2021

ANNUAL REPORT
Year ended March 31, 2021

Profile

Contents
1

Denyo has been a pioneer in outdoor power source, developing• Consolidated Financial Highlights• Review of Operations

4• Consolidated Financial Statements

7• Independent Auditor’s Report

31

Since its establishment in 1948,
and manufacturing many original products, including enginedriven generators, engine-driven welders and engine-driven
air compressors. Without contenting ourselves with our current
market position or technical expertise, we have boldly takenon new R&D challenges and, as a result, we now command a
70% share of the domestic market for engine-driven generators,
our main product. The Denyo Group comprises the Company
and eleven subsidiaries and affiliate, along with its production
facilities in Southeast Asia and the U.S., and R&D center in Japan.

• To Our Shareholders• Overview of Product Segment

6• Financial Review

8• Company Data

• Investor Information

New Coating facilities at Fukui Plant
Fully Operational
New coating facilities at Fukui Plant, the main plant, commenced
full operation in April 2021.
Because the systems use the powder coating method, thequality of products has improved due to the increased anticorrosion and weathering performance as a result of increased
and uniform coating thickness.
Moreover, the introduction of the latest equipment, as well as thesignificant expansion of the scale of equipment, has increased
coating capacity, production efficiency, and environmental
performance while improving the working environment.
Denyo will continue to actively invest in eco-friendly
equipment to improve the work of employees and achieve
superior manufacturing.

2

33
37

Year ended March 31, 2021

Consolidated Financial Highlights
2021

Millions of Yen
2020

2019

Thousands of
U.S. Dollars
2021

Net Sales¥55,007¥62,887¥55,554$496,812

Total Assets

79,05775,62674,086714,030

Total Net Assets

61,56458,35456,291

556,036

Operating Income

5,333

6,058

4,201

48,165Net Income*

3,860

4,071

3,167

34,863

Per Share Data

Yen

Total Net Assets

U.S. Dollars¥2,846.49¥2,689.54¥2,583.90$25.71Net Income*

185.13

194.32149.83

1.67

Cash Dividends

47.00

46.00

42.00

0.42

Note:Transaction into U.S. dollars has been made, solely for the reader’s convenience, at the rate of ¥110.72 to U.S.$1, prevailing on the Tokyo Foreign Exchange
Market on March 31, 2021.

Net Sales¥ million

Net Income*¥ million

62,88748,852

2017

50,182

2018

55,00755,554

2019

2020

2021

2,867

2,762

2017

2018

4,071

3,860

2020

2021

3,167

2019

* Net Income attributable to owners of the parent.

Total Assets

68,6782017

72,2102018¥ million

74,086

201975,6262020

Total Net Assets¥ million

79,0572021

53,14656,13356,29158,354

2017

2018

2019

2020

61,5642021
1

Shoichi Shiratori
President

2

Yoji Eto
Representative Director,
Chairman

Year ended March 31, 2021

In fiscal

2021(ended March 31, 2021), the Japanese economy continued to confront a challenging situation, witha fall in corporate earnings and a deteriorating employment environment due to the impact of COVID-19. The global economy also faced adifficult situation given the impact of the constraints on economic activities in many countries, such as prohibitions on going out, restrictions on
movement, and the suspension of business operations.
In the business environment surrounding the Denyo Group, although sales activities were restricted in Japan due to the cancellation of
product exhibitions in various regions, construction demand, including public works, remained firm, and demand related to disaster prevention
and mitigation also remained solid. Overseas, demand in the North American and Asian markets remained sluggish due to the suspension or
postponement of construction and resource development projects.
Under these circumstances, the Denyo Group focused on launching a range of new products and receiving orders for emergency generators,
continuing production activities while instituting infection control measures. Nonetheless, both sales and income decreased, with consolidated
net sales falling to ¥55,007 million (US$496,812 thousand), down 12.5% year on year, consolidated operating income decreasing to ¥5,333 million(US$48,165 thousand), a fall of 12.0% year on year, consolidated ordinary income declining to ¥5,646 million (US$50,989 thousand), down 9.0% year
on year, and net income attributable to owners of the parent decreasing 5.2% year on year, to ¥3,860 million (US$34,863 thousand).
Regarding dividends for the fiscal year under review, we issued an interim dividend of ¥22 (US$0.20) per share and decided to pay an ordinary
year-end dividend of ¥25 (US$0.23) per share. As a result, dividends for the full year came to ¥47 (US$0.42) per share (an increase of ¥1 (US$0.01)
from the previous fiscal year).
In terms of the future outlook, while overseas demand is currently showing signs of recovery as the global economy starts to pick up,
COVID-19 appears to be resurgent in Japan, creating concerns about its impact. Under these conditions, the Denyo Group will aim for sustainablegrowth by steadily implementing a range of measures under its second medium-term management plan Denyo 2023, for the three-year period
starting from fiscal 2021, while continuing to take action against COVID-19.
We would like to respectfully ask our shareholders for their continued patronage and support.

June 2021

Shoichi Shiratori, President

Yoji Eto, Representative Director, Chairman

3

DENYO CO., LTD. and Consolidated Subsidiaries

Review of Operations
1. Commencement of demonstrative test operationof fuel-cell portable generators
Following fuel cell power supply vehicles, Denyo has also achieved
the conversion of its mainstay mobile-type generators to fuelcell generators, which use hydrogen to generate electricity, andcommenced demonstrative test operation in May 2021. Thisinitiative is proceeding based on its selection under the Low
Carbon Technology Research, Development and Demonstration
Program of the Ministry of the Environment of Japan.
Because the newly developed fuel-cell portable generators
can be moved easily, just like engine generators, they can supply
power to any site, including construction sites, event sites andevacuation centers at the time of disaster. The fuel cell system*

Specifications of the fuel-cell portable generatorPower

7.0 kVA

Voltage

100/200 V

Current

35.0 A x 2 / 35.0 A

Power output Frequency

Dimensions
and weight50, 60 Hz switchable

Power factor

1.0

Number ofphasesSingle-phase, three-wireSupply method

Supplyied after
depressurized froma 14.7 MPa or 19.6 MPa
vessel, which is provided
separately from the main
body of the generator

Supply pressure

90 kPaPurity99.97%

Outer
dimensions

L:1,800 mm, W:900 mm,
H:1,500 mm

Service weight

950 kgHydrogengas

The fuel-cell portable generator

the portable power generator uses to generate power is also used in
the fuel cell forklift sold by Toyota Industries Corporation. Denyo has
developed a new power conditioner especially for fuel cells, and has
installed it in the generators to convert the DC power output from thefuel cells to AC power.
In the demonstrative test operation, Denyo will verify effects
unique to fuel-cell portable generators, such as the impact
on loading apparatuses and the reduction of CO2 emissions,compared to the current mainstream engine generators.
Denyo will continue active efforts to achieve a hydrogensociety and contribute to the growth in demand for hydrogenand the proliferation of renewable energy.
* The system employs the cell technology used in the first-generation MIRAI fuelcell vehicle (FCV) from Toyota Motor Corporation.

2. Commencement of demonstrative test driving andoperation of fuel cell power supply vehicles
Denyo has developed a fuel cell power supply vehicle (FCPV)
that generates electricity using hydrogen jointly with Toyota
Motor Corporation, commencing demonstrative test driving andoperation in September 2020. This initiative is proceeding basedon its selection under the the Low Carbon Technology Research,
Development and Demonstration Program of the Ministry of theEnvironment of Japan.
4Power supply vehicles are used in diverse situations that
require electricity, such as evacuation centers at the time ofdisaster, outdoor event venues and TV broadcasting. Because
the jointly developed FCPV uses hydrogen as fuel, it does notemit environmentally hazardous substances such as CO2 during
driving and power generation and can supply three-phase power

DENYO CO., LTD. and Consolidated Subsidiaries

Overview of Product Segment
Business performance by product category and domestic market share
Engine Generators
In the engine generators segment, shipments of mobile-type
generators used mainly on construction sites and outdoor eventsdeclined in Japan, but shipments of emergency generators thatare used as a back-up power source in a power outage increased
significantly.
Overseas, shipments to North America and Asia remainedsluggish.

70%
Domestic
Market Share(Mobile Type)As a result, segment sales fell to ¥44,020 million (US$397,581
thousand), down 12.7% year on year.

Engine Welders
In the engine welders segment, shipments declined in Japan
mainly due to a fall in sales opportunities caused by thecancellation of product exhibitions, and shipments overseas also
remained sluggish. As a result, segment sales declined to ¥4,387
million (US$39,618 thousand), a fall of 13.5% year on year.

55%
Domestic
Market Share

Compressors
In the compressors segment, shipments of engine compressors
remained weak. As a result, segment sales declined to ¥755 million(US$6,820 thousand), down 25.4% year on year.

15%
Domestic
Market ShareOther Products
In the other products segment, sales were ¥5,845 million (US$52,793 thousand), down 8.2% from the previous fiscal year, mainly due toa decrease in sales of parts attached to products and self-propelled lifters.

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

6

Denyo Co., Ltd.
and Subsidiaries
Consolidated Financial Statements
for the Year Ended March 31, 2021,
and Independent Auditor’s Report

DENYO CO., LTD. and Consolidated Subsidiaries

Financial Review
Business Environment and Results
In fiscal 2021 (ended March 31, 2021), the Japanese economy
continued to confront a challenging situation, with a fall in corporate
earnings and a deteriorating employment environment due tothe impact of COVID-19. The global economy also faced a difficult
situation given the impact of the constraints on economic activities
in many countries, such as prohibitions on going out, restrictions on
movement, and the suspension of business operations.
In the business environment surrounding the Denyo Group,
although sales activities were restricted in Japan due to thecancellation of product exhibitions in various regions, construction
demand, including public works, remained firm, and demand related
to disaster prevention and mitigation also remained solid. Overseas,
demand in the North American and Asian markets remainedsluggish due to the suspension or postponement of construction
and resource development projects.
Under these circumstances, the Denyo Group focused onlaunching a range of new products and receiving orders for
emergency generators, continuing production activities while
instituting infection control measures. Nonetheless, both sales andincome decreased, with consolidated net sales falling to ¥55,007
million (US$496,812 thousand), down 12.5% year on year, consolidated
operating income decreasing to ¥5,333 million (US$48,165 thousand),a fall of 12.0% year on year, consolidated ordinary income declining to¥5,646 million (US$50,989 thousand), down 9.0% year on year, and net
income attributable to owners of the parent decreasing 5.2% year on
year, to ¥3,860 million (US$34,863 thousand).

Segment Information
In the engine generators segment, shipments of mobile-type generators
used mainly on construction sites and outdoor events declined inJapan, but shipments of emergency generators that are used as a backup power source in a power outage increased significantly. Overseas,
shipments to North America and Asia remained sluggish. As a result,segment sales fell to ¥44,020 million (US$397,581 thousand), down
12.7% year on year.
In the engine welders segment, shipments declined in Japan
mainly due to a fall in sales opportunities caused by the cancellation of
product exhibitions, and shipments overseas also remained sluggish.
As a result, segment sales declined to ¥4,387 million (US$39,618
thousand), a fall of 13.5% year on year.
In the compressors segment, shipments of engine compressors
remained weak. As a result, segment sales declined to ¥755 million(US$6,820 thousand), down 25.4% year on year.
In the other products segment, sales were ¥5,845 million (US$52,793
thousand), down 8.2% from the previous fiscal year, mainly due to adecrease in sales of parts attached to products and self-propelled lifters.
Information by geographical area is as follows.
(Japan)In Japan, while shipments of emergency generators increased
significantly against a backdrop of rising awareness of the importanceof disaster preparedness, shipments of products to the rental market
declined affected by the suspension or postponement of certain

construction works and the self-restraint on holding outdoor events.
Overseas, exports of generators to the North American and the Asianmarkets remained weak. As a result, sales decreased to ¥42,919 million(US$387,635 thousand), down 1.6% year on year. However, segment profit
increased to ¥4,218 million (US$38,098 thousand), up 24.2% year on year,
mainly due to an improved cost-to-sales ratio and reduced expenses.
(U.S.)In the U.S., shipments of generators declined mainly because of the
impact of a cautious attitude toward purchasing, especially among
rental companies, reflecting concerns about the future, in addition to
the reaction to the large increase in sales in the previous fiscal year. As
a result, sales decreased to ¥8,750 million (US$79,031 thousand), down
42.3% year on year, and segment profit fell to ¥250 million (US$2,253
thousand), down 78.7% year on year.
(Asia)In Asia, demand was sluggish, particularly in Southeast Asia, and shipping
operations at a sales subsidiary in Singapore were affected by temporary
restrictions due to the lockdown. As a result, sales decreased to ¥2,797
million (US$25,264 thousand), down 22.0% year on year, and segment profit
also fell to ¥384 million (US$3,471 thousand), down 51.5% year on year.
(Europe)
In Europe, shipments of generators increased, resulting in a rise in sales
to ¥541 million (US$4,882 thousand), up 6,2% year on year, but a fall insegment profit to ¥23 million (US$206 thousand), down 38.8% year on year.

Financial Position(Assets)
Total assets at the end of the fiscal year under review were ¥79,057
million (US$714,030 thousand), an increase of ¥3,431 million(US$30,988 thousand) from the end of the previous fiscal year. Current
assets at the end of the fiscal year under review were ¥54,444 million(US$491,725 thousand), an increase of ¥1,512 million (US$13,653

Net Income per Share

Cash Dividends per Share

Equity Ratio

(¥)

(¥)

(%)

194.32134.18 130.03

185.1346.00 47.00

149.83
40.00

74.4

74.5

73.1

74.1

75.1

2017

2018

2019

2020

2021

42.00

30.00

2017
8

2018

2019

2020

2021

2017

2018

2019

2020

2021

Year ended March 31, 2021

thousand) from the end of the previous fiscal year. This was mainly
due to an increase in short-term loans of ¥1,107 million (US$10,000
thousand) as a result of the transfer from long-term loans. Noncurrent liabilities at the end of the fiscal year under review were
¥2,058 million (US$18,592 thousand), down ¥961 million (US$8,678
thousand) from the end of the previous fiscal year. This was mainly
due to a decrease in long-term loans of ¥1,088 million (US$9,829
thousand) as a result of the transfer from short-term loans.
(Net assets)
Net assets at the end of the fiscal year under review were ¥61,564
million (US$556,036 thousand), an increase of ¥3,210 million(US$28,994 thousand) from the end of the previous fiscal year. Thiswas mainly due to net income attributable to owners of the parentof ¥3,860 million (US$34,863 thousand), a ¥425 million (US$3,832
thousand) rise in accumulated other comprehensive income, andcash dividends paid of ¥997 million (US$9,002 thousand).

thousand) from the end of the previous fiscal year. This was mainly
due to an increase in cash and deposits of ¥1,860 million (US$16,795
thousand), a rise in merchandise and finished products of ¥716
million (US$6,466 thousand) and a fall in raw materials and suppliesof ¥1,071 million (US$9,670 thousand). Non-current assets at the endof the fiscal year under review were ¥24,613 million (US$222,305
thousand), an increase of ¥1,919 million (US$17,335 thousand) fromthe end of the previous fiscal year. This mainly reflected an increasein machinery, equipment and vehicles of ¥643 million (US$5,808
thousand) and an increase in investment securities of ¥1,422 million(US$12,843 thousand) due to the revaluation of stockholdings.
(Liabilities)
Total liabilities at the end of the fiscal year under review were ¥17,493
million (US$157,994 thousand), increasing ¥221 million (US$1,995
thousand) from the end of the previous fiscal year. Current liabilities
at the end of the fiscal year under review were ¥15,435 million(US$139,402 thousand), an increase of ¥1,182 million (US$10,673

Cash Flows(Cash flows from investing activities)
Net cash used in investing activities was ¥1,748 million (US$15,792
thousand) (cash used of ¥874 million (US$7,895 thousand) in theprevious fiscal year).
This largely reflected the purchase of property, plant andequipment of ¥1,844 million (US$16,657 thousand) and proceeds fromsales of investment securities of ¥135 million (US$1,216 thousand).
(Cash flows from financing activities)
Net cash used in financing activities was ¥1,086 million (US$9,813
thousand) (cash used of ¥1,528 million (US$13,802 thousand) in theprevious fiscal year). This was mainly due to dividends paid of ¥997
million (US$9,002 thousand).

Consolidated cash and cash equivalents (hereinafter, cash) were
¥22,914 million (US$206,953 thousand) at the end of the fiscal year
under review, increasing ¥1,860 million (US$16,795 thousand) fromthe end of the previous fiscal year, largely due to income before
income taxes of ¥5,678 million (US$51,283 thousand).
(Cash flows from operating activities)
Net cash provided by operating activities was ¥4,941 million(US$44,631 thousand) (cash provided of ¥7,272 million (US$65,685
thousand) in the previous fiscal year). This was largely due toincome before income taxes of ¥5,678 million (US$51,283 thousand),depreciation of ¥1,167 million (US$10,539 thousand), and income
taxes paid of ¥1,805 million (US$16,300 thousand).

Dividends
Regarding dividends for the fiscal year under review, we issued
an interim dividend of ¥22 (US$0.20) per share and decided to pay
an ordinary year-end dividend of ¥25 (US$0.23) per share basedon the policy above. As a result, dividends for the full year cameto ¥47 (US$0.42) per share (an increase of ¥1 (US$0.01) from theprevious fiscal year). As a consequence, the dividend payout ratio(consolidated) for the fiscal year under review came to 25.4%.

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

Return on Average
Shareholders’ Equity

Return on Average Assets
(ROA)

(%)

(%)

Price Earnings Ratio
14.6
12.6
9.1

7.4
5.7

2017

5.3

2018

5.9

2019

2020

6.7

2021

4.2

3.9

4.3

2017

2018

2019

5.4

5.0

2020

2021

2017

2018

2019

9.9

2020

11.3

2021
9

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Balance Sheet
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2021

Millions of Yen
2021
2020

Thousands of
U.S. Dollars(Note 1)2021

¥22,914¥ 21,054$ 206,953

4,127
3,426
11,779
1,532
145
(5)
10,276
250

3,997
2,922
12,401
1,795
62(4)
10,474231

37,27330,946
106,383
13,8331,308(45)
92,812
2,262

			 Total current assets

54,44452,932491,725

PROPERTY, PLANT AND EQUIPMENT:Land
Buildings and structures
Machinery and equipment (Note 13)
Furniture and fixtures
Construction in progress			Total
Accumulated depreciation

5,047
13,533
8,389
2,002
20
28,991(14,027)

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

45,585
122,230
75,76318,081
184
261,843(126,685)

			 Net property, plant and equipment

14,964

14,445

135,158

7,899
852
188
710

6,518
811
172
748

71,344
7,692
1,697
6,414

9,649

8,249

87,147¥79,057$75,626$ 714,030

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 14)
Receivables (Note 14):
		 Trade notes
		 Electronically recorded monetary claims—operating
		 Trade accounts
		 Associated companies (Note 20)
		Other
		 Allowance for doubtful receivables
Inventories (Note 5)
Prepaid expenses and other current assets

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 4 and 14)
Investments in associated companies (Note 6)
Deferred tax assets (Note 11)
Other assets (Note 13)
			 Total investments and other assets

TOTAL
See notes to consolidated financial statements.

10

Year ended March 31, 2021

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term bank loans (Notes 7 and 14)
Current portion of long-term debt (Notes 7, 13 and 14)
Payables (Note 14):
		 Trade notes
		 Electronically recorded obligations—operating
		 Trade accounts
		 Associated companies
		Other
Accrued income taxes (Note 11)
Accrued expenses
Provision for product warranties
Other current liabilities

Millions of Yen
2021
2020

Thousands of
U.S. Dollars(Note 1)
2021

¥210
1,122

¥210
15

$1,898
10,135

993
1,992
7,751
29
321
979
1,236
127
675

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

8,966
17,99170,009
262
2,897
8,838
11,161
1,146
6,099

Total current liabilities

15,435

14,253

139,402

LONG-TERM LIABILITIES:Long-term debt (Notes 7, 13 and 14)
Liability for retirement benefits (Note 9)
Deferred tax liabilities (Note 11)
Other long-term liabilities

267
401
1,359
31

1,371
434
961
253

2,412
3,622
12,271
287

				

2,058

3,019

18,592

1,955
1,779
54,766

1,955
1,779
51,903

17,656
16,072494,637(2,351)(2,365)(21,232)

3,643
(416)
(11)
59,365
2,199

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

32,907(3,767)(96)536,177
19,85961,56458,354

556,036¥79,057¥ 75,626$714,030

				

Total long-term liabilities

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 13, 15 and 16)
EQUITY (Note 10):
Common stock—authorized, 97,811,000 shares;
issued, 22,859,660 shares in 2021 and 22,859,660 shares in 2020
Capital surplus
Retained earnings
Treasury stock—at cost, 2,003,959 shares in 2021 and
2,014,745 shares in 2020 (Note 3)
Accumulated other comprehensive income:		 Unrealized gain on available-for-sale securities
		 Foreign currency translation adjustments
		 Defined retirement benefit plans				 Total
Noncontrolling interests
				
TOTAL

Total equity

11

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Statement of Income and Comprehensive Income

Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2021

Millions of Yen
2021
2020

Thousands of
U.S. Dollars(Note 1)2021

NET SALES (Notes 19 and 20)¥55,007¥62,887$496,812

COST OF SALES

41,68348,288376,476				

13,324

14,599120,336SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 12)

7,991

8,541

72,171

				

5,333

6,058

48,165

212
(56)
0
(8)

1,918
(502)
0
(71)

16
46
78
(7)
40
24
345

248
(57)
0
(40)
(180)
(56)
(108)
80
(32)
196
69
120

142
413
700
(63)
364
217
3,118

INCOME BEFORE INCOME TAXES

5,678

6,178

51,283

INCOME TAXES (Note 11):
Current
Deferred

1,736
(14)

1,895
(2)

15,677
(128)

				

1,722

1,893

15,549NET INCOME

3,956

4,285

35,734NET INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests

3,860
96

4,071
214

34,863871

NET INCOME—(Forward)¥3,956¥4,285$35,734

OTHER COMPREHENSIVE INCOME (LOSS) (Note 17):
Unrealized gain (loss) on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income (loss) in associates

1,064
(780)
22
4

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

9,605
(7,045)
201
41

310

(943)

2,802

COMPREHENSIVE INCOME¥4,266¥3,342$38,536

TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥4,284(18)¥3,130212$38,696(160)

Gross profit
Operating income

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 revaluation of investment securities
Foreign exchange gain (loss)
Equity in earnings (losses) of associated companies
Rent income
Commitment fee
Gain on sale of investment securities
Other—net (Note 2.w)				 Other income—net

				Total income taxes

Total other comprehensive income (loss)Yen
PER SHARE OF COMMON STOCK (Notes 2.t and 18):
Basic net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

12¥185.13
47.00

U.S. Dollars¥194.32
46.00

$1.67
0.42

Year ended March 31, 2021

Consolidated Statement of Changes in Equity
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2021

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE,APRIL 1, 2019
Net income attributableto owners of the parent
Cash dividends,¥46 per share
Purchase of treasury
stock
Selling of treasurystock
Net change in the year
BALANCE,MARCH 31, 2020
Net income attributableto owners of the parent
Cash dividends,¥47 per share
Purchase of treasury
stock
Selling of treasurystock
Net change in the year
BALANCE,MARCH 31, 2021

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock20,958¥1,955¥1,779¥48,791¥(2,107)¥56,288

(959)

(276)

(276)

51,903(2,365)

(889)

(52)

2,575

249

(33)

18
(941)

153

18
(788)

56,0632,291

58,354

3,860

3,860

3,860

(997)

(997)

(997)

(1)

(1)

(1)

11

15

¥1,779¥2,138(959)(0)¥1,955¥54,150(959)

18

20,856

¥(33)

Total
Equity

4,071

17

1,779

¥301

Noncontrolling
Interests

4,071

(276)

1,955

¥3,464

Total

4,071

(130)

20,845

Unrealized
Gain onForeignDefinedAvailableCurrency Retirement
for-SaleTranslation
BenefitSecurities Adjustments
Plans¥54,766¥(2,351)

1,608

(665)

22

15
425

(92)

15
333

¥3,643¥(416)¥(11)¥59,365¥2,199¥61,564

Total

Noncontrolling
Interests

Total
Equity$506,353$20,690$527,043

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

BALANCE, MARCH 31,
2020

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock$17,656$16,072$468,776$(21,363)

Net income attributableto owners of the parent
Cash dividends,$0.42 per share
Purchase of treasury
stock
Selling of treasury stock
Net change in the year
BALANCE,MARCH 31, 2021

Unrealized
Gain onForeignDefinedAvailableCurrency Retirement
for-SaleTranslation
BenefitSecurities Adjustments
Plans$23,261$2,248$(297)

34,86334,86334,863(9,002)(9,002)(9,002)

(831)

(8)
139
3,001

$19,859$556,036(8)
139$17,656$16,072$494,637$(21,232)

9,646(6,015)

201

(8)
139
3,832

$32,907$(3,767)$(96)$536,177

See notes to consolidated financial statements.

13

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2021

Thousands of
U.S. Dollars(Note 1)
2021

Millions of Yen
2020
2021
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
		 Equity in earnings of associated companies
		 Loss on revaluation of investment securities
		 Changes in assets and liabilities, net of effects:
			 Decrease in trade notes and accounts receivable			 (Increase) decrease in inventories
			 Decrease in interest and dividends receivable
			 Increase (decrease) in trade notes and accounts payable
			 Increase (decrease) in provision for allowance for doubtful accounts
			 Increase (decrease) in liability for retirement benefits
Other—net				 Total adjustments¥5,678¥6,178$51,283(1,805)
1,167
8
(40)
(46)

(1,387)
1,162
40
(196)
108
180

(16,300)
10,539
71
(364)
(413)

63
(32)
13
25
0
7
(97)
(737)

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

569
(290)
122
223
3
64
(876)
(6,652)

				

4,941

7,272

44,631(1,844)
(3)
135
(1)
3

(16,657)
(23)
1,216
(6)
30

(38)

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

(1,748)(874)(15,792)

(1)
(997)
(88)

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

(7)
(9,002)(804)(1,086)(1,528)(9,813)(247)

13(2,230)NET INCREASE IN CASH AND CASH EQUIVALENTS—(Forward)¥1,860¥4,883$16,796

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

21,054

16,171

190,157

CASH AND CASH EQUIVALENTS, END OF YEAR

¥22,914¥21,054$206,953

Net cash provided by operating activities

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

FINANCING ACTIVITIES:
Decrease in short-term loans—net
Purchases of treasury stock
Dividends paid
Other—net
				Net cash used in financing activities

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH
EQUIVALENTS

See notes to consolidated financial statements.

14

(352)

Year ended March 31, 2021

Notes to Consolidated Financial Statements
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2021

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements havepresent them in a form which is more familiar to readers outside
been prepared in accordance with the provisions set forth in theJapan.
Japanese Financial Instruments and Exchange Act and its related
The consolidated financial statements are stated in Japanese
accounting regulations and in accordance with accounting
yen, the currency of the country in which Denyo Co., Ltd. (theprinciples generally accepted in Japan ("Japanese GAAP"),"Company") is incorporated and operates. The translations ofwhich are different in certain respects as to the application andJapanese yen amounts into U.S. dollar amounts are included
disclosure requirements of International Financial Reporting
solely for the convenience of readers outside Japan and haveStandards.
been made at the rate of ¥110.72 to $1, the approximate rate
In preparing these consolidated financial statements, certainof exchange at March 31, 2021. Such translations should not bereclassifications and rearrangements have been made to theconstrued as representations that the Japanese yen amounts
consolidated financial statements issued domestically in order tocould be converted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements asof March 31, 2021, include the accounts of the Company andits 11 subsidiaries, including mainly "Denyo Kosan Co., Ltd.,""Nishihatsu Co., Ltd.," "Denyo America Corporation," "Denyo
Manufacturing Corporation," "Denyo Asia Pte. Ltd.," "Denyo
United Machinery Pte. Ltd.," "Denyo Europe B.V.," "Denyo Vietnam Co., Ltd." and "P.T. Dein Prima Generator" (together, the"Group").
		 Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated, andthose companies over which the Group has the ability to exercise significant influence are accounted for by the equity
method.
		 The investment in "New Japan Machinery Corporation," anassociated company, is accounted for by the equity method.
		 All significant intercompany balances and transactions
have been eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions 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 two other subsidiaries wereconsolidated using the financial statements as of December
31 because the difference between the fiscal year-end dateof the subsidiaries and that of the Company does not exceed
three months. Significant transactions between December
31 and March 31 are reflected in the accompanying consolidated financial statements.
b. Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements—Under Accounting Standards Board of Japan (“ASBJ”)
Practical Issues Task Force (“PITF”) No. 18, “Practical Solution
on Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements,” theaccounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events
under similar circumstances should in principle be unified
for the preparation of the consolidated financial statements.
However, financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting principles in
the United States of America (Financial Accounting Standards
Board Accounting Standards Codification) tentatively may be
used for the consolidation process, except for the following

items that should be adjusted in the consolidation process
so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of
goodwill; (b) scheduled amortization of actuarial gain or lossof pensions that has been recorded in equity through othercomprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model ofaccounting; and (e) recording a gain or loss through profit orloss on the sale of an investment in an equity instrument forthe difference between the acquisition cost and selling price,
and recording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment
in an equity instrument, where a foreign associate elects topresent in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument.
c. Cash and Cash Equivalents—Cash and cash equivalents
include cash on hand, bank deposits able to be withdrawn
on demand and short-term investments with an original maturity of three months or less and are exposed to insignificant
risk of fluctuations in value.
d. Marketable and Investment Securities—Marketable andinvestment securities are classified and accounted for depending on management’s intent. Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate componentof equity.
		 Nonmarketable available-for-sale securities are stated atcost determined by the moving-average method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
e. Allowance for Doubtful Accounts—The allowance for
doubtful accounts is stated in amounts considered to beappropriate based on the Company’s past credit loss experience and an evaluation of potential losses in the receivables
outstanding.
f. Inventories—Inventories are stated at the lower of cost, determined by the first-in, first-out method for finished products 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, plantand equipment of the Company and its consolidated domes15

DENYO CO., LTD. and Consolidated Subsidiaries

tic subsidiaries is computed by the declining-balance method based on the estimated useful lives of the assets, while
the straight-line method is applied to buildings of the Company and its consolidated domestic subsidiaries acquired on
or after April 1, 1998, building improvements and structuresof the Company and its consolidated domestic subsidiaries
acquired on or after April 1, 2016, and all property, plant andequipment of consolidated foreign subsidiaries. The range ofuseful lives is principally from 7 to 47 years for buildings andstructures, 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 the sumof 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 thewarranty period based on past experience.
j. Accrued Bonuses—Accrued bonuses to employees are provided for at the estimated amounts that the Company andits domestic subsidiaries are obligated to pay to employees
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 foreign subsidiaries maintain defined contribution pension plans.
		 The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis.
		 The unrecognized actuarial gains and losses are amortizedon a straight-line basis over a period of 5 years, no longer thanthe 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 recognizedwithin equity (accumulated other comprehensive income),
after adjusting for tax effects.
l. Employee Stockownership Plan—In accordance with PITF
No. 30, “Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees etc. through Trusts,”
upon transfer of treasury stock to the employee stockownership trust (the “Trust”) by the entity, any difference between
the book value and fair value of the treasury stock is recordedin capital surplus. At year-end, the Company records (1) the
Company stock held by the Trust as treasury stock in equity,(2) all other assets and liabilities of the Trust on a line-by-line
basis, and (3) a liability/asset for the net of (i) any gain or loss
on delivery of the stock by the Trust to the employees, (ii)
dividends received from the entity for the stock held by theTrust, and (iii) any expenses relating to the Trust.
m. Research and Development Costs—Research and development costs are charged to income as incurred.
16

n. Leases—In March 2007, the ASBJ issued ASBJ Statement
No. 13, “Accounting Standard for Lease Transactions,” whichrevised the previous accounting standard for lease transactions.
		 Under the previous accounting standard, finance leases
that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other financeleases were permitted to be accounted for as operating leasetransactions if certain “as if capitalized” information was disclosed in the notes to the lessee’s financial statements. The
revised accounting standard requires that all finance leasetransactions be capitalized by recognizing lease assets andlease obligations in the balance sheet. In addition, the revised
accounting standard permits leases that existed at the transition date and that do not transfer ownership of the leased
property to the lessee to continue to 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 to whichsuch bonuses are attributable.
p. Income Taxes—The provision for income taxes is computed based on the pretax income included in the consolidated
statement of income and comprehensive income. The asset
and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequencesof temporary differences between the carrying amounts andthe tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to thetemporary differences.
q. Foreign Currency Transactions—All short-term and longterm monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange
gains and losses from translation are recognized in the accompanying consolidated statement of income and comprehensive income.
r. Foreign Currency Financial Statements—The balance
sheet accounts of the consolidated foreign subsidiaries aretranslated into Japanese yen at the current exchange rate asof the balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation are shown as “Foreign currency translation adjustments”
under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts ofconsolidated foreign subsidiaries are translated into Japanese
yen at the average exchange rate.
s. Derivatives and Hedging Activities—The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange, interest rates and raw material
costs. Foreign exchange forward contracts, currency swaps,
interest rate swaps and commodity swaps are utilized by 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 and accounted for as follows: (a) all derivatives, except for those that qualify for hedge accounting, are recognized as either assets or
liabilities and measured at fair value, and gains or losses onYear ended March 31, 2021

derivative transactions are recognized in the income statement and (b) for derivatives used for hedging purposes, if
derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments
and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
		 Interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not remeasured atmarket value but the differential paid or received under theswap 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 under hedge accounting as a separate component of equity.
t. Per Share Information—Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares
outstanding for the period, retroactively adjusted for stock
splits.
		 Cash dividends per share presented in the accompanying
consolidated statement of income and comprehensive income are dividends applicable to the respective fiscal years,
including dividends to be paid after the end of the year.
u. Consumption Taxes—Consumption taxes are not included
in sales, cost of sales and selling, general and administrative
expenses, etc.
v. New Accounting Pronouncements
Accounting Standard for Revenue Recognition- Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020)- Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 26, 2021)- Implementation Guidance on Disclosures about Fair Value of
Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
On March 30, 2018, the ASBJ issued ASBJ Statement No. 29,“Accounting Standard for Revenue Recognition,” and ASBJ
Guidance No. 30, “Implementation Guidance on AccountingStandard for Revenue Recognition.” The core principle of thestandard 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 towhich the entity expects to be entitled in exchange for those
goods or services. An entity should recognize revenue in accordance with that core principle by applying the following
steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in thecontract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performanceobligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies
a performance obligation
		The accounting standard and guidance are effective forannual periods beginning on or after April 1, 2021.
(2) Scheduled date of adoption
This standard will be adopted from the beginning of the fiscal
year ending March 31, 2022.

(3) Impact of adopting this accounting standard
The Company is in the process of measuring the effects ofapplying the accounting standard and guidance in future applicable periods, but it has no significant effect.
Accounting Standard for Fair Value Measurement, Etc.
- Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)- Implementation Guidance on Accounting Standard for Fair
Value Measurement (ASBJ Guidance No. 31, July 4, 2019)- Accounting Standard for Measurement of Inventories (ASBJ
Guidance No. 9, July 4, 2019)- Accounting Standard for Financial Instruments (ASBJ Guidance No. 10, July 4, 2019)- Implementation Guidance on Disclosures about Fair Value of
Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
To improve comparability with international accounting standards, the "Accounting Standard for Fair Value Measurement"and "Implementation Guidance on Accounting Standard for
Fair Value Measurement" (hereinafter, "Fair Value Measurement Accounting Standards") were developed, establishingguidance and other information on how to calculate market
prices. Fair Value Measurement Accounting Standards are applied to the market prices of the following items.
• Financial instruments within the "Accounting Standard for
Financial Instruments"• Inventory assets held for the purpose of trading within the"Accounting Standard for Measurement of Inventories"
Additionally, "Guidance on Disclosures about Fair Value of
Financial Instruments" was revised and notes, including a
breakdown by the market value level of financial instruments,
were established.
(2) Scheduled date of adoption
This standard will be adopted from the beginning of the fiscal
year ending March 31, 2022.
(3) Impact of adopting this accounting standard
The Company is in the process of measuring the effects ofapplying the accounting standard and guidance in future applicable periods.
w. Change in Disclosures—”Insurance claim income” which
was disclosed under “Other income (expenses)” in the consolidated statement of income and comprehensive income
for the year ended March 31, 2020, has been included in “Other—net” for the year ended March 31, 2021, due to the decrease in amount.
		 As a result, the amount of ¥65 million disclosed as “Insurance claim income” under “Other income (expenses)” in the
consolidated statement of income and comprehensive income for the year ended March 31, 2020, has been reclassified
as ¥69 million under “Other—net.”

17

DENYO CO., LTD. and Consolidated Subsidiaries

3. STOCK GRANTING TRUST ("J-ESOP" and "BBT")The Company has introduced a Stock Granting Trust (“J-ESOP”) forthe purpose of enhancing the benefits package to employees andproviding incentives for raising corporate value.
The Company grants employees points according to theircontinued services and results, and when the employees
retire, the Company delivers to them its own stock (or pays anequivalent amount in cash) corresponding to the number of theiraccumulated points through the Trust.

The Company has introduced a stock compensation planfor directors called the “Board Benefit Trust (BBT).” The Company
grants its directors points according to the Company’s businessresults, etc., and the Company delivers to the directors who havebeneficiary 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 includedin the balance sheet of the Company:
Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020
¥477
(763)

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

¥492
(775)

$4,308

4. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2021 and 2020, consisted of the following:Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020
Non-current:
Marketable equity securities
Nonmarketable equity securities¥7,006893¥5,625893$63,280
8,064

Total

¥7,899¥6,518$71,344

The cost and aggregate fair values of marketable and investment securities at March 31, 2021 and 2020, were as follows:
Millions of Yen
Unrealized
Gains

Unrealized
LossesFair Value¥1,858¥5,156¥8¥7,006¥1,950¥3,687¥12¥5,625

March 31, 2021

Cost

Securities classified as available-for-sale—
Equity securities
March 31, 2020
Securities classified as available-for-sale—
Equity securities

Thousands of U.S. Dollars
March 31, 2020

Cost

Unrealized
Gains

Securities classified as available-for-sale—
Equity securities$16,780$46,568

Unrealized
LossesFair Value$68$63,280

The proceeds, realized gains and realized losses of the available-for-sale securities which were sold during the years ended March 31, 2021 and2020, were as follows:
Millions of Yen
March 31, 2021
Available-for-sale—Equity securities

Proceeds

Realized Gains Realized Loss

¥135

¥40

¥390

¥218

March 31, 2020
Available-for-sale—Equity securities
18¥22

Year ended March 31, 2021

Thousands of U.S. Dollars
March 31, 2020
Available-for-sale—Equity securities

Proceeds

Realized Gains Realized Loss

$1,216$364

The impairment losses on available-for-sale equity securities for the year ended March 31, 2020, were ¥180 million.

5. INVENTORIESInventories at March 31, 2021 and 2020, consisted of the following:
Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

Finished products and merchandiseWork in process
Raw materials and supplies¥4,636
1,566
4,074¥3,9201,410
5,144$41,873
14,14836,791

Total¥10,276¥10,474$92,812

6. INVESTMENTS IN ASSOCIATED COMPANIESInvestments in associated companies at March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

Investments—New Japan Machinery Corporation

¥852

¥811

¥7,692

Total

¥852

¥811

¥7,692

7. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2021 and 2020, consisted of bank overdrafts. The weighted-average interest rate applicable to the short-termbank loans was 0.5% at March 31, 2021 and 2020.
Long-term debt at March 31, 2021 and 2020, consisted of the following:
Millions of Yen
2021
2020
Unsecured loans from banks, with interest
rate at 3.4% (2021 and 2020)
Lease obligations
		TotalLess current portionLong-term debt, less current portion

Thousands of
U.S. Dollars
2021¥ 1,107282
1,389(1,122)¥1,088
298
1,386
(15)

$10,000
2,547
12,547(10,135)¥267¥1,371$2,41219

DENYO CO., LTD. and Consolidated Subsidiaries

Annual maturities of long-term debt at March 31, 2021, were as follows:Year Ending March 31

Millions of Yen

Thousands of
U.S. Dollars

2022
2023
2024
2025
2026
2027 and thereafter¥1,122
15
15
15
12
210

$10,135
140
132
134
111
1,895

Total

¥1,389$12,547

8. COMMITMENT LINE CONTRACTS
In order to raise funds efficiently, the Company has entered into a commitment line contract with four financial institutions, of which Mizuho Bank,
Ltd. is the arranger. The contract provided the Company with a commitment line of ¥3,000 million ($27,095 thousand) as of March 31, 2021. The
Company had no borrowings outstanding under the agreement as of March 31, 2021.

9. 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 subsidiaryis calculated using a simplified method, which is permitted for small
companies in accordance with the accounting standard for retirement
benefits.

(1) The changes in defined benefit obligation for the years ended March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Others¥2,779
165
24
(7)
(261)
(8)

¥2,865
168
24
19
(302)
5

$25,098
1,496
216
(66)
(2,361)(72)

Balance at end of year

¥2,692¥2,779$24,311(2) The changes in plan assets for the years ended March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
Others¥2,494
31
(6)
193
(261)

¥2,575
30
(6)
187
(295)
3

$22,529
283
(50)
1,739
(2,362)

Balance at end of year

¥2,451¥2,494$22,139

20

Year ended March 31, 2021

(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
2021
2020
Funded defined benefit obligation
Plan assets
			Total
Unfunded defined benefit obligation
Liability for stock granting retirement
Net liability arising from defined benefit obligation

Thousands of
U.S. Dollars
2021¥2,610
2,451
159
82
160

¥2,698
2,494
204
81
149

$23,571
22,138
1,433
740
1,449

¥401

¥434

$3,622Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

Liability for retirement benefits

¥401

¥434

$3,622Net liability arising from defined benefit obligation

¥401

¥434

$3,622(4) The components of net periodic benefit costs for the years ended March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

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

¥166
24
(31)
30
43

¥168
24
(30)
17
37

$1,496
215
(283)
274
389

Net periodic benefit costs

¥232

¥216

$2,091(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans
for the years ended March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020
Actuarial losses¥32

Thousands of
U.S. Dollars
2021
$290

(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans as of March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020
Unrecognized actuarial gains

¥(15)

¥(47)

Thousands of
U.S. Dollars
2021$(138)(7) Plan assets
a. Components of plan assets
		 Plan assets as of March 31, 2021 and 2020, consisted of the following:
2021

2020

General account managed by a life insurance company
Other

99.8%
0.2

100.0%

Total

100.0%

100.0%

21

DENYO CO., LTD. and Consolidated Subsidiaries

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, 2021 and 2020, are set forth as follows:

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

2021

2020

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

10. EQUITY
Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affectfinancial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at
any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders’ meeting. Additionally, 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 ofservice of the directors being prescribed as one year rather
than the normal two-year term by its articles of incorporation,
the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. With
respect to the third condition above, the Board of Directors ofcompanies with (a) board committees (namely, appointmentcommittee, compensation committee and audit committee)or (b) an audit and supervisory committee (as implemented
under the Companies Act effective May 1, 2015) may alsodeclare dividends at any time because such companies, by

nature, meet the criteria under the Companies Act. The Company is organized as a company with an audit and supervisory committee, effective June 29, 2021. The Company meets
all the above criteria and, accordingly, the Board of Directors
may declare dividends (except for dividends-in-kind) at any
time during the fiscal year.
		 The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders subject to acertain 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%
the Companies Act, the total amount of additional paid-inof dividends must be appropriated as a legal reserve (acapital and legal reserve may be reversed without limitation.
component of retained earnings) or as additional paid-in
The Companies Act also provides that common stock, legal
capital (a component of capital surplus), depending on thereserve, additional paid-in capital, other capital surplus andequity account charged upon the payment of such dividends,
retained earnings can be transferred among the accounts
until the aggregate amount of the legal reserve and additional
within equity under certain conditions upon resolution of thepaid-in capital equals 25% of the common stock. Undershareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specificformula. Under the Companies Act, stock acquisition rights
11. INCOME TAXESThe Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in the aggregate,
resulted in a normal effective statutory tax rate of approximately
30.6% for the years ended March 31, 2021 and 2020.

22

are presented as a separate component of equity. The Companies Act also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisitionrights.

The tax effects of significant temporary differences and tax
loss carryforwards which resulted in deferred tax assets andliabilities at March 31, 2021 and 2020, are as follows:Year ended March 31, 2021

Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020
Deferred tax assets:
¥194
44
74
51
21
108
77
7
235
(90)

¥190
36
65
79
22
113
77
12
227
(120)

$1,754
396
673
457
192
973
697
61
2,122
(809)

721

701

6,516

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

346
1,517
29

346
1,107
37

3,129
13,702259

			Total

1,892

1,490

17,090¥(1,171)¥(789)$(10,574)

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

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 years ended March 31, 2021 and 2020, is less than 5% of
the normal effective statutory tax rate, a reconciliation is omitted.
Year Ending March 31
2022
2023
2024
2025
2026 and thereafter
Total

At March 31, 2021, some subsidiaries have tax loss
carryforwards aggregating approximately ¥42 million ($379
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

¥38

$344

4

35

¥42

$379

12. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥604 million ($5,459 thousand) and ¥585 million for the years ended March 31, 2021
and 2020, respectively.

13. LEASESThe Group leases certain vehicles under finance leases. And the some foreign subsidiaries leases lands under operating leases which are included in noncurrent other assets in the consolidated balance sheet as right of use assets applying International Financial Reporting Standards (IFRS) 16.
Lease payments for the years ended March 31, 2021 and 2020, were ¥15 million ($135 thousand) and ¥15 million, respectively.

23

DENYO CO., LTD. and Consolidated Subsidiaries

Lease obligations were as follows:
Millions of Yen
2021
2020
Due within one year

Thousands of
U.S. Dollars
2021

Due after one year

¥15
267

¥15
283

$135
2,412

Total

¥282

¥298

$2,547

14. 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 notused for speculative purposes, but to manage exposure to financial risks as described in Note 15.
(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.
Investment securities, mainly equity instruments ofcustomers and suppliers of the Company, are exposed to therisk of market price fluctuations.
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 based on internal guidelines, which
include monitoring of payment term 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.

Maturities of bank loans are less than three months after
the balance 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.
Derivatives mainly include interest rate swaps, commodity
swaps, forward foreign currency contracts and currency
swap contracts, which are used to manage exposure tomarket risks from changes in interest rates of bank loans, fromchanges in raw material (copper) prices, and from changes inforeign currency exchange rates of receivables and advances.
Please see Note 15 for more detail about derivatives.

Interest rate swaps are used to manage exposure tomarket risks from changes in interest rates of loan payables,
and commodity swaps are used to manage exposure tomarket 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
and the relationship with the issuer.
In conducting derivative transactions, the division in
charge of each derivative transaction follows the internal
policies which prescribe the authority and the limit foreach transaction. The transaction data is reported to the
management meeting on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Company cannot
meet its contractual obligations in full on maturity dates. The
Company manages its liquidity risk by holding an adequate
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, other rational
valuation techniques are used instead. Additionally, notional amounts of derivative transactions, which are presented in Note 15,"Derivatives," do not indicate market risk of derivative transactions. Also, please see Note 15 for the details of fair value for derivatives.

24

Year ended March 31, 2021

(a) Fair value of financial instruments
Millions of Yen
March 31, 2021

Carrying
AmountFair Value

Cash and cash equivalents
Receivables
Investment securities¥22,91421,004
7,006¥22,91421,004
7,006

Total

¥50,924¥50,924

Short-term bank loans
PayablesLong-term debt

¥210
11,086
1,107¥210
11,086
1,107

Total

¥12,403¥12,403¥(107)¥(107)

Derivatives

Unrealized Loss

Millions of Yen
March 31, 2020

Carrying
AmountFair Value

Unrealized Loss

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

Total

¥47,852¥47,852

Short-term bank loans
PayablesLong-term debt

¥210
11,076
1,088¥210
11,076
1,110

¥(22)

Total

¥12,374¥12,396¥(22)¥(141)¥(141)

Derivatives

Thousands of U.S. Dollars
March 31, 2021

Carrying
AmountFair Value

Cash and cash equivalents
Receivables
Investment securities$206,953
189,698
63,280$206,953
189,698
63,280Total$459,931$459,931

Short-term bank loans
PayablesLong-term debt

$1,898100,125
10,000$1,898100,125
10,000Total$112,023$112,023$(963)$(963)

Derivatives

Unrealized Loss

Cash and Cash Equivalents
The carrying values of cash and 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 that include the current portion of long-term debt approximate fair value because of
their short maturities.
25

DENYO CO., LTD. and Consolidated Subsidiaries

The fair values of long-term debt are determined by discounting the cash flows related to the debt at the Group’s assumed
corporate borrowing rate.
The lease obligations which are included in the long-term debt are omitted from the fair value information.
Derivatives
Fair value information for derivatives is included in Note 15.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Millions of Yen
2021
2020
Investments in equity instruments that do not have a quoted market price inan active market¥893

Thousands of
U.S. Dollars
2021

¥893

$8,064(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen
Due inDue after One
One YearYear throughor Less
Five Years

March 31, 2021
Cash and cash equivalents

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

Receivables¥22,91421,004$206,953
189,698

Total¥43,918$396,651

Please see Note 7 for annual maturities of long-term debt and Note 13 for lease obligations.

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

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

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

March 31, 2021

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

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

¥(90)

¥(90)

$9,176$(815)$(815)

49

(16)

(16)

444

(148)

(148)

Currency swap contracts—
Selling U.S.$
March 31, 2020
Foreign currency forward contracts—
Selling U.S.$
Currency swap contracts—
Selling U.S.$

26¥1,016¥1,016

¥(53)

¥(53)

285

285

(87)

(87)

Year ended March 31, 2021

Derivative Transactions to Which Hedge Accounting Is Applied

March 31, 2021

Hedged Item

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

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

Long-term
debt$10,000

Long-term
debt$10,000

March 31, 2020
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 atmarket value, but the differential paid or received under theswap agreements is recognized and included in interest expense
or income. In addition, the fair value of such interest rate swaps inNote 14 is included in that of hedged items (i.e., long-term debt).

$10,000

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 parties and do not measure the Group’s
exposure to credit or market risk.

16. CONTINGENT LIABILITIESAt March 31, 2021, the Group had the following contingent liabilities:

Export trade bill discounted

Millions of Yen

Thousands of
U.S. Dollars¥348$3,141

17. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss), including reclassification adjustments and tax effects for the years ended March 31, 2021
and 2020, were as follows:
Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020
Unrealized gain (loss) on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments—
Adjustments arising during the year
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive income (loss) in
associates—Gains (losses) arising during the year
Total
Total other comprehensive income (loss)¥1,514
(40)
1,474
(410)

¥(1,237)(37)(1,274)
390$13,670(364)
13,306(3,701)¥1,064¥(884)$9,605¥(780)¥(54)$(7,045)¥(780)¥(54)$(7,045)

¥13
19
32
(10)

¥(0)
(0)
0

$113
176
289
(88)

¥22

¥(0)

$201

¥4

¥(5)

$41

¥4

¥(5)

$41

¥310

¥(943)$2,80227

DENYO CO., LTD. and Consolidated Subsidiaries

18. NET INCOME PER SHARE
Basis for the computation of net income per share ("EPS") for the years ended March 31, 2021 and 2020, is as follows:
Millions
Thousands ofof YenSharesNet Income
Attributable to
Owners of the
WeightedParent
Average SharesYear Ended March 31, 2021
Basic EPS—Net income available to common shareholders

Yen

U.S. Dollars

EPS¥3,86020,851¥185.13¥4,071

20,953¥194.32$1.67

Year Ended March 31, 2020
Basic EPS—Net income available to common shareholders

As noted in Note 2.l, the Company applied PITF No. 30,“Practical Solution on Transactions of Delivering the Company’s
Own Stock to Employees etc. through Trusts.” In calculating

the number of weighted-average shares above, the number ofshares that are held by the Trust (768 thousand shares in 2021
and 781 thousand shares in 2020) is reflected.

19. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment
Information Disclosures” and ASBJ Guidance No. 20, “Guidance on
Accounting Standard for Segment Information Disclosures,” anentity 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 ofan 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 in assessing performance. Generally, segment informationis required to be reported on the same basis as is used internallyfor evaluating operating segment performance and deciding
how to allocate resources to operating segments.

(1) Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by theCompany’s management is being performed in order to decide how resources are allocated among the Group. Therefore,
geographic segments of the Group consist of Japan, United States of America, Asia and Europe. Japan includes the Company,“Denyo Kosan Co., Ltd.” and “Nishihatsu Co., Ltd.” United States of America mainly includes “Denyo Manufacturing Corporation.” Asia
mainly includes “Denyo United Machinery Pte. Ltd.” Europe consists of “Denyo Europe B.V.”(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant
Accounting Policies."(3) Information about Sales, Profit (Loss), Assets and Other Items
Millions of Yen
2021
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers¥42,919
3,023¥8,750167¥2,797
3,213

¥541
4

¥55,007
6,407¥(6,407)

Total¥45,942¥8,917¥6,010¥545¥61,414¥(6,407)¥55,007

Segment profit
Segment assets
Other:
Depreciation and amortization
Investments in associated companies
Increase in property, plant andequipment and intangible assets¥4,21866,580

¥250
6,539

¥384
10,222¥23860¥4,87584,201¥458(5,144)¥5,33379,057

627
852

239

301

0

1,167
852

1,167
852

1,858

30

29

1

1,918

1,918

28

Reconciliations Consolidated¥55,007

Year ended March 31, 2021

Millions of Yen
2020
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

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

¥509
4

¥62,887
9,338¥(9,338)

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

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

577
811

241

344

0

1,162
811

1,162
811

887

294

20

1,201

1,201

Reconciliations Consolidated¥62,887

Thousands of U.S. Dollars
2021
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers$387,635
27,306$79,0311,503$25,264
29,023$4,88237$496,812
57,869$(57,869)

Total$414,941$80,534$54,287$4,919$554,681$(57,869)$496,812

Segment profit
Segment assets
Other:
Depreciation and amortization
Investments in associated companies
Increase in property, plant andequipment and intangible assets$38,098
601,335$2,25359,059$3,471
92,323$206
7,770$44,028
760,487$4,137(46,457)$48,165
714,030

5,662
7,692

2,156

2,720

1

10,539
7,692

10,539
7,692

16,783

272

264

3

17,322

17,322

Reconciliations Consolidated$496,812

Related Information(1) Information about Products and Services
Information about products and services for the years ended March 31, 2021 and 2020, 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, 2021 and 2020,are summarized as follows:
Millions of Yen
2021
Japan
Sales to external customers
Property, plant and equipment¥37,737
10,950

North andCentral America¥10,898
1,438

Asia¥3,9482,576

Other Areas¥2,4240

Total¥55,007
14,96429

DENYO CO., LTD. and Consolidated Subsidiaries

Millions of Yen
2020
Japan
Sales to external customers
Property, plant and equipment

North andCentral America¥37,043
9,736¥18,430
1,736

Asia

Other Areas¥5,1982,973¥2,216

Total¥62,887
14,445

Thousands of U.S. Dollars
2021
Japan
Sales to external customers
Property, plant and equipment

North andCentral America$340,835
98,902$98,428
12,987

Asia$35,661
23,266

Other Areas$21,8883

Total$496,812
135,158

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

(3) Information about Major Customers
Sales to major customers for the years ended March 31, 2021 and 2020, are summarized as follows:

Name of Customers
Multiquip Inc.

Millions of Yen
2021
2020
¥8,750¥15,167

Thousands of
U.S. Dollars
2021$79,031

Related Segment
United States of America

20. RELATED PARTY TRANSACTIONSThe Company sold its products to New Japan Machinery Corporation, an associated company. The transactions were made with usual terms andconditions.
The transactions with the associates for the years ended March 31, 2021 and 2020, and related balances at March 31, 2021 and 2020, weremainly as follows:
Millions of Yen
2020
2021

Thousands of
U.S. Dollars
2021

Transactions—Sales¥2,287¥2,881$20,657

Balances:
Trade notes receivable
Trade accounts receivable¥1,103347¥1,421359$9,965
3,133

23. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2021, was approved at the Company's Board of Directors' meeting heldon May 17, 2021:

Year-end cash dividends, ¥25 ($0.23) per share******

30

Millions of Yen

Thousands of
U.S. Dollars¥542$4,892

Independent Auditor’s Report
To the Board of Directors of Denyo Co., Ltd.
OpinionWe have audited the consolidated financial statements of Denyo Co., Ltd. and its subsidiaries (the "Group"), which comprise the consolidatedbalance sheet as of March 31, 2021, and the consolidated statement of income and comprehensive income, consolidated statement ofchanges in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies, all expressed in Japanese yen.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Group as of March 31, 2021, and its consolidated financial performance and its consolidated cash flows for the year then endedin 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 are presented solely forthe convenience of readers outside Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards
are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group in accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled our otherethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statementsof the current period. The matter was addressed in the context of our audit of the consolidated financial statements as a whole, and informing our opinion thereon, and we do not provide a separate opinion on the matter
The timing of revenue recognition at Denyo Co., Ltd. (the "Company")
Key Audit Matter Description

How the Key Audit Matter Was Addressed in the Audit

As stated in the consolidated statement of income, the Group
recorded sales of
55,007 million yen for the fiscal year ended March 31, 2021, of
which the Company accounted for 67% (before eliminating internaltransactions).
The Company sells products such as portable generators andwelding machines mainly to construction-related markets throughtrading companies, dealers and construction equipment rental
companies, and it also has direct transactions with users, and offers
services other than product sales such as installation works.
In addition, the Company is focusing on expanding its businessin fixed-type emergency generators, and the contents of the related
contracts are diversified.
Revenue is generally recognized upon shipment, but in cases
where services other than product shipment, such as site inspection
or installation work, are stipulated in the contract, the Company
recognizes revenue when it satisfies each contractual obligation.
Upon receiving orders, the sales department, in conjunction
with the technical department, registers order information in its
core business system, separated by the contract content, and uponrecognition of revenue, the logistics department and the sales
department work together to determine the fulfillment timing ofcontract obligations such as delivery completion.
The daily volume of transactions is so high that revenue may berecorded for transactions that do not meet the revenue recognition
requirements because of misjudgments regarding the identificationand fulfillment of contractual obligations.
For the above reasons, we have determined that the timing ofrevenue recognition at the Company is a key audit matter.

To test whether the revenue was recognized in proper timing, we
performed the following audit procedures, among others:(1) We evaluated the design and operating effectiveness of theinternal controls that check the contract details upon receiving
orders, and register the order information according to thecontract details in the core business system.
(2) We evaluated the design and operating effectiveness of theinternal controls that inspect documents such as delivery notes
and acceptance reports that are the basis for recording sales,depending on the contract details to determine the fulfillment of
the contractual obligation.
(3) Based on sales data extracted from core business-related systems,
for each sales department, we conducted a comparison of sales
figures and gross profit in the current periods with those in thesame periods of the previous year, and analyzed data using plot
charts, and extracted transactions that require careful judgments
in identifying and fulfilling obligations included in the contract
based on certain criteria such as transactions with new customers
and high-margin transactions.
(4) We selected a sample of contracts and we inquired of the sales
department about the history of the order and the contentsof the contract, and inspected the contract and order forms todetermine the details of the obligations included in the contract
and when they were fulfilled.
		In addition, the documents that serve as the basis for revenue
recognition, such as delivery notes and acceptance reports,
were inspected to determine that the requirements for revenue
recognition were met.

31

DENYO CO., LTD. and Consolidated Subsidiaries

Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting
principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japanand using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
The Audit and Supervisory Committee is responsible for overseeing the Directors' execution of duties relating to the design and operating
effectiveness of the controls over the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high levelof assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks. The procedures selected depend on the auditor's judgment. In addition, we obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, orthe override of internal control.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's
internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures madeby management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Groupto cease to continue as a going concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance with accounting
principles generally accepted in Japan, as well as the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a mannerthat achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of thegroup audit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements regarding
independence, and communicate with it all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with the Audit and Supervisory Committee, we determine those matters that were of most significancein the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to theprovisions of the Certified Public Accountants Act of Japan.
June 29, 2021

Deloitte Touche Tohmatsu LLC

32

Year ended March 31, 2021

Company Data
Company outline (As of March 31, 2021)
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.$ 17,655,650)

Authorized shares

97,811,000

Issued Shares

22,859,660

Shareholders

4,480

Financial Year

April 1 to March 31

Employees

583 (1,334 consolidated)

Branch and Sales offices

21

Directors, Audit Supervisory Board Members (As of June 29,2021)
Representative Director, Chairman

Yoji Eto

President

Shoichi Shiratori

Director, Managing Executive Officer

Kensaku Moriyama

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

Director, Senior Executive Officer

Takanori Yoshinaga

Chief Executive,
Development Division
Responsible for Production Division,
Overseas Manufacturing Subsidiary

Director, Senior Executive Officer

Masao Yamada

Chief Executive,
Quality Management Division

Director, Senior Executive Officer

Makoto Tanabe

Chief Executive,
Administration Division

Outside Director

Yoshio Takeyama

Director, Audit & Supervisory Committee Member

Toru Hiroi

Director, Audit & Supervisory Committee Member

Chiyoki Kimura

Ouside Director, Audit & Supervisory Committee Member

Akira Yamada

Ouside Director, Audit & Supervisory Committee Member

Keiko Yamagami

Ouside Director, Audit & Supervisory Committee Member

Masako Natori"Asterisk* indicates an external director or external audit & supervisory board member.

33

DENYO CO., LTD. and Consolidated Subsidiaries

Executive Officers
Senior Executive Officer

Yukio Nunogami

General Manager, West Japan Sales Department
Sales Division

Senior Executive Officer

Katsumi Ishikura

General Manager, Sales Promotion Department
Sales Division

Executive Officer

Masakazu Minato

General Manager, East Japan Sales Department
Sales Division

Executive Officer

Noboru Chosei

General Manager, Development Department,
Patent Administration Department
Development Division

Executive Officer

Shoichi Fujimoto

General Manager, Engineering Department
Development Division

Executive Officer

Toshiki Miyamoto

Chief Executive,
Production Division

Executive Officer

Kazuyoshi Kubo

General Manager, Personnel Department,
Responsible for General Affairs Department,
Administration Division

Executive Officer

Kenichi Otomo

Head of International Sales Unit
General Manager, International Sales Department 1
Sales Division

Executive Officer

Shoichiro Fujimoto

General Manager,
Planning & Coordination Office

Executive Officer

Hirokazu Tsukasaki

General Manager, Manufacuturing Department
Production Division34

Year ended March 31, 2021

Business Lines
Manufacture and sales of:Generators

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

Welders

Engine-driven Welders
Welding Generators
Welding Jigs
Automatic Welding Equipment

Compressors

Engine-driven Air Compressors
Motor-driven Air Compressors

Other Products

Self-propelled Lifters
Construction-related Machinery
Repair Parts

Plants and R&D Center
Fukui Plant

Wakasa-cho, Fukui Prefecture

Shiga Plant

Konan, Shiga Prefecture

Laboratory & Training Center

Sakado, Saitama Prefecture

Fukui Plant

Laboratory & Training Center

35

DENYO CO., LTD. and Consolidated Subsidiaries

Denyo Group Companies
Denyo Kosan Co., Ltd.
2-8-5, Nihonbashi-horidomecho, Chuo-ku, Tokyo 103-8566, Japan
Paid-in Capital: ¥50 million
Business: Services and sales of industrial electrical machinery and parts
Nishihatsu Co., Ltd.
140, Chichika, Karatsu, Saga 847-0831, Japan
Paid-in Capital: ¥50 million
Business: Manufacture and sales of industrial electrical machinery
Denyo America Corporation
1450 Minor Road, Danville, Kentucky 40422 U.S.A
Paid-in Capital: US$ 5 million
Business: Sales of parts for industrial electrical machinery
Denyo Manufacturing Corporation
1450 Minor Road, Danville, Kentucky 40422 U.S.A
Paid-in Capital: US$ 6 million
Business: Manufacture and sales of industrial electrical machinery to the U.S. market
Denyo Asia Pte. Ltd.
No.9 Neythal Road, Singapore 628614
Paid-in Capital: ¥600 million
Business: Sales of industrial electrical machinery
Denyo United Machinery Pte. Ltd.
No.9 Neythal Road, Singapore 628614
Paid-in Capital: S$ 3 million
Business: Sales, leasing and rental of industrial electrical machinery
Denyo Europe B.V.
Naamrijk 1, 3454 PX De Meern, The Netherlands
Paid-in Capital: €4 million
Business: Sales of industrial electrical machinery
Denyo Vietnam Co.,Ltd.
Plot A3, Thang Long Industrial Park II, Lieu Xa Commune,Yen My, Hung Yen, Vietnam
Paid-in Capital: US$ 10 million
Business: Manufacture and sales of industrial electrical machinery
Denyo Trading Vietnam Co., Ltd.
Room 606.03, 6th Floor, Indochina Plaza Hanoi Tower, No. 241 Xuan Thuy Street,
Dich Vong Hau Ward, Cau Giay District, Hanoi City, Vietnam
Paid-in Capital: US$ 900 thousand
Business: Services and sales of industrial electrical machinery and repair parts
P.T. Dein Prima Generator
JL. Raya Bekasi Km. 28, Medan Satria, Bekasi 17132 Jawa Barat, Indonesia
Paid-in Capital: Rp 13,563 million
Business: Manufacture and sales of industrial electrical machinery to the Indonesia market
New Japan Machinery Corporation
3-6-5, Shinyokohama, Kohoku-ku, Yokohama, Kanagawa 222-0033, Japan
Paid-in Capital: ¥495 million
Business: Sales and rental service of industrial electrical machinery36

Year ended March 31, 2021

Investor Information(As of March 31, 2021)

Head Office

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

Financial Year

April 1 to March 31

Common Stock

Authorized shares: 97,811,000
Issued shares: 22,859,660(Included 1,191,972 shares of Company’s own stock)

Stock Listing

Tokyo Stock Exchange, First Section (Code: 6517)

Shareholders

4,480Transfer Agency

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

Major Shareholders(As of March 31, 2021)

Shares Held(Thousands)

Voting Right Ratio(%)

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

1,462

6.74

Kyuei Corporation

1,417

6.54

Mizuho Trust & Banking Co., Ltd.

1,082

4.99

The Dai-ichi Life Insurance Co., Ltd

872

4.02

Custody Bank of Japan, Ltd. (Trust E Account)

763

3.52

Denyo Shin-eikai Group

646

2.98

Custody Bank of Japan, Ltd. (Trust Account)

589

2.72

The SFP Value Realization Master Fund Ltd.

572

2.64

Tsurumi Manufacturing Co., Ltd

543

2.50

MUFG Bank, Ltd.

540

2.49

Shareholders37https://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