2019
ANNUAL REPORT
Year ended March 31, 2019

DENYO CO., LTD. and Consolidated Subsidiaries

ProfileCONTENTS

Since its establishment
in 1948, Denyo has been a pioneer

Consolidate Financial Highlights

1

To Our Shareholders

2inReview 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

outdoorpower

sources,developing

andmanufacturing many original products, including
engine-driven generators, engine-driven welders andengine-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 and its ten subsidiaries
and one affiliate, along with its production facilities
in Southeast Asia and the U.S., and R&D center inJapan.

Opening Ceremony for

Sheet-Metal Plant of Denyo Manufacturing
Corporation
In March 2019, a sheet-metal plant was completed
at Denyo Manufacturing Corporation (DMC), a Denyo
Group company and a production base in the U.S.
state of Kentucky, and the opening ceremony was held.
The new sheet-metal plant was constructed on thepremises of DMC to increase its production capacity
and streamline its production system, given thatdemand for generators remained strong in the U.S. on
the back of the buoyant economy and that the old sheetmetal plant was located a long way from DMC and wasaging. With a site area of 5,574 m², approximately 1.8
times larger than the old plant, the new sheet-metal
plant is expected to have an annual working capacity of
approximately three times that of the old one because it
has introduced the latest facilities.
The Denyo Group will continue to proceed with its
efforts to improve productivity with the aim of taking afurther leap forward.

Tape cutting at the opening ceremony
Opening ceremony at the new sheet-metal plantYear ended March 31, 2019

Consolidated Financial Highlights
2019

Millions of Yen
2018

Thousands of U.S.
Dollars
2019

2017

Net Sales¥55,554¥50,182¥48,852$500,446

Total Assets

74,086

72,21068,678667,378

Total Net Assets

56,291

56,13353,146

507,078

Operating Income

4,201

3,902

4,247

37,847Net Income*

3,167

2,762

2,867

28,528Per Share Data

Yen

U.S. Dollars

Total Net Assets¥2,583.90¥2,545.17¥2,407.30$23.28Net Income*149.83130.03134.18

1.35

Cash Dividends

42.00

40.00

30.00

0.38

Note:Transaction into U.S. dollars has been made, solely for the reader’s convenience, at the rate of ¥111.01 to U.S.$1, prevailing on the Tokyo Foreign Exchange
Market on March 31, 2019.

Net Sales

Net Income*¥ million¥ million

52,267

2015

50,4202016

48,852

2017

50,182

2018

3,858

55,554

3,137

2019

2015

2016

2,867

2,762

2017

2018

3,167

2019

* Net Income attributable to owners of the parent.

Total Assets

Total Net Assets¥ million¥ million

67,324

66,994

68,67872,21074,086

2015

2016

2017

2018

2019

49,19550,81253,146

2015

2016

2017

56,13356,291

2018

2019
1

DENYO CO., LTD. and Consolidated Subsidiaries

Shoichi Shiratori, President2Year ended March 31, 2019

In fiscal

2019(ended March 31, 2019), the Japanese economy remained on a moderate recovery
trend against a backdrop of solid corporate earnings and continued improvement in the employment and income
situation. In the global economy, meanwhile, the future outlook became increasingly uncertain, due mainly to theprotectionist trade policy of the U.S. and the slower economic growth in China. However, the U.S. economy continued
to expand gradually, and Asian economies also remained firm overall.
In terms of the business environment surrounding the Denyo Group, construction demand was strong in Japan, withconstruction for redevelopment projects in the Tokyo Metropolitan area, works relating to the 2020 Tokyo Olympics,
and disaster relief works. Overseas, while demand remained high in the U.S. market, demand in Asian markets andthe Middle and Near East markets stopped short of a complete recovery.
Under these circumstances, the Denyo Group worked to increase sales by launching new products andimplementing sales campaigns, and it also implemented cost-cutting activities. As a result, consolidated net sales
increased to ¥55,554 million (US$500,446 thousand), up 10.7% year on year. Consolidated operating income roseto ¥4,201 million (US$37,847 thousand), an increase of 7.7% year on year, consolidated ordinary income climbed
to ¥4,592 million (US$41,374 thousand), up 9.7% year on year, and net income attributable to owners of the parent
increased 14.7% year on year to ¥3,167 million (US$28,528 thousand).
In terms of dividends for the fiscal year under review, we issued an interim dividend of ¥20 (US$0.18) per shareand decided to pay an ordinary year-end dividend of ¥22 (US$0.20) per share. As a result, dividends for the full year
came to ¥42 (US$0.38) per share (an increase of ¥2 (US$0.02) from the previous fiscal year).
Regarding the future business outlook, demand for construction such as infrastructure redevelopment works,
redevelopment projects in the Tokyo Metropolitan area and disaster prevention-related works is expected to remain
firm in Japan, and the U.S. market is also expected to remain strong. However, some situations requiring caution,
including developments in U.S.-China trade friction and the Brexit issue, are expected to continue.
Under these conditions, the Denyo Group will steadily implement a range of measures in the second year of themedium-term management plan “Denyo 2020” with the aim of enhancing its business performance.
We would like to take this opportunity to express our sincere gratitude to our shareholders for their continued
patronage and support.

June 2019

Shoichi Shiratori, President

3

DENYO CO., LTD. and Consolidated Subsidiaries

Review of Operations
New Gasoline Engine TIG Welding Machine GAT-155ES
Denyo has developed a gasoline engine TIG welding
machine, the GAT-155ES. The product went on sale in July
2018.
The GAT-155ES utilizes a new TIG unit, the RU3, toconsolidate monitors and switches for TIG welding into the
TIG unit. This enables users to easily adjust the TIG welding
current by hand, even when they are far away from thewelding machine.

In terms of the performance of the welding machine,
Denyo has allowed it to have more output leeway thanconventional machines by increasing the maximum welding
current (TIG welding/hand welding) to 155A. Users arealso able to switch between constant current and drooping
according to the details of their operation with one-touchaction while they conduct hand welding operation. They
can also use the machine with AC power while they are
welding.
In terms of power generation performance, the alternate current output has
increased to 3.0kVA to supply stable power
as commercial power with inverter control.
Denyo plans to actively incorporate theGAT-155ES into proposals as a welding
machine that can be easily transported
to construction sites in field service amid
increasing needs for TIG welding in theiron work industry, in addition to plant
construction and complex construction.

DCA-45LSKE-D2: a new Simul Generator for simultaneous three-phase and single-phase three-wire output
Denyo has developed the DCA-45LSKE-D2, a new Simul
Generator with three-phase and single-phase three-wire
output. The product went on sale in September 2018.
The new Simul Generator has increased output andachieved weight savings with Denyo’s new proprietarywinding system. This has increased the output of thesingle-phase three-wire system by approximately 10%
compared with conventional generators and has enabledsimultaneous three-phase and single-phase threewire output with more leeway. The (200/400V-classes),
which were an option for conventional
generators, have become a standard
feature, meaning that the product can beused for a broad range of applications.
Denyo will focus on the sale ofthe new Simul Generator, which has
achieved both higher power generation
performance and weight savings.

4

Year ended March 31, 2019

Design Award from Singapore Business Review
Denyo United Machinery Pte. Ltd. (DUM), a Group
company and a sales base in Singapore, has developed
an application for remote monitoring that enables the easy
remote supervision of generators. It received the DesignAward from Singapore Business Review, a businessinformation magazine in Singapore.
The necessary data to improve the performance of thegenerator are automatically accumulated in this application,and the data can be easily checked by logging in to theapplication. Because the application is also equipped with aremote supervision function, it is possible to check the statusof the generator on a regular basis by using the application,with no need to travel to the site and check the generator.
The extravagant award ceremony was held with 150
guests at Conrad Centennial Singapore Hotel on November
20, 2018.
Denyo Group will continue to actively advance thedevelopment of products tailored to customers’ needs.

Engine compressor DIS-80LBE-C with Environmentally friendly baseDenyo is also working to expand the lineup of environmentally friendly based engine compressors. It began selling anaftercooler type compressor, the DIS-80LBE-C, in October
2018 as its third environmentally friendly based compressor.
Users can utilize the product with peace of mind, evenin locations with strict installation standards such as riverworks and port construction works, because it minimizes
the outflow of fuel and the engine oil by integrating theenvironmentally friendly base and the compressor unit andstoring the fuel and the engine oil in the environmentallyfriendly base at the bottom of the main body, even when
they are leaked due to unforeseen circumstances.

The high-performance aftercooler also enables thestable supply of air with an external temperature of 15 degree
Celsius or less in all seasons by cooling the compressed air.
It also prevents the water inside the pipes from freezing in
the cold weather by adjusting the temperature of the intake
air by switching the partition board of an intake switching
duct in winter and in cold regions.
The high-efficiency drain separator makes it possible toeliminate the amount of water generated from the aftercooler
by more than 70% and reduce the contamination caused bywater splashing from the air tool. The product is therefore
recommended to be used for chipping work, blasting andpainting work indoors.

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 that are used on construction sites increased overall
in Japan, and shipments of generators for disaster prevention
measures also remained strong.
Overseas, while shipments to Asia and the Middle andNear East remained sluggish, shipments to the U.S. increased
significantly. As a result, segment sales rose to ¥43,660 million(US$393,300 thousand), up 13.0% year on year.

Engine Welders
In the engine welders segment, shipments of compact engine
welders and TIG welding machines remained strong in Japanon the back of solid construction demand, and shipments to the
U.S. also increased. As a result, segment sales rose to ¥5,115
million (US$46,081 thousand), an increase of 4.0% year on year.

Compressors
In the compressors segment, while shipments to the U.S.
increased, shipments of motor compressors remained weak inJapan. As a result, segment sales declined to ¥1,059 million(US$9,546 thousand), down 2.2% year on year.

65%

Domestic
Market Share(Mobile Type)55%

Domestic
Market Share20%

Domestic
Market ShareOther Products
In the other products segment, sales were ¥5,719 million (US$51,519 thousand), up 3.5% from the previous fiscal year, thanks
mainly to an increase in sales of self-propelled lifters and parts.

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

6

Year ended March 31, 2019

Denyo Co., Ltd. andSubsidiaries
Consolidated Financial Statements
for the Year Ended March 31, 2019,
and Independent Auditor’s Report

7

DENYO CO., LTD. and Consolidated Subsidiaries

Financial Review
Business Environment and Results
In fiscal 2019 (ended March 31, 2019), the Japanese economy
remained on a moderate recovery trend against a backdrop of solid
corporate earnings and continued improvement in the employment
and income situation. In the global economy, meanwhile, thefuture outlook became increasingly uncertain, due mainly to theprotectionist trade policy of the U.S. and the slower economic
growth in China. However, the U.S. economy continued to expand
gradually, and Asian economies also remained firm overall.

market, demand in Asian markets and the Middle and Near East
markets stopped short of a complete recovery.
Under these circumstances, the Denyo Group worked toincrease sales by launching new products and implementing
sales campaigns, and it also implemented cost-cutting activities.
As a result, consolidated net sales increased to ¥55,554 million(US$500,446 thousand), up 10.7% year on year. Consolidated
operating income rose to ¥4,201 million (US$37,847 thousand),an increase of 7.7% year on year, consolidated ordinary income
climbed to ¥4,592 million (US$41,374 thousand), up 9.7% year on
year, and net income attributable to owners of the parent increased
14.7% year on year to ¥3,167 million (US$28,528 thousand).

In terms of the business environment surrounding the
Denyo Group, construction demand was strong in Japan, withconstruction for redevelopment projects in the Tokyo Metropolitanarea, works relating to the 2020 Tokyo Olympics, and disaster
relief works. Overseas, while demand remained high in the U.S.

Segment Information
domestic construction demand, and exports of generators andwelding machines to the U.S. also increased. As a result, salesrose to ¥40,711 million (US$366,731 thousand), up 7.4% year on
year, and segment profit increased to ¥2,445 million (US$22,029
thousand), up 9.4% year on year.

In the engine generators segment, shipments of mobile-type
generators that are used on construction sites increased overall
in Japan, and shipments of generators for disaster prevention
measures also remained strong.
Overseas, while shipments to Asia and the Middle andNear East remained sluggish, shipments to the U.S. increased
significantly. As a result, segment sales rose to ¥43,660 million(US$393,300 thousand), up 13.0% year on year.

(U.S.)In the U.S., shipments of generators to our core rental market
increased on the back of the strong economy, and sales increasedto ¥10,893 million (US$98,128 thousand), up 34.9% year on year,
However, segment profit fell to ¥755 million (US$6,805 thousand),down 3.4% year on year, mainly due to rising raw material prices.

In the engine welders segment, shipments of compact engine
welders and TIG welding machines remained strong in Japan on
the back of solid construction demand, and shipments to the U.S.
also increased. As a result, segment sales rose to ¥5,115 million(US$46,081 thousand), an increase of 4.0% year on year.

(Asia)In Asia, demand for generators for infrastructure developmentrelated construction in Hong Kong, which was strong in theprevious year, declined, resulting in a fall in sales to ¥3,314 million(US$29,851 thousand), down 14.1% year on year. Meanwhile,
segment profit rose to ¥621 million (US$5,591 thousand), up 62.7%
year on year, thanks in part to an improved cost-to-sales ratio at theplant in Vietnam that supplies parts to Japan and U.S. plants.

In the compressors segment, while shipments to the U.S.
increased, shipments of motor compressors remained weak inJapan. As a result, segment sales declined to ¥1,059 million(US$9,546 thousand), down 2.2% year on year.
In the other products segment, sales were ¥5,719 million(US$51,519 thousand), up 3.5% from the previous fiscal year, thanks
mainly to an increase in sales of self-propelled lifters and parts.

(Europe)
In Europe, shipments of generators increased, driven by the last-minutedemand ahead of the new emission control regulations that cameinto force in January 2019, resulting in a rise in sales to ¥636 million(US$5,736 thousand), up 92.6% year on year, and a rise in segment
profit to ¥29 million (US$260 thousand), up 303.7% year on year.

Information by geographical area is as follows.
(Japan)In Japan, shipments of mobile-type generators primarily to major
rental companies remained strong against a backdrop of robust

Financial Position
From the beginning of the current consolidated fiscal year, thePartial Amendments to Accounting Standard for Tax EffectAccounting (ASBJ Statement No. 28 dated February 16, 2018)

are applied, and the financial position is compared using thefigures at the end of the previous consolidated fiscal year after
retroactive processing.

Net Income per Share

Cash Dividends per Share

(¥)

(¥)

179.38146.79

2015
8

2016

134.18130.03

2017

2018

42.00
40.00

149.832019

Equity Ratio

28.00

30.00

30.00

2015

2016

2017

2018

2019

(%)

70.3

72.9

74.4

74.5

73.1

2015

2016

2017

2018

2019

Year ended March 31, 2019

(Assets)
Total assets at the end of the fiscal year under review were¥74,086 million (US$667,378 thousand), an increase of ¥1,875
million (US$16,894 thousand) from the end of the previous fiscal
year.

Current liabilities at the end of the fiscal year under review
were ¥14,624 million (US$131,737 thousand), up ¥234 million(US$20,757 thousand) from the end of the previous fiscal year.
This was mainly due to an increase in trade notes and accounts
payable of ¥1,888 million (US$17,008 thousand) and a rise in
short-term loans of ¥221 million (US$1,998 thousand). Noncurrent liabilities at the end of the fiscal year under review
were ¥3,171 million (US$28,563 thousand), down ¥586 million(US$5,285 thousand) from the end of the previous fiscal year.
This was due largely to a fall in deferred tax liabilities of ¥554
million (US$4,995 thousand).

Current assets at the end of the fiscal year under review were¥49,849 million (US$449,050 thousand), an increase of ¥3,511
million (US$31,633 thousand) from the end of the previous fiscal
year. This was mainly due to an increase in cash and deposits of¥1,318 million (US$11,876 thousand), a rise in notes and accounts
receivable - trade of ¥1,274 million (US$11,480 thousand), andan increase in raw materials and supplies of ¥1,840 million(US$16,577 thousand). Non-current assets at the end of the fiscal
year under review were ¥24,236 million (US$218,328 thousand),down ¥1,636 million (US$14,739 thousand) from the end of theprevious fiscal year. This largely reflected a fall in investment
securities of ¥1,717 million (US$15,472 thousand) due to the saleand revaluation of stockholdings.

(Net assets)
Net assets at the end of the fiscal year under review were¥56,291 million (US$507,078 thousand), an increase of ¥157
million (US$1,421 thousand) from the end of the previous fiscal
year. This was mainly due to net income attributable to ownersof the parent of ¥3,167 million (US$28,528 thousand), a ¥1,153
million (US$10,388 thousand) fall in the valuation difference on
available-for-sale securities, cash dividends paid of ¥995 million(US$8,958 thousand), and the purchase of treasury shares of¥501 million (US$4,515 thousand).

(Liabilities)
Total liabilities at the end of the fiscal year under review were¥17,794 million (US$160,300 thousand), increasing ¥1,717 million(US$15,472 thousand) from the end of the previous fiscal year.

Cash Flows(Cash flows from investing activities)
Net cash used in investing activities was ¥164 million (US$1,478
thousand), a decrease of ¥956 million (US$8,620 thousand)from the previous fiscal year. This largely reflected the purchaseof property, plant and equipment of ¥1,489 million (US$13,410
thousand) and a net decrease (increase) in time deposits of¥1,112 million (US$10,019 thousand).

Consolidated cash and cash equivalents (hereinafter “cash”) were¥16,171 million (US$145,671 thousand) at the end of the fiscal year
under review, increasing ¥2,458 million (US$22,143 thousand)from the end of the previous fiscal year, largely due to income
before income taxes of ¥4,598 million (US$41,417 thousand).
(Cash flows from operating activities)
Net cash provided by operating activities was ¥4,085 million(US$36,801 thousand), an increase of ¥769 million (US$6,932
thousand) from the previous fiscal year. This was largely due
to income before income taxes of ¥4,598 million (US$41,417
thousand), depreciation of ¥1,132 million (US$10,201 thousand),an increase in trade notes and accounts receivable of ¥1,371
million (US$12,354 thousand), and a rise in trade notes andaccounts payable of ¥1,972 million (US$17,764 thousand).

(Cash flows from financing activities)
Net cash used in financing activities was ¥1,316 million(US$11,855 thousand), an increase of ¥577 million (US$5,204
thousand) from the end of the previous fiscal year. This mainlyreflected the purchase of treasury shares of ¥501 million(US$4,514 thousand) and dividends paid of ¥994 million(US$8,958 thousand).

Dividends
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 andstrengthen its financial structure. Our policy is to distribute profits
based on the comprehensive consideration of a wide range offactors including business performance and the payout ratio.

Based on this policy, for the fiscal year under review, we paid
an interim dividend of ¥20 (US$0.18) per share and decided to
pay an ordinary year-end dividend of ¥22 (US$0.20) per share.
As a result, the annual dividend amounted to ¥42 (US$0.38) per
share (an increase of ¥2 (US$0.02) from the previous fiscal year),and the consolidated dividend payout ratio came to 28.0%.

Return on Average Shareholders’ Equity

Return on Average Assets (ROA)

(%)

(%)

6.0

8.6
6.5

2015

Price Earnings Ratio

2016

4.7
5.7

5.3

2017

2018

5.9

2019

2015

2016

4.2

3.9

2017

2018

4.3

2019

10.0

2015

12.6

14.6
9.1

7.9

2016

2017

2018

2019
9

DENYO CO., LTD. and Consolidated Subsidiaries
DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2019

Consolidated Balance Sheet
Millions of Yen
ASSETS

Thousands of
U.S. Dollars(Note 1)
2019

2019

2018

¥16,17118¥13,713
1,158$145,671
165

8,973
10,8892,891
82(6)
10,648183

7,748
11,277
2,454
98
(6)
9,751
144

80,83398,091
26,044735(51)
95,920
1,642

			 Total current assets

49,84946,337449,050

PROPERTY, PLANT AND EQUIPMENT (Note 6):Land
Buildings and structures
Machinery and equipment (Note 14)
Furniture and fixtures
Construction in progress			Total
Accumulated depreciation

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

4,842
12,717
6,745
1,830
198
26,332(12,184)

43,552
119,131
65,218
17,108918
245,927(116,075)

			 Net property, plant and equipment

14,41514,148129,852

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 4 and 15)
Investments in associated companies (Note 7)
Deferred tax assets (Notes 2.w and 12)
Other assets

8,164
940
175
543

9,964
858
184
719

73,547
8,469
1,575
4,885

			 Total investments and other assets

9,822

11,72588,476¥74,086¥72,210$667,378

CURRENT ASSETS:
Cash and cash equivalents (Note 15)
Time deposits other than cash equivalents (Note 15)
Receivables (Note 15):
		 Trade notes		 Trade accounts
		 Associated companies (Note 21)
		Other
		 Allowance for doubtful receivables
Inventories (Note 5)
Prepaid expenses and other current assets

TOTAL

See notes to consolidated financial statements.

10

Year ended March 31, 2019

Millions of Yen
LIABILITIES AND EQUITY

2019

2018

Thousands of
U.S. Dollars(Note 1)2019

CURRENT LIABILITIES:
Short-term bank loans (Notes 8 and 15)
Current portion of long-term debt (Notes 8, 14 and 15)
Payables (Note 15):
		 Trade notes		 Trade accounts
		 Associated companies
		Other
Accrued income taxes (Note 12)
Accrued expenses
Provision for product warranties
Other current liabilities

¥432
1

¥210
3

$3,890
13

3,399
8,035
9
233
539
1,382
100
494

3,077
6,469
9
230
473
1,318
109
422

30,617
72,379
79
2,102
4,855
12,454899
4,449

			 Total current liabilities

14,624

12,320131,737

LONG-TERM LIABILITIES:Long-term debt (Notes 8, 14 and 15)
Liability for retirement benefits (Note 10)
Deferred tax liabilities (Notes 2.w and 12)
Other long-term liabilities

1,111
433
1,323
304

1,065
486
1,877
329

10,006
3,898
11,9182,741

			 Total long-term liabilities

3,171

3,757

28,563

Treasury stock—at cost, 1,901,761 shares in 2019 and 1,617,052 shares in 2018 (Note 3)

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

1,955
1,779
46,622(1,622)

17,61016,030439,539(18,982)

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

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

4,617
756
(41)
54,066
2,067

31,2072,714(296)
487,822
19,256

			 Total equity

56,291

56,133507,078

TOTAL¥74,086¥72,210$667,378

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 14, 16 and 17)

EQUITY (Note 11):
Common stock—authorized, 97,811,000 shares;
issued, 22,859,660 shares in 2019 and 22,859,660 shares in 2018

Capital surplus
Retained earnings

11

DENYO CO., LTD. and Consolidated Subsidiaries
DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2019

Consolidated Statement of Income and Comprehensive Income
Thousands of
U.S. Dollars(Note 1)
2019

Millions of Yen
2019

2018

NET SALES (Note 20 and 21)¥55,554¥50,182$500,446

COST OF SALES

43,145

38,100388,665

			 Gross profit

12,40912,082

111,781SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 13)

8,208

8,180

73,934

			 Operating income

4,201

3,902

37,847

222
(46)
4
(12)
(108)

193
(51)
1
(8)

1,997
(413)
40
(112)
(972)

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 6)
Loss on revaluation of investment securities
Foreign exchange gain (loss)
Equity in earnings of associated companies
Rent income
Commitment fee
Gain on sale of investment securities
Other—net

20
99
78
(7)
121
26

(34)
(38)
99
73
(7)
4
16

177
893
703
(63)
1,087
233

397

248

3,570

INCOME BEFORE INCOME TAXES

4,598

4,150

41,417

INCOME TAXES (Note 12):Current
Deferred

1,265
(24)

1,237
15

11,395(219)

			 Total income taxes

1,241

1,252

11,176NET INCOME

3,357

2,898

30,241NET INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests

3,167
190

2,762
136

28,5281,713

NET INCOME (Forward)¥3,357¥2,898$30,241

OTHER COMPREHENSIVE (LOSS) INCOME (Note 18):
Unrealized (loss) gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive (loss) income in associates(1,152)
(533)
8
(1)

881
(27)
(39)
1

(10,379)(4,804)72(9)

		 Total other comprehensive (loss) income(1,678)816(15,120)COMPREHENSIVE INCOME¥1,679¥3,714$15,121

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥1,567112¥3,596
118$14,114
1,007

			 Other income—net

Yen
PER SHARE OF COMMON STOCK (Notes 2.t and 19):
Basic net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

12¥149.83
42.00

U.S. Dollars¥130.03
40.00

$1.35
0.38

Year ended March 31, 2019
DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2019

Consolidated Statement of Changes in Equity
Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE,APRIL 1, 2017
Net income attributable toowners of the parent
Cash dividends,¥40 per share
Purchase oftreasury stock
Selling oftreasury stock
Net change inthe year
BALANCE,MARCH 31, 2018
Net income attributable toowners of the parent
Cash dividends,¥42 per share
Purchase oftreasury stock
Selling oftreasury stock
Net change inthe year
BALANCE,MARCH 31, 2019

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

21,236¥1,955¥1,779¥44,522

1,955

1,779

Foreign
Currency
Translation
Adjustments

DefinedRetirement
BenefitPlans¥(1,632)¥3,736

¥765

¥(2)

Total

Noncontrolling
Interests

Total
Equity¥51,123¥2,023¥53,146

2,762

2,762

2,762

(662)

(662)

(662)

(1)

(1)

(1)

11

11

11

7

21,243

Treasury
Stock

Unrealized
Gain onAvailablefor-Sale
Securities

46,622(1,622)

881

(9)

(39)

833

44

877

4,617

756

(41)

54,066

2,067

56,133

3,167

3,167

3,167

(995)

(995)

(995)

(300)

(501)

(501)

(501)

15

16

16

16

20,958¥1,955¥1,779¥48,794¥(2,107)(1,153)(455)

8(1,600)71(1,529)¥3,464

¥301

¥(33)

¥54,153¥2,138¥56,291

Noncontrolling
Interests

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

BALANCE,MARCH 31, 2018
Net income attributable toowners of the parent
Cash dividends, $0.38
per share
Purchase of treasury
stock
Selling of treasury stock
Net change in the year
BALANCE,MARCH 31, 2019

CommonStockCapitalSurplusRetained
Earnings$17,610$16,030 $419,969

Treasury
Stock

Unrealized
Gain onAvailablefor-Sale
Securities

Foreign
Currency
Translation
Adjustments$(14,610)$41,595$6,812

DefinedRetirement
BenefitPlans$(368) $487,038$18,619 $505,657

28,52828,52828,528(8,958)(8,958)(8,958)(4,515)
143(14,414)637(4,515)
143(13,777)$(296) $487,822$19,256$507,078(4,515)
143$17,610

Total$16,030 $439,539$(18,982)(10,388)(4,098)$31,207$2,71472

See notes to consolidated financial statements.

13

DENYO CO., LTD. and Consolidated Subsidiaries
DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2019

Consolidated Statement of Cash Flows
Thousands of
U.S. Dollars(Note 1)
2019

Millions of Yen
2019

2018

¥4,598¥4,150$41,417(10,909)
10,20172(1,087)972(893)

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 (Note 2.w)
		 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:			 (Increase) in trade notes and accounts receivable			 (Increase) decrease in inventories
			 Decrease in interest and dividends receivable
			 Increase in trade notes and accounts payable			 (Decrease) increase in provision for allowance for doubtful accounts
			 (Decrease) increase in liability for retirement benefits
		Other—net				 Total adjustments(1,211)
1,132
8
(121)
108
(99)

(1,397)
1,199
6
(4)

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

(2,094)
897
10
618
2
15
(22)
(835)

(12,354)(8,966)169
17,764
(4)
(284)
703
(4,616)

				

4,085

3,315

36,8015(1,489)
(3)
266
(7)
7
1,112
(55)

2
(681)
(2)
29
(1)
6
(457)
(17)

46
(13,410)
(24)
2,399
(67)
59
10,019
(500)

(164)

(1,121)(1,478)FINANCING ACTIVITIES:
Increase in short-term loans—net
Purchases of treasury stock
Dividends paid
Other—net

221
(501)
(994)
(42)

1
(1)
(663)
(75)

1,988
(4,514)(8,958)
(371)

				

(1,316)(738)(11,855)

(147)

38

(1,325)NET INCREASE IN CASH AND CASH EQUIVALENTS—(Forward)¥2,458¥1,494$22,143

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

13,713

12,219123,528

CASH AND CASH EQUIVALENTS, END OF YEAR

¥16,171¥13,713$145,671

Net cash provided by operating activities

INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment
Purchases of property, plant and equipment
Purchases of securities
Proceeds from sales of securities
Investment in loans receivableCollections of loans receivable
Decrease (increase) in time deposit—net
Other—net
				Net cash used in investing activities

Net cash used in financing activities

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

See notes to consolidated financial statements.

14

(99)
34

Year ended March 31, 2019
DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2019

Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Act and its
related accounting regulations and in accordance with accounting
principles generally accepted in Japan (“Japanese GAAP”), which
are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation— The consolidated financial statements asof March 31, 2019, include the accounts of the Company
and its 10 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”).
		 On October 1, 2018, “Nishinihon Generator Mfg. Co.,
Ltd.” changed its trade name to “Nishihatsu Co., Ltd.”
		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 thosecompanies 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
have been eliminated in consolidation. All material
unrealized profit included in assets resulting fromtransactions within the Group is 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 one othersubsidiary were consolidated using the financial statements
as of December 31 because the difference 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 theaccompanying 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 ofpresent them in a form which is more familiar to readers outside Japan.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which Denyo Co., Ltd. (the“Company”) is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and havebeen made at the rate of ¥111.01 to $1, the approximate rate ofexchange at March 31, 2019. Such translations should not be
construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

America (Financial Accounting Standards Board AccountingStandards Codification) tentatively may be used for the
consolidation process, except for the following items thatshould 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) cancellation of the fair value model of accounting forproperty, plant and equipment and investment properties andincorporation of the cost model of accounting.
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
maturity of three months or less and are exposed toinsignificant risk of fluctuations in value.
d. Marketable and Investment Securities— Marketable
and investment securities are classified and accounted
for depending on management’s intent. Available-for-salesecurities 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 atcost determined by the moving-average method. For otherthan-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 beappropriate based on the Company’s past credit loss
experience and an evaluation of potential losses in thereceivables outstanding.
f. Inventories— Inventories are stated at the lower of cost,
determined by the first-in, first-out method for finishedproducts and work in process, and by the average method
for raw materials, or net selling value.
g. Property, Plant and Equipment— Property, plant andequipment are stated at cost. Depreciation of property,
plant and equipment of the Company and its consolidated
domestic subsidiaries is computed by the decliningbalance method based on the estimated useful lives of
the assets, while the straight-line method is applied tobuildings of the Company and its consolidated domestic
subsidiaries acquired on or after April 1, 1998, building
improvements and structures of the Company and its
15

DENYO CO., LTD. and Consolidated Subsidiaries

consolidated domestic subsidiaries acquired on or after
April 1, 2016, and all property, plant and equipment ofconsolidated foreign subsidiaries. The range of useful lives
is principally from 7 to 47 years for buildings and structures,and from 2 to 12 years for machinery and equipment.
h. Long-Lived Assets— The Group reviews its long-lived assets
for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may
not be recoverable. An impairment loss is recognized if thecarrying amount of an asset or asset group exceeds thesum 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 the carrying 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
product warranties is recorded to provide for future potential
costs, such as costs related to after-sales services within
the warranty period based on past experience.
j. Accrued Bonuses— Accrued bonuses to employees areprovided for at the estimated amounts that the Company
and its domestic subsidiaries are obligated to pay toemployees after the fiscal year-end, 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 foreignsubsidiaries maintain defined contribution pension plans.
		The Company accounts for the liability for retirement benefits
based on the projected benefit obligations and plan assets atthe balance sheet date. The projected benefit obligations are
attributed to periods on a benefit formula basis.
		The unrecognized actuarial gains and losses areamortized on a 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 othercomprehensive income), after adjusting for tax 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 stockownershiptrust (the “Trust”) by the entity, any difference between the bookvalue and fair value of the treasury stock is recorded in capitalsurplus. At year-end, the Company records (1) the Company
stock held by the Trust as treasury stock in equity, (2) all otherassets 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 the Trust 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 anddevelopment costs are charged to income as incurred.
n. Leases— BoIn March 2007, the ASBJ issued ASBJ
Statement No. 13, “Accounting Standard for Lease
Transactions,” which revised the previous accounting
standard for lease transactions.
		Under the previous accounting standard, finance leases
that were deemed to transfer ownership of the leased property
16

to the lessee were capitalized. However, other finance leases
were permitted to be accounted for as operating leasetransactions if certain “as if capitalized” information wasdisclosed in the notes to the lessee’s financial statements.
The revised accounting standard requires that all financelease transactions be capitalized by recognizing lease assets
and lease obligations in the balance sheet. In addition, therevised accounting standard permits leases that existed at
the transition date and that do not transfer ownership of theleased property to the lessee to continue to be accounted 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.
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 towhich such bonuses are attributable.
p. Income Taxes— The provision for income taxes iscomputed 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 of assets 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 longterm monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at theexchange rates at the balance sheet date. The foreignexchange gains and losses from translation are recognizedin 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 historical rate. Differences arising fromsuch translation are shown as “Foreign currency translation
adjustments” under accumulated other comprehensive
income in a separate component of equity. Revenue andexpense accounts of consolidated foreign subsidiaries aretranslated into Japanese yen at the average exchange rate.
s. Derivatives and Hedging Activities— The Group uses
derivative financial instruments to manage its exposures tofluctuations in foreign exchange, interest rates and raw material
costs. Foreign exchange forward contracts, currency swaps,
interest rate swaps and commodity swaps are utilized by theGroup 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 andaccounted for as follows: (a) all derivatives, except for
those that qualify for hedge accounting, are recognized aseither assets or liabilities and measured at fair value, andgains or losses on derivative transactions are recognizedin the income statement and (b) for derivatives used
for hedging purposes, if derivatives qualify for hedge
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 hedged transactions.

Year ended March 31, 2019

		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 the unrealized gains or losses are deferred
until maturity as deferred gain (loss) on derivatives underhedge accounting as a separate component of equity.
t. Per Share Information— Basic net income per share iscomputed by dividing net income attributable to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock 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.
v. New Accounting Pronouncements
Accounting Standard for Revenue Recognition— On
March 30, 2018, the ASBJ issued ASBJ Statement No.
29, “Accounting Standard for Revenue Recognition,” andASBJ Guidance No. 30, “Implementation Guidance on
Accounting Standard for Revenue Recognition.” The core
principle of the standard and guidance is that an entity
should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitledin 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 thecontract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to theperformance obligations 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
and guidance for annual periods beginning on April 1, 2021,
and is in the process of measuring the effects of applying theaccounting standard and guidance in future applicable periods.
w. Change in Disclosures— On February 16, 2018, the
ASBJ issued ASBJ Statement No. 28, “Partial Amendments
to Accounting Standard for Tax Effect Accounting,” which
requires deferred tax assets and deferred tax liabilities to
be classified as investments and other assets and longterm liabilities, respectively. Deferred tax assets werepreviously classified as current assets and investments andother assets, and deferred tax liabilities were previouslyclassified as current liabilities and long-term liabilities under
the previous accounting standard. The revised accounting
standard is effective for annual periods beginning on orafter April 1, 2018. The Company retrospectively applied
the revised accounting standard effective April 1, 2018,
in the accompanying consolidated balance sheet, anddeferred tax assets of ¥489 million which were previouslyclassified as current assets, respectively, as of March 31,
2018, has decreased and investments and other assets of¥110 million has increased. On the other hand, long-term
tax liabilities of ¥379 million has decreased.
		In addition, deferred tax assets and deferred tax liabilities ofthe same taxable entity are offset and displayed, and total assets
decreased by ¥379 million compared to before the change.
		“Gain on sale of investment securities” which had been
included in the “Other―net” in “Operating activities” in the
consolidated statement of cash flows for the year ended
March 31, 2018, was presented as separate line items for theyear ended March 31, 2019, due to increase in materiality.
		As a result, the amount of ¥(26) million disclosed as“Other-net” under “Operating activities” in the consolidated
statement of cash flows for the year ended March 31, 2018,has been reclassified as ¥(4) million under “Gain on sale ofinvestment securities” and as ¥(22) million under “Other―net.”

3. STOCK GRANTING TRUST (“J-ESOP” and “BBT”)
The Company has introduced a Stock Granting Trust (“J-ESOP”)
for the purpose of enhancing the benefits package to employees
and providing 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 anequivalent amount in cash) corresponding to the number of theiraccumulated points through the Trust.

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

These Trusts held treasury stock as follows which was included in the balance sheet of the Company:

Millions of Yen
2019Treasury stock(Number of shares (thousands of shares))

¥511
(792)

2018
¥526
(808)

Thousands of
U.S. Dollars
2019$4,59917

DENYO CO., LTD. and Consolidated Subsidiaries

4. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars
2019

Millions of Yen
Non-current:
Marketable equity securities
Marketable trust fund investments and otherNonmarketable equity securities
Total

2019

2018

¥7,166$64,558998¥8,852
114
998¥8,164¥9,964$73,547

8,989

The cost and aggregate fair values of marketable and investment securities at March 31, 2019 and 2018, were as follows:

Millions of Yen
March 31, 2019

Cost

Unrealized Gains

Unrealized Losses

Securities classified as available-for-sale―
Equity securities

Fair Value¥2,216¥4,951¥1¥7,166

Securities classified as available-for-sale―
Equity securities
Trust fund investments and other¥2,245115¥6,607¥1¥8,852114

March 31, 2019

Cost

Securities classified as available-for-sale:
Equity securities$19,969

March 31, 2018

Thousands of U.S. Dollars
Unrealized Gains

Unrealized Losses$44,602$13

Fair Value$64,558

The proceeds, realized gains and realized losses of the available for sale securities which were sold during the years ended March 31,
2019 and 2018, were as follows:

Millions of Yen
March 31, 2019
Available-for-sale—Equity securities

Proceeds

Realized Gains

Realized Loss

¥266

¥122

¥1

¥29

¥4

March 31, 2018
Available-for-sale—Equity securities

Thousands of U.S. Dollars
March 31, 2019
Available-for-sale—Equity securities

Proceeds$2,399Realized Gains

Realized Loss

$1,102$15

The impairment losses on available-for-sale equity securities for the year ended March 31, 2018, was ¥34 million.

18

Year ended March 31, 2019

5. INVENTORIESInventories at March 31, 2019 and 2018, consisted of the following:

Millions of Yen

Thousands of
U.S. Dollars
2019

2019

2018

Finished products and merchandiseWork in process
Raw materials and supplies¥4,258
1,237
5,153¥5,254
1,184
3,313$38,361
11,141
46,418

Total¥10,648¥9,751$95,920

6. 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 ($972 thousand) as loss on impairmentof long-lived assets for an employee dormitory following thedecision to abolish and demolish it and the carrying amount of

the relevant buildings and leasehold rights was written down to
the recoverable amount. The recoverable amount was measured
using the net realizable value based on the selling price andevaluated at ¥0. No impairment loss was recognized in 2018.

7. INVESTMENTS IN ASSOCIATED COMPANIESInvestments in associated companies at March 31, 2019 and 2018, were as follows:

Millions of Yen
2019

2018

Thousands of
U.S. Dollars
2019

Investments—New Japan Machinery Corporation

¥940

¥858

$8,469

Total

¥940

¥858

$8,469

8. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2019 and 2018, consisted ofbank overdrafts. The weighted-average interest rate applicable tothe short-term bank loans was 1.9% and 0.6% at March 31, 2019and 2018.

Long-term debt at March 31, 2019 and 2018, consisted of the following:

Millions of Yen

Thousands of
U.S. Dollars
2019

2019

2018

Unsecured loans from banks, with interest rate at 3.4% (2019 and 2018)
Obligations under finance leases
Total
Less current portion¥1,1102
1,112(1)¥1,0635
1,068(3)$10,000
19
10,019(13)

Long-term debt, less current portion¥1,111¥1,065$10,006

Millions of Yen

Thousands of
U.S. Dollars

2020
2021
2022
2023
2024

¥1
1
1,110

$13
6
10,000Total¥1,112$10,019

Annual maturities of long-term debt at March 31, 2019, were as follows:Year Ending March 31

19

DENYO CO., LTD. and Consolidated Subsidiaries

9. COMMITMENT LINE CONTRACTS
In order to raise funds efficiently, the Company has entered into
a commitment line contract with four financial institutions, ofwhich Mizuho Bank, Ltd. is the arranger. The contract provided

the Company with a commitment line of ¥3,000 million ($27,025
thousand) as of March 31, 2019. The Company had no borrowings
outstanding under the agreement as of March 31, 2019.

10. 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.

The projected benefit obligation of a certain domestic
subsidiary is calculated using a simplified method, which ispermitted 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, 2019 and 2018, were as follows:

Millions of Yen

Thousands of
U.S. Dollars
2019

2019

2018

Balance at beginning of year
Current service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Others¥2,905
169
23
(8)
(213)
(11)

¥2,766
162
23
83
(125)
(4)

$26,168
1,526
207
(70)
(1,922)(99)

Balance at end of year

¥2,865¥2,905$25,810(2) The changes in plan assets for the years ended March 31, 2019 and 2018, were as follows:

Millions of Yen

Thousands of
U.S. Dollars
2019

2019

2018

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
Others¥2,552
30
(2)
188
(194)
1

¥2,462
30
(2)
186
(125)
1

$22,987
277
(21)
1,702
(1,749)1

Balance at end of year

¥2,575¥2,552$23,197(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

Funded defined benefit obligation
Plan assets
		TotalUnfunded defined benefit obligation
Liability for stock granting retirement
Net liability arising from defined benefit obligation

20

Thousands of
U.S. Dollars
2019

2019

2018

¥2,780
2,575
205
85
143

¥2,803
2,552
251
102
133

$25,041
23,197
1,844
769
1,285

¥433

¥486

$3,898

Year ended March 31, 2019

Millions of Yen
2019

2018

Thousands of
U.S. Dollars
2019

Liability for retirement benefits

¥433

¥486

$3,898Net liability arising from defined benefit obligation

¥433

¥486

$3,898(4) The components of net periodic benefit costs for the years ended March 31, 2019 and 2018, were as follows:

Millions of Yen
2019

2018

Thousands of
U.S. Dollars
2019

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

¥169
23
(30)
22
46

¥162
23
(30)
11
38

$1,526
207
(277)
197
416

Net periodic benefit costs

¥230

¥204

$2,069(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans
for the years ended March 31, 2019 and 2018, were as follows:

Millions of Yen
2019

2018
¥12

Actuarial gains (losses)¥(56)

Thousands of
U.S. Dollars
2019
$105

(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans as of March 31, 2019 and 2018, were as follows:

Millions of Yen
2019
Unrecognized actuarial gains

¥(47)

2018
¥(59)

Thousands of
U.S. Dollars
2019$(426)(7) Plan assets
a. Components of plan assets
		 Plan assets as of March 31, 2019 and 2018, consisted of the following:

2019

2018

General account managed by a life insurance company
Others100.0%

99.9%
0.1

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, 2019 and 2018, are set forth as follows:

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

2019

2018

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

21

DENYO CO., LTD. and Consolidated Subsidiaries

11. EQUITY
Japanese companies are subject to the Companies Act ofJapan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial 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 yearend dividend upon resolution at the shareholders’ meeting.
Additionally, for companies that meet certain criteria including(1) having a Board of 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 ofincorporation, 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 distributedividends-in-kind (noncash assets) to shareholders subject toa 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 incorporation of the company so stipulate. The Companies
Act provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation
is defined as the amount available for distribution to theshareholders, 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 (acomponent of retained earnings) or as additional paid-in capital(a component of capital surplus), depending on the equity
account charged upon the payment of such dividends, until theaggregate amount of the legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies
Act, the total amount of additional 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 canbe transferred among the accounts within equity under certain
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 byresolution of the Board of Directors. The amount of treasury
stock purchased cannot exceed the amount available for
distribution to the shareholders which is determined by aspecific formula. Under the Companies Act, stock acquisitionrights are presented as a separate component of equity. The
Companies Act also provides that companies can purchaseboth treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as aseparate component of equity or deducted directly from stockacquisition rights.

12. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanesenational and local income taxes which, in the aggregate, resulted
in normal effective statutory tax rates of approximately 30.6% and30.9% for the years ended March 31, 2019 and 2018 respectively.

The tax effects of significant temporary differences and tax
loss carryforwards which resulted in deferred tax assets andliabilities at March 31, 2019 and 2018, are as follows:

Thousands of
U.S. Dollars
2019

Millions of Yen
2019

2018

Deferred tax assets:
¥193
31
37
104
21
115
22
21
237
(73)

¥191
34
38
61
22
127
34
31
239
(85)

$1,739
279
338
937
192
1,033
198
191
2,137
(664)

708

692

6,380

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

346
1,498
12

346
2,002
37

3,121
13,492110

		Total

1,856

2,385

16,723¥(1,148)¥(1,693)$(10,343)

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

Net deferred tax liabilities
22Year ended March 31, 2019

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 for the 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%

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
for the year ended March 31, 2018, is less than 5% of the normal
effective statutory tax rate, a reconciliation is omitted.

At March 31, 2019, some subsidiaries have tax loss
carryforwards aggregating approximately ¥104 million ($939
thousand) which are available to be offset against taxable incomeof such subsidiaries in future years.

These tax loss carryforwards, if not utilized, will expire as follows:

Millions of Yen

Thousands of
U.S. Dollars

2020
2021
2022
2023
2024 and thereafter

¥48

$431

53
3

474
34

Total

¥104

$939

Year Ending March 31

13. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥588
million ($5,297 thousand) and ¥529 million for the years ended

March 31, 2019 and 2018, respectively.

14. LEASESThe Group leases certain vehicles.
Lease payments under finance leases for the years ended

March 31, 2019 and 2018, were ¥3 million ($24 thousand) and¥3 million, respectively.

Obligations under finance leases were as follows:

Thousands of
U.S. Dollars
2019

Millions of Yen
2019
Due within one year2018

Due after one year

¥1
1

¥3
2

$13
6

Total

¥2

¥5

$19

15. 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 16.

23

DENYO CO., LTD. and Consolidated Subsidiaries(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, areexposed to customer credit risk. Receivables in foreign
currencies are exposed to the market risk of fluctuation inforeign currency exchange rates.

Maturities of bank loans are less than five years after thebalance sheet date. Although a part of such bank loans is exposed
to market risks from changes in variable interest rates, those risks
are mitigated by using derivatives of interest rate swaps.

Investment securities, mainly equity instruments ofcustomers and suppliers of the Company, are exposed to therisk of market price fluctuations.

Derivatives mainly include interest rate swaps, commodity
swaps, forward foreign currency contracts and currency swap
contracts, which are used to manage exposure to market risks
from changes in interest rates of bank loans, from changes in raw
material (copper) prices, and from changes in foreign currency
exchange rates of receivables and advances. Please see Note 16
for more detail about derivatives.

Payment terms of payables, such as trade notes and tradeaccounts, are almost less than six months. Payables in foreign
currencies are exposed to the market risk of fluctuation inforeign 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
the contractual terms. The Company manages its credit risk
from receivables on the basis of internal guidelines, which
include monitoring of payment terms and balances of major
customers by the Sales Planning department to identify thedefault risk of customers at an early stage. Each consolidated
subsidiary also manages its credit risk from receivables by anequivalent method.
Market risk management (foreign exchange risk and interest
rate risk)
Foreign currency trade receivables and payables are exposed
to market risk resulting from fluctuations in foreign currency
exchange rates. The Group reduces such foreign exchange
risk by balancing foreign currency trade receivables andpayables. Forward foreign currency contracts and currency
swap contracts are used for some foreign currency tradereceivables and advances.

Interest rate swaps are used to manage exposure to market
risks from changes in interest rates of loan payables andcommodity swaps are used to manage exposure to market risks
from changes in raw material (copper) prices.
The Company continuously reviews portfolios of securities
by periodically monitoring fair values of each security and thefinancial condition of the issuer as well as market conditions andthe relationship with the issuer.
In conducting derivative transactions, the division in charge of each
derivative transaction follows the internal policies which prescribe theauthority and the limit for each transaction. The transaction data isreported to the management meeting on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Company cannot meetits contractual obligations in full on maturity dates. The Company
manages its liquidity risk by holding an adequate volume of liquid
assets, along with adequate financial planning by the corporate
treasury department.

(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, otherrational valuation techniques are used instead. Additionally,
notional amounts of derivative transactions, which arepresented in Note 16, “Derivatives,” do not indicate market risk ofderivative transactions. Also, please see Note 16 for the details offair value for derivatives.

(a) Fair value of financial instruments

Carrying AmountMillions of Yen
Fair 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

24

Unrealized GainYear ended March 31, 2019

Carrying AmountMillions of Yen
Fair Value

Cash and cash equivalents
Time deposits other than cash equivalents
Receivables
Investment securities¥13,713
1,158
21,571
8,966¥13,713
1,158
21,571
8,966

Total

¥45,408¥45,408

Short-term bank loans
Payables

¥210
9,785

¥210
9,785

Long-term debt

1,068

1,057

¥11

¥11,063¥11,052¥11¥(167)¥(167)March 31, 2018

Total
Derivatives

March 31, 2019

Unrealized Gain

Thousands of U.S. Dollars
Carrying Amount
Fair Value
Unrealized Gain

Cash and cash equivalents
Time deposits other than cash equivalents
Receivables
Investment securities$145,671
165
205,652
64,558$145,671
165
205,652
64,558

Total$416,046$416,046

Short-term bank loans
PayablesLong-term debt

$3,890105,177
10,019$3,890105,177
10,017$2

Total$119,086$119,084$2$(1,722)$(1,722)

Derivatives
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 short maturities.
Investment Securities
The fair values of investment securities are measured at the quoted market price of the relevant stock exchange for the equity instruments.
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 16.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined

Millions of Yen
2019
Investments in equity instruments that do not have a quoted market price inan active market

¥997

2018
¥997

Thousands of
U.S. Dollars
2019$8,98925

DENYO CO., LTD. and Consolidated Subsidiaries(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

Millions of Yen
Due in One Year Due after One Yearor Less
through Five Years

March 31, 2019
Cash and cash equivalents

Thousands of U.S. Dollars
Due in One Year Due after One Yearor Less
through Five Years

Time deposits other than cash equivalents
Receivables¥16,17118
22,829$145,671
165
205,652

Total¥39,018$351,488

Please see Note 8 for annual maturities of long term debt and Note 14 for obligations under finance leases.

16. DERIVATIVESThe Group enters into derivatives, in the normal course ofbusiness, to reduce the exposure to fluctuations in foreignexchange rates, raw material 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.
It is the Group’s policy to use derivatives only for the purposeof reducing market risks associated with assets and liabilities.
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
made in accordance with internal policies which regulate theauthorization and credit limit amount.

Derivative Transactions to Which Hedge Accounting Is Not Applied

Millions of Yen
Contract
Amount Dueafter OneYear
Fair Value

March 31, 2019

Contract
AmountForeign currency forward contracts —Selling U.S.$¥1,016¥1,016520

Currency swap contracts—
Selling U.S.$

Thousands of U.S. Dollars
Contract
Amount Dueafter OneYear
Fair Value

Unrealized
Gain/Loss

Contract
AmountUnrealized
Gain/Loss

¥(15)

¥(15)

$9,152$9,152$(134)$(134)

520

(176)

(176)

4,688

4,688

(1,588)(1,588)¥1,016¥1,016

¥49

¥49

756

756

(216)

(216)

March 31, 2018
Foreign currency forward contracts—
Selling U.S.$
Currency swap contracts—
Selling U.S.$

Derivative Transactions to Which Hedge Accounting Is Applied

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

Hedged Item

Thousands of U.S. Dollars
Contract AmountContract Amount Due after One Year
Fair Value

Long-term debt

$10,000$10,000

Long-term debt

$10,000$10,000

March 31, 2018
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, the fair value of such interest rate swaps inNote 15 is included in that of hedged items (i.e., long term debt).

26

The fair value of derivative transactions is measured at thequoted 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.

Year ended March 31, 201917. CONTINGENT LIABILITIESAt March 31, 2019, the Group had the following contingent liabilities:

Millions of Yen

Thousands of U.S.
Dollars¥245$2,210

Export trade bill discounted

18. OTHER COMPREHENSIVE (LOSS) INCOME
The components of other comprehensive (loss) income, including reclassification adjustments and tax effects for the years ended
March 31, 2019 and 2018, were as follows:

Thousands of
U.S. Dollars
2019

Millions of Yen
Unrealized (loss) gain on available-for-sale securities:(Losses) gains 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

2019

2018

¥(1,536)(121)(1,657)505¥1,235
34
1,269
(388)

$(13,835)(1,087)(14,922)
4,543¥(1,152)¥881$(10,379)¥(533)¥(27)$(4,804)¥(533)¥(27)$(4,804)

¥12
12
(4)

¥(56)
(56)
17

$105
105
(33)

¥8

¥(39)

$72

¥(1)

¥1

$(9)

¥(1)

¥1

$(9)

¥(1,678)¥816$(15,120)

Total
Share of other comprehensive (loss) income in associates—(Losses) gains arising during the year
Total
Total other comprehensive (loss) income

19. NET INCOME PER SHARE
Basis for the computation of net income per share (“EPS”) for the years ended March 31, 2019 and 2018, is as follows:Year Ended March 31, 2019

Millionsof YenThousands of Shares
Net Income
Attributable to
Weighted-Average
Owners of the Parent
SharesYen

U.S. Dollars
EPS¥3,167

21,136¥149.83

Basic EPS—Net income available to common shareholders¥2,762

21,241¥130.03

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

of weighted-average shares above, the number of shares thatare held by the Trust (800 thousand shares in 2019 and 809
thousand shares in 2018) is reflected.

Basic EPS—Net income available to common shareholders$1.35

Year Ended March 31, 201827

DENYO CO., LTD. and Consolidated Subsidiaries

20. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment
Information Disclosures” and ASBJ Guidance No. 20, “Guidanceon Accounting Standard for Segment Information Disclosures,”an entity is required to report financial and descriptive information
about its reportable segments. Reportable segments areoperating segments or aggregations of operating segments thatmeet specified criteria. Operating segments are components of(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 orderto decide how resources are allocated among the Group.
Therefore, geographic segments of the Group consistof 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

an entity about which separate financial information is available
and such information is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and inassessing performance. Generally, segment information isrequired to be reported on the same basis as is used internallyfor evaluating operating segment performance and deciding how
to allocate resources to operating segments.
includes “Denyo Manufacturing Corporation.” Asia mainly
includes “Denyo United Machinery Pte. Ltd.” Europe consistsof “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 areconsistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”(3) Information about Sales, Profit (Loss), Assets and Other Items

Millions of Yen
2019
Reportable Segment
Japan

United Statesof America

Asia

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

EuropeTotal

Reconciliations Consolidated¥55,554

Millions of Yen
2018
Reportable Segment
Japan

United Statesof America

Asia

Sales:
Sales to external customers
Intersegment sales or transfers¥37,917
3,809¥8,077275¥3,857
3,535

¥331
4

¥50,1827,623¥(7,623)

Total¥41,726¥8,352¥7,392¥335¥57,805¥(7,623)¥50,182

Segment profit
Segment assets
Other:
Depreciation and amortization
Investments in associatedcompanies
Increase in property, plant andequipment and intangible assets¥2,23461,702

¥782
6,217

¥382
10,605¥7461¥3,40578,985¥497(6,775)¥3,902
72,210

485

157

557

28

Europe

858
400

451

19

Total

Reconciliations Consolidated¥50,182

1,199

1,199

858

858

870

870

Year ended March 31, 2019

Thousands of U.S. Dollars
2019
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers$366,731
38,732$98,1282,861$29,851
32,710$5,73636$500,446
74,339$(74,339)

Total$405,463$100,989$62,561$5,772$574,785$(74,339)$500,446

Segment profit
Segment assets
Other:
Depreciation and amortization
Impairment losses of assets
Investments in associated companies
Increase in property, plant andequipment and intangible assets$22,029559,832$6,80565,650$5,591
92,691$260
4,987$34,685
723,160$3,162(55,782)$37,847
667,378

4,447
972
8,469

1,549

4,203

2

10,201
972
8,469

10,201
972
8,469

7,373

6,055

82

13,51013,510Reconciliations Consolidated$500,446

Related Information(1) Information about Products and Services
Information about products and services for the years ended March 31, 2019 and 2018, 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, 2019 and2018, are summarized as follows:

Millions of Yen
2019
Japan
Sales to external customers
Property, plant and equipment
Impairment losses of assets¥33,693
9,424
108

North andCentral America¥14,080
1,702

Asia¥5,528
3,288

Other Areas¥2,253
1

Total¥55,554
14,415
108

Millions of Yen
2018
Japan
Sales to external customers
Property, plant and equipment¥31,212
9,087

North andCentral America¥10,383
1,223

Asia¥5,939
3,837

Other Areas¥2,6481

Total¥50,182
14,148

Thousands of U.S. Dollars
2019
Japan
Sales to external customers
Property, plant and equipment
Impairment losses of assets$303,518
84,899972

North andCentral America$126,838
15,331

Asia$49,795
29,621Other Areas$20,295
1

Total$500,446
129,852972

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

29

DENYO CO., LTD. and Consolidated Subsidiaries(3) Information about Major Customers
Sales to major customers for the years ended March 31, 2019 and 2018, are summarized as follows:

Millions of Yen
Name of Customers

2019

2018

Multiquip Inc.

¥10,893¥8,077

Thousands of U.S.
Dollars
2019

Related Segment$98,128

United States of America

21. RELATED-PARTY TRANSACTIONSThe Company sold its products to New Japan Machinery
Corporation, an associated company. The transactions weremade with usual terms and conditions.

The transactions with the associates for the years ended March 31, 2019 and 2018, and related balances at March 31, 2019 and 2018,
were mainly as follows:

Millions of Yen

Thousands of
U.S. Dollars
2019

2019

2018

Transactions—Sales¥3,567¥2,936$32,129

Balances:
Trade notes receivable
Trade accounts receivable¥1,782
1,088¥1,594845$16,050
9,803

22. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2019, was approved at the Company’s Board of Directors’ meeting heldon May 16, 2019:Year-end cash dividends, ¥22 ($0.20) per share******

30

Millions of Yen

Thousands of U.S.
Dollars¥480$4,320Year ended March 31, 2019

Independent Auditor’s ReportTo
the Board of Directorsof Denyo Co., Ltd.
We have audited the accompanying consolidated balance sheet of Denyo Co., Ltd. and its subsidiaries as of March 31, 2019, and therelated consolidated statements of income and comprehensive income, changes in equity, and cash flows for the year then ended, anda summary of significant accounting policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit inaccordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatementof the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Denyo Co., Ltd. and its subsidiaries as of March 31, 2019, and the consolidated results of their operations and their 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 the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.
June 28, 2019

Deloitte Touche Tohmatsu LLC

31

DENYO CO., LTD. and Consolidated Subsidiaries

Company Data
Company outline (As of March 31, 2019)
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.$17,609,526)

Authorized shares

97,811,000

Issued Shares

22,859,660

Shareholders

5,013

Financial Year

April 1 to March 31

Employees

576 (1,350 consolidated)

Branch and Sales offices

21

Directors, Audit Supervisory Board Members (As of June 27, 2019)
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 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

Masaru Sugiyama

Audit & Supervisory Board Member

Toru Hiroi

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, 2019

Executive Officers (As of June 27, 2019)
Senior Executive Officer

Yasuhiro Yamada

Head of International Sales Unit General Manager,
International Sales Department I Sales Division

Senior Executive Officer

Makoto Tanabe

General Manager,
Planning & Coordination Department,
Finance Department Administration Division

Senior Executive Officer

Kensaku Moriyama

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

Senior Executive Officer

Michio Nonaka

Chief Executive, Production Division,
General Manager,
Production Management Department Production Division

Executive Officer

Chiyoki Kimura

General Manager,
General Affairs Department Administration Division

Executive Officer

Toshiaki Shimazu

General Manager,
Manufacturing Department 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

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

Water-related Equipment
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, 2019

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
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, 2019)

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 1,061,181 shares of Company’s own stock)

Stock Listing

Tokyo Stock Exchange, First Section (Code: 6517)

Shareholders

5,013

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, 2019)
Shares Held

Voting Right Ratio(Thousands)(%)

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

1,459

6.69

Kyuei Corporation

1,417

6.50

Mizuho Trust & Banking Co., Ltd.

1,088

4.99

The Dai-ichi Life Insurance Co., Ltd.

872

4.00

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

791

3.63

Japan Trustee Services Bank,Ltd.
(Trust Account)

676

3.10

Denyo Shin-eikai Group

607

2.78

Tsurumi Manufacturing Co., Ltd.

543

2.49

MUFG Bank, Ltd.

540

2.47

Northern Trust Co. (AVFC) Re Fidelity Funds

522

2.39

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