3,274
4,169
69,720
70,988
Gain on sales of investment securities
846
176
150
104
Insurance proceeds
596
–
2,489
–
736
45
4,845
299
59
491
2,039
2,676
Impairment loss
716
2,731
Other
521
484
Operating income
Non-operating income:
Interest income
Non-operating expenses:
Interest expenses
Foreign exchange losses
Miscellaneous loss
Total non-operating expenses
Ordinary income
Extraordinary income:
Gain on sales of noncurrent assets
Reversal of reserve for various competition-law
related expenses
Other
Total extraordinary income
Extraordinary loss:
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Total extraordinary loss
3,336
6,383
Income before income taxes and non-controlling
interests
71,229
64,905
Income taxes - current
20,506
20,176
Income taxes - deferred
2,330
(1,874)
Total income taxes
22,836
18,302
Net income
48,393
46,602
1,415
1,956
46,978
44,646
Net income attributable to non-controlling interests
Net income attributable to owners of parent
22
2016 Annual Report
Consolidated Statements of Comprehensive Income
(Millions of yen)
Prior Fiscal Year
(From April 1, 2014
To March 31, 2015)
Net income
Other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests
Current Fiscal Year
(From April 1, 2015
To March 31, 2016)
48,393
46,602
2,565
(67)
39,146
(8,692)
(1,337)
(860)
(35,649)
(29,409)
71
(41)
33,022
81,416
(67,298)
(20,695)
78,429
2,986
(21,338)
642
23
Consolidated Statements of Changes in Net Assets
Prior Fiscal Year (From April 1, 2014 to March 31, 2015)
(Millions of yen)
Shareholders’ equity:
Capital stock
Balance at the beginning of
current period
Capital surplus
11,992
34,938
Cumulative effects of changes
in accounting policies
Restated balance
Retained
earnings
Treasury stock
482,537
Total shareholders’
equity
(9)
529,458
(4,464)
(4,464)
11,992
34,938
478,073
(9)
524,994
Changes in items during
the period
Dividends from surplus
(2,637)
(2,637)
Net income attributable to
owners of parent
46,978
46,978
Purchase of treasury stock
(1)
(1)
Changes in equity
attributable to transactions
with non-controlling
interests
–
Changes in the scope of
consolidation
(55)
(55)
Net changes in items other
than shareholders’ equity
Total changes in items
during the period
Balance at the end of
current period
–
–
44,284
(1)
44,282
11,992
34,938
522,357
(10)
569,277
Noncontrolling
interests
Total net
assets
12,370
513,543
Accumulated other comprehensive income:
Valuation
difference
on availablefor-sale
securities
Balance at the beginning of
current period
3,805
Deferred
gains or
losses on
hedges
664
Total
Foreign
Remeasurements accumulated
currency
of defined
other
translation
benefit plans comprehensive
adjustments
income
(7,226)
(25,528)
(28,285)
Cumulative effects of changes
in accounting policies
Restated balance
(4,464)
3,805
664
(7,226)
(25,528)
(28,285)
12,370
509,079
Changes in items during
the period
Dividends from surplus
(2,637)
Net income attributable to
owners of parent
46,978
Purchase of treasury stock
(1)
Changes in equity
attributable to transactions
with non-controlling
interests
–
Changes in the scope of
consolidation
(55)
Net changes in items other
than shareholders’ equity
2,566
(67)
37,584
(8,631)
31,451
1,850
33,301
Total changes in items
during the period
2,566
(67)
37,584
(8,631)
31,451
1,850
77,584
Balance at the end of
current period
6,371
596
30,358
(34,160)
3,165
14,220
586,664
24
2016 Annual Report
Current Fiscal Year (From April 1, 2015 to March 31, 2016)
(Millions of yen)
Shareholders’ equity:
Capital stock
Balance at the beginning of
current period
Capital surplus
11,992
34,938
Retained
earnings
Treasury stock
522,357
Total shareholders’
equity
(10)
569,277
Cumulative effects of changes in
accounting policies
Restated balance
–
11,992
34,938
522,357
(10)
569,277
Changes in items during
the period
Dividends from surplus
(2,637)
(2,637)
Net income attributable to
owners of parent
44,646
44,646
Purchase of treasury stock
(1)
Changes in equity
attributable to transactions
with non-controlling
interests
(1)
277
Changes in the scope of
consolidation
277
(853)
(853)
Net changes in items other
than shareholders’ equity
Total changes in items
during the period
Balance at the end of
current period
–
277
41,154
(1)
41,431
11,992
35,215
563,512
(11)
610,708
Noncontrolling
interests
Total net
assets
14,220
586,664
Accumulated other comprehensive income:
Valuation
difference
on availablefor-sale
securities
Balance at the beginning of
current period
6,371
Deferred
gains or
losses on
hedges
596
Total
Foreign
Remeasurements accumulated
currency
of defined
other
translation
benefit plans comprehensive
adjustments
income
30,358
(34,160)
3,165
Cumulative effects of changes
in accounting policies
Restated balance
–
6,371
596
30,358
(34,160)
3,165
14,220
586,664
Changes in items during
the period
Dividends from surplus
(2,637)
Net income attributable to
owners of parent
44,646
Purchase of treasury stock
(1)
Changes in equity
attributable to transactions
with non-controlling
interests
277
Changes in the scope of
consolidation
(853)
Net changes in items other
than shareholders’ equity
(1,338)
(860)
(34,508)
(29,247)
(65,954)
(593)
(66,548)
Total changes in items
during the period
(1,338)
(860)
(34,508)
(29,247)
(65,954)
(593)
(25,116)
Balance at the end of
current period
5,033
(264)
(4,150)
(63,407)
(62,788)
13,626
561,547
25
Consolidated Statements of Cash Flows
(Millions of yen)
Prior Fiscal Year
(From April 1, 2014
To March 31, 2015)
Current Fiscal Year
(From April 1, 2015
To March 31, 2016)
Net cash provided by (used in) operating activities
Income before income taxes and non-controlling
interests
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in net defined benefit liabilities
Interest and dividends income
Interest expenses
Equity in (earnings) losses of affiliates
Loss on retirement of property, plant and equipment
Loss (gain) on sales of property, plant and equipment
Decrease (increase) in notes and accounts receivable
- trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable trade
Other, net
Subtotal
Interest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
71,229
64,905
41,171
716
(628)
4,955
(2,662)
1,049
30
1,211
(786)
46,719
2,731
10
3,886
(2,753)
824
3
1,666
340
3,869
(1,045)
(788)
(4,294)
(2,983)
1,377
(1,170)
115,212
2,456
(1,122)
(25,291)
91,254
7,583
121,955
2,731
(829)
(22,129)
101,727
21
(16,251)
10,305
(55,649)
1,347
(4,805)
21
(76)
2,241
(1,409)
(1,383)
(337)
(65,976)
(161)
(17,180)
9,854
(85,126)
977
(2,684)
3
(813)
113
(36)
(22)
(175)
(95,252)
(532)
(322)
51
(156)
(1)
(2,635)
(782)
(87)
(203)
20
(491)
(1)
(2,637)
(940)
–
(18)
(4,379)
(4,359)
9,502
(8,548)
30,401
143,131
(6,432)
173,558
25
103
173,558
167,229
Net cash provided by (used in) investing activities
Net decrease (increase) in short-term loans receivable
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Proceeds from sales of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Purchases of stocks of subsidiaries and affiliates
Payments of long-term loans receivable
Other, net
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Repayments of finance lease obligations
Proceeds from long-term loans payable
Repayments of long-term loans payable
Purchases of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Payments from changes in ownership interests in
subsidiaries that do not result in change in scope of
consolidation
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Increase in cash and cash equivalents from newly
consolidated subsidiaries
Cash and cash equivalents at the end of period
26
2016 Annual Report
Notes to the Consolidated Financial Statements
Significant Accounting Policies
1. Scope of consolidation
(1) Number of consolidated subsidiaries .............. 112
Number of newly consolidated subsidiaries
due to new establishment ................................... 2
YKK AP (THAILAND)CO.,LTD.
YKK (SHENZHEN) TRADING CO., LTD.
Number of newly consolidated subsidiaries
formerly unconsolidated due to increase in
importance ......................................................... 1
Bhoruka Extrusions Private Limited
(2) Number of consolidated subsidiaries .................. 4
Name of major unconsolidated subsidiaries:
Y2K HOLDINGS CORPORATION
Reason for exclusion from consolidation is as
follows:
These companies have been excluded from
the consolidation because they are small, and
their total assets, net sales, net income (the
equity portion) and retained earnings (the equity
portion) do not have a significant effect on the
consolidated financial statements.
parent fiscal year end, which are prepared solely for
consolidation purposes.
4. Matters regarding accounting policy
(1) Valuation method for assets
a) Securities:
1) Held-to-maturity debt securities
Held-to-maturity debt securities are carried
at amortized cost (Straight-line).
2) Other securities
a. Marketable securities
Marketable securities are carried mainly
at fair value as of the parent fiscal year
end, with changes in unrealized gains or
losses included directly in net assets. Cost
of securities sold is determined using the
moving average method.
b. Non-marketable securities
Non-marketable securities are carried at
cost, which is determined using the moving
average method.
2. Application of equity method
(1) Number of companies accounted for using the
equity method .................................................... 1
Affiliated companies: 1
YKK PHILIPPINES, INC.
(2) Number of companies not accounted for using the
equity method .................................................... 6
Unconsolidated subsidiaries: 4
Y2K HOLDINGS CORPORATION and others
Affiliated companies: 2
L-Y PHILIPPINES INC. and others
Reason for not using the equity method
These companies are not accounted for using
the equity method because their impact is
not significant on the consolidated financial
statements in terms of their total net income (the
equity portion) and retained earnings (the equity
portion), and they are not significant as a whole.
b) Derivatives:
Derivative financial instruments are stated at
fair value.
c) Inventories:
Inventories are mainly stated at cost based on
the average method (the balance sheet amounts
are determined including any required writedowns based on any decrease in profitability).
(2) Depreciation of assets
a) Property, plant and equipment (excluding
leased assets):
Depreciation is calculated using the straightline method.
The estimated useful lives are as follows:
Buildings and structures
2 - 50 years
Machinery, equipment and vehicles 2 - 15 years
3. Accounting period of consolidated subsidiaries
The fiscal year end of certain foreign consolidated
subsidiaries, including SHANGHAI YKK ZIPPER
CO., LTD., is December 31. These subsidiaries are
consolidated using their financial statements as of the
b) Intangible assets (excluding leased assets):
Amortization is calculated using the straightline method.
Software for internal use is amortized over a
period of mainly 5 years.
27
c) Leased assets:
Leased assets held under finance lease
transactions, where ownership is not transferred
Depreciation of leased assets is calculated
using the straight-line method over the lease
terms with no residual value
(3) Basis for significant reserves
a) Allowances for doubtful accounts:
Allowances for doubtful accounts are provided
at an amount sufficient to cover probable losses
on collection. The allowances consist of the
estimated uncollectible amount with respect to
certain identified doubtful receivables and an
amount calculated using the historical actual
percentage of collection losses on normal
receivables.
b) Provision for bonuses:
Accrued bonuses of the Company and its
domestic consolidated subsidiaries have been
provided based on the estimated amount of
bonuses to be paid to employees that relates to
the current fiscal year.
c) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits
of the Company and certain domestic
consolidated subsidiaries has been made at an
amount to be required at the fiscal year end
based on the Company’s bylaws.
(4) Accounting for retirement benefits
a) Attribution to periods of expected benefits
Company and its domestic consolidated
subsidiaries calculate retirement benefits
obligations by using the straight-line method to
attribute expected benefits to the periods up to
the current fiscal year.
b) Amortization of actuarial gains and losses and
past service costs
The Company and its domestic consolidated
subsidiaries amortize past service costs using
the straight-line method over the average
remaining years (10-22 years) of service of
eligible employees.
Amortization of actuarial gains or losses begins
in the fiscal year after the fiscal year in which
the gain or loss is recognized, and is recorded
using the straight-line method over a period
within the average remaining years (10-22
years) of service of eligible employees.
28
(5) Reporting of significant revenues and expenses
Recognition of sales and costs of construction
contracts
Revenue and costs from construction contracts
have been accounted for based on the percentage
of completion method for the portion of
construction completed by the end of the current
fiscal year, when the outcome of the construction
contracts can be estimated reliably (the percentage
of completion is estimated based on costs
incurred). The completed contract method has
been applied for all other construction contracts.
(6) Translation of significant assets and liabilities
denominated in foreign currencies into yen
Current and noncurrent monetary accounts
denominated in foreign currencies are translated
into yen at the rates of exchange in effect at the
consolidated balance sheet date, and differences
arising from the translation are included in the
consolidated statements of income. All asset
and liability accounts of foreign consolidated
subsidiaries and affiliates are translated into yen at
the rates of exchange in effect at the consolidated
balance sheet date, and all income and expense
accounts are translated into yen at the average
exchange rate during the year. Differences arising
from the translation are presented as foreign
currency translation adjustments and noncontrolling interests in net assets.
(7) Hedge accounting
a) Hedge accounting
Deferral hedge accounting is adopted, in
principle. Forward foreign exchange contracts
are subject to appropriation if they satisfy the
requirements for appropriation treatment.
b) Hedging instruments and hedged items
Hedging instruments and hedged items for
which hedge accounting is adopted in the
current fiscal year are as follows:
Hedging instruments: Forward foreign
exchange contracts
Hedged items: Receivables and payables
denominated in foreign currencies, forecasted
transactions denominated in foreign currencies.
c) Hedging policy
Foreign exchange fluctuation risk is hedged
in accordance with the Company’s internal
policies.
2016 Annual Report
d) Assessment of hedge effectiveness
Hedge effectiveness is assessed quarterly,
based on the change in market value of hedged
items and the change in market value of
hedging instruments. Forward foreign exchange
contracts, which are subject to appropriation
treatment, are excluded from the assessment of
hedge effectiveness.
(8) Goodwill amortization method and period
In principle, goodwill is amortized using
the straight-line method over an estimated
effective period. When the amount of goodwill
is insignificant or when it is impracticable to
estimate its effective period, goodwill is fully
expensed in the period in which it arises.
(9) Cash and cash equivalents in the Consolidated
Statements of Cash Flows
Cash and cash equivalents consist of cash on
hand, cash at banks that can be withdrawn at any
time, and short-term investments with a maturity
of 3 months or less when purchased that can
easily be converted to cash and are subject to little
risk of change in value.
(10) Other significant accounting policies of the
Consolidated Financial Statements
a) Accounting for consumption tax
Transactions subject to consumption tax are
recorded at amounts exclusive of consumption
tax.
b) Application of the consolidated tax return
system
The Company applies the Consolidated Tax
Return System.
(11) Changes in Accounting Policy
(Application of the Accounting Standard for
Business Combinations, etc.)
The “Revised Accounting Standard for Business
Combinations” (Accounting Standards Board of
Japan (“ASBJ”) Statement No. 21, September 13,
2013. Hereafter referred to as the “Accounting
Standard for Business Combinations.”),
“Revised Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22,
September 13, 2013. Hereafter referred to as the
“Consolidation Accounting Standard.”),“Revised
Accounting Standard for Business Divestitures”
(ASBJ Statement No. 7, September 13, 2013.
Hereafter referred to as the “Business Divestitures
Accounting Standard.”) and others have been
applied effective from the current fiscal year. As a
result, any change resulting from the Company’s
ownership interests in its subsidiary when the
Company retains control over the subsidiary is
accounted for as capital surplus, and acquisition
related costs are expensed in the year in which the
costs are incurred. For any business combinations
on or after the beginning of the current fiscal
year, subsequent measurement of the provisional
amount recognized based on the purchase price
allocation due to the completion of accounting
for the business combination is reflected in the
consolidated financial statements for the period
in which the business combination occurs. In
addition, the presentation method of net income
was amended and “minority interests” was
changed to “non-controlling interests.” To reflect
these changes in presentation, reclassifications
have been made to the consolidated financial
statements for the prior fiscal year presented
herein.
The aforementioned accounting standards are
applied prospectively from the beginning of the
current fiscal year, according to the transitional
treatment provided for in Paragraph 58-2 (4) of the
Accounting Standard for Business Combinations,
Paragraph 44-5 (4) of the Consolidation
Accounting Standard and Paragraph 57-4 (4) of
the Business Divestitures Accounting Standard.
These changes resulted in a 277 million yen
decrease in income before income taxes and
non-controlling interests for the current fiscal year.
They additionally resulted in a 277 million yen
increase in capital surplus at the end of the current
fiscal year.
In the consolidated statement of cash flows for the
current fiscal year, cash flows from the purchase
or sale of shares in subsidiaries that do not result
in change in scope of consolidation are presented
under “Net cash provided by (used in) financing
activities,” whereas cash flows concerning
the costs related to the purchase of shares in
subsidiaries that result in a change in the scope of
consolidation or the expenses incurred in relation
to purchase or sales of shares in subsidiaries that
do not result in change in scope of consolidation
are presented under “Net cash provided by (used
in) operating activities.”
The balance of capital surplus on the consolidated
statement of changes in net assets at the end of the
current fiscal year has increased by 277 million
yen.
29
(12) Accounting standards to be adopted
ASBJ Guidance No. 26, “Revised Implementation
Guidance on Recoverability of Deferred Tax
Assets” (released on March 28, 2016)
a) Outline of guidance
The practical guidance on accounting
standards and auditing standards (where
it is related to the accounting treatment)
for deferred tax accounting, issued by
the Japanese Institute of Certified Public
Accountants (JICPA), is to be transferred to
the competence of the Accounting Standards
Board of Japan (ASBJ). For the sake of the
said transfer, the “Revised Implementation
Guidance on Recoverability of Deferred Tax
Assets” (hereinafter the “Implementation
Guidance”) has been issued by the ASBJ to
provide guidance on applying the “Accounting
standard for deferred tax accounting” (Business
Accounting Council) for the recoverability
of deferred tax assets. The Implementation
Guidance is based, in principle, on the
framework for recoverability of deferred tax
assets specified in the “Audit Treatment of
Judgments with Regard to Recoverability of
Deferred Tax Assets” (Report No. 66, the audit
committee of the JICPA), where the amount of
deferred tax assets to be recorded is estimated
in accordance with the 5 categories of a
corporate entity. The Implementation Guidance
made certain necessary changes in the criteria
for these categories and also in the treatment of
the amount of deferred tax assets.
b) Scheduled date of adoption
The Company is planning to adopt the
Implementation Guidance from the beginning
of the consolidated fiscal year that starts on or
after April 1, 2016.
c) Impact of adopting the guidance
The Company is currently evaluating the effect
of adopting the Implementation Guidance on
its consolidated financial statements.
(13) Changes in presentation
(Consolidated statement of income)
Gain on sales of scrap, which was presented as a
separate account under “Non-operating income”
in the prior fiscal year, has been included in
“Miscellaneous income” in the current fiscal year
because it became 10% or less of the total amount
of non-operating income. To reflect these changes
30
in presentation, reclassifications have been made
to the consolidated financial statements for the
prior fiscal year presented herein.
To reflect this change, 673 million yen included
in “Gain on sales of scrap” and 2,733 million yen
in “Miscellaneous income” in the consolidated
statement of income for the prior fiscal year
has been reclassified as 3,406 million yen of
“Miscellaneous income.”
Gain on sales of investment securities, which
was included in “Other” under “Extraordinary
income” in the prior fiscal year, has been
presented as a separate account in the current
fiscal year because it exceeded 10% of
extraordinary income. To reflect these changes in
presentation, reclassifications have been made to
the consolidated financial statements for the prior
fiscal year presented herein.
To reflect this change, 912 million yen included in
“Other” in the consolidated statement of income
for the prior fiscal year has been reclassified as
176 million yen of “Gain on sales of investment
securities” and 736 million yen of “Other.”
2016 Annual Report
Segment Information
1. Overview of reportable segments
products.
The reportable segments of the Group are components
for which discrete financial information is available
and whose operating results are regularly reviewed
by the Board of Directors to make decisions about
resource allocation and to assess performance.
The Group operates based on comprehensive strategies
for products in Japan and overseas, which are planned
for each business.
2. Calculation method for net sales, income or loss,
assets, liabilities and other items by reportable
segments
Reportable segment income is calculated from
operating income.
Intersegment sales and transfers are recorded
generally at market prices and the cost of goods
manufactured.
Accordingly, the Company consists of two reportable
segments, identified by products and based on
division, which are the “Fastening Products” business
and the “AP” business. The “Fastening Products”
business manufactures and sells fasteners, fastener
parts, fastener materials, snap fasteners, buttons, etc.
The “AP” business manufactures and sells residential
products and sashes, commercial products and
sashes, interior doors and partitions, exterior
materials, industrial products and architectural
3. Information on net sales, income or loss, assets, liabilities and other items by reportable segments
Prior Fiscal Year (From April 1, 2014 to March 31, 2015)
(Millions of yen)
Reportable segments
Fastening
AP
Total
Products
Net sales
Sales to third parties
Intersegment sales and
transfers
Total
Segment income
Segment assets
Other items
Depreciation
Increase in tangible and
intangible assets
Other
*1
Adjustments Consolidated
*3
*2
312,952
401,946
714,898
6,138
–
721,037
312
313,264
57,448
471,932
520
402,467
25,129
364,006
832
715,731
82,578
835,938
57,714
63,852
1,625
276,118
(58,547)
(58,547)
(17,459)
(165,773)
–
721,037
66,743
946,283
24,010
12,537
36,547
2,479
2,081
41,108
33,107
20,507
53,615
5,610
2,977
62,203
Notes:
1. “Other” includes businesses, such as manufacturing and sales of fastening products manufacturing machinery, manufacturing and sales of architectural
products manufacturing machinery, manufacturing and sales of mold and machinery parts, real estate and aluminum smelting, etc.
2. (1) Adjustments for segment income of (17,459) million yen include a 677 million yen elimination of inter-segment transactions and (18,354) million yen
of operating expenses, which are not allocable to the reportable segments. Operating expenses which are not allocable to the reportable segments are
expenses such as those related to the administration divisions.
(2) Adjustments for segment assets of (165,773) million yen include a (56,573) million yen elimination of receivables due to the corporate administration
division, 445,588 million yen of corporate assets which are not allocable to the reportable segments, and a (1,110) million yen adjustment for
inventories.
3. Segment income has been reconciled to operating income represented in the consolidated statements of income.
31
Current Fiscal Year (From April 1, 2015 to March 31, 2016)
(Millions of yen)
Reportable segments
Fastening
AP
Total
Products
Net sales
Sales to third parties
Intersegment sales and
transfers
Total
Segment income
Segment assets
Other items
Depreciation
Increase in tangible and
intangible assets
Other
*1
Adjustments Consolidated
*3
*2
326,222
407,763
733,986
7,949
–
741,935
383
326,605
60,699
466,414
451
408,215
24,329
379,835
835
734,821
85,029
846,250
62,120
70,070
705
289,125
(62,955)
(62,955)
(16,570)
(181,315)
–
741,935
69,164
954,060
27,663
13,445
41,108
3,223
2,387
46,719
45,868
17,944
63,813
17,469
7,292
88,574
Notes:
1. “Other” includes businesses, such as manufacturing and sales of fastening products manufacturing machinery, manufacturing and sales of architectural
products manufacturing machinery, manufacturing and sales of mold and machinery parts, real estate and aluminum smelting, etc.
2. (1) Adjustments for segment income of (16,570) million yen include a 1,475 million yen elimination of inter-segment transactions and (18,342) million yen
of operating expenses, which are not allocable to the reportable segments. Operating expenses which are not allocable to the reportable segments are
expenses such as those related to the administration divisions.
(2) Adjustments for segment assets of (181,315) million yen include a (73,476) million yen elimination of receivables due to the corporate administration
division, 475,956 million yen of corporate assets which are not allocable to the reportable segments, and a (994) million yen adjustment for inventories.
3. Segment income has been reconciled to operating income represented in the consolidated statements of income.
32
2016 Annual Report
Corporate Profile
YKK Corporation
Foundation:
Capital:
Headquarter Address:
URL:
Directors and Auditors:
Chairman & CEO
Representative Director and Vice Chairman
Representative Director and President
Directors
January 1, 1934
11,992,400,500 yen
*as of March 31, 2016
1, Kanda Izumi-cho, Chiyoda-ku, Tokyo 101-8642, Japan
http://www.ykk.co.jp
Tadahiro Yoshida
Hideo Yoshizaki
Masayuki Sarumaru
Hiroaki Otani
Wataru Otani
Akira Yoshida
Tetsuo Yazawa
Jiichi Bamba
Keinosuke Ono
Yoshio Osawa
Audit & Supervisory Board Members
Satoshi Kawai
Kiyotaka Nagata
Hiroshi Akiyama
Naoki Yanagida
YKK AP Inc.
Foundation:
Capital:
Headquarter Address:
URL:
Directors and Auditors:
Chairman & CEO
Representative Director and Vice Chairman
Representative Director and President
Director and Vice Chairman
Directors
July 22, 1957
10,000,000,000 yen
*as of March 31, 2016
1, Kanda Izumi-cho, Chiyoda-ku, Tokyo 101-8642, Japan
http://www.ykkap.co.jp
Tadahiro Yoshida
Hideo Yoshizaki
Hidemitsu Hori
Yukio Kanayama
Fumio Niizeki
Akira Yoshida
Junichi Takahashi
Kosuke Iwabuchi
Kazuo Matsutani
Audit & Supervisory Board Members
Susumu Miyoshi
Junichi Keino
Kiyotaka Nagata
Takashi Miyatani
33