2020

ANNUAL REPORT
Year ended March 31, 2020

Profile

Since its establishment in 1948, Denyo has been a pioneer in outdoor power sources, developing andmanufacturing many original products, including engine-driven generators, engine-driven welders and engine-driven air compressors. Without
contenting ourselves with our current market position or technical expertise, we have boldly taken on new R&D challenges and, as a result, we
now command a 65% share of the domestic market for engine-driven generators, our main product. The Denyo Group comprises the Company

Contents

and its eleven subsidiaries and one affiliate, along with its production facilities in Southeast Asia and the U.S., and R&D center in Japan.

Consolidated Financial Highlights

1

To Our Shareholders

2

Review of Operations

4

Overview of Product Segment

6

Consolidated Financial Statements

7

Financial Review

8

Independent Auditor’s Report31

Company Data

32

Investor Information

36

Establishment of
Denyo Trading Vietnam Co., Ltd.

Generators sold by DTVInside the DTV office

Denyo established Denyo Trading Vietnam Co., Ltd. (DTV), a new sales subsidiary, in Hanoi, Vietnam in February 2020 as a wholly-owned
subsidiary, and it commenced business in April.
DTV will actively develop operations in Vietnam, where economic development is remarkable, in cooperation with Denyo Vietnam Co.,
Ltd. (DVC), a local manufacturing plant.

Year ended March 31, 2020

Consolidated Financial Highlights
2020

Millions of Yen
2019

2018

Thousands of
U.S. Dollars
2020

Net Sales¥62,887¥55,554¥50,182$577,847

Total Assets

75,62674,086

72,210694,904

Total Net Assets

58,35456,291

56,133536,195

Operating Income

6,058

4,201

3,902

55,665Net Income*

4,071

3,167

2,762

37,411Per Share Data

Yen

Total Net Assets

U.S. Dollars¥2,689.54¥2,583.90¥2,545.17$24.71Net Income*

194.32149.83130.03

1.79

Cash Dividends

46.00

42.00

40.00

0.42

Note:Transaction into U.S. dollars has been made, solely for the reader’s convenience, at the rate of ¥108.83 to U.S.$1, prevailing on the Tokyo Foreign Exchange
Market on March 31, 2020.

Net Sales

Net Income*¥ million

62,88750,4202016

48,852

2017

50,1822018¥ million

4,071

55,554
3,137

2019

2020

2016

2,867

2,762

2017

2018

3,167

2019

2020

* Net Income attributable to owners of the parent.

Total Assets

Total Net Assets¥ million¥ million

66,994

68,6782016

2017

72,21074,08675,626

2018

2019

2020

50,81253,1462016

2017

56,13356,29158,354

2018

2019

2020
1

Shoichi Shiratori, President2Year ended March 31, 2020

In fiscal

2020(ended March 31, 2020), the Japanese economy remained on a moderate recovery trend against a

backdrop of improvements in the employment and income situations. On the other hand, the outlook for the global economy has become
uncertain, given concerns over prolonged economic stagnation due to COVID-19, which began toward the end of the period, in addition to trade
conflict between the United States and China.
In terms of the business environment surrounding the Denyo Group, construction demand remained solid in Japan thanks to construction
for redevelopment projects in the Tokyo Metropolitan area, disaster prevention and disaster mitigation work. Demand for emergency generators
also increased partly due to the natural disasters that have successively occurred in recent years. Overseas, demand remained high in the U.S.
market.
Under these circumstances, the Denyo Group launched many new products onto the market and worked to improve production systems.
As a result, both sales and income increased significantly, with consolidated net sales rising to ¥62,887 million (US$577,847 thousand), up 13.2%
year on year, consolidated operating income increasing to ¥6,058 million (US$55,665 thousand), a rise of 44.2% year on year, consolidated ordinary
income climbing to ¥6,203 million (US$56,997 thousand), up 35.1% year on year, and net income attributable to owners of the parent increasing
28.6% year on year to ¥4,071 million (US$37,411 thousand). The Group recorded share of loss of entities accounted for using the equity method of¥108 million (US$989 thousand) as a result of posting allowance for doubtful accounts for overdue accounts receivable at associated companies.
Regarding dividends for the fiscal year under review, we issued an interim dividend of ¥22 (US$0.20) per share and decided to pay an ordinary
year-end dividend of ¥24 (US$0.22) per share. As a result, dividends for the full year came to ¥46 (US$0.42) per share (an increase of ¥4 (US$0.04)
from the previous fiscal year).
The future outlook is uncertain, given that COVID-19 continues to spread in countries around the world and is having a significant impact on
economic activities in Japan and overseas.
Under these conditions, the Denyo Group will steadily implement a range of measures in the final year of its Denyo 2020 medium-term
management plan while continuously paying all due attention to COVID-19, making the safety and health of its customers, business partners andemployees its first priority.
We would like to respectfully ask our shareholders for their continued patronage and support.

June 2020

Shoichi Shiratori, President

3

DENYO CO., LTD. and Consolidated Subsidiaries

Review of Operations(1) Engagement infuel-cell portable generatorsand electric generator trucks

Denyo has decided to work on the technology development anddemonstration program for fuel-cell portable generator and electric
generator truck jointly with other companies because Denyo wasselected by the Low Carbon Technology Research, Development
and Demonstration Program of the Ministry of the Environment ofJapan.

Given the commencement of the general sale of fuel cellvehicles (FCV) and the development of hydrogen refueling stations
supplying hydrogen, a fuel for FCV, Denyo has decided to work on
the development and demonstration of fuel-cell portable generatorsand electric generator trucks as the leading manufacturer of mobiletype generators, believing that this will lead to future measures
addressing global warming.
Denyo will contribute to the reductionof CO2 emissions by developing anddemonstrating fuel cell systems for mobiletype generators and electric generator trucks
able to use hydrogen manufactured fromelectricity generated using renewable energy
such as solar or wind power, as well as power
conditioners compatible with various loading
apparatuses.

(2) Introduction ofultra-low noise
emergency generators

Denyo focuses on the development and sale of emergency generators together with
Nishihatsu Co., Ltd., a Group company.
Depending on the location's intended use and size, disaster preparedness
equipment including sprinklers and fire hydrant pumps, are installed in buildings usedby large numbers of the general public, such as department stores, hotels, hospitals
and underground malls, to be used in an emergency.
A great number of Denyo emergency generators are used to provide emergency
power to this equipment.
Ultra-low noise emergency generators, which combine thetechnical capabilities cultivated by Nishihatsu over many years inprivate emergency generators and the noise insulation package
technology developed by Denyo in the DCA-US series of ultralow noise generator, have a noise level of 65dB at a distanceof 1 meter. They are so quiet that people standing a moderatedistance away can be unaware that they are operating.
They are optimal products for customers who need to pay
particular attention to noise, such as hospitals, nursing-carefacilities, hotels, and facilities in residential areas.
4Year ended March 31, 2020(3) Introduction of

DCW-500LSE,
a CO₂ arc engine-driven welding machine
Denyo developed DCW-500LSE, a 500A CO2 arc engine-driven
welding machine, and began selling it in July 2019.
Denyo developed the industry's first 350A CO2 arc enginedriven welding machine more than 35 years ago, and to date it hasdeveloped a good reputation for its high welding performance.

The DCW-500LSE has further
improved welding performance with its
inverter welding control, and its maximum
welding current has also increased from
350A to 500A. 500A output is possible
in all CO2 arc welding modes, manual
welding and gouging, and operations
that could not previously be conductedby conventional engine-driven welding
machines are extensively enabled,
contributing to the improvement ofoperations to make them faster and more
efficient.

The alternating-current (AC) output has also increased significantly, with threephase AC 25kVA and single-phase AC 9.9kVA now available. The DCW-500LSE canbe used in a wide range of applications, including shipbuilding, bridge work andheavy machine maintenance.
As the pioneer of engine-driven welding machines, Denyo will continue todevelop new engine-driven welding machines that meet customers' expectations.

5

DENYO CO., LTD. and Consolidated Subsidiaries

Overview of Product Segment
Business performance by product category and domestic market share

Engine Generators
In the engine generators segment, shipments of mobile-type
generators used mainly on construction sites calmed down inJapan, but shipments of emergency generators, such as gasfueled generators, that are used as a back-up power source in a
power outage increased.
Overseas, while shipments to Asia remained sluggish, shipments
to the U.S. remained strong. As a result, segment sales rose to¥50,436 million (US$463,442 thousand), up 15.5% year on year.

Engine Welders
In the engine welders segment, shipments of special welders
such as CO2 welding machines and TIG welding machines
increased in Japan, but shipments to the U.S. decreased. As
a result, segment sales declined to ¥5,073 million (US$46,610
thousand), a fall of 0.8% year on year.

Compressors
In the compressors segment, while shipments to the U.S. increased,
shipments in Japan remained weak. As a result, segment sales
declined to ¥1,013 million (US$9,304 thousand), down 4.5% year on
year.

65%
Domestic
Market Share(Mobile Type)55%
Domestic
Market Share20%
Domestic
Market ShareOther Products
In the other products segment, sales were ¥6,366 million (US$58,492 thousand), up 11.3% from the previous fiscal year, thanks mainly
to an increase in sales of self-propelled lifters and parts attached to products.

Note: Above domestic share is five year mean by our investigation

6

Year ended March 31, 2020

Denyo Co., Ltd.
and Subsidiaries
Consolidated Financial Statements
for the Year Ended March 31, 2020,and Independent Auditor’s Report

7

DENYO CO., LTD. and Consolidated Subsidiaries

Financial Review
Business Environment and Results
disasters that have successively occurred in recent years. Overseas,
demand remained high in the U.S. market.
Under these circumstances, the Denyo Group launched many
new products onto the market and worked to improve production
systems. As a result, both sales and income increased significantly,
with consolidated net sales rising to ¥62,887 million (US$577,847
thousand), up 13.2% year on year, consolidated operating income
increasing to ¥6,058 million (US$55,665 thousand), a rise of 44.2%
year on year, consolidated ordinary income climbing to ¥6,203
million (US$56,997 thousand), up 35.1% year on year, and net income
attributable to owners of the parent increasing 28.6% year on year to¥4,071 million (US$37,411 thousand).

In fiscal 2020 (ended March 31, 2020), the Japanese economy
remained on a moderate recovery trend against a backdrop of
improvements in the employment and income situations. On
the other hand, the outlook for the global economy has become
uncertain, given concerns over prolonged economic stagnation due
to COVID-19, which began toward the end of the period, in addition to
trade conflict between the United States and China.
In terms of the business environment surrounding the Denyo
Group, construction demand remained solid in Japan thanks toconstruction for redevelopment projects in the Tokyo Metropolitanarea, disaster prevention and disaster mitigation work. Demandfor emergency generators also increased partly due to the natural

Segment Information
generators to the U.S. also increased. As a result, sales rose to ¥43,626
million (US$400,860 thousand), up 7.2% year on year, and segment profit
increased to ¥3,396 million (US$31,209 thousand), up 38.9% year on year.
(U.S.)In the U.S., shipments of generators to our core rental market
increased significantly on the back of the strong economy. As aresult, sales increased to ¥15,167 million (US$139,368 thousand),up 39.2% year on year, and segment profit rose to ¥1,169 million(US$10,739 thousand), up 54.7% year on year.
(Asia)In Asia, shipments of generators for transportation infrastructure
projects such as subways increased, and sales increased to ¥3,585
million (US$32,941 thousand), up 8.2% year on year. Segment profit alsorose to ¥793 million (US$7,287 thousand), up 27.8% year on year, thanks
in part to an improved cost-to-sales ratio at the plant in Vietnam.
(Europe)
In Europe, the last-minute demand ahead of the new emission
control regulations that came into force in the previous fiscal year
cooled down, resulting in a fall in sales to ¥509 million (US$4,678
thousand), down 20.0% year on year. However, segment profit roseto ¥37 million (US$342 thousand), up 29.2% year on year, due partly
to the improved cost-to-sales ratio.

In the engine generators segment, shipments of mobile-type
generators used mainly on construction sites calmed down inJapan, but shipments of emergency generators, such as gas-fueled
generators, that are used as a back-up power source in a power outage
increased. Overseas, while shipments to Asia remained sluggish,
shipments to the U.S. remained strong. As a result, segment sales roseto ¥50,436 million (US$463,442 thousand), up 15.5% year on year.
In the engine welders segment, shipments of special welders suchas CO2 welding machines and TIG welding machines increased in Japan,
but shipments to the U.S. decreased. As a result, segment sales declined
to ¥5,073 million (US$46,610 thousand), a fall of 0.8% year on year.
In the compressors segment, while shipments to the U.S. increased,
shipments in Japan remained weak. As a result, segment sales declinedto ¥1,013 million (US$9,304 thousand), down 4.5% year on year.
In the other products segment, sales were ¥6,366 million (US$58,492
thousand), up 11.3% from the previous fiscal year, thanks mainly to anincrease in sales of self-propelled lifters and parts attached to products.
Information by geographical area is as follows.
(Japan)In Japan, while shipments of generators to the rental market calmed
down, shipments of emergency generators remained strong against a
backdrop of a rising awareness of disaster preparedness. Exports of large

Financial Position(Assets)
Total assets at the end of the fiscal year under review were ¥75,626
million (US$694,904 thousand), an increase of ¥1,541 million(US$14,157 thousand) from the end of the previous fiscal year.

Net Income per Share(¥)

Current assets at the end of the fiscal year under review were¥52,932 million (US$486,375 thousand), an increase of ¥3,083 million(US$28,330 thousand) from the end of the previous fiscal year. Thiswas mainly due to an increase in cash and deposits of ¥4,865 million

Cash Dividends per Share

Equity Ratio

(¥)

(%)

194.32146.792016
8134.18

2017

40.00

130.03

2019

74.4

74.5

73.1

74.1

2016

2017

2018

2019

2020

46.00

149.83

2018

72.9

2020

30.00

30.00

2016

2017

2018

42.00

2019

2020

Year ended March 31, 2020

million (US$3,746 thousand) and a fall in short-term loans of ¥222
million (US$2,038 thousand). Non-current liabilities at the end of the
fiscal year under review were ¥3,019 million (US$27,744 thousand),down ¥151 million (US$1,391 thousand) from the end of the previous
fiscal year. This was mainly due to an increase in lease obligationsof ¥282 million (US$2,591 thousand) as a result of the application of
IFRS 16 Leases at some overseas consolidated subsidiaries and a fallin deferred tax liabilities of ¥362 million (US$3,330 thousand).
(Net assets)
Net assets at the end of the fiscal year under review were ¥58,354
million (US$536,195 thousand), an increase of ¥2,063 million(US$18,959 thousand) from the end of the previous fiscal year. Thiswas mainly due to net income attributable to owners of the parentof ¥4,071 million (US$37,411 thousand), an ¥889 million (US$8,168
thousand) fall in the valuation difference on available-for-salesecurities, cash dividends paid of ¥959 million (US$8,813 thousand),and the purchase of treasury shares of ¥276 million (US$2,539
thousand).

(US$44,703 thousand), a fall in notes and accounts receivable - tradeof ¥1,266 million (US$11,631 thousand), a decrease in electronicallyrecorded monetary claims - operating of ¥373 million (US$3,423
thousand) and an decrease in merchandise and finished productsof ¥338 million (US$3,109 thousand). Non-current assets at the endof the fiscal year under review were ¥22,694 million (US$208,529
thousand), down ¥1,542 million (US$14,173 thousand) from theend of the previous fiscal year. This mainly reflected a decrease ininvestment securities of ¥1,776 million (US$16,316 thousand) due tothe sale and revaluation of stockholdings.
(Liabilities)
Total liabilities at the end of the fiscal year under review were¥17,272 million (US$158,709 thousand), decreasing ¥523 million(US$4,802 thousand) from the end of the previous fiscal year.
Current liabilities at the end of the fiscal year under review were¥14,253 million (US$130,965 thousand), down ¥371 million (US$3,411
thousand) from the end of the previous fiscal year. This was mainly
due to a decrease in trade notes and accounts payable - trade of ¥408

Cash Flows(Cash flows from investing activities)
Net cash used in investing activities was ¥874 million (US$8,033
thousand) (cash used of ¥164 million (US$1,508 thousand) in theprevious fiscal year). This largely reflected the purchase of property,
plant and equipment of ¥1,250 million (US$11,486 thousand)and proceeds from sales of investment securities of ¥390 million(US$3,585 thousand).
(Cash flows from financing activities)
Net cash used in financing activities was ¥1,528 million (US$14,042
thousand) (cash used of ¥1,316 million (US$12,092 thousand) in theprevious fiscal year). This was mainly due to a decrease in short-termloans of ¥218 million (US$2,007 thousand), the purchase of treasury
shares of ¥276 million (US$2,539 thousand) and dividends paid of¥959 million (US$8,813 thousand).

Consolidated cash and cash equivalents (hereinafter, cash) were¥21,054 million (US$193,460 thousand) at the end of the fiscal year
under review, increasing ¥4,883 million (US$44,872 thousand) fromthe end of the previous fiscal year, largely due to income before
income taxes of ¥6,178 million (US$56,767 thousand).
(Cash flows from operating activities)
Net cash provided by operating activities was ¥7,272 million(US$66,826 thousand) (cash provided of ¥4,085 million (US$37,536
thousand) in the previous fiscal year). This was largely due toincome before income taxes of ¥6,178 million (US$56,767 thousand),depreciation of ¥1,162 million (US$10,676 thousand), a decrease intrade notes and accounts receivable of ¥1,608 million (US$14,772
thousand), and a fall in trade notes and accounts payable of ¥546
million (US$5,012 thousand).

Dividends
Regarding dividends for the fiscal year under review, we issued
an interim dividend of ¥22 (US$0.20) per share and decided to pay
an ordinary year-end dividend of ¥24 (US$0.22) per share basedon the policy above. As a result, dividends for the full year cameto ¥46 (US$0.42) per share (an increase of ¥4 (US$0.04) from theprevious fiscal year). As a consequence, the dividend payout ratio(consolidated) for the fiscal year under review came to 23.7%.

Denyo recognizes the importance of making further efforts toreturn profits to shareholders while also investing in equipment
and research & development to enhance and maintain productcompetitiveness and striving to improve profitability and strengthen
its financial structure. Our policy is to distribute profits based on thecomprehensive consideration of a wide range of factors including
business performance and the payout ratio.

Return on Average
Shareholders’ Equity

Return on Average Assets
(ROA)

(%)

(%)

Price Earnings Ratio
14.6
12.6

6.5

2016

7.9

7.4
5.7

2017

5.3

2018

5.9

2019

2020

9.1

4.7

4.2

3.9

4.3

2016

2017

2018

2019

9.9

5.4
2020

2016

2017

2018

2019

2020
9

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Balance Sheet
DENYO CO., LTD. AND SUBSIDIARIES · YEAR ENDED MARCH 31, 2020

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 16)
Time deposits other than cash equivalents (Note 16)
Receivables (Note 16):
		 Trade notes (Note 2.w)
		 Electronically recorded monetary claims—operating (Note 2.w)
		 Trade accounts
		 Associated companies (Note 22)
		Other
		 Allowance for doubtful receivables
Inventories (Note 6)
Prepaid expenses and other current assets

Millions of Yen
2020
2019

Thousands of
U.S. Dollars(Note 1)
2020

¥21,054¥16,17118$193,460

3,997
2,922
12,401
1,795
62(4)
10,474
231

5,679
3,294
10,8892,891
82(6)
10,648183

36,73026,849113,947
16,493574(40)
96,2392,123

			 Total current assets

52,932

49,849486,375

PROPERTY, PLANT AND EQUIPMENT (Note 7):Land
Buildings and structures
Machinery and equipment (Note 15)
Furniture and fixtures
Construction in progress			Total
Accumulated depreciation

4,836
13,041
7,477
1,969
602
27,925(13,480)

4,835
13,225
7,240
1,899
102
27,301(12,886)

44,432
119,826
68,707
18,103
5,528
256,596(123,862)

			 Net property, plant and equipment

14,445

14,415

132,734

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 16)
Investments in associated companies (Note 8)
Deferred tax assets (Note 13)
Other assets

6,518
811
172
748

8,164
940
175
543

59,889
7,454
1,579
6,873

			 Total investments and other assets

8,249

9,822

75,795¥75,626¥74,086$694,904

TOTAL
See notes to consolidated financial statements.

10

Year ended March 31, 2020

LIABILITIES AND EQUITY

Millions of Yen
2020
2019

Thousands of
U.S. Dollars(Note 1)
2020

CURRENT LIABILITIES:
Short-term bank loans (Notes 9 and 16)
Current portion of long-term debt (Notes 9, 15 and 16)
Payables (Note 16):
		 Trade notes (Note 2.w)
		Electronically recorded obligations—operating (Note 2.w)
		 Trade accounts
		 Associated companies
		Other
Accrued income taxes (Note 13)
Accrued expenses
Provision for product warranties
Other current liabilities

¥210
15

¥432
1

$1,930
137

1,063
1,986
7,813
12
201
1,062
1,261
103
527

1,253
2,146
8,035
9
233
539
1,382
100
494

9,771
18,24871,795
107
1,850
9,761
11,591949
4,826

			 Total current liabilities

14,253

14,624130,965

LONG-TERM LIABILITIES:Long-term debt (Notes 9, 15 and 16)
Liability for retirement benefits (Note 11)
Deferred tax liabilities (Note 13)
Other long-term liabilities

1,371
434
961
253

1,111
433
1,323
304

12,597
3,987
8,827
2,333

			 Total long-term liabilities

3,019

3,171

27,744

Treasury stock—at cost, 2,014,745 shares in 2020 and 1,901,761 shares in 2019 (Note 4)

1,955
1,779
51,903(2,365)

1,955
1,779
48,794(2,107)

17,962
16,351
476,917(21,734)

Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
			Total
Noncontrolling interests

2,575
249
(33)
56,063
2,291

3,464
301
(33)
54,153
2,138

23,6652,287(302)
515,146
21,049

			 Total equity

58,35456,291

536,195

TOTAL¥75,626¥74,086$694,904

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 15, 17 and 18)

EQUITY (Note 12):
Common stock—authorized, 97,811,000 shares;
issued, 22,859,660 shares in 2020 and 22,859,660 shares in 2019

Capital surplus
Retained earnings

11

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Statement of Income and Comprehensive Income
DENYO CO., LTD. AND SUBSIDIARIES · YEAR ENDED MARCH 31, 2020

Millions of Yen
2020
2019

Thousands of
U.S. Dollars(Note 1)
2020

NET SALES (Notes 21 and 22)¥62,887¥55,554$577,847

COST OF SALES

48,28843,145443,706

			 Gross profit

14,59912,409134,141SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 14)

8,541

8,208

78,476

			 Operating income

6,058

4,201

55,665

248
(57)

222
(46)
4
(12)
(108)

2,283
(523)

OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Gain on sale of property, plant and equipment
Loss on sale or disposal of property, plant and equipment
Loss on impairment of long-lived assets (Note 7)
Loss on revaluation of investment securities
Foreign exchange gain (loss) gain
Equity in earnings of associated companies
Rent income
Insurance claim income (Note 2.w)
Commitment fee
Gain on sale of investment securities
Other—net

(180)
(56)
(108)
80
65
(32)
196
4

20
99
78
3
(7)
121
23

(1,657)
(513)
(989)
738
598
(293)
1,797
32

			 Other income—net

120

397

1,102

INCOME BEFORE INCOME TAXES

6,178

4,598

56,767

INCOME TAXES (Note 13):
Current
Deferred

1,895
(2)

1,265
(24)

17,414(17)

			 Total income taxes

1,893

1,241

17,397NET INCOME

4,285

3,357

39,370Owners of the parent
Noncontrolling interests

4,071
214

3,167
190

37,411
1,959

NET INCOME—(Forward)¥4,285¥3,357$39,370

OTHER COMPREHENSIVE LOSS (Note 19):
Unrealized loss on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive loss in associates

(884)
(54)
(0)
(5)

(1,152)
(533)
8
(1)

(8,124)
(492)
(0)
(44)

		 Total other comprehensive loss

(943)

(1,678)8,660

COMPREHENSIVE INCOME¥3,342¥1,679$30,710TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥3,130212¥1,567
112$28,761
1,949

(40)

(371)

NET INCOME ATTRIBUTABLE TO:Yen
PER SHARE OF COMMON STOCK (Notes 2.t and 20):
Basic net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

12¥194.32
46.00

U.S. Dollars¥149.83
42.00

$1.79
0.42

Year ended March 31, 2020

Consolidated Statement of Changes in Equity
DENYO CO., LTD. AND SUBSIDIARIES · YEAR ENDED MARCH 31, 2020

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE,APRIL 1, 2018
Net income attributable toowners of the parent
Cash dividends,¥42 per share
Purchase oftreasury stock
Selling of treasury stock
Net change in the year
BALANCE,MARCH 31, 2019
Cumulative effect ofaccounting change
BALANCE,APRIL 1, 2019
Net income attributable toowners of the parent
Cash dividends,¥46 per share
Purchase oftreasury stock
Selling of treasury stock
Net change in the year
BALANCE,MARCH 31, 2020

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock21,243¥1,955¥1,779¥46,622¥(1,622)¥4,617

¥756

¥(41)

1,779

¥54,066

1,955

1,779

(995)

(995)

(995)

71

(501)
16
(1,529)2,13856,291

48,794

48,791(2,107)(1,153)

(455)

8

(501)
16
(1,600)

3,464

301

(33)

54,153(3)(2,107)

3,464

301

(33)

¥1,7792,13856,288

4,071

4,071

(959)

(959)

(959)

(276)
18
(941)

153

(276)
18
(788)

¥56,063¥2,291¥58,354(276)
18¥1,95554,150

(3)

4,071

(130)
17

20,84556,1333,167(3)20,958¥2,067

Total
Equity

3,167

(501)
16

1,955

Noncontrolling
Interests

Total

3,167

(300)
15

20,958

Unrealized
Gain onForeignDefinedAvailableCurrency
Retirement
for-SaleTranslation
BenefitSecurities Adjustments
Plans¥51,903¥(2,365)

(889)

(52)

¥2,575

¥249

¥(33)

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income

CommonStock

BALANCE,MARCH 31, 2019
Cumulative effect ofaccounting change
BALANCE,APRIL 1, 2019
Net income attributable toowners of the parent
Cash dividends,$0.42 per share
Purchase oftreasury stock
Selling of treasury stock
Net change in the year
BALANCE,MARCH 31, 2020

CapitalSurplusRetained
Earnings$17,962 $16,351 $448,343

Treasury
Stock

Unrealized
Gain onForeignDefinedAvailableCurrency
Retirement
for-SaleTranslation
BenefitSecurities Adjustments
Plans$(19,362)$31,832$2,769$(302) $497,593(24)
17,962

16,351

448,319

Total

Noncontrolling
Interests$19,642(24)(19,362)

31,832

2,769

(302)

497,569

Total
Equity$517,235(24)

19,642517,21137,411

37,411

37,411(8,813)(8,813)(8,813)(2,539)167(7,242)(2,539)167$17,962 $16,351 $476,917(8,167)(482)(2,539)167(8,649)$(21,734) $23,665$2,287$(302) $515,146

1,407$21,049 $536,195

See notes to consolidated financial statements.

13

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
DENYO CO., LTD. AND SUBSIDIARIES · YEAR ENDED MARCH 31, 2020

Millions of Yen
2020
2019

Thousands of
U.S. Dollars(Note 1)
2020

OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:		 Income taxes paid
		 Depreciation and amortization
		 Loss on sale or disposal of property, plant and equipment—net
		 Gain on sale of investment securities
		 Loss on impairment of long-lived assets
		 Equity in earnings of associated companies
		 Loss on revaluation of investment securities
		 Changes in assets and liabilities, net of effects:
			 Decrease (increase) in trade notes and accounts receivable
			 Decrease (increase) in inventories
			 Decrease in interest and dividends receivable			 (Decrease) increase in trade notes and accounts payable			 Decrease in provision for allowance for doubtful accounts
			 Decrease in liability for retirement benefits
		Other—net				 Total adjustments¥6,178¥4,598$56,767(1,387)
1,162
40
(196)

(1,211)
1,132
8
(121)
108
(99)

(12,743)
10,676370(1,797)

1,608
138
13
(546)
(3)
(2)
(21)
1,094

(1,371)
(995)
19
1,972
(1)
(32)
78
(513)

14,772
1,264
115(5,012)
(30)
(15)
(187)
10,059

				

7,272

4,085

66,826INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Purchases of securities
Proceeds from sales of securities
Investment in loans receivableCollections of loans receivable
Decrease in time deposit—net
Other—net (Note 2.w)

(1,250)
(3)
390
(1)
5
18
(33)

(1,489)
(3)
266
(7)
7
1,112
(50)

(11,486)
(25)
3,585
(13)
48
166
(308)

				

Net cash used in investing activities

(874)

(164)

(8,033)

FINANCING ACTIVITIES:(Decrease) increase in short-term loans—net
Purchases of treasury stock
Dividends paid
Other—net

(218)
(276)
(959)
(75)

221
(501)
(994)
(42)

(2,007)(2,539)(8,813)
(683)

				

(1,528)(1,316)(14,042)

13

(147)

121

NET INCREASE IN CASH AND CASH EQUIVALENTS—(Forward)¥4,883¥2,458$44,872

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

16,171

13,713

148,588

CASH AND CASH EQUIVALENTS, END OF YEAR

¥21,054¥16,171$193,460

Net cash provided by operating activities

Net cash used in financing activities

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

See notes to consolidated financial statements.

14

108
180

989
1,657

Year ended March 31, 2020

Notes to Consolidated Financial Statements
DENYO CO., LTD. AND SUBSIDIARIES · YEAR ENDED MARCH 31, 2020

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements havepresent them in a form which is more familiar to readers outside Japan.
been prepared in accordance with the provisions set forth in
The consolidated financial statements are stated in Japanese
the Japanese Financial Instruments and Exchange Act and its
yen, the currency of the country in which Denyo Co., Ltd. (therelated accounting regulations and in accordance with accounting"Company") is incorporated and operates. The translations ofprinciples generally accepted in Japan ("Japanese GAAP"), which
Japanese yen amounts into U.S. dollar amounts are included solely
are different in certain respects as to the application and disclosurefor the convenience of readers outside Japan and have been maderequirements of International Financial Reporting Standards.
at the rate of ¥108.83 to $1, the approximate rate of exchange
In preparing these consolidated financial statements, certain
at March 31, 2020. Such translations should not be construed
reclassifications and rearrangements have been made to theas representations that the Japanese yen amounts could be
consolidated financial statements issued domestically in order toconverted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements as ofMarch 31, 2020, include the accounts of the Company and its 11
subsidiaries, including mainly "Denyo Kosan Co., Ltd.," "Nishihatsu Co., Ltd.," "Denyo America Corporation," "Denyo Manufacturing Corporation," "Denyo Asia Pte. Ltd.," "Denyo United Machinery Pte. Ltd.," "Denyo Europe B.V.," "Denyo Vietnam Co., Ltd." and"P.T. Dein Prima Generator" (together, the "Group").
		 Under the control and influence concepts, those companies
in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant
influence are accounted for by the equity method.
		 The investment in "New Japan Machinery Corporation," anassociated company, is accounted for by the equity method.
		 All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Groupis also eliminated.
		 "Denyo America Corporation," "Denyo Manufacturing Corporation," "Denyo Asia Pte. Ltd.," "Denyo United Machinery Pte.
Ltd.," "Denyo Europe B.V.," "Denyo Vietnam Co., Ltd." and "P.T. Dein
Prima Generator" and two other subsidiaries were consolidated
using the financial statements as of December 31 because thedifference between the fiscal year end date of the subsidiaries
and that of the Company does not exceed three months. Significant transactions between December 31 and March 31 are reflected in the accompanying consolidated financial statements.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements—Under
Accounting Standards Board of Japan ("ASBJ") Practical Issues
Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements," the accounting policies and procedures applied to a parent company and its subsidiaries for similartransactions and events under similar circumstances should in
principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either International Financial
Reporting Standards or generally accepted accounting principles
in the United States of America (Financial Accounting Standards
Board Accounting Standards Codification) tentatively may be
used for the consolidation process, except for the following items
that should be adjusted in the consolidation process so that net
income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has
been recorded in equity through other comprehensive income;(c) expensing capitalized development costs of R&D; and (d) can-cellation of the fair value model of accounting for property, plantand equipment and investment properties and incorporation of
the cost model of accounting; and (e) recording a gain or loss
through profit or loss on the sale of an investment in an equity
instrument for the difference between the acquisition cost andselling price, and recording impairment loss through profit or loss
for other than temporary declines in the fair value of an investment in an equity instrument, where a foreign associate elects topresent in other comprehensive income subsequent changes in
the fair value of an investment in an equity instrument.
c. Cash and Cash Equivalents—Cash and cash equivalents include cash on hand, bank deposits able to be withdrawn on
demand and short-term investments with an original maturityof three months or less and are exposed to insignificant risk offluctuations in value.
d. Marketable and Investment Securities—Marketable and investment securities are classified and accounted for dependingon management's intent. Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
		 Nonmarketable available for sale securities are stated at cost
determined by the moving average method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
e. Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered to be appropriate
based on the Company's past credit loss experience and an evaluation of potential losses in the receivables outstanding.
f. Inventories—Inventories are stated at the lower of cost, determined by the first-in, first-out method for finished products andwork in process, and by the average method for raw materials, or
net selling value.
g. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of property, plant andequipment of the Company and its consolidated domestic subsidiaries is computed by the declining-balance method basedon the estimated useful lives of the assets, while the straight line
method is applied to buildings of the Company and its consolidated domestic subsidiaries acquired on or after April 1, 1998,
building improvements and structures of the Company and its
consolidated domestic subsidiaries acquired on or after April 1,
2016, and all property, plant and equipment of consolidated foreign subsidiaries. The range of useful lives is principally from 7 to47 years for buildings and structures, and from 2 to 12 years formachinery and equipment.
h. Long-Lived Assets—The Group reviews its long-lived assets
for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not
15

DENYO CO., LTD. and Consolidated Subsidiaries

be recoverable. An impairment loss is recognized if the carrying
amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued
use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which thecarrying amount of the asset exceeds its recoverable amount,which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling
price at disposition.
i. Provision for Product Warranties—The provision for productwarranties is recorded to provide for future potential costs, suchas costs related to after sales services within the warranty period
based on past experience.
j. Accrued Bonuses—Accrued bonuses to employees are provided
for at the estimated amounts that the Company and its domestic
subsidiaries are obligated to pay to employees after the fiscal yearend, based on services provided during the current period.
k. Retirement and Pension Plans—The Company, its domestic
subsidiaries and a certain foreign subsidiary maintain defined
benefit pension plans. Some foreign subsidiaries maintain defined contribution pension plans.
		 The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date. The projected benefit obligations are
attributed to periods on a benefit formula basis.
		 The unrecognized actuarial gains and losses are amortized ona straight-line basis over a period of 5 years, no longer than the
expected average remaining service period of the employees,
from the year incurred. Actuarial gains and losses that are yet
to be recognized in profit or loss are recognized within equity(accumulated other comprehensive income), after adjusting fortax effects.
l. Employee Stockownership Plan—In accordance with PITF No.
30, "Practical Solution on Transactions of Delivering the Company's Own Stock to Employees etc. through Trusts," upon transfer of treasury stock to the employee stockownership trust (the"Trust") by the entity, any difference between the book value andfair value of the treasury stock is recorded in capital surplus. At
year-end, the Company records (1) the Company stock held by
the Trust as treasury stock in equity, (2) all other assets and liabilities of the Trust on a line-by-line basis, and (3) a liability/asset
for the net of (i) any gain or loss on delivery of the stock by theTrust to the employees shareholding association, (ii) dividends
received from the entity for the stock held by the Trust, and (iii)any expenses relating to the Trust.
m. Research and Development Costs—Research and development costs are charged to income as incurred.
n. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13,"Accounting Standard for Lease Transactions," which revised theprevious accounting standard for lease transactions.
		 Under the previous accounting standard, finance leases thatwere deemed to transfer ownership of the leased property to
the lessee were capitalized. However, other finance leases werepermitted to be accounted for as operating lease transactions if
certain "as if capitalized" information was disclosed in the notes
to the lessee's financial statements. The revised accounting standard requires that all finance lease transactions be capitalized
by recognizing lease assets and lease obligations in the balance
sheet. In addition, the revised accounting standard permits leases that existed at the transition date and that do not transfer
ownership of the leased property to the lessee to continue to beaccounted for as operating lease transactions.
		 The Company applied the revised accounting standard effective April 1, 2008.
		 All other leases are accounted for as operating leases.
16

o. Bonuses to Directors and Audit & Supervisory Board Members—Bonuses to directors and Audit & Supervisory Board
members are accrued at the end of the year to which such bonuses are attributable.
p. Income Taxes—The provision for income taxes is computed
based on the pretax income included in the consolidated statement of income and comprehensive income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases ofassets and liabilities. Deferred taxes are measured by applying
currently enacted income tax rates to the temporary differences.
q. Foreign Currency Transactions—All short-term and long-termmonetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates atthe balance sheet date. The foreign exchange gains and losses
from translation are recognized in the accompanying consolidated statement of income and comprehensive income.
r. Foreign Currency Financial Statements—The balance sheet
accounts of the consolidated foreign subsidiaries are translated
into Japanese yen at the current exchange rate as of the balance
sheet date except for equity, which is translated at the historicalrate. Differences arising from such translation are shown as "Foreign currency translation adjustments" under accumulated othercomprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries
are translated into Japanese yen at the average exchange rate.
s. Derivatives and Hedging Activities—The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange, interest rates and raw material costs.
Foreign exchange forward contracts, currency swaps, interest
rate swaps and commodity swaps are utilized by the Group to
reduce the risk of fluctuation of foreign currency exchange, interest rate and raw material costs. The Group does not enter into
derivatives for trading or speculative purposes.
		 Derivative financial instruments are classified and accounted
for as follows: (a) all derivatives, except for those that qualify forhedge accounting, are recognized as either assets or liabilities
and measured at fair value, and gains or losses on derivativetransactions are recognized in the income statement and (b) for
derivatives used for hedging purposes, if derivatives qualify forhedge accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items, gains
or losses on derivatives are deferred until maturity of the hedgedtransactions.
		 Interest rate swaps which qualify for hedge accounting andmeet specific matching criteria are not remeasured at market
value but the differential paid or received under the swap agreements is recognized and included in interest expense.
		 The commodity swaps which qualify for hedge accounting
are measured at market value at the balance sheet date and theunrealized gains or losses are deferred until maturity as deferredgain (loss) on derivatives under hedge accounting as a separate
component of equity.
t. Per Share Information—Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares
outstanding for the period, retroactively adjusted for stock splits.
		 Cash dividends per share presented in the accompanying
consolidated statement of income and comprehensive income
are dividends applicable to the respective fiscal years, including
dividends to be paid after the end of the year.
u. Consumption Taxes—Consumption taxes are not included
in sales, cost of sales and selling, general and administrative expenses, etc.

Year ended March 31, 2020

v. New Accounting Pronouncements
As a result, in the consolidated statement of balance sheet for
the year ended March 31, 2019, "Other assets" under "Investments
and other assets" increased by ¥293 million, "Other" under "Current liabilities" increased by ¥14 million, and "Long-term debt"
under "Long term liabilities" increased by ¥282 million. And theopening balance of "Retained earnings" decreased by ¥3 million.
Accounting Standard for Revenue Recognition—On March
30, 2018, the ASBJ issued ASBJ Statement No. 29, "AccountingStandard for Revenue Recognition," and ASBJ Guidance No. 30,"Implementation Guidance on Accounting Standard for Revenue
Recognition." The core principle of the standard and guidance isthat an entity should recognize revenue to depict the transfer
of promised goods or services to customers in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should
recognize revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performanceobligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation
		 The accounting standard and guidance are effective for annual
periods beginning on or after April 1, 2021. Earlier application ispermitted for annual periods beginning on or after April 1, 2018.
		The Company expects to apply the accounting standard andguidance for annual periods beginning on April 1, 2021, and is in
the process of measuring the effects of applying the accounting
standard and guidance in future applicable periods.
–Accounting–Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)–Implementation–
Guidance on Accounting Standard for Fair
Value Measurement (ASBJ Guidance No. 31, July 4, 2019)–Accounting–Standard for Measurement of Inventories (ASBJ
Guidance No. 9, July 4, 2019)–Accounting–Standard for Financial Instruments (ASBJ Guidance No. 10, July 4, 2019)–Implementation–
Guidance on Disclosures about Fair Value of
Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
To improve comparability with international accounting standards, the "Accounting Standard for Fair Value Measurement"and "Implementation Guidance on Accounting Standard for
Fair Value Measurement" (hereinafter, "Fair Value Measurement Accounting Standards") were developed, establishingguidance and other information on how to calculate market
prices. Fair Value Measurement Accounting Standards are applied to the market prices of the following items.
• Financial instruments within the "Accounting Standard for
Financial Instruments"• Inventory assets held for the purpose of trading within the"Accounting Standard for Measurement of Inventories"
Additionally, "Guidance on Disclosures about Fair Value of
Financial Instruments" was revised and notes, including a
breakdown by the market value level of financial instruments,
were established.
(2) Scheduled date of adoption
This standard will be adopted from the beginning of the fiscal
year ending March 31, 2022.
(3) Impact of adopting this accounting standard

At the time these consolidated financial statements were prepared, the material impact of the adoption of this accounting
standard had not yet been determined.
–– Accounting Standard for Disclosure of Accounting Estimates(ASBJ Guidance No. 31, March 31, 2020)(1) Overview
As the purpose of this standard is to disclose information that
contributes to the understanding among users of financial
statements, this addresses figures recorded in the financial
statements for the current fiscal year based on accounting estimates for items that have a risk of a significantly impacting
financial statements in the next fiscal year.
(2) Scheduled date of adoption
This standard will be adopted from the end of the fiscal year
ending March 31, 2021.
–– Accounting Standard for Accounting Policy Disclosures,
Accounting Changes and Error Corrections (ASBJ Guidance
No. 24, March 31, 2020)(1) Overview
This guidance is intended to provide an overview of the accounting principles and procedures adopted when the relevant accounting standards are not clear.
(2) Scheduled date of adoption
This standard will be adopted from the end of the fiscal year
ending March 31, 2021.
w. Change in Disclosures—"Electronically recorded monetaryclaims—operating" which had been included in the "Tradenotes" in "Current assets" in the consolidated statement of balance sheet for the year ended March 31, 2019, and "Electronicallyrecorded obligations—operating" which had been included inthe "Trade notes" in "Current liabilities" in the consolidated statement of balance sheet for the year ended March 31, 2019, were
presented as separate line items for the year ended March 31,
2020, due to increase in materiality.
		 As a result, the amount of ¥8,973 million disclosed as "Tradenotes" under "Current assets" in the consolidated statement ofbalance sheet for the year ended March 31, 2019, has been reclassified as ¥3,294 million under "Electronically recorded monetaryclaims—operating" and as ¥5,679 million under "Trade notes."
And the amount of ¥3,399 million disclosed as "Trade notes" under "Current liabilities" in the consolidated statement of balance
sheet for the year ended March 31, 2019, has been reclassified as¥2,146 million under "Electronically recorded obligations—operating" and as ¥1,253 million under "Trade notes."
		 "Insurance claim income" which had been included in the"Other―net" in "Other income (expenses)" in the consolidated
statement of income and comprehensive income for the year
ended March 31, 2019, was presented as separate line items forthe year ended March 31, 2020, due to increase in materiality.
		 As a result, the amount of ¥26 million disclosed as "Other―net" under "Other income (expenses)" in the consolidated statement of income and comprehensive income for the year ended
March 31, 2019, has been reclassified as ¥3 million under "Insurance claim income" and as ¥23 million under "Other―net."
		 "Proceeds from sales of property, plant and equipment"
which were disclosed under "Investing activities" in the consolidated statement of cash flows for the year ended March 31, 2019,
have been disclosed as "Other—net" for the year ended March
31, 2020, due to decrease in materiality.
		 As a result, the amount of ¥5 million disclosed as "Proceedsfrom sales of property, plant and equipment" under "Investing
activities" in the consolidated statement of cash flows for theyear ended March 31, 2019, has been reclassified as ¥(50) million
under "Other―net."

17

DENYO CO., LTD. and Consolidated Subsidiaries

3. ACCOUNTING CHANGEIFRS 16 Leases—IFRS 16 sets out the principles for recognition,measurement, presentation, and disclosure of leases. A lessee isrequired to account for all leases in its consolidated statement offinancial position, applying a single accounting model. IFRS 16 iseffective for annual periods beginning on or after January 1, 2019,
4. STOCK GRANTING TRUST ("J-ESOP" and "BBT")The Company has introduced a Stock Granting Trust ("J-ESOP") forthe purpose of enhancing the benefits package to employees andproviding incentives for raising corporate value.
The Company grants employees points according to theircontinued services and results, and when the employees retire,
the Company delivers to them its own stock (or pays an equivalentamount in cash) corresponding to the number of their accumulated
points through the Trust.

and some foreign subsidiaries have applied IFRS 16 from January 1,
2019. Some foreign subsidiaries apply transition requirements in IFRS
16 that retrospectively recognize the cumulative effect of initiallyapplying the standard as an adjustment to the opening balance ofretained earnings at the date of initial application.

The Company has introduced a new stock compensation planfor directors called the "Board Benefit Trust (BBT)" since September
1, 2015. The Company grants its directors points according to theCompany's business results, etc., and the Company delivers to thedirectors who have beneficiary rights its own stock corresponding to
the number of their accumulated points determined on a given dateevery year through the Trust.

These Trusts held treasury stock as follows which was included in the balance sheet of the Company:
Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
¥492
(775)

Treasury stock(Number of shares (thousands of shares))

¥511
(792)

$4,524

5. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2020 and 2019, consisted of the following:Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Non-current:
Marketable equity securities
Nonmarketable equity securities¥5,625893¥7,166998$51,685
8,204

Total

¥6,518¥8,164$59,889

The cost and aggregate fair values of marketable and investment securities at March 31, 2020 and 2019, were as follows:
Millions of Yen
March 31, 2020
Securities classified as available-for-sale—
Equity securities

Unrealized
Gains

Unrealized
LossesFair Value¥1,950¥3,687¥12¥5,625¥2,216¥4,951¥1¥7,166

Cost

March 31, 2019
Securities classified as available-for-sale—
Equity securities

Thousands of U.S. Dollars
March 31, 2020

Cost

Securities classified as available-for-sale—
Equity securities$17,915

18

Unrealized
Gains

Unrealized
LossesFair Value$33,881$111$51,685

Year ended March 31, 2020

The proceeds, realized gains and realized losses of the available-for-sale securities which were sold during the years ended March 31, 2020 and
2019, were as follows:
Millions of Yen
March 31, 2020

Proceeds

Available-for-sale—Equity securities

Realized Gains Realized Loss

¥390

¥218

¥22

¥266

¥122

¥1

March 31, 2019
Available-for-sale—Equity securities

Thousands of U.S. Dollars
March 31, 2020

Proceeds$3,585

Available-for-sale—Equity securities

Realized Gains Realized Loss
$2,004$207

The impairment losses on available-for-sale equity securities for the year ended March 31, 2020, was ¥180 million ($1,657 thousand).

6. INVENTORIESInventories at March 31, 2020 and 2019, consisted of the following:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Finished products and merchandiseWork in process
Raw materials and supplies¥3,9201,410
5,144¥4,2581,237
5,153$36,021
12,95047,268

Total¥10,474¥10,648$96,239

7. LONG-LIVED ASSETSThe Group reviewed its long-lived assets for impairment as ofMarch 31, 2019. As a result, the Group recognized an impairment
loss of ¥108 million as loss on impairment of long-lived assets foran employee dormitory following the decision to abolish anddemolish it and the carrying amount of the relevant buildings andleasehold rights was written down to the recoverable amount. The
recoverable amount was measured using the net realizable value
based on the selling price and evaluated at ¥0. No impairment loss
was recognized in 2020.

8. INVESTMENTS IN ASSOCIATED COMPANIESInvestments in associated companies at March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Investments—New Japan Machinery Corporation

¥811

¥940

$7,454

Total

¥811

¥940

$7,45419

DENYO CO., LTD. and Consolidated Subsidiaries

9. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2020 and 2019, consisted of bank overdrafts. The weighted-average interest rate applicable to the short‑termbank loans was 0.5% and 1.9% at March 31, 2020 and 2019.
Long-term debt at March 31, 2020 and 2019, consisted of the following:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Unsecured loans from banks, with interest
rate at 3.4% (2020 and 2019)
Obligations under finance leases
		TotalLess current portion¥1,088
298
1,386
(15)

¥1,110
2
1,112(1)$10,000
2,734
12,734(137)

Long-term debt, less current portion¥1,371¥1,111$12,597

Millions of Yen

Thousands of
U.S. Dollars

2021
2022
2023
2024
2025
2026 and thereafter

¥15
1,101
13
13
14
230

$137
10,114
117
119
129
2,118

Total

¥1,386$12,734

Annual maturities of long term debt at March 31, 2020, were as follows:Year Ending March 31

10. COMMITMENT LINE CONTRACTS
In order to raise funds efficiently, the Company has entered into acommitment line contract with four financial institutions, of which
Mizuho Bank, Ltd. is the arranger. The contract provided the Company

11. RETIREMENT AND PENSION PLANS
The Company has a defined benefit pension plan and domestic
subsidiaries also participate in the same plan. A certain foreignsubsidiary has its own defined benefit pension plan and other foreignsubsidiaries have defined contribution plans. In addition, the Company
and domestic subsidiaries have a stock granting retirement plan.

with a commitment line of ¥3,000 million ($27,566 thousand) as ofMarch 31, 2020. The Company had no borrowings outstanding under
the agreement as of March 31, 2020.

The projected benefit obligation of a certain domestic subsidiaryis calculated using a simplified method, which is permitted for small
companies in accordance with the accounting standard for retirement
benefits.

(1) The changes in defined benefit obligation for the years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Others¥2,865
168
24
19
(302)
5

¥2,905
169
23
(8)
(213)
(11)

$26,327
1,541
221
170
(2,772)
47

Balance at end of year

¥2,779¥2,865$25,534

20

Year ended March 31, 2020

(2) The changes in plan assets for the years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
Others¥2,575
30
(6)
187
(295)
3

¥2,552
30
(2)
188
(194)
1

$23,662
280
(53)
1,718
(2,712)
25

Balance at end of year

¥2,494¥2,575$22,920(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligationand plan assets was as follows:
Millions of Yen
2020
2019
Funded defined benefit obligation
Plan assets
			Total
Unfunded defined benefit obligation
Liability for stock granting retirement
Net liability arising from defined benefit obligation

Thousands of
U.S. Dollars
2020¥2,698
2,494
204
81
149

¥2,780
2,575
205
85
143

$24,788
22,920
1,868
745
1,374

¥433

¥433

$3,987

Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Liability for retirement benefits

¥434

¥433

$3,987Net liability arising from defined benefit obligation

¥434

¥433

$3,987(4) The components of net periodic benefit costs for the years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Stock granting cost

¥168
24
(30)
17
37

¥169
23
(30)
22
46

$1,541
220
(279)
157
348

Net periodic benefit costs

¥216

¥230

$1,978(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans
for the years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

¥12

Actuarial gains(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans as of March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019
Unrecognized actuarial gains

¥(47)

¥(47)

Thousands of
U.S. Dollars
2020$(435)
21

DENYO CO., LTD. and Consolidated Subsidiaries(7) Plan assets
a. Components of plan assets
		 Plan assets as of March 31, 2020 and 2019, consisted of the following:
2020

2019

General account managed by a life insurance company

100.0%

100.0%

Total

100.0%

100.0%

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the
future from the various components of the plan assets.
(8) Assumptions used for the years ended March 31, 2020 and 2019, are set forth as follows:

Discount rate
Expected rate of return on plan assets
Expected rate of future salary increase

2020

2019

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

12. EQUITY
Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affectfinancial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders' meeting. Additionally, forcompanies that meet certain criteria including (1) having a Boardof Directors, (2) having independent auditors, (3) having an Audit& Supervisory Board, and (4) the term of service of the directors
being prescribed as one year rather than the normal two-year
term by its articles of incorporation, the Board of Directors may
declare dividends (except for dividends-in-kind) at any time during
the fiscal year if the company has prescribed so in its articles ofincorporation. The Company meets all the above criteria.

The Companies Act permits companies to distribute dividends-inkind (noncash assets) to shareholders subject to a certain limitation
and additional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporationof the company so stipulate. The Companies Act provides certain
limitations on the amounts available for dividends or the purchase oftreasury stock. The limitation is defined as the amount available for
distribution to the shareholders, but the amount of net assets after
dividends must be maintained at no less than ¥3 million.

b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of
dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (a componentof capital surplus), depending on the equity account charged
upon the payment of such dividends, until the aggregate amountof the legal reserve and additional paid-in capital equals 25% of

the common stock. Under the Companies Act, the total amount ofadditional paid-in capital and legal reserve may be reversed without
limitation. The Companies Act also provides that common stock, legal
reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts within equity undercertain conditions upon resolution of the shareholders.

c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolution of
the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to theshareholders which is determined by a specific formula. Under
the Companies Act, stock acquisition rights are presented as aseparate component of equity. The Companies Act also provides thatcompanies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented
as a separate component of equity or deducted directly from stockacquisition rights.

13. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanesenational and local income taxes which, in the aggregate, resulted innormal effective statutory tax rates of approximately 30.6% and 30.9%
for the years ended March 31, 2020 and 2019, respectively.

The tax effects of significant temporary differences and tax loss
carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2020 and 2019, are as follows:

22

Year ended March 31, 2020

Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Deferred tax assets:
¥190
36
65
79
22
113
77
12
227
(120)

¥193
31
37
104
21
115
22
21
237
(73)

$1,746
328
595
729
204
1,044
709
110
2,082
(1,100)

701

708

6,447

Deferred tax liabilities:
Reserve for deferred gains on sales of property
Unrealized gain on available-for-sale securities
Other

346
1,107
37

346
1,498
12

3,184
10,174337

			Total

1,490

1,856

13,695Net deferred tax liabilities¥(789)¥(1,148)$(7,248)

Accrued bonuses
Provision for product warranties
Accrued enterprises taxes
Unrealized gain on sale of inventory
Unrealized gain on sale of property
Liability for retirement benefits
Loss on revaluation of investment securities
Tax loss carryforwards
Other
Less valuation allowance
			Total

As the difference between the normal effective statutory tax
rate and the actual effective tax rate reflected in the accompanying
consolidated statement of income and comprehensive income forthe year ended March 31, 2020, is less than 5% of the normal effective
statutory tax rate, a reconciliation is omitted.

A reconciliation between the normal effective statutory tax rates
and the actual effective tax rates reflected in the accompanying
consolidated statement of income and comprehensive income forthe year ended March 31, 2019, is as follows:
2019

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Income not recognizable for income tax purposes
Per capita portion of inhabitants' taxes
Tax credits
Lower income tax rates applicable to income in certain foreign countries
Valuation allowance
Other—net

30.6%
2.0
(0.5)
0.6
(2.8)
(1.8)
(0.5)
(0.6)

Actual effective tax rate

27.0%

At March 31, 2020, some subsidiaries have tax loss carryforwards aggregating approximately ¥54 million ($497 thousand) which are available to be offset
against taxable income of such subsidiaries in future years. These tax loss carryforwards, if not utilized, will expire as follows:
Millions of Yen

Thousands of
U.S. Dollars

2021
2022
2023
2024
2025 and thereafter

¥50

$464

4

33

Total

¥54

$497

Year Ending March 31

23

DENYO CO., LTD. and Consolidated Subsidiaries

14. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥585 million ($5,373 thousand) and ¥588 million for the years ended March 31, 2020
and 2019, respectively.

15. LEASESThe Group leases certain vehicles and right of use assets.
Lease payments under finance leases for the years ended March 31, 2020 and 2019, were ¥15 million ($137 thousand) and ¥1 million,
respectively.
Obligations under finance leases were as follows:
Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Due within one year
Due after one year

¥15
283

¥1
1

$137
2,597

Total

¥298

¥2

$2,734

16. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group invests cash surpluses in low-risk financial assets. Bank loans are used to fund its ongoing operations. Derivatives are not used for
speculative purposes, but to manage exposure to financial risks as described in Note 17.
(2) Nature and Extent of Risks Arising from Financial Instruments
Maturities of bank loans are less than five years after the balance
Receivables, such as trade notes and trade accounts, are exposed tosheet date. Although a part of such bank loans is exposed to market
customer credit risk. Receivables in foreign currencies are exposedrisks from changes in variable interest rates, those risks are mitigatedto the market risk of fluctuation in foreign currency exchange rates.
by using derivatives of interest rate swaps.
Investment securities, mainly equity instruments of customers
Derivatives mainly include interest rate swaps, commodity swaps,
and suppliers of the Company, are exposed to the risk of market
forward foreign currency contracts and currency swap contracts, which
price fluctuations.
are used to manage exposure to market risks from changes in interest
Payment terms of payables, such as trade notes and traderates of bank loans, from changes in raw material (copper) prices, andaccounts, are almost less than six months. Payables in foreignfrom changes in foreign currency exchange rates of receivables andcurrencies are exposed to the market risk of fluctuation in foreign
advances. Please see Note 17 for more detail about derivatives.
currency exchange rates.
(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from acounterparty’s failure to repay or service debt according to thecontractual terms. The Company manages its credit risk fromreceivables on the basis of internal guidelines, which include

monitoring of payment terms and balances of major customers
by the Sales Planning department to identify the default risk ofcustomers at an early stage. Each consolidated subsidiary also
manages its credit risk from receivables by an equivalent method.

Market risk management (foreign exchange risk and interest rate risk)
in raw material (copper) prices.
Foreign currency trade receivables and payables are exposed to
The Company continuously reviews portfolios of securities bymarket risk resulting from fluctuations in foreign currency exchange
periodically monitoring fair values of each security and the financial
rates. The Group reduces such foreign exchange risk by balancing
condition of the issuer as well as market conditions and the relationshipforeign currency trade receivables and payables. Forward foreign
with the issuer.
currency contracts and currency swap contracts are used for someforeign currency trade receivables and advances.
In conducting derivative transactions, the division in charge of each
derivative transaction follows the internal policies which prescribe theInterest rate swaps are used to manage exposure to market risks
authority and the limit for each transaction. The transaction data isfrom changes in interest rates of loan payables and commodity
reported to the management meeting on a monthly basis.
swaps are used to manage exposure to market risks from changes
Liquidity risk management
Liquidity risk comprises the risk that the Company cannot
meet its contractual obligations in full on maturity dates. The
Company manages its liquidity risk by holding an adequate
24

volume of liquid assets, along with adequate financial planningby the corporate treasury department.

Year ended March 31, 2020

(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices
in active markets. If a quoted price is not available, other rational
valuation techniques are used instead. Additionally, notionalamounts of derivative transactions, which are presented in Note 17,"Derivatives," do not indicate market risk of derivative transactions.
Also, please see Note 17 for the details of fair value for derivatives.

(a) Fair value of financial instruments
Millions of Yen
Carrying
AmountFair Value

Cash and cash equivalents
Receivables
Investment securities¥21,054
21,173
5,625¥21,054
21,173
5,625

Total

¥47,852¥47,852

Short-term bank loans
PayablesLong-term debt

¥210
11,076
1,386¥210
11,076
1,408

¥(22)

Total

¥12,672¥12,694¥(22)¥(141)¥(141)March 31, 2020

Derivatives

Unrealized Loss

Millions of Yen
Carrying
AmountFair Value

Cash and cash equivalents
Time deposits other than cash equivalents
Receivables
Investment securities¥16,17118
22,829
7,167¥16,17118
22,829
7,167

Total

¥46,185¥46,185

Short-term bank loans
PayablesLong-term debt

¥432
11,676
1,112¥432
11,676
1,112

Total

¥13,220¥13,220¥(191)¥(191)March 31, 2019

Derivatives

Unrealized Loss

Thousands of U.S. Dollars
March 31, 2020

Carrying
AmountFair Value

Cash and cash equivalents
Receivables
Investment securities$193,460
194,553
51,685$193,460
194,553
51,685

Total$439,698$439,698

Short-term bank loans
PayablesLong-term debt

$1,930101,770
12,734$1,930101,770
12,936$(202)

Total$116,434$116,636$(202)$(1,293)$(1,293)

Derivatives

Unrealized Loss

Cash and Cash Equivalents and Time Deposits Other Than Cash Equivalents
The carrying values of cash and cash equivalents and time deposits other than cash equivalents approximate fair value because of their shortmaturities.
Investment Securities
The fair values of investment securities are measured at the quoted market price of the relevant stock exchange for the equity instruments.
25

DENYO CO., LTD. and Consolidated Subsidiaries

Receivables and Payables
The carrying values of receivables and payables approximate fair value because of their short maturities.
Short-Term Bank Loans and Long-Term Debt
The carrying values of short-term bank loans approximate fair value because of their short maturities.
The fair values of long-term debt that includes the current portion of long-term debt are determined by discounting the cash flows
related to the debt at the Group's assumed corporate borrowing rate.
Derivatives
Fair value information for derivatives is included in Note 17.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Millions of Yen
2020
2019
Investments in equity instruments that do not have a quoted market price inan active market¥893

Thousands of
U.S. Dollars
2020

¥997

$8,204(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen
Due inDue after One
One YearYear throughor Less
Five Years

March 31, 2020
Cash and cash equivalents

Thousands of U.S. Dollars
Due inDue after One
One YearYear throughor Less
Five Years

Receivables¥21,054
21,173$193,460
194,553

Total¥42,227$388,013

Please see Note 9 for annual maturities of long-term debt and Note 15 for obligations under finance leases.

17. DERIVATIVESThe Group enters into derivatives, in the normal course of business,to reduce the exposure to fluctuations in foreign exchange rates, rawmaterial prices and interest rates. The primary derivative instruments
used by the Company are foreign currency forward contracts,
currency swap contracts, commodity swaps and interest rate swaps.

Because the counterparties to these derivatives are limited
to major international financial institutions, the Group does not
anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been madein accordance with internal policies which regulate the authorizationand credit limit amount.

It is the Group's policy to use derivatives only for the purpose of
reducing market risks associated with assets and liabilities.
Derivative Transactions to Which Hedge Accounting Is Not Applied

March 31, 2020

Millions of Yen
Thousands of U.S. Dollars
Contract
Contract
AmountAmountContract Due after
Unrealized Contract Due after
Unrealized
Amount One Year Fair Value Gain/Loss Amount One Year Fair Value Gain/Loss

Foreign currency forward contracts —Selling U.S.$¥1,016¥1,016

¥(53)

¥(53)

$9,336$9,336$(491)$(491)

285

285

(87)

(87)

2,617

2,617

(802)

(802)

¥1,016¥1,016

¥(15)

¥(15)

520

520

(176)

(176)

Currency swap contracts—
Selling U.S.$
March 31, 2019
Foreign currency forward contracts—
Selling U.S.$
Currency swap contracts—
Selling U.S.$

26

Year ended March 31, 2020

Derivative Transactions to Which Hedge Accounting Is AppliedThousands of U.S. Dollars
Contract
Contract
Amount Due
Amountafter One Year
Fair Value

March 31, 2020

Hedged Item

Interest rate swaps (fixed rate payment, floating rate receipt)

Long-term debt

$10,000$10,000

Long-term debt

$10,000$10,000

March 31, 2019
Interest rate swaps (fixed rate payment, floating rate receipt)

The above interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not remeasured at market value,
but the differential paid or received under the swap agreements is
recognized and included in interest expense or income. In addition, thefair value of such interest rate swaps in Note 16 is included in that ofhedged items (i.e., long-term debt).

The fair value of derivative transactions is measured at the quoted
price obtained from the financial institution.
The contract or notional amounts of derivatives which are shown in
the above table do not represent the amounts exchanged by the partiesand do not measure the Group's exposure to credit or market risk.

18. CONTINGENT LIABILITIESAt March 31, 2020, the Group had the following contingent liabilities:

Export trade bill discounted

Millions of Yen

Thousands of
U.S. Dollars¥361$3,32019. OTHER COMPREHENSIVE LOSS
The components of other comprehensive (loss) income, including reclassification adjustments and tax effects for the years ended March 31, 2020
and 2019, were as follows:
Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Unrealized loss on available-for-sale securities:
Losses arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments—
Adjustments arising during the year
Total
Defined retirement benefit plans:
Adjustments arising during the year
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive loss in associates—
Losses arising during the year
Total
Total other comprehensive loss¥(1,237)(37)(1,274)390¥(1,536)(121)(1,657)505$(11,365)(347)(11,712)3,588¥(884)¥(1,152)$(8,124)¥(54)¥(533)$(492)¥(54)¥(533)$(492)

¥(0)
(0)
0

¥12
12
(4)

$(0)
(0)
0

¥(0)

¥8

$(0)

¥(5)

¥(1)

$(44)

¥(5)

¥(1)

$(44)

¥(943)¥(1,678)$(8,660)27

DENYO CO., LTD. and Consolidated Subsidiaries

20. NET INCOME PER SHARE
Basis for the computation of net income per share ("EPS") for the years ended March 31, 2020 and 2019, is as follows:
Millions
Thousands ofof YenSharesNet Income
Attributable to
Owners of the
WeightedParent
Average SharesYear Ended March 31, 2020

Yen

U.S. Dollars

EPS¥4,071

20,953¥194.32

Basic EPS—Net income available to common shareholders¥3,167

21,136¥149.83

As noted in Note 2.l, the Company applied PITF No. 30, "Practical
Solution on Transactions of Delivering the Company's Own Stockto Employees etc. through Trusts." In calculating the number ofweighted-average shares above, the number of shares that are heldby the Trust (781 thousand shares in 2020 and 800 thousand shares in2019) is reflected.

21. SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Segment
Information Disclosures" and ASBJ Guidance No. 20, "Guidance on
Accounting Standard for Segment Information Disclosures," an entity
is required to report financial and descriptive information about its
reportable segments. Reportable segments are operating segments
or aggregations of operating segments that meet specified criteria.
Operating segments are components of an entity about which

separate financial information is available and such information isevaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. Generally,
segment information is required to be reported on the same basis as
is used internally for evaluating operating segment performance anddeciding how to allocate resources to operating segments.

Basic EPS—Net income available to common shareholders$1.79

Year Ended March 31, 2019(1) Description of Reportable Segments
The Group's reportable segments are those for which separate financial information is available and regular evaluation by the Company's
management is being performed in order to decide how resources are allocated among the Group. Therefore, geographic segments of theGroup consist of Japan, United States of America, Asia and Europe. Japan includes the Company, "Denyo Kosan Co., Ltd." and "Nishihatsu Co.,Ltd." United States of America mainly includes "Denyo Manufacturing Corporation." Asia mainly includes "Denyo United Machinery Pte. Ltd."
Europe consists of "Denyo Europe B.V."(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant Accounting
Policies."(3) Information about Sales, Profit (Loss), Assets and Other Items
Millions of Yen
2020
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers¥43,626
4,847¥15,167275¥3,585
4,212

¥509
4

¥62,887
9,338¥(9,338)

Total¥48,473¥15,442¥7,797¥513¥72,225¥(9,338)¥62,887

Segment profit
Segment assets
Other:
Depreciation and amortization
Investments in associated companies
Increase in property, plant andequipment and intangible assets¥3,39662,490¥1,169
7,816¥793
10,991¥37
705¥5,39582,002¥663(6,376)¥6,05875,626

577
811

241

344

0

1,162
811

1,162
811

887

294

20

1,201

1,201

28

Reconciliations Consolidated¥62,887

Year ended March 31, 2020

Millions of Yen
2019
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers¥40,7114,300¥10,893317¥3,314
3,631

¥636
4

¥55,5548,252¥(8,252)

Total¥45,011¥11,210¥6,945¥640¥63,806¥(8,252)¥55,554

Segment profit
Segment assets
Other:
Depreciation and amortization
Impairment losses of assets
Investments in associated companies
Increase in property, plant andequipment and intangible assets¥2,44562,147

¥755
7,288

¥621
10,290¥29
553¥3,85080,278¥351(6,192)¥4,201
74,086

494
108
940

172

466

1,132
108
940

1,132
108
940

819

672

9

1,500

1,500

Reconciliations Consolidated¥55,554

Thousands of U.S. Dollars
2020
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers$400,860
44,541$139,368
2,530$32,941
38,701$4,67836$577,847
85,808$(85,808)

Total$445,401$141,898$71,642$4,714 $663,655$(85,808)$577,847

Segment profit
Segment assets
Other:
Depreciation and amortization
Investments in associated companies
Increase in property, plant andequipment and intangible assets$31,209574,201$10,739
71,818$7,287
100,993

$342
6,482

$49,577
753,494$6,088(58,590)$55,665
694,904

5,303
7,454

2,213

3,159

1

10,676
7,454

10,676
7,454

8,151

2,699

188

11,038

11,038Reconciliations Consolidated$577,847

Related Information(1) Information about Products and Services
Information about products and services for the years ended March 31, 2020 and 2019, is omitted since sales to external customers in a single
product line (generators, welders, compressors, and other related products) accounted for more than 90% of the total consolidated sales.
(2) Information about Geographical Areas
Sales to external customers and property, plant and equipment by geographical areas for the years ended March 31, 2020 and 2019, aresummarized as follows:
Millions of Yen
2020
Japan
Sales to external customers
Property, plant and equipment¥37,043
9,736

North andCentral America¥18,430
1,736

Asia¥5,1982,973

Other Areas¥2,216

Total¥62,887
14,44529

DENYO CO., LTD. and Consolidated Subsidiaries

Millions of Yen
2019
Japan
Sales to external customers
Property, plant and equipment
Impairment losses of assets

North andCentral America¥33,693
9,424
108¥14,080
1,702

Asia

Other Areas¥5,5283,288¥2,253
1

Total¥55,554
14,415
108

Thousands of U.S. Dollars
2020
Japan
Sales to external customers
Property, plant and equipment

North andCentral America$340,376
89,456$169,349
15,956

Asia$47,758
27,322Other Areas$20,364

Total$577,847
132,734

Note: Sales are classified in countries or regions based on location of customers.

(3) Information about Major Customers
Sales to major customers for the years ended March 31, 2020 and 2019, are summarized as follows:

Name of Customers
Multiquip Inc.

Millions of Yen
2020
2019
¥15,167¥10,893

Thousands of
U.S. Dollars
2020$139,368

Related Segment
United States of America

22. RELATED PARTY TRANSACTIONSThe Company sold its products to New Japan Machinery Corporation, an associated company. The transactions were made with usual terms andconditions.
The transactions with the associates for the years ended March 31, 2020 and 2019, and related balances at March 31, 2020 and 2019, weremainly as follows:
Millions of Yen
2019
2020

Thousands of
U.S. Dollars
2020

Transactions—Sales¥2,881¥3,567$26,471

Balances:
Trade notes receivable
Trade accounts receivable¥1,421359¥1,782
1,088$13,059
3,295

23. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2020, was approved at the Company's Board of Directors' meeting held on May 18,
2020:

Year-end cash dividends, ¥24 ($0.22) per share******

30

Millions of Yen

Thousands of
U.S. Dollars¥520$4,778

Independent Auditor’s ReportTo
the Board of Directors of Denyo Co., Ltd.
OpinionWe have audited the consolidated financial statements of Denyo Co., Ltd. and its subsidiaries (the "Group"), which comprise the consolidated balance sheet as of March 31, 2020,
and the consolidated statements of income and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year
then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, all expressed in Japanese yen.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of March 31, 2020,
and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in accordance with thebasis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor's
Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the provisions of the Code ofProfessional Ethics in Japan, and we have fulfilled our other ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Responsibilities of Management and Audit & Supervisory Board Members and the Audit & Supervisory Board for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally acceptedin Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going concern basis of accounting unless management
either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the Directors' execution of duties relating to the design and operating
effectiveness of the controls over the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance withauditing standards generally accepted in Japan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive
to those risks. The procedures selected depend on the auditor's judgment. In addition, we obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group tocease to continue as a going concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance with accounting principles generally accepted inJapan, as well as the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding, among other matters, the planned scope and timing of the audit andsignificant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide Audit & Supervisory Board members and the Audit & Supervisory Board with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public
Accountants Act of Japan.
June 26, 2020

Deloitte Touche Tohmatsu LLC

31

DENYO CO., LTD. and Consolidated Subsidiaries

Company Data
Company outline (As of March 31, 2020)
Company Name

Denyo Co., Ltd.

Established

July 2, 1948

Head Office

2-8-5, Nihonbashi-horidomecho, Chuo-ku, Tokyo 103-8566, Japan
Tel: 81-3-6861-1111 / Fax: 81-3-6861-1181

Paid-in Capital¥1,954,833,520 (U.S.$17,962,267)

Authorized shares

97,811,000

Issued Shares

22,859,660

Shareholders

4,297

Financial Year

April 1 to March 31

Employees

569 (1,370 consolidated)

Branch and Sales offices

21

Directors, Audit Supervisory Board Members (As of June 26, 2020)
President

Shoichi Shiratori

Representative Director,
Executive Vice President

Yoji Eto

Director & Executive Advisor

Hideaki Kuboyama

Director,
Senior Managing Executive Officer

Yasuo Mizuno

Chief Executive, Sales Division
Head of International Sales Unit
Responsible for Overseas Sales Subsidiary

Director, Managing Executive Officer

Toshiya Tozawa

Chief Executive, Adminstration Division

Director, Executive Officer

Takanori Yoshinaga

Chief Executive, Development Division

Director, Executive Officer

Masao Yamada

Chief Executive, Quality Management Division

Director

Haruhito Takada*

Director

Yoshio Takeyama*

Audit & Supervisory Board Member

Toru Hiroi

Audit & Supervisory Board Member

Chiyoki Kimura

Audit & Supervisory Board Member

Akira Yamada*

Audit & Supervisory Board Member

Keiko Yamagami*"Asterisk* indicates an external director or external audit & supervisory board member.

32

Responsible for Global Marketing Office,Production Division,
Overseas Manufacturing SubsidiaryYear ended March 31, 2020

Executive Officers
Managing Executive Officer

Kensaku Moriyama

Deputy Chief Executive, Sales Division,
Head of Domestic Sales Unit

Senior Executive Officer

Makoto Tanabe

General Manager,
Planning & Coordination OfficeSenior Executive Officer

Michio Nonaka

Chief Executive, Production Division

Executive Officer

Yukio Nunogami

General Manager, West Japan Sales Department
Sales Division

Executive Officer

Masakazu Minato

General Manager, East Japan Sales Department
Sales Division

Executive Officer

Katsumi Ishikura

General Manager, Sales Promotion Department
Sales Division

Executive Officer

Noboru Chosei

General Manager, Development Department,
Patent Administration Department
Development Division

Executive Officer

Shoichi Fujimoto

General Manager, Engineering Department
Development Division

Executive Officer

Toshiki Miyamoto

Gnenral Manager, Manufacturing Department
Production Division

Executive Officer

Kazuyoshi Kubo

General Manager, General Affairs Department,
Personnel Department
Administration Division

Executive Officer

Kenichi Otomo

General Manager,
International Sales Department 1
Sales Division

33

DENYO CO., LTD. and Consolidated Subsidiaries

Business Lines
Manufacture and sales of:Generators

Engine-driven Generators
Stand-by Generating Sets
General-use Generating Sets
AC Generators

Welders

Engine-driven Welders
Welding Generators
Welding Jigs
Automatic Welding Equipment

Compressors

Engine-driven Air Compressors
Motor-driven Air Compressors

Other Products

Self-propelled Lifters
Construction-related Machinery
Repair Parts

Plants and R&D Center
Fukui Plant

Wakasa-cho, Fukui Prefecture

Shiga Plant

Konan, Shiga Prefecture

Laboratory & Training Center

Sakado, Saitama Prefecture

Fukui Plant

Laboratory & Training Center

34

Year ended March 31, 2020

Denyo Group Companies
Denyo Kosan Co., Ltd.
2-8-5, Nihonbashi-horidomecho, Chuo-ku, Tokyo 103-8566, Japan
Paid-in Capital: ¥50 million
Business: Services and sales of industrial electrical machinery and parts
Nishihatsu Co., Ltd.
140, Chichika, Karatsu, Saga 847-0831, Japan
Paid-in Capital: ¥50 million
Business: Manufacture and sales of industrial electrical machinery
Denyo America Corporation
1450 Minor Road, Danville, Kentucky 40422 U.S.A
Paid-in Capital: US$ 5 million
Business: Sales of parts for industrial electrical machinery
Denyo Manufacturing Corporation
1450 Minor Road, Danville, Kentucky 40422 U.S.A
Paid-in Capital: US$ 6 million
Business: Manufacture and sales of industrial electrical machinery to the U.S. market
Denyo Asia Pte. Ltd.
No.9 Neythal Road, Singapore 628614
Paid-in Capital: ¥600 million
Business: Sales of industrial electrical machinery
Denyo United Machinery Pte. Ltd.
No.9 Neythal Road, Singapore 628614
Paid-in Capital: S$ 3 million
Business: Sales, leasing and rental of industrial electrical machinery
Denyo Europe B.V.
Naamrijk 1, 3454 PX De Meern, The Netherlands
Paid-in Capital: €4 million
Business: Sales of industrial electrical machinery
Denyo Vietnam Co.,Ltd.
Plot A3, Thang Long Industrial Park II, Lieu Xa Commune,Yen My, Hung Yen, Vietnam
Paid-in Capital: US$ 10 million
Business: Manufacture and sales of industrial electrical machinery
Denyo Trading Vietnam Co., Ltd.
Room 606.03, 6th Floor, Indochina Plaza Hanoi Tower, No. 241 Xuan Thuy Street,
Dich Vong Hau Ward, Cau Giay District, Hanoi City, Vietnam
Paid-in Capital: US$ 300 thousand
Business: Services and sales of industrial electrical machinery and repair parts
P.T. Dein Prima Generator
JL. Raya Bekasi Km. 28, Medan Satria, Bekasi 17132 Jawa Barat, Indonesia
Paid-in Capital: Rp 13,563 million
Business: Manufacture and sales of industrial electrical machinery to the Indonesia market
New Japan Machinery Corporation
3-6-5, Shinyokohama, Kohoku-ku, Yokohama, Kanagawa 222-0033, Japan
Paid-in Capital: ¥495 million
Business: Sales and rental service of industrial electrical machinery

35

DENYO CO., LTD. and Consolidated Subsidiaries

Investor Information(As of March 31, 2020)

Head Office

2-8-5, Nihonbashi-horidomecho, Chuo-ku,
Tokyo 103-8566, Japan
Tel: 81-3-6861-1111 Fax: 81-3-6861-1181

Financial Year

April 1 to March 31

Common Stock

Authorized shares: 97,811,000
Issued shares: 22,859,660(Included 1,191,596 shares of Company’s own stock)

Stock Listing

Tokyo Stock Exchange, First Section (Code: 6517)

Shareholders

4,297

Transfer Agency

Tokyo Securities Transfer Agent Co., Ltd.
3-11, Kanda Nishiki-cho, Chiyoda-ku, Tokyo
101-0054, Japan

Major Shareholders(As of March 31, 2020)

Shares Held(Thousands)

Voting Right Ratio(%)

Kyuei Corporation

1,417

6.54

The Master Trust Bank of Japan, Ltd.
(Trust Account)

1,199

5.53

Mizuho Trust & Banking Co., Ltd.

1,088

5.02

The Dai-ichi Life Insurance Co., Ltd

872

4.02

Trust & Custody Services Bank, Ltd.
(Trust E Account)

774

3.57

Denyo Shin-eikai Group

630

2.91

Japan Trustee Services Bank,Ltd.
(Trust Account)

613

2.83

Tsurumi Manufacturing Co., Ltd

543

2.50

MUFG Bank, Ltd.

540

2.49

Kubota Corporation

500

2.31

Shareholders

36http://www.denyo.co.jp
Head Office
2-8-5, Nihonbashi-horidomecho, Chuo-ku, Tokyo 103-8566, JapanTel
81-3-6861-1111
Fax
81-3-6861-1181

38