2017
Annual Report
Year ended March 31, 2017

DENYO CO., LTD. and Consolidated Subsidiaries

ProfileSince its establishment
in 1948, Denyo has been a pioneer in outdoor

power sources, developing and manufacturing
many original products, including engine-driven
generators, engine-driven welders and engine-driven
air compressors. Without contenting ourselves with ourcurrent market position or technical expertise, we haveboldly taken on new R&D challenges and, as a result, we
now command a 65% share of the domestic market forengine-driven generators, our main product. The Denyo
Group comprises the Company and its ten subsidiaries
and one affiliate, along with its production facilities inSoutheast Asia and the U.S., and R&D center in Japan.

Governor of Kentucky’s visit to Denyo in JapanIn March 2017, Matthew G. Bevin, Governor of theCommonwealth of Kentucky, and Terry R. Gill Jr.,
Secretary of the state’s Cabinet for Economic
Development, visited Denyo in Japan as part of theirvisits to Japanese companies that have close ties withthe state of Kentucky. Denyo has a factory in the state.
We had a very productive meeting with Governor
Bevin, exchanging views on systems for revitalizing
business in Kentucky. Denyo will continue to work
together as a group to develop its business andcontribute to the further growth of Kentucky.

CONTENTS

1

2

4

6

Consolidate
Financial Highlights

To OurShareholders

Review ofOperations

Overview of
Product Segment

7

8

31

32

36

Consolidated
Financial
Statements

Financial Review

Independent
Auditor’s ReportCompany Data

Investor
Information

Years ended March 31, 2017

Consolidated Financial Highlights
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2015

2017

Net Sales¥ 48,852¥ 50,420¥ 52,267$ 435,398

Total Assets

68,67866,994

67,324

612,106

Total Net Assets

53,14650,812

49,195473,670

Operating Income

4,247

4,097

5,349

37,854Net Income*

2,867

3,137

3,858

25,557

Yen

U.S. Dollars¥ 2,407.30¥2,285.62¥ 2,215.29$ 21.46

Net Income*

134.18146.79179.38

1.20

Cash Dividends

30.00

30.00

28.00

0.27

Total Net Assets

Note:Transaction into U.S. dollars has been made, solely for the reader’s convenience, at the rate of ¥112.20 to U.S.$1, prevailing on the Tokyo Foreign Exchange
Market on March 31, 2017.

Net Sales

Net Income*¥ million¥ million1

2017

48,8522017

2016

50,4202016

2015

52,267

2015

3,858

2014

3,726

2014
2013

49,83247,672

2,867
3,137

3,399

2013

* Net Income attributable to owners of the parent.

Total Assets

Total Net Assets¥ million¥ million

53,146

2017

68,6782017

2016

66,994

2016

50,812

2015

67,3242015

49,1952014
2013

61,51855,7152014
2013

44,32440,153

DENYO CO., LTD. and Consolidated Subsidiaries

2

Shoichi Shiratori,
PresidentYears ended March 31, 2017

In fiscal

2017,(ended March 31, 2017), the Japanese economy recovered moderately due largely
to improvements in corporate earnings and the employment and income situation as a result of the government’s
economic policy and other measures. Meanwhile, the economy in the U.S. continued to expand gradually, but
emerging and resource-rich economies slowed down.
Regarding the business environment surrounding the Denyo Group, in Japan, there was strong demand inconstruction for redevelopments mainly in the Tokyo Metropolitan area and infrastructure developments for the2020 Tokyo Olympics, among others. In the meantime, overseas, demand remained firm in the U.S., but harshconditions persisted mainly in resource-rich nations, affected by weak resource prices.
Under these circumstances, the Denyo Group actively conducted sales activities by enhancing cooperation
further within the Group. However, consolidated net sales came to ¥48,852 million (US$435,398 thousand), down
3.1% year on year. Profitability reflected an increase in the shipments of products with comparatively high profit
margins, and consolidated operating income was ¥4,247 million (US$37,854 thousand), a 3.7% increase year
on year, consolidated ordinary income was ¥4,526 million (US$40,339 thousand), up 0.7% year on year, andprofit attributable to owners of the parent fell 8.6% year on year to ¥2,867 million (US$25,557 thousand) due to adecrease in gain on sales of non-current assets in extraordinary income.
The year-end dividend was an ordinary dividend of ¥15 (US$0.13) per share, which together with the interim
dividend of ¥15 (US$0.13) per share,made the total payout for the year ¥30 (US$0.27) per share. (the same as theprevious year)
Regarding the future business outlook, there is expected to be strong domestic demand in construction for
redevelopments mainly in the Tokyo Metropolitan area and developments for the 2020 Tokyo Olympics. Meanwhile,
the prospects for our overseas business will remain uncertain, given various factors such as trends in the new U.S.
administration’s policy, issues regarding Brexit, and the effects of an economic downturn in resource-rich countries.
Under these conditions, the Denyo Group will concentrate on providing products and services that meet theneeds of customers in domestic and overseas markets. It will also work to expand sales channels by focusing on
aggressive proposal-based business.
We would like to take this opportunity to express our sincere gratitude to our shareholders for their continued
patronage and support.
June 2017

Shoichi Shiratori, President

3

DENYO CO., LTD. and Consolidated Subsidiaries

Review of Operations
Expansion of Simul Generator series for simultaneous
three-phase and single-phase output
Denyo developed two models, DCA-25LSKE-D and
DCA-100LSIE-D, to respond to numerous customer
requests, and commenced sales of the models in
April 2016, in addition to other models of the engine
generator series Simul Generator.

Denyo will continue to develop products that meetthe needs of more customers.

With previous generators, when powering threephase machinery such as water pumps andcompressors and single-phase gadgets such as thelighting and air-conditioning of temporary offices, users
had to install both a three-phase generator and a singlephase generator in order to use them simultaneously.
However, the new Simul Generator models enable
users to output three-phase and single-phase power
simultaneously with a single unit.

4

A power-generating unit, which produces electricity,uses Denyo’s unique “three-phase/single-phaseindependent winding system,” enabling a sufficient
power supply with the single-phase three-wire system.
The Simul Generator series is equipped with an Ecobase as standard to prepare for contingencies such asfuel leaks, and the units are therefore safe to use evenin places that must meet strict installation criteria, suchas rivers and ports.

DCA-25LSKE-D

KCA-8SPS kerosene-fueled engine generator
Denyo developed the KCA-8SPS, an engine generator
fueled by kerosene, and launched it in January 2017.
The KCA-8SPS is fueled by kerosene, which has
a lower freezing temperature than light oil or gasoline,
and is therefore safer to use in cold climates and in
winter. In addition, this new product uses a relatively
inexpensive fuel, kerosene, thus reducing the runningcost by about 30% as compared to generators of thesame class fueled by light oil under the same conditions(according to our estimate).

Denyo will continue to actively develop productsthat serve customer needs such as economic efficiency
and safe and secure living.

Moreover, since Denyo’s unique technology enables
the KCA-8SPS to provide a stable power supply, it canbe used for precision equipment such as PCs and POS
systems. Further, KCA-8SPS is also used as a backup
power source during power outages because it comesstandard with a battery charger, ensuring that it can bestarted even during power outages.
KCA-8SPS

Years ended March 31, 2017

LP Gas general-use Generating Set LLG-35US
In January 2017, Denyo launched the LLG-35US, acertified general-use generating set, fueled by LP gas.
Since 2011, Denyo has sold the LEG Power seriesof stand-by generators fueled by LP gas. This gas is a
type of energy that is quick to restore and is resistant todisasters, even when lifelines are cut off in the event ofa large-scale disaster. The LEG Power series is highly
regarded by many customers.
The LLG-35US that has now been launched can beused for a business continuity plan (BCP), enabling acompany to continue production activity and service bygenerating minimal power by itself even in the event ofa blackout. In addition, because it is a certified generaluse generating set, the LLG-35US can also be usedfor various purposes such as dispersed power sources
within buildings and blocks, as well as peak cutbacks
even in cases other than a blackout.

LLG-35US

5

New engine compressors
Denyo commenced sales of two new engine compressor
models, the DIS-140LB (standard box type) and the
DIS-140LB-C (after-cooler type), in February 2017. They
are equipped with highly-efficient air-ends (parts thatcompress air), improving the air delivery from the 3.7
m3/min (130 cfm) of the previous model to 3.9 m3/
min (140 cfm) and reducing fuel consumption by 10%
compared to the previous model, and cutting the noiselevel as well.

tasks to be performed simultaneously; for example, one
service cock is used for an air tool while the other two
are used for double air hose reels. The additional cocktherefore enhances work efficiency.

Moreover, the addition of a service cock for air
discharge to the previous two cocks enables several

Denyo will continue to develop products that satisfy
the needs of more customers.

DIS-140LB

Furthermore, these new models enable one-side
maintenance, where operators can inspect the insideby opening only one door. With their improved
maintainability, these compressors have been popularamong customers.

DIS-140LB-C

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 large-sized
generators to the domestic and U.S. markets increased, but
shipments to resource-rich countries remained sluggish. This
resulted in segment sales of ¥36,857 million (US$328,498
thousand), down 3.8% from the previous fiscal year.

Engine Welders
6

In the engine welders segment, despite a rise in shipments ofsmall-sized welders to European markets, shipments to thedomestic market were stagnant due largely to delays in thestart of construction works. As a result, segment sales were
¥4,832 million (US$43,072 thousand), falling 5.3% from theprevious fiscal year.

Engine Compressors
In the compressors segment, shipments to the domestic
market remained firm and those to the U.S. and Asian markets
rose, resulting in segment sales of ¥1,440 million (US$12,841
thousand), up 30.4% from the previous fiscal year.

65%
Domestic Market Share(Mobile Type)55%
Domestic Market Share20%
Domestic Market ShareOther Products
In the other products segment, sales were ¥5,720 million (US$50,987 thousand), down 3.4% from the previous fiscal year, due
mainly to lower sales of self-propelled lifters.
Note: Above domestic share is five year mean by our investagtion

Years ended March 31, 2017

Denyo Co., Ltd. and Subsidiaries
Consolidated Financial Statements
for the Year Ended March 31, 2017,
and Independent Auditor’s Report

7

DENYO CO., LTD. and Consolidated Subsidiaries

Financial Review
Business Environment and Results
In fiscal 2017 (ended March 31, 2017), the Japanese economy
recovered moderately due largely to an improvement in corporate
earnings and the employment and income situation through thegovernment’s economy policy and other measures. Meanwhile,the economy in the U.S. continued to expand gradually, but
emerging and resource-rich economies slowed down.
Regarding the business environment surrounding the Denyo
Group, in Japan, there was strong demand in construction for
redevelopments mainly in the Tokyo Metropolitan area andinfrastructure developments for the 2020 Tokyo Olympics,
among others. Overseas, in the meantime, demand remained
firm in the U.S., but harsh conditions persisted mainly inresource-rich nations, affected by weak resource prices.

Under these circumstances, the Denyo Group conductedactive sales activities by enhancing cooperation further within
the Group. However, consolidated net sales came to ¥48,852
million (US$435,398 thousand), down 3.1% from the previous
fiscal year. Profitability reflected an increase in the shipments ofproducts with comparatively high profit margins, and consolidated
operating income was ¥4,247 million (US$37,854 thousand), a
3.7% increase from the previous fiscal year, consolidated ordinary
income was ¥4,526 million (US$40,339 thousand), up 0.7% fromthe previous fiscal year, and profit attributable to owners of theparent fell 8.6% from the previous fiscal year, to ¥2,867 million(US$25,557 thousand), due to a decrease in gain on sales of
non-current assets in extraordinary income.

Segment Information

8

In the engine generators segment, shipments of large-sized
generators to the domestic and U.S. markets increased, but
shipments to resource-rich countries remained sluggish. This
resulted in segment sales of ¥36,857 million (US$328,498
thousand), down 3.8% from the previous fiscal year.

the Middle and Near East markets were sluggish overall due toa decline in crude oil prices. As a result, sales came to ¥36,837
million (US$328,317 thousand), down 3.1% from the previous fiscal
year, and operating income came to ¥2,638 million (US$23,511
thousand), down 1.7% from the previous fiscal year.

In the engine welders segment, despite a rise in shipmentsof small-sized welders to European markets, shipments to thedomestic market were stagnant due largely to delays in the start ofconstruction works. As a result, segment sales were ¥4,832 million(US$43,072 thousand), falling 5.3% from the previous fiscal year.

(U.S.)In the U.S., shipments of large-sized generators to the rental
market, which is our core market, grew, resulting in sales of¥7,856 million (US$70,012 thousand), up 7.5% from the previous
fiscal year, and operating income of ¥1,050 million (US$9,362
thousand), up 35.1% from the previous fiscal year.

In the compressors segment, shipments to the domestic
market remained firm and those to the U.S. and Asian markets
rose, resulting in segment sales of ¥1,440 million (US$12,841
thousand), up 30.4% from the previous fiscal year.

Information by geographical area is as follows.

(Asia)In Asia, shipments of generators for construction for infrastructuredevelopment rose in some markets, but overall business was
sluggish owing to the effects of lower resource prices and theeconomic slowdown in China. As a result, sales were ¥3,751 million(US$33,433 thousand), down 18.2% from the previous fiscal year.
Operating income was ¥358 million (US$3,190 thousand), up
48.6% from the previous fiscal year, as a result of an improvementin the cost to sales ratio.

(Japan)In Japan, shipments of generators to major leasing and rental
companies, our key clients, remained robust, but shipments ofstand-by generators for emergency equipment decreased in thedomestic business. In the overseas business, however, exports to(Europe)
In Europe, shipments of generators declined, resulting in salesof ¥408 million (US$3,636 thousand), falling 21.7% from theprevious fiscal year, and operating income of ¥8 million (US$72
thousand), down 51.1%.

In the other products segment, sales were ¥5,720 million(US$50,987 thousand), down 3.4% from the previous fiscal year,
due mainly to lower sales of self-propelled lifters.

Net Income per Share

Cash Dividends per Share

(¥)

(¥)

149.00165.21

28.00

179.38146.79

2013

2014

2015

2016

134.18

2017

22.00

2013

30.00

Equity Ratio
30.00

24.00

2014

2015

2016

2017

(%)

70.4

69.6

70.3

2013

2014

2015

72.9

74.4

2016

2017

Years ended March 31, 2017

Financial Position(Assets)
Total assets at the end of the fiscal year under review were ¥68,678
million (US$612,106 thousand), an increase of ¥1,684 million(US$15,008 thousand) from the end of the previous fiscal year.

(US$5,789 thousand) from the end of the previous fiscal year.
Current liabilities at the end of the fiscal year under review
were ¥11,596 million (US$103,355 thousand), down ¥859 million(US$7,656 thousand) from the end of the previous fiscal year. Thiswas mainly due to a decrease in notes and accounts payabletrade of ¥1,082 million (US$9,648 thousand) and an increase inincome taxes payable of ¥237 million (US$2,113 thousand).

Current assets at the end of the fiscal year under review were
¥43,815 million (US$390,506 thousand), an increase of ¥1,568
million (US$13,975 thousand) from the end of the previous fiscal
year. This was mainly due to an increase in cash and deposits of¥691 million (US$6,166 thousand) and a rise in securities of ¥500
million (US$4,457 thousand), as well as an increase in merchandiseand finished goods of ¥414 million (US$3,691 thousand).

Non-current liabilities at the end of the fiscal year under review
were ¥3,936 million (US$35,080 thousand), up ¥210 million(US$1,867 thousand) from the end of the previous fiscal year. Thiswas due largely to a rise in deferred tax liabilities of ¥331 million(US$2,950 thousand).

Non-current assets at the end of the fiscal year under review
were ¥24,863 million (US$221,600 thousand), up ¥116 million(US$1,033 thousand) from the end of the previous fiscal year.
This largely reflected a ¥1,211 million (US$10,801 thousand)decrease in property, plant and equipment and intangible
assets due to depreciation and amortization and an increase ininvestments in securities of ¥1,113 million (US$9,920 thousand),reflecting the revaluation of stockholdings.

(Net assets)
Net assets at the end of the fiscal year under review were ¥53,146
million (US$473,671 thousand), an increase of ¥2,333 million(US$20,797 thousand) from the end of the previous fiscal year.
This was mainly due to profit attributable to owners of theparent of ¥2,867 million (US$25,557 thousand) and a ¥721
million (US$6,431 thousand) increase in valuation difference on
available-for-sale securities, as well as cash dividends paid of¥689 million (US$6,147 thousand).

(Liabilities)
Total liabilities at the end of the fiscal year under review were
¥15,532 million (US$138,436 thousand), decreasing ¥650 million

Cash Flows
and income taxes paid of ¥1,232 million (US$10,980 thousand).

Consolidated cash and cash equivalents (hereinafter “cash”)
were ¥12,219 million (US$108,907 thousand) at the end of the
fiscal year under review, increasing ¥473 million (US$4,223
thousand) from the end of the previous fiscal year, largely due
to income before income taxes of ¥4,526 million (US$40,339
thousand).
The status of cash flows and the factors affecting cash flows
in the fiscal year under review are as follows.

(Cash flows from investing activities)
Net cash used in investing activities was ¥1,253 million(US$11,168 thousand), an increase of ¥478 million (US$4,258
thousand) from the previous fiscal year. This largely reflected¥537 million (US$4,788 thousand) in payments for the purchaseof property, plant and equipment, as well as ¥675 million(US$6,012 thousand) in payments into time deposits.

(Cash flows from operating activities)
Net cash provided by operating activities was ¥2,948 million(US$26,277 thousand), a decrease of ¥25 million (US$220
thousand) from the previous fiscal year. This mainly reflected
income before income taxes of ¥4,526 million (US$40,339
thousand), depreciation of ¥1,212 million (US$10,801 thousand).

(Cash flows from financing activities)
Net cash used in financing activities was ¥1,081 million (US$9,626
thousand), a decrease of ¥101 million (US$902 thousand) fromthe previous fiscal year. This mainly reflected the purchase oftreasury shares of ¥265 million (US$2,365 thousand) anddividends paid of ¥690 million (US$6,147 thousand).

Dividends
Denyo recognizes the importance of returning profits toshareholders while also investing in equipment and research &development to enhance and maintain product competitivenessand 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.

Based on this policy, for fiscal 2017, the annual dividend
amounted to ¥30 (US$0.27) per share (the same as the previousyear): ¥15 (US$0.13) per share each as an interim dividend anda year-end dividend. As a result, the consolidated dividend
payout ratio was 22.4%.

Return on
Average Shareholders’ Equity

Return on Average Assets (ROA)

(%)

(%)

9.1

9.1

8.6

6.3
6.5

2013

2014

2015

2016

6.4

Price Earnings Ratio

12.6

6.0

10.7

10.0

8.2
4.7

5.7
2017

2013

2014

2015

2016

4.2
2017

7.9
2013

2014

2015

2016

2017

9

DENYO CO., LTD. and Consolidated Subsidiaries

DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2017

Consolidated Balance Sheet
Thousands of
U.S. Dollars(Note 1)Millions of Yen
ASSETS

2017

2016

2017

¥ 11,746$ 108,907

CURRENT ASSETS:
Cash and cash equivalents (Note 14)
Time deposits other than cash equivalents (Note 14)¥ 12,219
718

6,401

Receivables (Note 14):
		 Trade notes		 Trade accounts
		 Associated companies (Note 20)
		Other
		 Allowance for doubtful receivables
Inventories (Note 5)
Deferred tax assets (Note 11)
Prepaid expenses and other current assets

6,278
10,6882,455
17(7)10,705
541
201

5,737
10,840
2,738
143
(26)
10,338517
214

55,95095,25521,882
149(60)
95,412
4,825
1,785

			 Total current assets

43,81542,247

390,506

4,848
12,247
6,750
1,744
141

4,855
12,359
6,703
1,706
26

43,210109,153
60,156
15,5481,253

			Total
Accumulated depreciation

25,730(11,230)

25,649(10,231)229,320(100,093)

			 Net property, plant and equipment

14,50015,418129,227

8,752
774
61
776

7,716
697
59
857

78,001
6,900
545
6,927

10,363

9,329

92,373¥ 68,678¥ 66,994$ 612,106

PROPERTY, PLANT AND EQUIPMENT

10

Land
Buildings and structures
Machinery and equipment (Note 13)
Furniture and fixtures
Construction in progress

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

TOTAL

See notes to consolidated financial statements.

Years ended March 31, 2017

Thousands of
U.S. Dollars(Note 1)Millions of Yen
LIABILITIES AND EQUITY

2017

2016

2017

CURRENT LIABILITIES:
¥ 210

¥ 233

¥ 1,8723

4

30

		 Trade notes

2,231

2,095

19,887

		 Trade accounts

6,691

7,907

59,631

Short-term bank loans (Notes 7 and 14)
Current portion of long-term debt (Notes 7, 13 and 14)
Payables (Note 14):

		 Associated companies

16

18

141

		Other

42

122

374

630

393

5,618

1,260

1,319

11,229Other current liabilities

108
405

122
242

965
3,608

			 Total current liabilities

11,596

12,455

103,355

1,127
419
1,908
482

1,135
441
1,577
574

10,045
3,734
17,002
4,299

3,936

3,727

35,080

1,955

1,955

17,423

1,779
44,522(1,632)

1,779
42,344(1,381)

15,860396,807(14,549)

Accrued income taxes (Note 11)
Accrued expenses
Provision for product warranties

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
			 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 2017 and 22,859,660 shares in 2016

Capital surplus
Retained earnings
Treasury stock—at cost, 1,623,221 shares in 2017 and 1,484,961 shares in 2016 (Note 3)

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

3,736
765
(2)

3,014
1,142
1

33,2956,817(16)

51,123
2,023

48,854
1,958

455,637
18,034

			 Total equity

53,14650,812473,671¥ 68,678¥ 66,994$ 612,106

TOTAL

11

DENYO CO., LTD. and Consolidated Subsidiaries

DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2017

Consolidated Statement of Income andComprehensive Income
Thousands of
U.S. Dollars(Note 1)Millions of Yen
2017

2016

2017

¥ 48,852
36,874¥ 50,420
38,263¥ 435,398
328,643

			 Gross profit

11,97812,157

106,755SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 12)
			 Operating income

7,731
4,247

8,060
4,097

68,90137,854

183
(65)
3
(3)
(14)
92
87
(35)
31
279

175
(43)
312
(2)
(10)
92
83
(7)
108
708

1,632
(581)
25
(27)
(123)
816
777
(308)
274
2,485

4,526

4,805

40,339

1,472

1,383

13,118

(8)
1,464
3,062

21
1,404
3,401

(72)
13,04627,2932,867
195¥ 3,0623,137
264¥ 3,401

25,557
1,736$ 27,293

719

6,411

(421)
(2)
2

(1,017)
(1)
(27)
10
(3)

(3,759)
(21)
20

298
¥ 3,360(1,038)¥ 2,363

2,651$ 29,944¥ 3,209151¥ 2,182
181$ 28,600
1,344

NET SALES (Note 19 and 20)
COST OF SALESOTHER INCOME (EXPENSES):

12Interest and dividend income
Interest expense
Gain on sale of property, plant and equipment
Loss on sale or disposal of property, plant and equipment
Foreign exchange loss
Equity in earnings of associated companies
Rent income
Commitment fee
Other—net
			 Other income—net
INCOME BEFORE INCOME TAXESINCOME TAXES (Note 11):
Current
Deferred			 Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
NET INCOME (Forward)
OTHER COMPREHENSIVE INCOME (LOSS) (Note 17):
Unrealized gain (loss) on available-for-sale securities
Deferred loss on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income (loss) in associates
		 Total other comprehensive income (loss)
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests

Yen

U.S. Dollars

PER SHARE OF COMMON STOCK (Notes 2.s and 18):
Basic net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

¥ 134.18¥ 146.79

30.00

30.00

$ 1.200.27

Years ended March 31, 2017

DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2017

Consolidated Statement of Changes in Equity
Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE,APRIL 1, 2015

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplus21,368¥ 1,955¥ 1,754 ¥ 39,873

Retained
Earnings

Treasury
Stock

Deferred
Unrealized
Gain
Gain on(Loss) on
ForeignDefinedAvailable- Derivatives
Currency
Retirement
for-Sale
under Hedge Translation
BenefitSecurities Accounting Adjustments
Plans¥ (1,359) ¥ 4,034¥1¥ 1,087

Noncontrolling
Interests

Total

Total
Equity¥ (9) ¥ 47,336¥ 1,859 ¥ 49,195

Net income attributableto owners of the parent

3,137

3,137

3,137

Cash dividends,¥30 per share

(666)

(666)

(666)

Purchase oftreasury stock

(1)

(2)

(2)

(2)

Selling oftreasury stock

8

5

5

5

Disposal oftreasury stock

25

(25)

Net change inthe year
BALANCE,MARCH 31, 2016

(1,020)21,375

1,955

1,779

42,344(1,381)

(1)

3,014

55

10

(956)

99

(857)

1,142

1

48,854

1,958 50,812

Net income attributableto owners of the parent

2,867

2,867

2,867

Cash dividends,¥30 per share

(689)

(689)

(689)

Purchase oftreasury stock

(150)

(265)

(265)

(265)

Selling oftreasury stock

11

14

14

14

Net change inthe year
BALANCE,MARCH 31, 201721,236 ¥ 1,955 ¥ 1,779 ¥ 44,522

722

(377)

(3)

342

¥ (1,632) ¥ 3,736¥ 765¥(2) ¥ 51,123

65

407

¥ 2,023 ¥ 53,146

Thousands of U.S. Dollars (Note 1)

BALANCE,MARCH 31, 2016

$ 17,423 $ 15,860 $ 377,397 $ (12,310) $ 26,864$ 10,184$ 5 $ 435,423 $ 17,451 $ 452,874

Net income attributableto owners of the parent

25,55725,55725,557

Cash dividends, $0.27
per share(6,147)(6,147)(6,147)(2,365)(2,365)(2,365)126

126

Purchase of treasury
stock
Selling of treasury stock

6,431(3,367)$ 17,423 $ 15,860 $ 396,807 $ (14,549) $ 33,295$ 6,817

Net change in the year
BALANCE,MARCH 31, 2017

See notes to consolidated financial statements.

(21)

3,043

126
583

3,626

$ (16) $ 455,637 $ 18,034 $ 473,671

13

DENYO CO., LTD. and Consolidated Subsidiaries

DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2017

Consolidated Statement of Cash Flows
Thousands of
U.S. Dollars(Note 1)Millions of Yen
2017

2016

2017

¥ 4,526¥ 4,805$ 40,339(1 ,232)
1,212(1,530)
1,284
(311)
(92)

(10,980)
10,8012(816)(1,758)(4,620)105(8,218)
1
(192)
(235)
1,848
(14,062)

OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:		 Income taxes paid
		 Depreciation and amortization
		 Loss (gain) on sale or disposal of property, plant and equipment—net
		 Equity in earnings of associated companies
		 Changes in assets and liabilities, net of effects:

14

(92)

			 Increase in trade notes and accounts receivable
			 Increase in inventories
			 Decrease in interest and dividend receivable
			 Decrease in trade notes and accounts payable
			 Increase in interest payable			 Decrease in provision for allowance for doubtful accounts
			 Decrease in liability for retirement benefits
		Other—net				 Total adjustments

(22)
(26)
207
(1,578)

(214)
(398)
11
(54)
1
(15)
(24)
(490)
(1,832)

				

2,948

2,973

26,277

8
(537)
(2)
(5)
7
(675)

71
(4,788)
(22)
(43)
65
(6,012)(49)369(1,046)
(2)
(11)
12
(242)
242
(97)

(1,253)(775)(11,168)

Net cash provided by operating activities

(197)
(518)
12
(922)

INVESTING ACTIVITIES:
Proceeds from sales of property, plant and equipment
Purchases of property, plant and equipment
Purchases of securities
Investment in loans receivableCollections of loans receivable
Increase in time deposit
Decrease in time deposit
Other—net
				Net cash used in investing activities(439)

FINANCING ACTIVITIES:
Decrease in short-term loans—net
Repayment of long-term debt
Proceeds from sales of treasury stock
Purchases of treasury stock
Dividends paid
Other—net

(265)
(690)
(103)

(667)
(117)

(2,365)(6,147)
(909)

				

(1,081)(1,181)(9,626)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

(141)

(47)

(1,260)NET INCREASE IN CASH AND CASH EQUIVALENTS—(Forward)

¥ 473

¥ 970

$ 4,223

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

11,746

10,776

104,684¥ 12,219¥ 11,746$ 108,907

Net cash used in financing activities

CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

(23)

(205)
(400)
3

Years ended March 31, 2017

DENYO CO., LTD. AND SUBSIDIARIES·YEAR ENDED MARCH 31, 2017

Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
domestically in order to present them in a form which is more
The accompanying consolidated financial statements havefamiliar to readers outside Japan.
been prepared in accordance with the provisions set forthin the Japanese Financial Instruments and Exchange Act
The consolidated financial statements are stated in
and its related accounting regulations and in accordanceJapanese yen, the currency of the country in which Denyo
with accounting principles generally accepted in Japan
Co., Ltd. (the “Company”) is incorporated and operates.
(“Japanese GAAP”), which are different in certain respects
The translations of Japanese yen amounts into U.S. dollar
as to the application and disclosure requirements ofamounts are included solely for the convenience of readersInternational Financial Reporting Standards.
outside Japan and have been made at the rate of ¥112.20
to $1, the approximate rate of exchange at March 31, 2017.
In preparing these consolidated financial statements,
Such translations should not be construed as representations
certain reclassifications and rearrangements have beenthat the Japanese yen amounts could be converted into U.S.
made to the consolidated financial statements issued
dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements
as of March 31, 2017, include the accounts of the Company
and its 10 subsidiaries, including mainly “Denyo Kosan Co.,
Ltd.,” “Nishinihon Generator Mfg. 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, thosecompanies in which the Company, directly or indirectly, isable to exercise control over operations are fully consolidated,
and those companies over which the Group has the ability to
exercise significant influence are accounted for by the equity
method.
The investment in “New Japan Machinery Corporation,”an associated 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 theGroup is also eliminated.
“Denyo America Corporation,” “Denyo Manufacturing
Corporation,” “Denyo Asia Pte. Ltd.,” “Denyo United
Machinery Pte. Ltd.,” “Denyo Europe B.V.,” “Denyo Vietnam
Co., Ltd.” and “P.T. Dein Prima Generator” and one othersubsidiary were consolidated using the financial statements
as of December 31 because the difference between the fiscal
year-end date of the subsidiaries and that of the Company
does not exceed three months. Significant transactions
between December 31 and March 31 are reflected in theaccompanying consolidated financial statements.
b. Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial
Statements—Under Accounting Standards Board of Japan(“ASBJ”) Practical Issues Task Force (“PITF”) No. 18,“Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for the Consolidated Financial
Statements,” the accounting policies and procedures

applied to a parent company and its subsidiaries for similartransactions and events under similar circumstances
should in principle be unified for the preparation of theconsolidated financial statements. However, financial
statements prepared by foreign subsidiaries in accordancewith either International Financial Reporting Standards orgenerally accepted accounting principles in the UnitedStates 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 thatnet income is accounted for in accordance with Japanese
GAAP, unless they are not material: (a) amortization of
goodwill; (b) scheduled amortization of actuarial gain orloss of pensions that has been recorded in equity throughother comprehensive income; (c) expensing capitalized
development costs of R&D; and (d) cancellation of the fairvalue model of accounting for property, plant and equipment
and investment properties and incorporation of the costmodel of accounting.
c. Cash and Cash Equivalents—Cash and cash
equivalents include cash on hand, bank deposits able to bewithdrawn on demand and short-term investments with an
original maturity of three months or less and are exposed toinsignificant risk of fluctuations in value.
d. Marketable and Investment Securities—Marketable
and investment securities are classified and accounted
for depending on management’s intent. Available-for-salesecurities are reported at fair value, with unrealized gains
and losses, net of applicable taxes, reported in a separate
component of equity.
Nonmarketable available for sale securities are stated atcost determined by the moving average method. For otherthan-temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.
e. Allowance for Doubtful Accounts—The allowancefor doubtful accounts is stated in amounts considered tobe appropriate based on the Company’s past credit loss

15

DENYO CO., LTD. and Consolidated Subsidiaries

experience and an evaluation of potential losses in thereceivables outstanding.
f. Inventories—Inventories are stated at the lower ofcost, determined by the first-in, first-out method for finishedproducts and work in process, and by the average method
for raw materials, or net selling value.
g. Property, Plant and Equipment—Property, plant andequipment are stated at cost. Depreciation of property, plantand equipment of the Company and its consolidated domestic
subsidiaries is computed by the declining-balance method
based on the estimated useful lives of the assets, while thestraight-line method is applied to buildings of the Company
and its consolidated domestic subsidiaries acquired on orafter 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
of useful lives is principally from 7 to 47 years for buildings
and structures, and from 2 to 12 years for machinery andequipment.
Pursuant to an amendment to the Corporate Tax Act, theCompany adopted ASBJ PITF No. 32, “Practical Solution on achange in depreciation method due to Tax Reform 2016” andchanged the depreciation method for building improvements
and structures acquired on or after April 1, 2016, from thedeclining-balance method to the straight-line method.

16

The influence of the change on profit or loss is insignificant.
h. 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.
i. Accrued Bonuses—Accrued bonuses to employees areprovided 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.
j. Retirement and Pension Plans—The Company, its
domestic subsidiaries and a certain foreign subsidiary
maintain defined benefit pension plans. Some foreignsubsidiaries maintain defined contribution pension plans.
The Company accounts for the liability for retirement
benefits based on the projected benefit obligations andplan assets at the balance sheet date. The projected benefit
obligations are attributed to periods on a benefit formulabasis.
The unrecognized actuarial gains and losses areamortized on a straight-line basis over a period of 5 years, nolonger than the expected average remaining service periodof the employees, from the year incurred. Actuarial gains
and losses that are yet to be recognized in profit or loss arerecognized within equity (accumulated other comprehensive
income), after adjusting for tax effects.
k. Employee Stockownership Plan—In accordance with
PITF No. 30, “Practical Solution on Transactions of Delivering
the Company’s Own Stock to Employees etc. throughTrusts,” 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 recorded in capital surplus. At year end, the Company
records (1) the Company stock held by the Trust as treasury
stock in equity, (2) all other assets and liabilities of the Truston 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 theemployees shareholding association, (ii) dividends received
from the entity for the stock held by the Trust, and (iii) any
expenses relating to the Trust.
l. Research and Development Costs—Research anddevelopment costs are charged to income as incurred.
m. Leases—In March 2007, the ASBJ issued ASBJ Statement
No. 13, “Accounting Standard for Lease Transactions,”
which revised the previous accounting standard for leasetransactions.
Under the previous accounting standard, finance leases
that were deemed to transfer ownership of the leased property
to the lessee were capitalized. However, other finance leases
were permitted to be accounted for as operating leasetransactions if certain “as if capitalized” information wasdisclosed in the notes to the lessee’s financial statements.
The revised accounting standard requires that all financelease transactions be capitalized by recognizing lease assets
and lease obligations in the balance sheet. In addition, therevised accounting standard permits leases that existed
at the transition date and do not transfer ownership of theleased property to the lessee to continue to be accounted
for as operating lease transactions.
The Company applied the revised accounting standard
effective April 1, 2008.
All other leases are accounted for as operating leases.
n. 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.
o. Income Taxes—The provision for income taxes iscomputed based on the pretax income included in the
consolidated statement of income and comprehensive
income. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted
income tax rates to the temporary differences.
The Company applied ASBJ Guidance No. 26, “Guidanceon Recoverability of Deferred Tax Assets,” effective April 1,
2016. There was no impact from this for the year ended
March 31, 2017.
p. Foreign Currency Transactions—All short-term andlong-term monetary receivables and payables denominatedin foreign currencies are translated into Japanese yen at
the exchange rates at the balance sheet date. The foreignexchange gains and losses from translation are recognizedin the accompanying consolidated statement of income andcomprehensive income.
q. Foreign Currency Financial Statements—The balance
sheet accounts of the consolidated foreign subsidiaries

Years ended March 31, 2017

are translated into Japanese yen at the current exchange
rate as of the balance sheet date except for equity, which
is translated at the historical rate. Differences arising fromsuch translation are shown as “Foreign currency translation
adjustments” under accumulated other comprehensive
income in a separate component of equity. Revenue andexpense accounts of consolidated foreign subsidiaries aretranslated into Japanese yen at the average exchange rate.
r. Derivatives and Hedging Activities—The Group uses
derivative financial instruments to manage its exposures
to fluctuations in foreign exchange, interest rates andraw material costs. Foreign exchange forward contracts,
currency swaps, interest rate swaps and commodity swaps
are utilized by the Group to reduce the risk of fluctuationof foreign currency exchange, interest rate and raw material
costs. The Group does not enter into derivatives for tradingor speculative purposes.
Derivative financial instruments are classified andaccounted for as follows: (a) all derivatives, except for thosethat qualify for hedge accounting, are recognized as either
assets or liabilities and measured at fair value, and gains orlosses on derivative transactions are recognized in the income
statement and (b) for derivatives used for hedging purposes,
if derivatives qualify for hedge accounting because of highcorrelation and effectiveness between the hedging instruments
and the hedged items, gains or losses on derivatives aredeferred 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 andthe unrealized gains or losses are deferred until maturity as
deferred gain (loss) on derivatives under hedge accounting
as a separate component of equity.
s. Per Share Information—Basic net income per share iscomputed by dividing net income attributable to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock splits.
Cash dividends per share presented in the accompanying
consolidated statement of income and comprehensive
income are dividends applicable to the respective fiscal
years, including dividends to be paid after the end of theyear.
t. Consumption Taxes—Consumption taxes are notincluded in sales, cost of sales and selling, general andadministrative expenses, etc.

17
3. STOCK GRANTING TRUST (“J-ESOP” and “BBT”)
The Company has introduced a Stock Granting Trust(“J-ESOP”) for the purpose of enhancing the benefits package
to employees and providing incentives for raising corporate
value.
The Company grants employees points according to theircontinued services and results, and when the employees
retire, the Company delivers to them its own stock (or pays
an equivalent amount in cash) corresponding to the numberof their accumulated points through the Trust.

The Company has introduced a new stock compensation
plan for directors called the “Board Benefit Trust (BBT)” since
September 1, 2015. The Company grants its directors points
according to the Company’s business results, etc., and theCompany delivers to the directors who have beneficiaryrights its own stock corresponding to the number of theiraccumulated points determined on a given date every year
through the Trust.
These Trusts held treasury stock as follows which was
included in the balance sheet of the Company:
Thousands of
U.S. Dollars

Millions of Yen
2017

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

¥ 538
(814)

2016

¥ 552
(826)

2017

$ 4,793DENYO CO., LTD. and Consolidated Subsidiaries

4. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Non-current:
Marketable equity securities
Marketable trust fund investments and otherNonmarketable equity securities
Total¥ 7,610118
1,024¥ 6,563130
1,023$ 67,828
1,052
9,121

¥ 8,752¥ 7,716$ 78,001

The cost and aggregate fair values of marketable and investment securities at March 31, 2017 and 2016, were as follows:
Millions of Yen
March 31, 2017

Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Securities classified as available-for-sale:
Equity securities
Trust fund investments and other¥ 2,242149¥ 5,368¥ 2,240150¥ 4,378¥ 31¥ 7,610
118

¥ 55
20

¥ 6,563130

March 31, 2016

Securities classified as available-for-sale:
Equity securities
Trust fund investments and other18

Thousands of U.S. Dollars
March 31, 2017

Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Securities classified as available-for-sale:
Equity securities
Trust fund investments and other$ 19,987
1,325$ 47,846$4273$ 67,829
1,052

5. INVENTORIESInventories at March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Finished products and merchandiseWork in process
Raw materials and supplies¥ 6,111
1,101
3,493

¥ 5,696
1,103
3,539

$ 54,464
9,816
31,132

Total¥ 10,705¥ 10,338$ 95,412

Years ended March 31, 2017

6. INVESTMENTS IN ASSOCIATED COMPANIESInvestments in associated companies at March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Investments—New Japan Machinery Corporation

¥ 774

¥ 697

$ 6,900

Total

¥ 774

¥ 697

$ 6,900

7. SHORT-TERM BANK LOANS AND LONG TERM DEBT
Short-term bank loans at March 31, 2017 and 2016, consistedof bank overdrafts. The weighted-average interest rates

applicable to the short-term bank loans were 0.6% and 0.8%
at March 31, 2017 and 2016, respectively.

Long-term debt at March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Unsecured loans from banks, with interest rate at 3.4% (2017 and 2016)
Obligations under finance leases
		TotalLess current portion¥ 1,1228¥ 1,12712$ 10,000
75

1,130
(3)

1,139
(4)

10,075(30)

Long-term debt, less current portion¥ 1,127¥ 1,135$ 10,045

19

Annual maturities of long-term debt at March 31, 2017, were as follows:Year Ending March 31

2018
2019
2020
2021
2022 and thereafterTotal

8. COMMITMENT LINE CONTRACTS
In order to raise funds efficiently, the Company hasentered 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

9. RETIREMENT AND PENSION PLANS
The Company has a defined benefit pension plan anddomestic subsidiaries also participate in the same plan. A
certain foreign subsidiary has its own defined benefit pension
plan and other foreign subsidiaries have defined contributionplans. In addition, the Company and domestic subsidiaries
have a stock granting retirement plan.

Millions of Yen

Thousands of
U.S. Dollars

¥3
3

$ 30
26

1
1
1,122
¥ 1,13013
6
10,000$ 10,075¥3,000 million ($26,738 thousand) as of March 31, 2017.
The Company had no borrowings outstanding under theagreement as of March 31, 2017.

The projected benefit obligation of a certain domestic
subsidiary is calculated using a simplified method, whichis permitted for small companies in accordance with theaccounting standard for retirement benefits.

DENYO CO., LTD. and Consolidated Subsidiaries(1) The changes in defined benefit obligation for the years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

Balance at beginning of year
Current service cost
Interest cost2017

¥ 2,765165
23¥ 2,734
166
21$ 24,649
1,467
205

15
(198)
(4)

8
(151)
(13)

138
(1,769)(40)¥ 2,766¥ 2,765$ 24,650

Actuarial losses
Benefits paid
OthersBalance at end of year

2016(2) The changes in plan assets for the years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

20

2016

2017

Balance at beginning of year
Expected return on plan assets
Actuarial gains¥ 2,42731
1¥ 2,355
31
13$ 21,635
276
10Contributions from the employer
Benefits paid
Others

182
(180)
2

177
(147)
(2)

1,618
(1,604)12¥ 2,463¥ 2,427$ 21,947

Balance at end of year

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit
obligation and plan assets was as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Funded defined benefit obligation
Plan assets
		TotalUnfunded defined benefit obligation¥ 2,665
2,463¥ 2,649
2,427$ 23,753
21,947

202
101

222
116

1, 806897

Liability for stock granting retirement

116

103

1,031

¥ 419

¥ 441

$ 3,734

Net liability arising from defined benefit obligation

Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Liability for retirement benefits

¥ 419

¥ 441

$ 3,734

Net liability arising from defined benefit obligation

¥ 419

¥ 441

$ 3,734

Years ended March 31, 2017(4) The components of net periodic benefit costs for the years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial (gains) losses

2017

¥ 165
23
(31)
(1)

¥ 165
21
(31)
2

$ 1,467
205
(277)
(6)

32

39

288

¥ 188

¥ 196

$ 1,677

Stock granting cost
Net periodic benefit costs

2016(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans forthe years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

¥ (3)

Actuarial (gains) losses

2017

¥4

$ (30)(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans as of March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

¥ (2)

Unrecognized actuarial (gains) losses

2017

¥1

$ (23)(7) Plan assets
a. Components of plan assets
		 Plan assets as of March 31, 2017 and 2016, consisted of the following:
2017

2016

General account managed by a life insurance company
Others

99.3%
0.7

98.8%
1.2

Total

100.0%

100.0%

b. Method of determining the expected rate of return on plan assets
		 The expected rate of return on plan assets is determined considering the long term rates of return which are expected		 currently and in the future from the various components of the plan assets.
(8) Assumptions used for the years ended March 31, 2017 and 2016, are set forth as follows:

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

10. EQUITY
Japanese companies are subject to the Companies Act ofJapan (the “Companies Act”). The significant provisions
in the Companies Act that affect financial and accounting
matters are summarized below:

2017

2016

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

a. Dividends
Under the Companies Act, companies can pay dividends
at any time during the fiscal year in addition to the year-end

21

DENYO CO., LTD. and Consolidated Subsidiaries

dividend upon resolution at the shareholders’ meeting.
Additionally, for companies that meet certain criteria
including (1) having a Board of Directors, (2) having
independent auditors, (3) having an Audit & Supervisory
Board, and (4) the term of service of the directors beingprescribed as one year rather than the normal twoyear term by its articles of incorporation, the Board of
Directors may declare dividends (except for dividendsin-kind) at any time during the fiscal year if the company
has prescribed so in its articles of incorporation. The
Company meets all the above criteria.
The Companies Act permits companies to distributedividends-in-kind (noncash assets) to shareholders
subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid oncea year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The
Companies Act provides certain limitations on the amounts
available for dividends or the purchase of treasury stock.
The limitation is defined as the amount available for
distribution to the shareholders, but the amount of net
assets after dividends must be maintained at no less than
¥3 million.
b. Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Companies Act requires that an amount equal to 10%

of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paidin capital (a component of capital surplus), depending on
the equity account charged upon the payment of such
dividends, until the aggregate amount of the legal reserve
and additional paid-in capital equals 25% of the common
stock. Under the Companies Act, the total amount ofadditional paid-in capital and legal reserve may bereversed without limitation. The Companies Act also
provides that common stock, legal reserve, additional paidin capital, other capital surplus and retained earnings canbe transferred among the accounts within equity undercertain conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies topurchase treasury stock and dispose of such treasury
stock by resolution of the Board of Directors. The amountof treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which isdetermined by a specific formula. Under the Companies
Act, stock acquisition rights are presented as a separate
component of equity. The Companies Act also provides
that companies can purchase both treasury stockacquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate componentof equity or deducted directly from stock acquisitionrights.

22
11. INCOME TAXESThe Company and its domestic subsidiaries are subject
to Japanese national and local income taxes which, in theaggregate, resulted in normal effective statutory tax rates ofapproximately 30.9% and 33.1% for the years ended March
31, 2017 and 2016, respectively.

The tax effects of significant temporary differences andtax loss carryforwards which resulted in deferred tax assets
and liabilities at March 31, 2017 and 2016, are as follows:

Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Deferred tax assets:
Accrued bonuses

¥ 186

¥ 183

$ 1,656

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

34
46
119
22
125
24
79
234
(137)

41
37
99
21
135
24
98
276
(156)

303
407
1,063
195
1,117
213
702
2,095
(1,221)

732

758

6,530

346
1,614
78

346
1,298
114

3,088
14,381693

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

Years ended March 31, 2017

Thousands of
U.S. Dollars

Millions of Yen
2017		Total
Net deferred tax liabilities

A reconciliation between the normal effective statutory
tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of income and

2016

2017

2,038

1,758

18,162¥ (1,306)¥ (1,000)$ (11,632)

comprehensive income for the year ended March 31, 2016,is as follows:
2016

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

33.1%
1.2
(1.7)
0.6
(2.9)
(0.1)
0.2
(1.2)

Actual effective tax rate

29.2%

As the difference between the normal effective statutory
tax rate and the actual effective tax rate reflected in theaccompanying consolidated statement of income andcomprehensive income for the year ended March 31, 2017,is less than 5% of the normal effective statutory tax rate, areconciliation is omitted.

At March 31, 2017, some subsidiaries have tax loss
carryforwards aggregating approximately ¥382 million($3,401 thousand) which are available to be offset against
taxable income of such subsidiaries in future years

These tax loss carryforwards, if not utilized, will expire as follows:Year Ending March 31

Millions of Yen

Thousands of
U.S. Dollars

2018
2019
2020
2021 and thereafter
Total

¥ 58
28
55
241
¥ 382

$ 518
246
488
2,149
$ 3,401

12. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥453 million ($4,035 thousand) and ¥467 million for the years
ended March 31, 2017 and 2016, respectively.

13. LEASESThe Group leases certain vehicles.
Lease payments under finance leases for the years ended March 31, 2017 and 2016, were ¥3 million ($30 thousand) and¥3 million, respectively.
Obligations under finance leases were as follows:23

DENYO CO., LTD. and Consolidated Subsidiaries

Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Due within one year

¥3

¥4

$ 30

Due after one year

5

8

45

¥8

¥12

$ 75

Total

14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
foreign currency exchange rates. The Group reduces
The Group invests cash surpluses in low-risk financial
such foreign exchange risk by balancing foreign currency
assets. Bank loans are used to fund its ongoing operations.
trade receivables and payables. Forward foreign currency
Derivatives are not used for speculative purposes, but tocontracts and currency swap contracts are used for somemanage exposure to financial risks as described in Note 15.
foreign currency trade receivables and advances.

24(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.

Interest rate swaps are used to manage exposure
to market risks from changes in interest rates of loan
payables and commodity swaps are used to manage
exposure to market risks from changes in raw material(copper) prices.

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

The Company continuously reviews portfolios of
securities by periodically monitoring fair values of eachsecurity and the financial condition of the issuer as wellas market conditions and the relationship with the issuer.

Payment terms of payables, such as trade notes andtrade accounts, are almost less than six months. Payables
in foreign currencies are exposed to the market risk offluctuation in foreign currency exchange rates.
Maturities of bank loans are less than five years
after the balance sheet date. Although a part of suchbank loans is exposed to market risks from changes invariable 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 to market risks from changes in interest rates ofbank loans, from changes in raw material (copper) prices,and from changes in foreign currency exchange rates ofreceivables and advances. Please see Note 15 for moredetail about derivatives.
(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from acounterparty’s failure to repay or service debt according
to the contractual terms. The Company manages its credit
risk from receivables on the basis of internal guidelines,
which include monitoring of payment terms and balancesof major customers by the Sales Planning department to
identify the default risk of customers at an early stage.
Each consolidated subsidiary also manages its credit risk
from receivables by an equivalent method.
Market risk management (foreign exchange risk andinterest rate risk)
Foreign currency trade receivables and payables are
exposed to market risk resulting from fluctuations in

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 anadequate 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 notindicate market risk of derivative transactions. Also, please
see Note 15 for the details of fair value for derivatives.

Years ended March 31, 2017(a) Fair value of financial instruments
Millions of Yen
March 31, 2017

Carrying
AmountFair
Value

Cash and cash equivalents
Time deposits other than cash equivalents¥ 12,219
718

Receivables
Investment securities
Total
Short-term bank loans
PayablesLong-term debt
Total
Derivatives

Thousands of U.S. Dollars
Unrealized
Loss

Carrying
AmountFair
Value

Unrealized
Loss¥ 12,219
718$ 108,907
6,401$ 108,907
6,401

19,431
7,728

19,431
7,728

173,176
68,880173,176
68,880¥ 40,096¥ 40,096$ 357,364$ 357,364

210
8,980
1,130

210
8,980
1,145

¥ (15)

1,872
80,033
10,075

1,872
80,033
10,207$ (132)¥ 10,320¥ 10,335¥ (15)$ 91,980$ 92,112$ (132)¥ (352)¥ (352)$ (3,135)$ (3,135)

Millions of Yen
March 31, 2016

Carrying
AmountFair
Value

Cash and cash equivalents
Receivables
Investment securities¥ 11,746
19,432
6,693¥ 11,746
19,432
6,693

Total

¥ 37,871¥ 37,871¥ 233
10,142
1,139¥ 233
10,142
1,268¥ (129)¥ 11,514¥ 11,643¥ (129)¥ (441)¥ (441)

Short-term bank loans
PayablesLong-term debt
Total
Derivatives

Cash and Cash Equivalents and Time deposits other thancash equivalents
The carrying values of cash and cash equivalents and time
deposits other than cash equivalents approximate fair value
because of their short maturities.
Investment Securities
The fair values of investment securities are measured at thequoted market price of the stock exchange for the equity
instruments.

Unrealized
Loss

25

Short-Term Bank Loans and Long-Term Debt
The carrying values of short term bank loans approximate
fair value because of their short maturities.
The fair values of long term debt that includes the current
portion of long-term debt are determined by discounting
the cash flows related to the debt at the Group’s assumed
corporate borrowing rate.
Derivatives
Fair value information for derivatives is included in Note 15.

Receivables and Payables
The carrying values of receivables and payables approximate
fair value because of their short maturities.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen
2017

Investments in equity instruments that do not have a quoted market price inan active market¥ 1,0242016¥ 1,0232017$ 9,121

DENYO CO., LTD. and Consolidated Subsidiaries(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen
Due after
One YearthroughFive Years

Due inOne Yearor Less

March 31, 2017

Cash and cash equivalents

Thousands of U.S. Dollars¥ 12,219
718

Time deposits other than cash equivalents$ 108,907
6,401

19,431

Receivables
Investment securities

Due after
One YearthroughFive Years

Due inOne Yearor Less

173,176¥ 70¥ 32,368

Total

¥ 70

$ 625
$ 288,484$ 625

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

15. DERIVATIVESThe Group enters into derivatives, in the normal course ofbusiness, to reduce the exposure to fluctuations in foreignexchange rates, raw material prices and interest rates. The
primary derivative instruments used by the Company areforeign currency forward contracts, currency swap contracts,
commodity swaps and interest rate swaps.

Because the counterparties to these derivatives arelimited to major international financial institutions, the Group
does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group havebeen made in accordance with internal policies which
regulate the authorization 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.

26

Derivative Transactions to Which Hedge Accounting Is Not Applied
Millions of Yen

March 31, 2017

Contract
AmountContract
AmountDue after
One Year¥ 1,016¥ 1,016

992

Thousands of U.S. Dollars

Unrealized
Gain/Loss

Contract
AmountContract
AmountDue after
One Year¥1¥1¥ 9,055¥ 9,055

¥8

¥8

992

(353)

(353)

8,838

8,838

(3,143)(3,143)¥ 1,016¥ 1,016

¥ (9)

¥ (9)

1,227

1,227

(430)

(430)

Fair
Value

Fair
Value

Unrealized
Gain/Loss

Foreign currency forward contracts —Selling U.S.$
Currency swap contracts—
Selling U.S.$
March 31, 2016

Foreign currency forward contracts—
Selling U.S.$
Currency swap contracts—
Selling U.S.$

Derivative Transactions to Which Hedge Accounting Is AppliedThousands of U.S. Dollars

March 31, 2017

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

Hedged Item

Contract
AmountContract
AmountDue after
One YearLong-term debt

$ 10,000$ 10,000

Long-term debt

$ 10,000$ 10,000March 31, 2016

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

Fair
Value

Years ended March 31, 2017

The above interest rate swaps which qualify for hedge
accounting and meet specific matching criteria are notremeasured at market value, but the differential paid or
received under the swap agreements is recognized andincluded in interest expense or income. In addition, the fairvalue of such interest rate swaps in Note 14 is included inthat of hedged items (i.e., long-term debt).

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

16. CONTINGENT LIABILITIESAt March 31, 2017, the Group had the following contingent liabilities:
Millions of Yen

Thousands of
U.S. Dollars¥ 139$ 1,235

Export trade bill discounted

17. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss), including reclassification adjustments and tax effects for the years
ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

¥ 1,034¥ (1,605)$ 9,222Amount before income tax effect
Income tax effect

1,034
(315)

(1,605)588

9,222(2,811)

Total

¥ 719

¥ (1,017)$ 6,411

Unrealized gain (loss) on available-for-sale securities:
Gains (losses) arising during the year

Deferred (loss) gain on derivatives under hedge
accounting:Losses arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect

¥ (3)
2
(1)

¥ (1)

Total
Foreign currency translation adjustments
Adjustments arising during the year

¥ (421)¥(27)$ (3,759)

Total¥ (421)¥(27)$ (3,759)

Adjustments arising during the year
Amount before income tax effect
Income tax effect

¥ (3)

¥ 14

$ (30)

(3)
1

14
(4)

(30)
9

Total

¥ (2)

¥ 10

$ (21)

Gains (loses) arising during the year

¥2

¥ (3)

$ 20

Total

¥2

¥ (3)

$ 20

¥ 298

¥ (1,038)$ 2,651

Defined retirement benefit plans:

Share of other comprehensive income (loss) in associates—

Total other comprehensive income (loss)

27

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, 2017 and 2016, is as follows:Year Ended March 31, 2017

Millionsof YenThousandsof Shares

Net Income
Attributableto Owners of
the Parent

WeightedAverage
SharesYen

U.S. Dollars

EPS¥ 2,867

21,370¥ 134.18¥ 3,137

21,373¥ 146.79

Basic EPS—Net income available to common shareholders$ 1.20Year Ended March 31, 2016

Basic EPS—Net income available to common shareholders

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

28

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,” an entity is required to reportfinancial and descriptive information about its reportablesegments. Reportable segments are operating segments
or aggregations of operating segments that meet specified
criteria. Operating segments are components of an entity
about which separate financial information is available andsuch information is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources andin assessing performance. Generally, segment informationis required to be reported on the same basis as is usedinternally for evaluating operating segment performance anddeciding 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 regularabove, the number of shares that are held by the Trust (820
thousand shares in 2017 and 810 thousand shares in 2016)is reflected.

evaluation by the Company’s management is being
performed in order to decide how resources are allocatedamong 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 “Nishinihon Generator Mfg. 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 areconsistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”(3) Information about Sales, Profit (Loss), Assets and Other Items
Millions of Yen
2017

Reportable Segment
Japan

United Statesof America

Asia

EuropeTotal

Reconciliations Consolidated

Sales:¥ 36,837¥ 7,856¥ 3,751¥ 408¥ 48,852

4,345

265

3,196

5

7,811

¥ (7,811)

Total¥ 41,182¥ 8,121¥ 6,947¥ 413¥ 56,663¥ (7,811)¥ 48,852

Segment profit
Segment assets
Other:¥ 2,638
57,882¥ 1,050
6,083

¥ 358
11,155¥8638¥ 4,054
75,758¥193(7,080)¥4247
68,678

540
774

123

549

1,212
774

1,212
774

205

254

53

512

512

Sales to external customers
Intersegment sales or transfers

Depreciation and amortization
Investments in associated companies
Increase in property, plant andequipment and intangible assets¥ 48,852

Years ended March 31, 2017

Millions of Yen
2016
Reportable Segment
Japan

United Statesof America

Asia

EuropeTotal

Reconciliations Consolidated

Sales:¥ 38,005¥ 7,308¥ 4,586¥ 521¥ 50,420

5,385

400

2,937

4

8,726

¥ (8,726)

Total¥ 43,390¥ 7,708¥ 7,523¥ 525¥ 59,146¥ (8,726)¥ 50,420

Segment profit
Segment assets¥ 2,683
55,789

¥ 777
5,491

¥ 241
12,248¥17606¥ 3,718
74,134¥379(7,140)¥4,097
66,994

567

121

596

Sales to external customers
Intersegment sales or transfers¥ 50,420

Other:
Depreciation and amortization
Investments in associatedcompanies
Increase in property, plant andequipment and intangible assets

1,284

1,284

697

697

1,125

1,125

697
702

26

397
Thousands of U.S. Dollars
2017

Reportable Segment
Japan

United Statesof AmericaAsia$ 328,317$ 70,012$ 33,433$ 3,636$ 435,398

38,7272,359

28,48644

69,616

Total$ 367,044$ 72,371$ 61,919$ 3,680$ 505,014

Segment profit
Segment assets$ 23,511
515,886$ 9,362
54,212$ 3,190
99,422$ 72
5,690$ 36,135
675,210

4,813
6,900

1,099

4,887

2

10,801
6,900

10,801
6,900

1,825

2,260

475

2

4,562

4,562

EuropeTotal

Reconciliations Consolidated

Sales:
Sales to external customers
Intersegment sales or transfers$ 435,398$ (69,616)$ (69,616) $ 435,398$ 1,719(63,104)$ 37,854
612,106

Other:
Depreciation and amortization
Investments in associated companies
Increase in property, plant andequipment and intangible assets

Related Information(1) Information about Products and Services
Information about products and services for the years
ended March 31, 2017 and 2016, 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, 2017and 2016, are summarized as follows:
Millions of Yen
2017
Japan

Sales to external customers
Property, plant and equipment¥ 29,252
9,119

North andCentral America¥ 10,311
961

Asia¥ 6,480
4,419

Other
Areas

¥ 2,8091

Total¥ 48,852
14,50029

DENYO CO., LTD. and Consolidated Subsidiaries

Millions of Yen
2016
Japan

Sales to external customers
Property, plant and equipment

North andCentral America¥ 30,115
9,443

Other
Areas

Asia

¥ 9,776850¥ 6,922
5,124¥ 3,6071

Total¥ 50,420
15,418

Thousands of U.S. Dollars
2017
Japan

Sales to external customers
Property, plant and equipment

North andCentral America$ 260,716
81,276$ 91,896
8,559

Asia

Other
Areas

$ 57,753
39,385$ 25,033
7

Total$ 435,398
129,227

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, 2017 and 2016, are summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen

30

Name of Customers

2017

2016

2017

Multiquip Inc.

¥ 7,856¥ 7,308

Related Segment$ 70,012 United States of America

20. RELATED-PARTY TRANSACTIONSThe Company sold its products to New Japan Machinery Corporation, an associated company. The transactions were madewith usual terms and conditions.
The transactions with the associates for the years ended March 31, 2017 and 2016, and related balances at March 31,2017 and 2016, were mainly as follows:
Thousands of
U.S. Dollars

Millions of Yen

Transactions—Sales

2017

2016

2017

¥ 2,948¥ 3,427$ 26,278¥ 1,723717¥ 1,918803$ 15,355
6,391

Balances:
Trade notes receivable
Trade accounts receivable

21. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2017, was approved at the Company’s Board of Directors’
meeting held on May 19, 2017:

Year-end cash dividends, ¥15 ($0.13) per share

Millions of Yen

Thousands of
U.S. Dollars¥ 331$ 2,954

Years ended March 31, 2017

Independent Auditor’s ReportTo
the Board of Directorsof Denyo Co., Ltd.
We have audited the accompanying consolidated balance sheet of Denyo Co., Ltd. and its subsidiaries as of March 31, 2017,
and the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for the year
then ended, and a summary of significant accounting policies and other explanatory information, all expressed in Japaneseyen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith 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.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating theoverall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Denyo Co., Ltd. and its subsidiaries as of March 31, 2017, and the consolidated results of their operations
and their cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.
Convenience Translation.
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation 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 for the convenience of readers outside Japan.
June 30, 2017

Deloitte Touche Tohmatsu LLC

31

DENYO CO., LTD. and Consolidated Subsidiaries

Company Data
Company outline (As of March 31, 2017)
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

32

Paid-in Capital¥1,954,833,520 (U.S.$17,422,759)

Authorized shares

97,811,000

Issued Shares

22,859,660

Shareholders

4,371

Financial Year

April 1 to March 31

Employees

546 (1,215 consolidated )Branch and Sales offices

21

Directors, Audit Supervisory Board Members (As of June 29, 2017)
Chairman

Shigeru Koga

President

Shoichi Shiratori

Representative Director
Executive Vice President

Yoji Eto

Director & Executive Advisor

Hideaki Kuboyama

Director
Managing Executive Officer

Teruo Yashiro

Responsible for Production Division,Development Division,
Overseas Manufacturing Subsidiary

Director
Managing Executive Officer

Yasuo Mizuno

Chief Executive, Sales Division
Responsible for Overseas Sales Subsidiary

Director

Haruhito Takada*

Director

Reiko Asahina*

Audit & Supervisory
Board Member

Toru Masui

Audit & Supervisory
Board Member

Masaru Sugiyama

Audit & Supervisory
Board Member

Akira Yamada*

Audit & Supervisory
Board Member

Yoshio Takeyama*

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

Responsible for sales Division,
Administration Division,
Quality Management Division

Years ended March 31, 2017

Executive Officers (As of June 29, 2017)
Senior Executive Officer

Yoshito Yamaguchi

Chief Executive,
Quality Management Division

Senior Executive Officer

Toshiya Tozawa

Chief Executive,
Administration Division

Senior Executive Officer

Satoru Kato

General Manager,
Sales Planning Department
Sales Division

Senior Executive Officer

Yasuhiro Yamada

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

Senior Executive Officer

Fumitoshi Arimitsu

President of Nishinihon Generator Mfg. Co., Ltd.

Senior Executive Officer

Sampei Sato

Chief Executive,
Development Division
General Manager,
Development Department,
Patent Administration Department

Executive Officer

Makoto Tanabe

General Manager,
General Affairs Department,
Finance Department
Administration Divsion

Executive Officer

Kenichi Hamanosono

Executive Officer
General Manager,
Sales Department of Denyo Kosan Co., Ltd.

Executive Officer

Kensaku Moriyama

Head of Domestic Sales Unit
General Manager,
East Japan Sales Department
Sales Division

Executive Officer

Chiyoki Kimura

General Manager,
West Japan Sales Department
Sales Division

Executive Officer

Michio Nonaka

Chief Executive,
Production Division
General Manager,
Production Management Department

Executive Officer

Toshiaki Shimazu

General Director of Denyo Vietnam Co., Ltd.

Executive Officer

Toru Hiroi

Chairman & CEO of Denyo Manufacturing Corporation

Executive Officer

Takanori Yoshinaga

General Manager,
Engineering Department
Development Division

33

DENYO CO., LTD. and Consolidated Subsidiaries

Business Lines
Manufacture and sales of:Generators

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

Welders

Engine-driven Welders
Welding Generators
Welding Jigs
Automatic Welding Equipment

Compressors

Engine-driven Air Compressors
Motor-driven Air Compressors

Other Products

Water-related Equipment
Self-propelled Lifters
Construction-related Machinery
Repair Parts

Plants and R&D Center

34

Fukui Plant

Wakasa-cho, Fukui Prefecture

Shiga Plant

Konan,Shiga Prefecture

Laboratory & Training Center

Sakado, Saitama Prefecture

Fukui Plant

Laboratory & Training Center

Years ended March 31, 2017

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

Nishinihon Generator Mfg. 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,Yen My, Hung Yen, Vietnam
Paid-in Capital: US$ 10 million
Business: Manufacture and sales of industrial electrical machinery

P.T. Dein Prima Generator
JL. Raya Bekasi Km.28, Medan Satria,Bekasi 17132 Jawa Barat, Indonesia
Paid-in Capital: Rp 13,563 million
Business: Manufacture and sales of industrial electrical machinery to the Indonesia market

New Japan Machinery Corporation
3-6-5, Shinyokohama, Kohoku-ku, Yokohama, Kanagawa 222-0033, Japan
Paid-in Capital: ¥495 million
Business: Sales and rental service of industrial electrical machinery

35

DENYO CO., LTD. and Consolidated Subsidiaries

Years ended March 31, 2017

Investor Information(As of March 31, 2017)

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 760,247 shares of Company’s own stock)

Stock Listing

Tokyo Stock Exchange, First Section (Code: 6517)

Shareholders

4,371

Transfer Agency

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

Major Shareholders
Shares Held(Thousands)

Voting Right
Ratio(%)

Kyuei Corporation

1,600

7.24

Mizuho Bank, Ltd.

1,109

5.01

The Dai-ichi Life Insurance Co., Ltd.

872

3.94

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

814

3.68

Japan Trustee Services Bank,Ltd.
(Trust Account)

613

2.77

Denyo Shin-eikai Group

607

2.74

Tsurumi Manufacturing Co., Ltd.

543

2.45

Northern Trust Co. (AVFC)
Re Fidelity Funds

543

2.45

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

540

2.44

KUBOTA Corporation

500

2.26

36
Shareholders

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