12022

ANNUAL REPORT
Year ended March 31, 2022

DENYO CO., LTD. and Consolidated Subsidiaries

ProfileContents
Since its establishment in
1948, Denyo has been a pioneer in outdoor• Consolidated Financial Highlights

1• To Our Shareholders

2

many original products, including engine-driven• Review of Operations

4

generators, engine-driven welders and engine-• Overview of Product Segment

6

ourselves with our current market position or• Financial Review

8technical expertise, we have boldly taken on• Consolidated Balance Sheet

10command a 70% share of the domestic market• Independent Auditor's Report

31

for engine-driven generators, our main product.

• Company Data

33

• Executive Officers

34• Investor Information

37

power source, developing and manufacturing

driven air compressors. Without contenting

new R&D challenges and, as a result, we now

The Denyo Group comprises the Company andeleven subsidiaries and affiliate, along with its
production facilities in Southeast Asia and the
U.S., and R&D center in Japan.

Sales of engine-driven
welders have exceeded
800 thousand units
In January 2022, Denyo Co., Ltd. exceededa cumulative production volume of 800
thousand units of its engine-driven welders.
This was achieved over the 63 years
since Denyo began production of Japan's
first high-speed engine-driven welder, theACD-180, in March 1959.
This is a result of the patronage ofcustomers around the world supporting
Denyo's
engine-driven
welders.
We
would like to express our thanks to all
stakeholders, including the customers who
have chosen our products.
As the top manufacturer of enginedriven welders, we will continue to work todevelop and produce products that ensure
customer satisfaction.

ACD-180,
Japan's first high-speedengine-driven welder

Year ended March 31, 2022

Consolidated Financial Highlights
2022

Millions of Yen
2021

2020

Thousands of
U.S. Dollars
2022

Net Sales¥55,168¥55,007¥62,887$450,684

Total Assets

80,77579,05775,626

659,869

Total Net Assets

63,761

61,56458,354

520,878

Operating Income

3,654

5,333

6,058

29,848Net Income*

2,753

3,860

4,071

22,491Per Share Data

Yen

Total Net Assets

U.S. Dollars¥2,963.99¥2,846.49¥2,689.54$24.21Net Income*

132.02185.13

194.32

1.08

Cash Dividends

47.00

47.00

46.00

0.38

Note:Transaction into U.S. dollars has been made, solely for the reader’s convenience, at the rate of ¥122.41 to U.S.$1, prevailing on the Tokyo Foreign Exchange
Market on March 31, 2022.

Net Sales

Net Income*¥ million

62,88750,18255,55455,007¥ million

4,071

55,168
2,762

2018

2019

2020

2021

2022

2018

3,860

3,167

2019

2,753

2020

2021

2022

* Net Income attributable to owners of the parent.

Total Assets

Total Net Assets¥ million

72,21074,08675,626

79,05780,775

2018

2019

2020

2021

2022

¥ million

56,13356,29158,35461,564

63,761

2018

2019

2020

2021

2022

1

Shoichi Shiratori
President

2

Yoji Eto
Representative Director,
ChairmanIn the year ended March 31,2022, the 74th term, the consolidated net sales of the

Denyo Group increased slightly (0.3%) year on year, to ¥55,168 million (US$450,684 thousand). However, ordinary income decreased
to ¥4,029 million (US$32,915 thousand), down 28.6% year on year, and net income attributable to owners of the parent declined to¥2,753 million (US$22,491 thousand), down 28.7% year on year.
In the domestic business environment, economic activity resumed gradually despite the ongoing COVID-19 pandemic. However,demand related to events remained weak, partly reflecting the repeated restriction of travel. Meanwhile, the overseas businessenvironment recovered more quickly than the domestic one. However, delays in the delivery of some production materials, shortagesof production materials, and other factors put the brakes on production activities. Further, manufacturing costs increased due in part torising raw materials prices, putting pressure on profits.
In the year ending March 31, 2023, the 75th term, COVID-19 will continue to impact the Denyo Group, but public investment is
expected to be steady, including government measures to increase the resilience of national land. Events such as sales trade showshave begun to be resumed in various areas, so sales activities have been steadily progressing. While rising raw materials prices,delivery delays, labor shortages, and other issues have surfaced, all the Group companies around the world will accommodate eachother regarding production materials and take other measures to overcome these issues.
The current fiscal year is the second year of Denyo 2023, the medium-term management plan. To achieve the plan in the final year,
we will proactively develop new products and strive to ensure stable production activities.
Regarding dividends for the year ended March 31, 2022, we paid an interim dividend of ¥22 (US$0.18) per share and decided to
pay an ordinary year-end dividend of ¥25 (US$0.20) per share. As a result, dividends for the full year came to ¥47 (US$0.38) per share.
We wish to thank all shareholders for their continued support for the Denyo Group going forward.

June 2022

Shoichi Shiratori,
President

Yoji Eto,
Representative Director,
Chairman

4

DENYO CO., LTD. and Consolidated Subsidiaries

Review of Operations
1.

LiBP-2000,
a lithium ion
battery powersupply device

Denyo has developed the LiBP-2000 power-supply device using lithium ion
batteries.
It consists of three components. They are four battery units, an inverter unitthat converts the DC power supplied by the battery units into AC power (100 V),
and a battery charger unit that charges the battery using commercial power. Its
maximum power output is 2000 W at 100 V. While the LiBP-2000 works using only
one battery unit, using four connected units ensures a longer continuous power
supply.
Unlike engine-driven generators, the device does not emit any gases, whichmeans that power is generated with zero CO2 emissions. Further, it can be usedindoors and in other places where engine-driven generators are prohibited. It is
optimal for use in tunnel construction sites, for server room maintenance, as a
backup power supply in a power outage and for other purposes.
Denyo will continue to proactively implement initiatives for the establishment ofa decarbonized society.

Battery unit × 4
Inverter unit
Battery charger unit

Connection examples (Output: 2000 W)
Example 1: Output of 2000 W with battery unit × 1
Operable time: Approx. 15 minutes

Example 2: Output of 2000 W with battery unit × 4
Operable time: Approx. 75 minutes

2.

Introduction of
DCW-400LSE, a
CO2 arc enginedriven welding
machineDenyo developed DCW-400LSE, a 400A CO₂ arc engine-driven welding machine, andbegan selling it in February 2021.
Denyo developed the industry's first 350 A CO₂ arc engine-driven welding machine,which has developed a good reputation for its high welding performance.
DCW-400LSE is the successor to DCW-350LS which had a maximum welding currentof 350 A. It features a higher maximum CO₂ arc welding current of 400 A, permitting theuse of wires with diameters up to 1.4 mm. The 400 A output is also possible in the manual
welding and gouging modes, contributing to a significant improvement of the efficiency ofoperations. As with the DCW-500LSE, which has been received well since its release in2019, the DCW-400LSE leverages inverter welding control. This ensures a stable arc, fromlow current to high current, controlling voltage fluctuations. Thus, DCW-400LSE enables abeautiful finish with straight bead edges.

Year ended March 31, 2022

As a pioneer of engine-driven welding machines, Denyo will continue to propose new
directions for these welding machines.

Output of max. 400 A in three modes

The new welding monitor permits detailed
settings of welding conditions.

CO2 arc welding

Manual welding

Gouging

More than enough AC
Power supply output
Three phase
200 V/220 V
13/15 kVA
(50/60 Hz)

3.

Single phase
100 V/110 V
9.0/9.9 kVA(50/60 Hz)

Ground-breaking
ceremony held
at a planned
construction siteof a large-scale
maintenancefacility in east
district

In March 2022, a ground-breaking ceremony was held at the construction site of alarge-scale maintenance facility in the east district of Sakura City, Chiba.
At this approx. 3,000 m² site, we plan to construct a maintenance factory. Thisfacility will enable the indoor maintenance of small units up to the 1,100 kVA-classlarge generators, which are the largest of our products. The factory is scheduled
to begin operating in January 2023.
Denyo will continue to produce high-quality, high-performance products andenhance its services to increase customer satisfaction.

5

6

DENYO CO., LTD. and Consolidated Subsidiaries

Overview of Product Segment
Business performance by product category and domestic market share
Engine Generators
In the generator segment, sales declined to ¥43,754 million (US$357,440
thousand), down 0.6% year on year. Shipments of products to overseas markets
increased, with an increase in shipments of large generators to the U.S. and arecovery trend seen shipments to Asia. This was offset by the decline of shipments
in Japan, including shipments of compact generators for use in a power outagethat had been subsidized by the government until the previous fiscal year.

70%
Domestic
Market Share(Mobile Type)Engine Welders
In the engine welders segment, sales rose to ¥4,830 million (US$39,457 thousand),up 10.1% year on year. This reflected an increase in shipments of welders foroverseas markets, such as the U.S. and Asia, which more than offset a decline
in shipments of compact welders for the domestic market as mainstay products.

55%
Domestic
Market Share

Compressors
In the compressors segment, sales declined to ¥727 million (US$5,940 thousand),down 3.7% year on year. This is attributed to a decline in shipments of engine
compressors produced locally in the U.S., offsetting an increase in shipments ofengine compressors in Japan.

15%
Domestic
Market ShareOther Products
In the other products segment, sales were ¥5,857 million (US$47,847 thousand), up
0.2% year on year. This mainly reflected an increase in sales of parts incidental toproducts, which more than offset a decline in sales of self-propelled lifters.
Note: Above domestic share is five year mean by our investigation

Denyo Co., Ltd.
and Subsidiaries
Consolidated Financial Statements
for the Year Ended March 31, 2022,
and Independent Auditor’s Report

8

DENYO CO., LTD. and Consolidated Subsidiaries

Financial Review
Business Environment and Results
During the fiscal year under review, there were signs that corporate earnings, consumer spending, and other aspects of the Japanese economy were recovering as the challenging conditions created by COVID-19
eased. There were also signs that the global economy was recovering,but COVID-related supply restrictions remained.
In terms of the business environment surrounding the Denyo Group,
demand for construction, including public works, remained strong inJapan. However, many product exhibitions that are sales opportunities
were cancelled due to COVID-19, and demand for event-related generators remained sluggish. On the other hand, demand in overseas markets
overall continued to trend toward recovery.
Supply was affected by production delays and the rising manufactur-

ing cost of some products, which was a result of a tight supply-demandbalance in electronic components and rising raw materials prices.
Under these conditions, the Denyo Group focused its efforts on implementing a range of measures under its second medium-term management plan, including the strengthening of overseas sales and the development and sale of new products, and it strived to normalize production.
However, while net sales increased to ¥55,168 million (US$450,684
thousand), up 0.3% year on year, operating income decreased to ¥3,654
million (US$29,848 thousand), down 31.5% year on year, ordinary income
declined to ¥4,029 million (US$32,915 thousand), down 28.6% year on
year, and net income attributable to owners of the parent fell to ¥2,753
million (US$22,491 thousand), down 28.7% year on year.

Segment Information
In the generator segment, sales declined to ¥43,754 million(US$357,440 thousand), down 0.6% year on year. Shipments of products to overseas markets increased, with an increase in shipments oflarge generators to the U.S. and a recovery trend seen shipments toAsia. This was offset by the decline of shipments in Japan, including
shipments of compact generators for use in a power outage that had
been subsidized by the government until the previous fiscal year.
In the welders segment, sales rose to ¥4,830 million (US$39,457 thousand), up 10.1% year on year. This reflected an increase in shipments of welders for overseas markets, such as the
U.S. and Asia, which more than offset a decline in shipments ofcompact welders for the domestic market as mainstay products.
In the compressors segment, sales declined to ¥727 million(US$5,940 thousand), down 3.7% year on year. This is attributed toa decline in shipments of engine compressors produced locally in
the U.S., offsetting an increase in shipments of engine compressors
in Japan.
In the other products segment, sales were ¥5,857 million(US$47,847 thousand), up 0.2% year on year. This mainly reflected
an increase in sales of parts incidental to products, which morethan offset a decline in sales of self-propelled lifters.
Information by geographical area is as follows.
Consolidated results in each segment are based on the results of
the Company and its consolidated subsidiaries located in the specific region.
Accordingly, consolidated results in the Japan segment are forthe period from April 2021 to March 2022. Those in segments otherthan Japan are for January to December 2021 because the fiscal
year end of overseas consolidated subsidiaries is December 31.
(Japan)In Japan, shipments of generators declined partly because demandfor products related to events for the domestic market remainedsluggish and partly because of a reactionary reduction in shipmentsof emergency generators, which had increased significantly in theprevious fiscal year. Regarding products for overseas markets,
there was an increase in exports mainly of large generators for the
U.S. market and plant construction in the Middle East. As a result,segment sales increased to ¥43,228 million (US$353,143 thousand), up 0.7% year on year. However, segment profit decreasedto ¥3,290 million (US$26,874 thousand), down 22.0% year on year,
due to rising raw materials prices and logistics costs.
(United States)
In the U.S., sales decreased to ¥8,685 million (US$70,945 thousand), down 0.8% year on year, and a segment loss of ¥112 million(US$916 thousand) was posted compared to a segment profit of¥250 million (US$2,038 thousand) posted in the previous fiscal
year. This mainly reflected rising raw material prices in addition todelays in local production that resulted from the difficulty of procuring main parts and manpower shortage although demand remained
strong mainly reflecting the economic policy.
(Asia)In Asia, the size of the economic recovery varied from country tocountry, but there was an increase in shipments of products formines in Australia and rental services in Singapore. As a result,sales increased to ¥3,120 million (US$25,489 thousand), up 11.5%
year on year, and segment profit rose to ¥489 million (US$3,997
thousand), up 27.3% year on year.
(Europe)
In Europe, sales declined to ¥135 million (US$1,107 thousand),down 74.9% year on year, and a segment loss of ¥14 million(US$113 thousand) was posted, compared with a segment profit of¥23 million (US$186 thousand) posted in the previous fiscal year.
This partly reflected supply restrictions, including delays in production and logistics slowdowns.

Net Income per Share

Cash Dividends per Share

Equity Ratio

(¥)

(¥)

(%)

194.32185.13149.8340.00

130.03

46.00

47.00

47.00

2020

2021

2022

74.5

73.1

74.1

75.1

76.0

2018

2019

2020

2021

2022

42.00

132.02

2018

2019

2020

2021

2022

2018

2019

Year ended March 31, 2022

Financial Position(Assets)
Total assets at the end of the fiscal year under review were ¥80,775
million (US$659,869 thousand), an increase of ¥1,717 million(US$14,028 thousand) from the end of the previous fiscal year.
Current assets at the end of the fiscal year under review were¥56,872 million (US$464,604 thousand), an increase of ¥2,428 million(US$19,838 thousand) from the end of the previous fiscal year. Thiswas mainly due to an increase in electronically recorded monetaryclaims - operating of ¥880 million (US$7,187 thousand) and a rise in
raw materials and supplies of ¥1,976 million (US$16,146 thousand).
Non-current assets at the end of the fiscal year under review were¥23,902 million (US$195,265 thousand), down ¥711 million (US$5,810
thousand) from the end of the previous fiscal year. This mainlyreflected a decrease in machinery, equipment and vehicles of ¥515
million (US$4,207 thousand), an increase in construction in progressof ¥299 million (US$2,446 thousand), and a decrease in investment
securities of ¥658 million (US$5,379 thousand) due to the revaluationof stockholdings.
(Liabilities)
Total liabilities at the end of the fiscal year under review were ¥17,014

million (US$138,991 thousand), decreasing ¥479 million (US$3,915
thousand) from the end of the previous fiscal year.
Current liabilities at the end of the fiscal year under review were¥14,270 million (US$116,573 thousand), down ¥1,165 million (US$9,517
thousand) from the end of the previous fiscal year. This change wasprimarily attributable to a decrease of ¥1,107 million (US$9,046
thousand) in short-term loans payable. Non-current liabilities at theend of the fiscal year under review were ¥2,744 million (US$22,418
thousand), up ¥686 million (US$5,601 thousand) from the end of theprevious fiscal year. This was due largely to an increase in long-term
debt of ¥857 million (US$7,000 thousand) and a fall in deferred tax
liabilities of ¥245 million (US$2,004 thousand).
(Net assets)
Net assets at the end of the fiscal year under review were ¥63,761 million(US$520,878 thousand), an increase of ¥2,196 million (US$17,943
thousand) from the end of the previous fiscal year.This was mainly due
to net income attributable to owners of the parent of ¥2,753 million(US$22,491 thousand), a ¥551 million (US$4,501 thousand) rise inaccumulated other comprehensive income, and cash dividends paid of¥1,018 million (US$8,319 thousand).

Cash Flows
Consolidated cash and cash equivalents (hereinafter, cash) were¥23,359 million (US$190,825 thousand) at the end of the fiscal year
under review, increasing ¥445 million (US$3,636 thousand) fromthe end of the previous fiscal year, largely due to income before
income taxes of ¥3,916 million (US$31,994 thousand).
(Cash flows from operating activities)
Net cash provided by operating activities was ¥2,696 million (US$22,023 thousand) (cash provided of ¥4,941 million(US$40,368 thousand) in the previous fiscal year). This was largely
due to income before income taxes of ¥3,916 million (US$31,994
thousand), depreciation of ¥1,361 million (US$11,119 thousand), an
increase in inventories of ¥2,119 million (US$17,307 thousand), andincome taxes paid of ¥1,800 million (US$14,705 thousand).

(Cash flows from investing activities)
Net cash used in investing activities was ¥819 million (US$6,693
thousand) (cash used of ¥1,749 million (US$14,284 thousand) in
the previous fiscal year). This largely reflected the purchase of property, plant and equipment of ¥800 million (US$6,539 thousand)and proceeds from sales of investment securities of ¥82 million(US$667 thousand).
(Cash flows from financing activities)
Net cash used in financing activities was ¥1,644 million (US$13,428
thousand) (cash used of ¥1,086 million (US$8,875 thousand) in
the previous fiscal year). This was mainly due to dividends paid of¥1,018 million (US$8,319 thousand).

Dividends
Regarding dividends for the fiscal year under review, we issued
an interim dividend of ¥22 (US$0.18) per share and decided to pay
an ordinary year-end dividend of ¥25 (US$0.20) per share based on
the policy above. As a result, dividends for the full year came to ¥47(US$0.38).
As a consequence, the dividend payout ratio (consolidated) for the
fiscal year under review came to 35.6%.

Denyo recognizes the importance of making further efforts to return
profits to shareholders while also investing in equipment and research& development to enhance and maintain product competitiveness andstriving to improve profitability and strengthen its financial structure.
Our policy is to distribute profits based on the comprehensive
consideration of a wide range of factors including businessperformance and the payout ratio.

Return on Average
Shareholders’ Equity

Return on Average Assets (ROA)(%)

Price Earnings Ratio

(%)

14.6
7.4
5.3

2018

5.9

6.7

4.6

2019

2020

2021

2022

5.4
3.9

4.3

2018

2019

9.9
5.0

11.3

12.4

9.1

3.4
2020

2021

2022

2018

2019

2020

2021

2022

9

10

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Balance Sheet
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2022

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

Millions of Yen
2022
2021

Thousands of
U.S. Dollars(Note 1)
2022

¥23,359¥22,914$190,825

4,102
3,335
11,425
1,403
116
(5)
12,861
276

4,127
3,426
11,779
1,532
145
(5)
10,276250

33,511
27,242
93,333
11,461949(37)
105,061
2,259

			 Total current assets

56,87254,444

464,604

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

5,067
14,120
8,593
2,129
320
30,229(15,464)

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

41,391
115,352
70,202
17,3892,613
246,947(126,331)

			 Net property, plant and equipment

14,765

14,964

120,616

7,203
889
226
820

7,899
852
188
710

58,847
7,262
1,847
6,693

9,138

9,649

74,649¥80,775¥79,057$659,869

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 16)
Investments in associated companies (Note 7)
Deferred tax assets (Note 12)
Other assets (Note 15)
			 Total investments and other assets

TOTAL
See notes to consolidated financial statements.

Year ended March 31, 2022

LIABILITIES AND EQUITY

Millions of Yen
2022
2021

Thousands of
U.S. Dollars(Note 1)
2022

CURRENT LIABILITIES:
Short-term bank loans (Notes 8 and 16)
Current portion of long-term debt (Notes 8, 15 and 16)
Payables (Note 16):
		 Trade notes
		 Electronically recorded obligations—operating
		 Trade accounts
		 Associated companies
		Other
Accrued income taxes (Note 12)
Accrued expenses
Provision for product warranties
Other current liabilities

¥210
20

¥210
1,122

$1,716
163

803
2,554
8,220
3
207
405
1,263
98
487

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

6,560
20,865
67,155
28
1,690
3,307
10,316
802
3,971

				

Total current liabilities

14,27015,435116,573

LONG-TERM LIABILITIES:Long-term debt (Notes 8, 15 and 16)
Liability for retirement benefits (Note 10)
Deferred tax liabilities (Note 12)
Other long-term liabilities

1,141
458
1,113
32

267
401
1,359
31

9,318
3,745
9,095
260

				

2,744

2,058

22,418

1,955
1,789
56,501

1,955
1,779
54,766

15,97014,612
461,571(2,598)(2,351)(21,227)

3,209
591
(34)
61,413
2,348

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

26,2194,827(276)
501,696
19,182

63,761

61,564

520,878¥80,775¥79,057$659,869

Total long-term liabilities

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 15, 17 and 18)
EQUITY (Note 11):
Common stock—authorized, 97,811,000 shares;
issued, 22,859,660 shares in 2022 and 22,859,660 shares in 2021
Capital surplus
Retained earnings
Treasury stock—at cost, 2,140,078 shares in 2022 and2,003,959 shares in 2021 (Note 4)
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

12

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Statement of Income and Comprehensive Income
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2022

Millions of Yen
2022
2021

Thousands of
U.S. Dollars(Note 1)2022

NET SALES (Notes 13, 21 and 22)¥55,168¥55,007$450,684

COST OF SALES

43,44941,683354,945

				

11,71913,324

95,739SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 14)

8,065

7,991

65,891

				

3,654

5,333

29,848OTHER 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 from remittance fraud in foreign subsidiary
Foreign exchange gain
Equity in earnings of associated companies
Rent income
Commitment fee
Gain on sale of investment securities
Other—net				 Other income—net

226
(38)
4
(43)
(102)
33
42
82
(7)
29
36
262

212
(56)
0
(8)
16
46
78
(7)
40
24
345

1,850
(314)
34
(354)
(836)
268
343
668
(57)
235
309
2,146

INCOME BEFORE INCOME TAXES

3,916

5,678

31,994

INCOME TAXES (Note 12):Current
Deferred

1,230
(36)

1,736
(14)

10,049
(295)

				

1,194

1,722

9,754

NET INCOME

2,722

3,956

22,240NET INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests

2,753
(31)

3,860
96

22,491(251)

NET INCOME— (Forward)¥2,722¥3,956$22,240

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

(434)
1,219
(23)
(0)

1,064
(780)
22
4

(3,541)
9,958
(190)
(4)

762

310

6,223

COMPREHENSIVE INCOME¥3,484¥4,266$28,463

TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥3,304180¥4,284(18)$26,991
1,472

				

Gross profit
Operating income

Total income taxes

Total other comprehensive income

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

¥132.02
47.00

U.S. Dollars¥185.13
47.00

$1.08
0.38

Year ended March 31, 2022

Consolidated Statement of Changes in Equity
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2022

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE,APRIL 1, 2020
Net income attributableto owners of the parent
Cash dividends,¥46 per share
Purchase of treasury
stock
Selling of treasury
stock
Disposal of treasury sharesto stock benefit trust
Net change in the year
BALANCE,MARCH 31, 2021
Net income attributableto owners of the parent
Cash dividends,¥47 per share
Purchase of treasury
stock
Selling of treasury
stock
Disposal of treasury sharesto stock benefit trust
Net change in the year
BALANCE,MARCH 31, 2022

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock20,845¥1,955¥1,779¥51,903¥(2,365)

Unrealized
Gain onForeignDefinedAvailableCurrency Retirement
for-SaleTranslation
BenefitSecurities Adjustments
Plans¥2,575

¥249

¥(33)

Total

Noncontrolling
Interests

Total
Equity¥56,063¥2,291¥58,354

3,860

3,860

3,860

(997)

(997)

(997)

(0)

(1)

(1)

(1)

11

15

15

15

20,856

1,955

1,779

54,766(2,351)

1,068

(665)

22

425

(92)

333

3,643

(416)

(11)

59,365

2,199

61,564

2,753

2,753

2,753

(1,018)(1,018)(1,018)

(150)

(254)

(254)

(254)

14

17

17

17

10

20,720¥1,955¥1,789(10)¥56,501¥(2,598)

(434)

1,007

(23)

550

149

699

¥3,209

¥591

¥(34)

¥61,413¥2,348¥63,761

Total

Noncontrolling
Interests

Total
Equity$484,973$17,962$502,935

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

BALANCE, MARCH 31,
2021

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock

Unrealized
Gain onForeignDefinedAvailableCurrency Retirement
for-SaleTranslation
BenefitSecurities Adjustments
Plans$15,970$14,537$447,399$(19,204)$29,765

Net income attributableto owners of the parent
Cash dividends,$0.38 per share
Purchase of treasury
stock
Selling of treasury
stock
Disposal of treasury sharesto stock benefit trust
Net change in the year
BALANCE,MARCH 31, 2022

See notes to consolidated financial statements.

$14,612$(87)

22,491

22,491

22,491(8,319)(8,319)(8,319)(2,087)(2,087)(2,087)

139

139

139

75

$15,970$(3,407)(75)$461,571$(21,227)(3,546)

8,234

(189)

4,499

1,220

5,719

$26,219$4,827$(276)$501,696$19,182$520,878

13

14

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2022

Millions of Yen
2021
2022

Thousands of
U.S. Dollars(Note 1)2022

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
		 Changes in assets and liabilities, net of effects:
			 Decrease in trade notes and accounts receivable
			 Increase in inventories
			 Decrease in interest and dividends receivable
			 Increase in trade notes and accounts payable			 (Decrease) increase in provision for allowance for doubtful accounts
			 Increase in liability for retirement benefits
Other—net				 Total adjustments¥3,916¥5,678$31,994(1,800)
1,361
39
(29)
(42)

(1,805)
1,167
8
(40)
(46)

(14,705)
11,119
320
(235)
(343)

933
(2,119)
12
534
(1)
8
(116)
(1,220)

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

7,619
(17,307)
101
4,364
(4)
69
(969)
(9,971)

				

2,696

4,941

22,023INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Investment in loans receivableCollections of loans receivable
Other—net

(800)
(3)
82
(1)
4
(101)

(1,844)
(3)
135
(1)
3
(38)

(6,539)
(21)
667
(7)
29
(822)

				

(819)

(1,748)(6,693)

Net cash provided by operating activities

Net cash used in investing activities

FINANCING ACTIVITIES:
Decrease in short-term loans—net
Proceeds from long-term debt
Repayments of long-term debt
Purchases of treasury stock
Dividends paid
Other—net(0)783(1,107)(255)(1,018)
(47)

(1)
(997)
(88)

(1)
6,393
(9,045)(2,087)(8,319)
(369)

				

(1,644)(1,086)(13,428)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH
EQUIVALENTS

212

(247)

1,734

NET INCREASE IN CASH AND CASH EQUIVALENTS—(Forward)¥445¥1,860$3,636

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

22,914

21,054

187,189

CASH AND CASH EQUIVALENTS, END OF YEAR

¥23,359¥22,914$190,825

Net cash used in financing activities

See notes to consolidated financial statements.

Year ended March 31, 2022

Notes to Consolidated Financial Statements
Denyo Co., Ltd. and Subsidiaries · Year Ended March 31, 2022

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements as ofMarch 31, 2022, 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 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 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,” the accounting 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 fol-

der to present them in a form which is more familiar to readers
outside Japan.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Denyo Co., Ltd.
(the “Company”) is incorporated and operates. The translationsof Japanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and havebeen made at the rate of ¥122.41 to $1, the approximate rate ofexchange at March 31, 2022. Such translations should not be
construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

lowing items that should be adjusted in the consolidation process so that net income is accounted for in accordance withJapanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gainor loss of pensions that has been recorded in equity throughother comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value
model of accounting for property, plant and equipment andinvestment 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 andlosses, net of applicable taxes, reported in a separate component of equity.
		 Nonmarketable available-for-sale securities are statedat cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge toincome.
		 Effective April 1, 2021, the Company applied ASBJ Statement No. 30, “Accounting Standard for Fair Value Measurement” and ASBJ Guidance No. 31, “Implementation Guidance on Accounting Standard for Fair Value Measurement,”
and revised related ASBJ Statements and ASBJ Guidance(the “New Accounting Standards”). Under the New Accounting Standards, nonmarketable available-for-sale equity securities are stated at cost, while under the previous accounting
standards, nonmarketable available-for-sale securities arestated at cost. The Company applied the New AccountingStandards prospectively. As a result, there is no impact on
the financial statements

15

16

DENYO CO., LTD. and Consolidated Subsidiaries

e. Allowance for Doubtful Accounts—The allowance for
doubtful accounts is stated in amounts considered to be appropriate based on the Company’s past credit loss experience and an evaluation of potential losses in the receivables
outstanding.
f. Inventories—Inventories are stated at the lower of cost, determined by the first-in, first-out method for finished products andwork in process, and by the average method for raw materials,
or net selling value.
g. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of property, plant andequipment of the Company and its consolidated domestic
subsidiaries is computed by the declining-balance method
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 structures of
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 exapected to result fromthe continued use and eventual disposition of the asset or
asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds
its recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of
the asset or the net selling price at disposition.
i. Provision for Product Warranties—The provision for product warranties is recorded to provide for future potential costs,
such as costs related to after-sales services within the warranty period based on past experience.
j. Accrued Bonuses—Accrued bonuses to employees are provided for at the estimated amounts that the Company and its
domestic subsidiaries are obligated to pay to employees after
the fiscal year-end, based on services provided during thecurrent 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
than the expected average remaining service period of theemployees, 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 stockowner-ship 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 the Trust,and (iii) any expenses relating to the Trust.
m. Revenue Recognition—The Group manufactures and sells
industrial electrical machineries, such as engine-driven generators, engine-driven welders and engine-driven compressors,
sells parts related to these products, and provides installation
services. The Group identifies its performance obligations as
the provision of products or services that meet the specifications and quality promised to customers. The sales contracts
with customers include the Group’s obligation to guaranteethat the products continually conform to the agreed specifications within the certain warranty period after the sales, but do
not include the guarantee as additional services to customers.
So the provision for product warranties is recorded to provide
for future costs related to these warranties.
		 Revenue from the sales of products and parts is recognized at the time the products and parts are delivered to customers because the Group determines that customers obtain
control of the products and parts, and the performance obligations are satisfied at the time of delivery of the products
and parts based on the contract terms. However, for sales inJapan, a period between shipping and the transfer of control
is typical in most cases, revenue is mainly recognized at thetime of shipping.
		 Revenue from the services such as installation works ismainly recognized at the time of inspection by customers because the Group determines that the performance obligations
are satisfied at the time of completion of services.
		 To determine a transaction price, variable considerationsuch as discount, rebate and incentive payment is deductedfrom consideration promised in the contract with customers.
The Group usually receives consideration within one year
after the performance obligations are satisfied according to
payment terms separately set forth, which does not include asignificant financing component.
		 For subcontract processing transactions with supply ofmaterials for value that are repurchase agreements, the outstanding supplies at recipient of supplies is recognized as
inventories. At the same time, the amount equivalent to theoutstanding supplies at recipient of supplies is recognized as“Liabilities for subcontract processing transactions with supply of materials for value.”n. Research and Development Costs—Research and development costs are charged to income as incurred.
o. Leases—In March 2007, the ASBJ issued ASBJ Statement No.
13, “Accounting Standard for Lease Transactions,” which revised the previous accounting standard for lease transactions.
		 Under the previous accounting standard, finance leases
that were deemed to transfer ownership of the leased property
to the lessee were capitalized. However, other finance leases
were permitted to be accounted for as operating lease transactions if certain “as if capitalized” information was disclosed
in the notes to the lessee’s financial statements. The revised
accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and leaseobligations in the balance sheet. In addition, the revised ac-

Year ended March 31, 2022

counting 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 operatinglease transactions.
		 The Company applied the revised accounting standard effective April 1, 2008.
		 All other leases are accounted for as operating leases.
p. 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.
q. 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.
r. 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.
s. 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.
t. 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 onderivative 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 andthe hedged items, gains or losses on derivatives are deferred
until maturity of the hedged transactions.
		 Interest rate swaps which qualify for hedge accounting andmeet specific matching criteria are not remeasured at market value but the differential paid or received under the swap
agreements is recognized and included in interest expense.
		 The commodity swaps which qualify for hedge accounting
are measured at market value at the balance sheet date andthe unrealized gains or losses are deferred until maturity as
deferred gain (loss) on derivatives under hedge accounting as
a separate component of equity.
u. 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.

3. ACCOUNTING CHANGE
Effective April 1, 2021, the Group adopted ASBJ Statement
No. 29, “Accounting Standard for Revenue Recognition,”and ASBJ Guidance No. 30, “Implementation Guidance on
Accounting Standard for Revenue Recognition,” issued on
March 31, 2020 (“ASBJ Statement No. 29”) and recognizes
revenue at the amount expected to be received in exchange
for promised goods or services when control of the goods orservices is transferred to customers.
		 As a result, incentive compensation and sales discounts,
which had been recorded in selling, general and administrative expenses or other expenses, are now deducted from net
sales. Furthermore, for subcontract processing transactions
with supply of materials for value that are repurchase agreements, the outstanding supplies at recipient of supplies, which
had been recognized extinguishment, is now recognized as
inventories and the amount equivalent to the outstanding supplies at recipient of supplies is recognized as “Liabilities for
subcontract processing transactions with supply of materials
for value.”In accordance with the transitional treatment prescribed in
the proviso of Paragraph 84 of the Accounting Standard for
Revenue Recognition, the cumulative effect of retrospective

application of the new accounting policy prior to the beginningof the current fiscal year is added to or deducted from retained
earnings at the beginning of the current fiscal year, and the
new accounting policy is applied from such beginning balance. The new accounting policy is applied from the balanceat the beginning of the current fiscal year. However, the new accounting policy was not applied retrospectively to contracts forwhich almost all revenue amounts were recognized prior to thebeginning of the current fiscal year in accordance with the previous treatment, applying the method prescribed in Paragraph
86 of the Accounting Standard for Revenue Recognition.
		 As a result of this change, net sales, cost of sales and selling, general and administrative expenses decreased by ¥129
million, ¥27 million, and ¥77 million, respectively, while operating income decreased by ¥25 million, and other expenses
decreased by ¥22 million, while income before income taxes
decreased by ¥3 million. Trade receivables decreased by ¥23
million, and finished products, raw materials and supplies andother current liabilities increased by ¥18 million, ¥45 millionand ¥45 million, respectively. There was no effect on the beginning balance of retained earnings and the effect on per
share information was immaterial.

17

18

DENYO CO., LTD. and Consolidated Subsidiaries

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

The Company has introduced a stock compensation
plan for directors called the “Board Benefit Trust (BBT).”The Company grants its directors points according to theCompany’s business results, etc., and the Company delivers
to the directors who have beneficiary rights its own stock
corresponding to the number of their accumulated points
determined on a given date every year through the Trust.
These Trusts held treasury stock as follows which was
included in the balance sheet of the Company:
Thousands of
U.S. Dollars
2022

Millions of Yen
2022
2021
¥500
(769)

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

¥477
(763)

$4,085

5. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2022 and 2021, consisted of the following:Thousands of
U.S. Dollars
2022

Millions of Yen
2022
2021
Non-current:
Marketable equity securities
Nonmarketable equity securities¥6,310893¥7,006893$51,553
7,294

Total

¥7,203¥7,899$58,847

The cost and aggregate fair values of marketable and investment securities at March 31, 2022 and 2021, were as follows:
Millions of Yen
Unrealized
Gains

Unrealized
LossesFair Value

March 31, 2022

Cost

Securities classified as available-for-sale—
Equity securities¥1,807¥4,509¥6¥6,310¥1,858¥5,156¥8¥7,006

March 31, 2021
Securities classified as available-for-sale—
Equity securities

Thousands of U.S. Dollars
March 31, 2022

Cost

Unrealized
Gains

Securities classified as available-for-sale—
Equity securities$14,767$36,834

Unrealized
LossesFair Value$48$51,553

The proceeds, realized gains and realized losses of the available-for-sale securities which were sold during the years ended March 31,
2022 and 2021, were as follows:
Thousands of U.S. Dollars

Millions of Yen
March 31, 2022
Available-for-sale—Equity securities

Proceeds

Realized
Gains

¥82

¥29

¥135

¥40

March 31, 2021
Available-for-sale—Equity securities

Realized
Loss

Proceeds

Realized
Gains

$667

$235

Realized LossYear ended March 31, 2022

6. INVENTORIESInventories at March 31, 2022 and 2021, consisted of the following:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Finished products and merchandiseWork in process
Raw materials and supplies¥5,0871,724
6,050¥4,636
1,566
4,074$41,552
14,08649,423

Total¥12,861¥10,276$105,061

7. INVESTMENTS IN ASSOCIATED COMPANIESInvestments in associated companies at March 31, 2022 and 2021, were as follows:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Investments—New Japan Machinery Corporation

¥889

¥852

¥7,262

Total

¥889

¥852

¥7,262

8. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2022 and 2021, consisted of bank overdrafts. The weighted-average interest rates applicable to theshort-term bank loans were 0.4% and 0.5% at March 31, 2022 and 2021 , respectively.
Long-term debt at March 31, 2022 and 2021, consisted of the following:

Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Unsecured loans from banks, with interest
rate at 1.0% and 3.4% (2022 and 2021)
Lease obligations
		TotalLess current portion

¥857
304
1,161
(20)

¥ 1,107282
1,389(1,122)$7,000
2,481
9,481
(163)

Long-term debt, less current portion¥1,141¥267$9,318Annual maturities of long-term debt at March 31, 2022, were as follows:Year Ending March 31
2023
2024
2025
2026
2027
2028 and thereafter
Total

Millions of Yen

Thousands of
U.S. Dollars

¥20
18
19
873
15
216

$163
147
155
7,133
122
1,761

¥1,161$9,481

9. 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 ($24,508 thousand) as
of March 31, 2022. The Company had no borrowings outstanding under the agreement as of March 31, 2022.

19

20

DENYO CO., LTD. and Consolidated Subsidiaries

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

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

(1) The changes in defined benefit obligation for the years ended March 31, 2022 and 2021, were as follows:
Thousands of
U.S. Dollars
2022

Millions of Yen
2022
2021
Balance at beginning of year
Current service cost
Interest cost
Actuarial losses (gains)
Benefits paid

¥2,692
182
25
37
(240)

¥2,779
165
24
(7)
(261)

$21,990
1,486
203
300
(1,958)

16

(8)

131

¥2,712¥2,692$22,152

OthersBalance at end of year

(2) The changes in plan assets for the years ended March 31, 2022 and 2021, were as follows:
Millions of Yen
2022
2021
Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
OthersBalance at end of year

¥2,451
28
(33)
208
(231)

¥2,494
31
(6)
193
(261)

1
¥2,424

Thousands of
U.S. Dollars
2022$20,024
228
(270)
1,702
(1,886)
5¥2,451$19,803(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
2022
2021

Thousands of
U.S. Dollars
2022

Funded defined benefit obligation
Plan assets¥2,6342,424¥2,6102,451$21,521
19,803

			Total
Unfunded defined benefit obligation
Liability for stock granting retirement

210
77
171

159
82
160

1,718
631
1,396

Net liability arising from defined benefit obligation

¥458

¥401

$3,745

Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Liability for retirement benefits

¥458

¥401

$3,745Net liability arising from defined benefit obligation

¥458

¥401

$3,745

Year ended March 31, 2022

(4) The components of net periodic benefit costs for the years ended March 31, 2022 and 2021, were as follows:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

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

¥182
25
(28)
36
50

¥166
24
(31)
30
43

$1,486
203
(228)
296
410

Net periodic benefit costs

¥265

¥232

$2,167(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans
for the years ended March 31, 2022 and 2021, were as follows:
Millions of Yen
2022
2021
Actuarial (gains) losses

¥(33)

¥32

Thousands of
U.S. Dollars
2022$(274)(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans as of March 31, 2022 and 2021, were as follows:
Millions of Yen
2022
2021
Unrecognized actuarial gains

¥(49)

¥(15)

Thousands of
U.S. Dollars
2022$(398)(7) Plan assets
a. Components of plan assets
		 Plan assets as of March 31, 2022 and 2021, consisted of the following:
2022

2021

General account managed by a life insurance company
Other

97.2%
2.8

99.8%
0.2

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, 2022 and 2021, are set forth as follows:

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

2022

2021

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

Mainly 0.60%
Mainly 1.25%
Mainly 1.90%

11. EQUITY
Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies
Act that affect financial and accounting matters are summarized below:
service of the directors being prescribed as one year rather
a. Dividends
than the normal two-year term by its articles of incorporation,
Under the Companies Act, companies can pay dividends
the Board of Directors may declare dividends (except for divat any time during the fiscal year in addition to the year-end
idends-in-kind) at any time during the fiscal year if the comdividend upon resolution at the shareholders’ meeting. Addipany has prescribed so in its articles of incorporation. Withtionally, for companies that meet certain criteria including (1)respect to the third condition above, the Board of Directors of
having a Board of Directors, (2) having independent auditors,
companies with (a) board committees (namely, appointment(3) having an Audit & Supervisory Board, and (4) the term of

21

22

DENYO CO., LTD. and Consolidated Subsidiaries

committee, 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 isdefined 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 paid-in capital (acomponent of capital surplus), depending on the equity account charged upon the payment of such dividends, until theaggregate amount of the legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital andlegal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts within equity
under certain conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock 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 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
stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

12. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese 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, 2022 and 2021.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets andliabilities at March 31, 2022 and 2021, are as follows:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Deferred tax assets:
¥197
35
43
121
19
113
77
32
251
(92)

¥194
44
74
51
21
108
77
7
235
(90)

$1,611
282
353
987
154
922
631
262
2,052
(752)

796

721

6,502

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

346
1,305
32

346
1,517
29

2,831
10,662257

			Total

1,683

1,892

13,750Net deferred tax liabilities¥(887)¥(1,171)$(7,248)

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

As the difference between the normal effective statutory tax
rate and the actual effective tax rate reflected in the accompanying
consolidated statement of income and comprehensive income
for the years ended March 31, 2022 and 2021, is less than 5% of
the normal effective statutory tax rate, a reconciliation is omitted.

At March 31, 2022, some subsidiaries have tax loss
carryforwards aggregating approximately ¥66 million ($537
thousand) which are available to be offset against taxable
income of such subsidiaries in future years.

Year ended March 31, 2022

13. REVENUE(1) Disaggregation of Revenues
Revenues from contracts with customers on a disaggregated basis for the years ended March 31, 2022 and 2021, were as follows:(a) Sales results by productMillions of Yen
2022

Thousands of U.S. Dollars

Generators Welders Compressors Others

Total

Generators Welders Compressors Others

Total

Products and services
Revenues from contracts
with customers
Other revenue¥43,754¥4,830¥727¥5,857 ¥55,168$357,440$39,457$5,940 $47,847 $450,684

43,754

4,830

727

5,857 55,168

357,440

39,457

5,940

Total

¥43,754¥4,830¥727¥5,857 ¥55,168$357,440$39,457$5,940 $47,847 $450,684

Products and services
Revenues from contracts
with customers
Other revenue¥44,020¥4,387¥755¥5,845 ¥55,007

44,020

4,387

755

5,845

Total

¥44,020¥4,387¥755¥5,845 ¥55,007

47,847 450,684

2021

55,007(b) Sales results by region
Millions of Yen

Thousands of U.S. Dollars

2022

Japan

North andCentralAmerica

Products and services
Revenues from contracts
with customers
Other revenue¥34,632¥13,053¥4,596¥2,887¥55,168$282,920$106,633$37,547$23,584$450,684

34,632

13,053

4,596

2,887

55,168282,920

106,633

37,547

23,584450,684

Total¥34,632¥13,053¥4,596¥2,887¥55,168$282,920$106,633$37,547$23,584$450,684

Products and services
Revenues from contracts
with customers
Other revenue¥37,737¥10,898¥3,948¥2,424¥55,00737,737

10,898

3,948

2,424

55,007

Total¥37,737¥10,898¥3,948¥2,424¥55,007

Asia

Other
Areas

Total

Japan

North andCentralAmerica

Asia

Other
Areas

Total

2021

(2) Basic Information to Understand Revenues from Contracts with Customers
Basic information to understand revenues from contracts with customers is as stated in Note 2.m.
(3) Contract Balances
Contract liabilities consist mainly of advances received from customers before the performance obligations are satisfied andare reversed according to the recognition of revenue.
		 Contract liabilities at the beginning and end of the year are as follows:
Millions of Yen
2022

Thousands of
U.S. Dollars
2022

Contract liabilities:
Balance at beginning of year
Balance at end of year

¥100
91

$814
743

Of revenue recognized during the current fiscal year, the amount included in the balance at beginning of year was ¥91 million($742 thousand).
(4) Transaction Prices Allocated to Remaining Performance Obligations
There were no significant contracts having an original expected duration of over one year at end of current fiscal year. For
contracts with an initially anticipated contract period within one year, description of transaction price allocated to remaining
performance obligations of the Group has been omitted applying a practical expedient. Moreover, there were not any
material consideration from contracts with customers which was not included in the transaction price.

23

24

DENYO CO., LTD. and Consolidated Subsidiaries

14. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥608 million ($4,969 thousand) and ¥604 million for the years ended March
31, 2022 and 2021, respectively.

15. LEASESThe Group leases certain vehicles and other assets under finance leases. Also, some foreign subsidiaries leases lands under operatingleases which are included in non-current other assets in the consolidated balance sheet as right of use assets applying International
Financial Reporting Standards (IFRS) 16.
Lease obligations were as follows:

Millions of Yen
2022
2021
Due within one year

Thousands of
U.S. Dollars
2022

Due after one year

¥20
284

¥15
267

$163
2,318

Total

¥304

¥282

$2,481

16. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group invests cash surpluses in low-risk financial
assets such as commercial paper. Bank loans are used
to fund its ongoing operations. Derivatives are not used
for speculative purposes, but to manage exposure tofinancial risks as described in Note 17.

which include monitoring of payment term 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.

(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
the risk of market price fluctuations.
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 three and halfyears after the balance sheet date. A part of such bankloans is exposed to market risks from changes in variableinterest rates.
Derivatives mainly include interest rate swaps, commodity swaps, forward foreign currency contracts, which
are used to manage exposure to market risks from changes in interest rates of bank loans, from changes in raw
material (copper) prices, and from changes in foreign
currency exchange rates of receivables and advances.
Please see Note 17 for more detail about derivatives.

Market risk management (foreign exchange risk andinterest rate risk)
Foreign currency trade receivables and payables are
exposed to market risk resulting from fluctuations inforeign currency exchange rates. The Group reducessuch foreign exchange risk by balancing foreign currency
trade receivables and payables. Forward foreign currency
contracts are used for some foreign currency tradereceivables and advances.
The Company keeps its borrowings within acceptable
limits and uses derivatives of interest rate swaps asnecessary to manage exposure to market risks fromchanges in interest rates of loan payables. And theCompany uses commodity swaps to manage exposure
to market risks from changes in raw material (copper)
prices.
The Company continuously reviews portfolios of
securities by periodically monitoring fair values of eachsecurity and the financial condition of the issuer as wellas 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.

(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,

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.

Year ended March 31, 2022

(4) Fair Values of Financial Instruments
Fair values of financial instruments are as follows: Investments in equity instruments that do not have a quoted
market price in an active market are not included in thefollowing table. The fair values of cash and cash equivalents, receivables (trade notes, electronically recorded monetary claims-operating and trade accounts),

payables (trade notes, electronically recorded obligations-operating and trade accounts) and short-term bankloans are not disclosed because their maturities are shortand the carrying values approximate fair value. Also,
please see Note 17 for details of the fair values of derivatives.

(a) Fair value of financial instruments
Millions of Yen
March 31, 2022

Carrying Amount

Fair Value

Unrealized Gain/Loss

Investment securities¥6,310¥6,310Total
Long-term debt

6,310
¥857

6,310
¥857

Total

¥857

¥857

Investment securities¥7,006¥7,006Total
Long-term debt

7,006
¥1,107

7,006¥1,107

Total
Derivatives¥1,107¥(107)¥1,107¥(107)March 31, 2021

Thousands of U.S. Dollars
March 31, 2022

Carrying Amount

Fair Value

Unrealized Gain/Loss

Investment securities$51,553$51,553

Total
Long-term debt

$51,553$7,000$51,553$7,000Total$7,000$7,000(b) Carrying amount of investments in equity instruments that do not have a quoted market price in an active market
Millions of Yen
2022
2021
¥893

Unlisted equity instruments¥893

Thousands of
U.S. Dollars
2022$7,294(c) Maturity analysis for financial assets and securities with contractual maturities

March 31, 2022
Cash and cash equivalents

Millions of Yen
Due inDue after One
One YearYear throughor Less
Five Years

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

Receivables¥22,359
20,265$182,656
165,547

Total¥42,624$348,203

March 31, 2021
Cash and cash equivalents
Receivables¥22,91421,004

Total¥43,918

Please see Note 8 for annual maturities of long-term debt and Note 15 for lease obligations.

25

26

DENYO CO., LTD. and Consolidated Subsidiaries(5) Financial Instruments Categorized by Fair Value Hierarchy
The fair value of financial instruments is categorized into the following three levels, depending on the observability andsignificance of the inputs used in making fair value measurements:
Level 1: Fair values measured by using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Fair values measured by using inputs other than quoted prices included within Level 1 that are observable forthe assets or liabilities, either directly or indirectly.
Level 3: Fair values measured by using unobservable inputs for the assets or liabilities.
If multiple inputs are used that have a significant impact on the measurement of fair value, fair value is classified at thelowest level in the fair value measurement among the levels to which each of these inputs belongs.
(a) The financial assets and liabilities measured at the fair values in the consolidated balance sheet
Total

Level 1Thousands of U.S. Dollars
Level 2
Level 3
Total

¥6,310¥6,310$51,553$51,553¥6,310¥6,310$51,553$51,553

March 31, 2022

Level 1Marketable and investment securities—
Investment securities
Total assets

Millions of Yen
Level 2
Level 3(b) The financial assets and liabilities not measured at the fair values in the consolidated balance sheet
Millions of Yen
Level 2
Level 3

Total

Marketable and investment securities—
Commercial paper¥1,000¥1,000$8,169$8,169Total assets¥1,000¥1,000$8,169$8,169Long-term debt

¥857

¥857

$7,000$7,000Total liabilities

¥857

¥857

$7,000$7,000March 31, 2022

Level 1

Level 1Thousands of U.S. Dollars
Level 2
Level 3Total

The following is a description of valuation methodologies and inputs used for measurement of the fair value of assets andliabilities:
Marketable and Investment Securities
The fair values of commercial paper approximate carrying amounts because of its short maturities. Therefore, the carrying
amounts are regarded as the fair values. The fair values of investment securities are measured at the quoted market prices.
Since listed investment securities are traded in active markets, the fair values are categorized as Level 1. The fair valuesof other securities are classified as Level 2.
Long-Term Debt
The fair values of long-term debt are measured by using discounted present value techniques considering assumptions
including expected future cash flows and discount, and are classified as Level 2. However, the fair values of long-term
debt on floating rate approximate carrying amounts because it reflects market interest rates in short times. Therefore, thecarrying amounts are regarded as the fair values.

17. 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, commodity swaps andinterest rate swaps.
It is the Group’s policy to use derivatives only for the purposeof reducing market risks associated with assets and liabilities.
Because the counterparties to these derivatives 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.

Year ended March 31, 2022

Derivative Transactions to Which Hedge Accounting Is Not Applied

March 31, 2022

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.$
Currency swap contracts—
Selling U.S.$
March 31, 2021
Foreign currency forward contracts—
Selling U.S.$
Currency swap contracts—
Selling U.S.$¥1,016

¥(90)

¥(90)

49

(16)

(16)

Derivative Transactions to Which Hedge Accounting Is Applied

March 31, 2022

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)
March 31, 2021
Interest rate swaps (fixed rate payment,floating rate receipt)

Long-term debt

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 16 is included inthat of hedged items (i.e., long-term debt).

$ 10,000

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.

18. CONTINGENT LIABILITIESAt March 31, 2022, the Group had the following contingent liabilities:

Export trade bill discounted

Millions of Yen

Thousands of
U.S. Dollars¥176$1,44127

28

DENYO CO., LTD. and Consolidated Subsidiaries

19. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income, including reclassification adjustments and tax effects for the years ended March 31,
2022 and 2021, were as follows:
Thousands of
U.S. Dollars
2022

Millions of Yen
2022
2021
Unrealized (loss) gain on available-for-sale securities:(Losses) gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments—
Adjustments arising during the year
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive income (loss) in
associates—(Losses) gains arising during the year
Total
Total other comprehensive income¥(617)
(29)
(646)
212

¥1,514
(40)
1,474
(410)

$(5,037)(235)(5,272)
1,731¥(434)¥1,064$(3,541)¥1,219¥(780)$9,958¥1,219¥(780)$9,958

¥(49)
16
(33)
10

¥13
19
32
(10)

$(403)
129
(274)
84

¥(23)

¥22

$(190)

¥(0)

¥4

$(4)

¥(0)

¥4

$(4)

¥762

¥310

$6,223

20. NET INCOME PER SHARE
Basis for the computation of net income per share ("EPS") for the years ended March 31, 2022 and 2021, is as follows:Year Ended March 31, 2022

Millions
Thousands ofof YenSharesNet Income
Attributable to
Owners of the
WeightedParent
Average Shares

Basic EPS—Net income available to common shareholders

Yen

U.S. Dollars

EPS¥2,753

20,853¥132.02¥3,86020,851¥185.13$1.08

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 Stockto Employees etc. through Trusts.” In calculating the number of weighted-average shares above, the number of shares that are held by
the Trust (761 thousand shares in 2022 and 768 thousand shares in 2021) is reflected.

21. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20,“Guidance on Accounting Standard for Segment Information
Disclosures,” an entity is required to report financial and descriptive information about its reportable segments. Reportablesegments are operating segments or aggregations of operating
segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available and such information is evaluated regularly by
the chief operating decision maker in deciding how to allocate
resources and in assessing performance. Generally, segment
information is required to be reported on the same basis as isused internally for evaluating operating segment performanceand deciding how to allocate resources to operating segments.

Year ended March 31, 2022

(1) Description of Reportable Segments
The Group’s reportable segments are those for which
separate financial information is available and regular
evaluation by the Company’s management is being
performed in order to decide how resources are allocatedamong the Group. Therefore, geographic segments of theGroup consist of Japan, United States of America, Asia andEurope. 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 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
2022
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers¥43,228
4,312¥8,685
312¥3,120
4,497

¥135
5

¥55,168
9,126¥(9,126)

Total¥47,540¥8,997¥7,617¥140¥64,294¥(9,126)¥55,168

Segment profit (loss)
Segment assets¥3,29067,414¥(112)
7,805¥489
10,926¥(14)476¥3,65386,621¥1(5,846)¥3,65480,775

840
889

237

284

0

1,361
889

1,361
889

796

15

28

839

839

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

Reconciliations Consolidated¥55,168

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¥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

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

Reconciliations Consolidated¥55,007

29

30

DENYO CO., LTD. and Consolidated Subsidiaries

Thousands of U.S. Dollars
2022
Reportable Segment
Japan

United Statesof America

Asia

Europe

Total

Sales:
Sales to external customers
Intersegment sales or transfers$353,143
35,222$70,945
2,552$25,489
36,736$1,10737$450,684
74,547$(74,547)

Total$388,365$73,497$62,225$1,144$525,231$(74,547)$450,684

Segment profit (loss)
Segment assets$26,874
550,722$(916)
63,758$3,99789,258$(113)
3,890$29,842
707,628$6(47,759)$29,848
659,869

6,860
7,262

1,936

2,322

1

11,119
7,262

11,119
7,262

6,503

127

227

6,857

6,857

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

Reconciliations Consolidated$450,684

Related Information(1) Information about Products and Services
Information about products and services for the years ended March 31, 2022 and 2021, is omitted since sales to externalcustomers 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 Major Customers
Sales to major customers for the years ended March 31, 2022 and 2021, are summarized as follows:
Thousands of U.S.
Dollars2022

Millions of Yen
Name of Customers
Multiquip Inc.

2022

2021
¥8,685¥8,750$70,945

Related Segment
United States of America

22. RELATED-PARTY TRANSACTIONSThe Company sold its products to New Japan Machinery Corporation, an associated company. The transactions were made with usual
terms and conditions.
The transactions with the associates for the years ended March 31, 2022 and 2021, and related balances at March 31, 2022 and
2021, were mainly as follows:
Millions of Yen
2022
2021
¥2,085

Transactions—Sales
Balances:
Trade notes receivable
Trade accounts receivable
Electronically recorded monetary claims—operating

¥429
958

¥2,287¥1,103
347

Thousands of
U.S. Dollars
2022$17,032$3,508
7,827

23. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2022, was approved at the Company’s Board of Directors’
meeting held on May 17, 2022:

Year-end cash dividends, ¥25 ($0.20) per share******

Millions of Yen

Thousands of
U.S. Dollars¥538$4,399

Year ended March 31, 2022

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 comprisethe consolidated balance sheet as of March 31, 2022, and the consolidated statement of income and comprehensive income,consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to theconsolidated 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, 2022, and its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made in accordance with the basis stated in Note 1 to the consolidated financial statements. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards 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, andwe have fulfilled our other ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our 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
statements of the current period. The matter was addressed in the context of our audit of the consolidated financial statements as awhole, and in forming 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 andcomprehensive income, the Group recorded sales of¥55,168 million for the fiscal year ended March 31, 2022, of
which the Company accounted for 69% before eliminatinginternal transactions.
The Company manufactures and sells industrial electricalmachineries, such as engine-driven generators, enginedriven welders and enginedriven compressors, sells parts
related to these products, and provides installation services.
Revenue from the sales of products and parts is mainly
recognized at the time of shipping. However, if services suchas installation works are stipulated in the contract, revenue
is mainly recognized at the time of inspection by customers
because the Company determines that the performanceobligations are satisfied at the time of completion of services.
Upon receiving orders, the sales department, in
conjunction with the technical department, registers orderinformation in its core business system, separated by thecontract content, and upon recognition of revenue, thelogistics department and the sales department work together
to determine whether the performance obligation was
satisfied at the timing such as delivery completion.
The daily volume of transactions is so high that revenue
may be recorded for transactions that do not meet therevenue recognition requirements because of misjudgments
regarding the identification and satisfaction of contractual
obligations.
For the above reasons, we have determined that thetiming of revenue 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 ofthe controls that inspect documents such as delivery notes
and inspection reports that are the basis for recording sales,depending on the contract details to determine the satisfactionof the contractual obligation.
(3) Based on sales data extracted from core business-related
systems, for each sales department, we performed a comparison
analysis of sales and gross profit between the current period
and the previous period and analyzed data using plot charts,and selected transactions that require careful judgments in
identifying and satisfying performance obligations included in
the contract based on certain criteria such as transactions withnew customers and high-margin transactions.
(4) We selected a sample of contracts and we inquired of managementin the sales department about the history of the order and thecontents of the contract, and inspected the contract and orderforms to determine the details of the obligations included in thecontract and when they were satisfied.
In addition, the documents that serve as the basis for revenue
recognition, such as delivery notes and inspection reports,
were inspected to determine that the requirements for revenue
recognition were met.

Other Information
Management is responsible for the other information. 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 other information. The otherinformation comprises the information included in the annual report, but does not include the consolidated financial statements andour auditor's report thereon. The annual report is expected to be made available to us after the date of this auditor's report.

31

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DENYO CO., LTD. and Consolidated Subsidiaries

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified
above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with theconsolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
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 withaccounting 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 asa going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally
accepted in Japan and using the going concern basis of accounting unless management either intends to liquidate the Group or tocease 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 andoperating 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 frommaterial misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally acceptedin Japan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users takenon 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 andmaintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks. The procedures selected depend on the auditor's judgment. In
addition, we obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theGroup's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance withaccounting 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 manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within theGroup to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision andperformance of the group 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 theaudit 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 thesematters in 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 the provisions of the Certified Public Accountants Act of Japan.

June 27, 2022
Deloitte Touche Tohmatsu LLCYear ended March 31, 2022

Company Data
Company outline (As of March 31, 2022)
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.$ 15,969,557)

Authorized Shares

97,811,000

Issued Shares

22,859,660

Shareholders

5,694

Financial Year

April 1 to March 31

Employees

582 (1,359 consolidated)

Branch and Sales Offices

21

Directors, Audit Supervisory Board Members (As of June 29, 2022)
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
MemberAkira Yamada

Ouside Director, Audit & Supervisory Committee
MemberKeiko Yamagami

Ouside Director, Audit & Supervisory Committee
Member

Masako Natori

33

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DENYO CO., LTD. and Consolidated Subsidiaries

Executive Officers
Senior Executive Officer

Yukio Nunogami

General Manager, West Japan Sales Department
Sales Division

Executive Officer

Masakazu Minato

General Manager, East Japan Sales Department
Sales Division

Executive Officer

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,
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 Division

Executive Officer

Kenjiro Shirai

General Manager, Finance Department
Administration Division

Executive Officer

Koji Ikeda

Deputy General Manager, East Japan Sales Department
Sales Division

Executive Officer

Yoshihisa Furuta

Director of Denyo Kosan Co., Ltd.

Year ended March 31, 2022

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

36

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 machineryYear ended March 31, 2022

Investor Information
Investor Information(As of March 31, 2022)

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: 1,191,972(Included 1,322,238 shares of Company’s own stock)

Stock Listing

Tokyo Stock Exchange, First Section (Code: 6517)

Shareholders

5,694Transfer Agency

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

Major Shareholders(As of March 31, 2022)

Shares Held(Thousands)

Voting Right Ratio(%)

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

2,141

9.94

The SFP Value Realization Master Fund Ltd.

1,484

6.89

Kyuei Corporation

1,417

6.58

Mizuho Trust & Banking Co., Ltd.

1,082

5.02

The Dai-ichi Life Insurance Co., Ltd.

872

4.04

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

769

3.57

Denyo Shin-eikai Group

668

3.10

Custody Bank of Japan, Ltd. (Trust Account)

558

2.59

Tsurumi Manufacturing Co., Ltd.

543

2.52

MUFG Bank, Ltd.

540

2.50

Shareholders

37

38

DENYO CO., LTD. and Consolidated Subsidiaries

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