ANNUAL REPORT 2016
Year ended March 31, 2016

Who We Are
Sanden continues to create new values through
Challenge & Innovation based on the “Environment”
The Sanden Group continues to develop and deliver products, systems, and services that provide
constant satisfaction to our customers around the world.

Based on our CO2 heat pump teche ss
nology, Sanden provides eco-friendly
si nu
products such as home use hotrBewater supply systems and heatersthO
which contribute to comfortd
able life.

an

s

m

L ivin g

CO2 Heat
Pump HeaterCompressor

HVAC Unit

CO2 Scroll Type
Compressorss& Environm

e nt

Sy

st e

Electric Motor
Driven Compressor

ne
Busi
ms
ste
Sy
ive
ot

Sanden manufactures and delivers
compressors for automotive air conditioners and climate systems
Au
to around the world. Our state-ofthe-art technology suitable formhybrid vehicles and electricvehicles is highly evaluated by the world’s leading car manufacturers.

Eco Cute

CO2 Piston Type
Compressor

Vending
MachineOpen
Showcase

Co
mm

erci

Round
Showcase

CoffeeMachineal Store Systems

in
Bu s

es

s

Sanden manufacturesand delivers freezing andrefrigerating showcases,
vending machines, and coffeeservers around the world. Our
products, systems, and services
contribute to our customers’ business growth.

Contents
Corporate Philosophy ..............................................................1
Interview with Sanden’s President ............................................2
Highlights of the Fiscal Year .....................................................4
Performance Overview ............................................................6

Financial Section
Management’s Discussion & Analysis................................... 12
Consolidated Balance Sheets ............................................. 16
Consolidated Statements of Income/Consolidated Statements of Comprehensive Income ............ 18

Corporate Governance ..........................................................10

Consolidated Statements of Changes in Net Assets.............. 19
Consolidated Statements of Cash Flows .............................. 20
Notes to Consolidated Financial Statements .........................21
Independent Auditor’s Report...............................................37

Directors/Audit & Supervisory Board Members/Officers .......11

Sanden’s World Network ....................................................... 38

Topics......................................................................................8
CSR ........................................................................................9

Corporate Philosophy

Sanden’s Corporate Philosophy, which was adopted in 2003, systematically states our universal shared values and our basic
stance. By putting this Corporate Philosophy into practice, the Sanden Group aims to attain sustainable growth and continue
to be a company that is trusted by society.

Structure of the Corporate Principles
Aiming to Become “Global Excellent Companies”

Founding
SpiritManagement
Principles
Corporate Philosophy

Founding Spirit“Let Us Develop with Wisdom and Prosper in Harmony”“Let Us Develop with Wisdom and Prosper in Harmony” means that
we should use our intelligence in combining our development andpioneering abilities to win prosperity for us all.

Corporate Vision

Management Principles

Management Policies• Satisfy our customers needs with high-quality products

Mid-Term Plan, Execution Plan

• Contribute to the social and cultural improvement of
the community through business activity

STQM
STQM SANDEN WAY• Build a company of which all are proud, through theefforts of self-motivated employees
These principles have served as fundamental employee action
guidelines since Sanden’s founding.

The Sanden Group (G-SDC) will observe the following 10 principles
in full compliance with laws, regulations, and rules.
Values Shared by the Global
Basic Principles (Universal
Community)

Basic Stance toward Stakeholders

1. Good Corporate Citizenship and Harmony with Society
We will grow as good corporate citizens, trusted by society
and in harmony with the international community.

6. Customers
We will stand on the admired ability of engineering development
and manufacturing, and can offer products, systems, andservices, based on the QUALITY FIRST, that provide constantsatisfaction to our customers around the world.

2. Respect for Human Rights
We will build a corporate culture founded on respect forindividuals and human rights.
3. The Environment
We will endeavor to preserve the environment in every aspectof our corporate activities to ensure that future generations
will inherit our beautiful, irreplaceable earth.
4. Corporate Ethics
We will conduct our corporate activities in a spirit of sincerity
and fairness based on a strong sense of ethics.
5. Safety and Health
We will enable our employees to achieve a healthy lifestyle bycreating an environment that assures their health and safety.

7. Employees
We will grow together with our employees by creating anorganizational culture that encourages free and vigorous
communication imbued with a spirit of respect for humanity inline with our corporate culture of challenge and innovation.
8. Shareholders and Investors
We will respond to the trust and expectations of our shareholders
and investors by expanding the Sanden Group, enhancing ourcorporate value and making our management more transparent.
9. Communities
We will respect regional customs and cultures around theworld and contribute to the social and cultural development of
the communities, which we are related with.
10. Suppliers
We will grow together with our suppliers as business partners who
provide our customers with the best possible products, systems,
and services on the basis of fair and transparent relationships.

Sanden Holdings Corporation

1Interview with Sanden’s President

All management and staff of the SandenGroup are working together to achieve
Sanden’s Key Strategic Goals.

Kin-ei Kanda
Director & President

review Sanden’s
Q Please
performance in fiscal 2015.
In fiscal 2015, ended March 31, 2016, net sales were ¥294.2
billion, operating income was ¥5.5 billion, and ordinary income
amounted to ¥6.1 billion. Net income attributable to owners of
the parent came to a total of ¥7.0 billion.
Factors influencing net sales included expansion in automotive
air-conditioning systems in China. However, lower sales of automobiles, mainly in North America and Japan, impacted our overall sales; also, the domestic market for Commercial Store
Systems Business was weak. As a consequence of these conditions, changes in the market environment were greater than we
had anticipated. Beginning in the current fiscal year that commenced on April 1, 2016, since we are working to achieve
steady growth, we are aware that we must respond more
flexibly and aggressively to changes in the business environment.

were Sanden’s results
Q Whatby business segment?
In the Automotive Systems Business, we have moved forwardwith the development of cutting-edge products that accurately
respond to customer needs for environmentally friendly products. In this business, we offered value-added compressorsthat are more compact and lighter as well as systems that2

Annual Report 2016

incorporate heat pump technology. As a result, sales in Europe
and Asia held firm, supported in part by the acquisition of new
business in the Chinese market. However, overall sales were
adversely affected by the decline in automobile sales in North
America and Japan. As a consequence, net sales decreased 1%.
Despite lower sales, operating income rose 16%. Although
there was some impact from environment-related R&D investments for future development and lower sales, as a result of
cost reductions through shifting to in-house production of partsand reforms in our global parts procurements structure as wellas improvements in productivity, Sanden was able to reporthigher profitability.
In the retail store systems sector within the Commercial Store
Systems Business, we offered total packages of products, systems, and services that respond to changes in environmental
awareness and in lifestyles. In addition, in the vending systems
sector, we aggressively developed environmentally friendly
products centered around our original CO2 heat pump vending
machines and expanded the scope of business activities to
new domains, including coffee servers.
Despite these initiatives, net sales declined 12% mainly due
to lower domestic demand. Operating income decreased 70%
in spite of cost reductions and continued thoroughgoing activities to implement business structural reforms focusing on
increasing productivity.

In the Living & Environment Systems and Other Business, we
moved forward with global marketing initiatives for our heatpump hot water supply system that uses CO2 as a naturalrefrigerant. Moreover, we continued active capital investmentsin the further development of our hot water heaters and otheroriginal technologies that incorporate our environmental technologies, while also taking initiatives in expanding into new
business domains.

are your plans
Q Whatfor future growth?
To maximize the corporate value of the Sanden Group, we haveadopted management policies to achieve future growth with“environment” as the core, based on our robust global networkand our commitment to quality.
To continue and further realize our management policies,
Sanden has specified “Sales Growth Centered on
Environmental Technologies,” “Strengthening Business
Competitiveness Based on Reform of the Corporate Structure,”and “Management Reforms Based on the Reform ofManagement Systems” as Key Strategic Goals and is taking
initiatives to implement these on a groupwide basis.

Q

Please explain Sanden’s Key
Strategic Goals more specifically.

The core focuses of the Sanden Group’s R&D are CO2 refrigerant and heat pump technologies.
Sanden selected CO2 as the best refrigerant for a number ofreasons. Its ODP (ozone depletion potential) is zero, its GWP(global warming potential) is 1, it has the lowest impact on theenvironment, and it is safe, with no toxic effects and is non-flammable. However, its use requires sophisticated technology
because it must be used at 10 times the usual pressure for arefrigerant, and Sanden has implemented bold initiatives to commercialize its use. Sanden has been able to achieve sales growththrough the development of new products that are lighter, morecompact, and energy saving because of the pursuit of technologies that are above and beyond previously existing R&D.
As one initiative for corporate reforms, Sanden is accelerating
its structural reforms for global procurement. Previously, to copewith foreign currency fluctuation risk and tariff barriers, optimalarea procurement assuming local procurement was the mainstream approach. However, with the trend toward the elimination of tariff barriers, Sanden is now working to realize optimal
global procurement through expanding the supplier network to
include those with global bases.
One year has now passed since the transition to a holding
company configuration, but it is already clear that delegating
authority to business companies definitely speeds up decision
making. In addition, the distance from our customers has
diminished, and we are building relationships of trust. Going forward, we will work to strengthen the holding company functions
and conduct optimal group management.

is your basic policy
Q Whatregarding allocation of profit?
The return of profits to all our shareholders is one of theCompany’s key management policies. Based on providing
stable dividends on a sustainable, ongoing basis and after
comprehensive consideration of the Company’s consolidated
results, our goal is to offer dividends with around a 30%
consolidated payout ratio.

Sanden continues to create new values through
Challenge & Innovation based on the “Environment.”
Strengthening
Business
CompetitivenessBased on Reform of the
Corporate Structure

Sales GrowthCenteredon Environmental
Technologies

Management
Reforms Based on
the Reform ofManagement Systems• Implement cost-cutting activities• Enact productivity reforms• Increase asset efficiency• Provide unique environmental
value by strengthening coretechnologies and the Sanden
global network• Reinforce the global workforce• Build a stronger financial position• Maximize group synergy
through a holding company
structure

Sanden Holdings Corporation

3

Highlights of the Fiscal Year

Thousands of
U.S. dollars (Note)

Millions of yen

FY2012FY2013

FY2014FY2015FY2015¥241,780¥274,786¥306,984¥294,237$2,611,261

712

(896)

4,858

9,407

5,494

48,757

1,204
57

1,084
5,331

5,843
13,123

5,580
11,713

6,965
2,044

61,812
18,139Total net assets.................................................. ¥ 48,199
Total assets........................................................ 212,300¥ 52,961
247,387¥ 65,651
277,920¥ 75,677
299,265¥ 75,503
301,325$  670,065
2,674,165

Net assets per share (yen and U.S. dollars)........ ¥ 331.08
Net income per share (yen and U.S. dollars).......
8.84¥ 364.35
7.96¥ 443.68
42.65¥ 510.80
40.40¥ 507.56
50.43$     4.50
0.44

FY2011

Net sales............................................................ ¥214,282
Operating income (loss)......................................
Net income attributable to ownersof the parent.....................................................
Comprehensive income......................................

Capital adequacy ratio (%)..................................
Return on equity (%)...........................................
Price earnings ratio (%).......................................

21.3%
2.7
30.6

20.1%
2.3
47.1

22.1%
10.5
10.8

23.6%
8.5
13.3

23.3%
9.9
6.4

Cash flows from operating activities.................... ¥   (5,227)
Cash flows from investing activities.....................
(7,588)Cash flows from financing activities.....................
9,432
Cash and cash equivalents at end of the year......
14,842¥  3,148(16,794)
17,74019,961¥ 18,803(12,105)(8,675)
19,078¥ 16,223(13,301)(2,022)
20,588¥  6,304(14,932)
6,066
17,482$   55,946(132,516)
53,833
155,147

Gross profit......................................................... ¥ 35,928¥ 36,731¥ 48,101¥ 57,246¥ 53,311$  473,118

Gross profit ratio (%)...........................................
Ratio of SG&A expenses (%)..............................
Total net assets ratio (%).....................................

16.8%
16.4
21.3

15.2%
15.6
20.1

17.5%
15.7
22.1

18.6%
15.6
23.6

18.1%
16.3
23.3

Note: U.S. dollar figures are translated, for convenience only, at the rate of ¥112.68 to US$1.00, the effective rate of exchange prevailing on March 31, 2016.

Environmental Figures
Energy usage (in GJ)...........................................
CO2 emissions (in t-CO2)....................................

FY2011FY2012FY2013

FY2014FY20152,584,768
110,506

2,676,267
118,6932,654,591
124,080

2,764,352
129,026

2,803,609
130,335

FY2011FY2012FY2013

FY2014FY2015

4,197
2,685
1,342
1,647
9,871

4,344
4,879
1,664
1,672
12,559

4,432
5,449
1,581
1,818
13,280

4,340
5,901
1,464
1,810
13,515

4,168
5,655
1,251
2,152
13,226

Number of Employees by Region
Japan.................................................................
Asia-Pacific.........................................................
Americas............................................................
Europe...............................................................
Total...................................................................

4

Annual Report 2016

Net Sales

Operating Income (Loss)Net Income Attributable to
Owners of the Parent(Millions of yen)

(Millions of yen)

(Millions of yen)

400,000

10,000

8,000

9,407

6,965
306,984
300,000

274,786

294,237

8,000

241,780

4,858

214,282
200,000

5,843

6,000

5,580

5,494

6,000

4,000

4,000
2,000

712

100,000

2,000

0

(896)

0

2011

2012

2013

2014

2015 (FY)-2,000

2011

2012

2013

2014

0

2015 (FY)

Total Assets

Total Net Assets

ROE(Millions of yen)

(Millions of yen)(%)

400,000

80,000300,000

277,920299,265

75,677 75,503
65,651

301,325
60,000247,387

48,199

1,084

2011

2012

2013

2014

2015

(FY)

15

12

10.5

52,961

9.9
8.5

9212,300
200,000

1,204

40,0006

100,000

20,000

0

2011

2012

2013

2014

2015 (FY)

0

2.7

3

2011

2012

2013

2014

2015 (FY)

0

2011

2.3

2012

2013

2014

Energy Usage by Region

CO2 Emissions by Region

Number of Employees by Region(GJ)(t CO2)(Persons)

3,000,000

150,000

15,0002,500,000

125,000

12,5002,000,000

100,000

10,0001,500,000

75,0007,500

1,000,000

50,0005,000

500,000

25,000

2,500

0

Japan
China

2011

2012

EuropeAmericas

2013

2014

Asia-Pacific2015 (FY)

0

Japan
China

2011

2012

EuropeAmericas

2013

2014

Asia-Pacific2015 (FY)

0

2011

Japan

2012

2013

2014

2015

(FY)

2015 (FY)EuropeAsia-Pacific (including China)

Americas* No companies are accounted for by the equity
method.

Sanden Holdings Corporation

5

Performance Overview

Automotive
Systems Business

Living & Environment
Systems and Other
Business

Automotive Systems Business

67.4%¥198,385(Millions of yen)

4.0%
¥11,863(Millions of yen)

Net Sales¥294,237(Millions of yen)

28.6%
¥83,988(Millions of yen)

Commercial Store
Systems BusinessNote: Percentages have been adjusted to add to 100%.

Leveraging the power of quality and global operations
to create corporate value from the environment is thecore management philosophy of the Sanden Group.
During the fiscal year, group companies took manyactions for achieving three key strategic goals: “Sales
Growth Centered on Environmental Technologies,”“Strengthening Business Competitiveness Based on
Reform of the Corporate Structure,” and “Management
Reforms Based on the Reform of Management
Systems”.
In the fiscal year that ended on March 31, 2016, net
sales decreased 4.2% to ¥294,237 million, operating
income was down 41.6% to ¥5,494 million, ordinary
income was down 40.5% to ¥6,138 million, but profit
attributable to owners of parent rose 24.8% to ¥6,965
million.
6

Annual Report 2016

Group companies worked on developing highly
advanced products that precisely target the environmental needs of customers. These activities resulted in theprovision of products that provide value for customers byfocusing on the themes of compact size, light weight,
and heat pumps. Segment sales were firm in Europe andAsia and new business in China contributed to sales
growth. However, total segment sales declined becauseof a downturn in automobile sales in North America andJapan.
Investments to develop future environmental technologies and the decline in segment sales had a negative
effect on earnings. However, segment earnings
increased because of cost-cutting measures, including
an increase in the internal production of parts and structural reforms for procuring parts outside Japan, and an
improvement in productivity.
As a result, segment sales decreased 0.9% to¥198,385 million and operating income increased 16.4%
to ¥6,523 million.

Sales and Operating Income (Loss)(Billions of yen)

182

180
160
140

200

141

200

198

153

141

120
100
80
60
40
20
0
–20

3.8

1.7

5.6

6.5

(2.8)
2011

2012
Sales

2013
Operating Income (Loss)20142015 (FY)Commercial Store Systems Business

Living & Environment Systems
and Other Business

The retail store systems sector continued to create ​comprehensive proposals combining products, systems,
and services that reflect changes in customers’ interest inenvironmental issues and their lifestyles. Despite these
activities, a decline in demand following the growth in theprevious fiscal year caused this sector’s sales to decrease.
In the vending systems sector, there were extensive
measures to develop environmentally responsible products,
chiefly vending machines incorporating our exclusive CO2heat pump. We also expanded operations to include
coffee servers and other new products. However, sales
decreased primarily because of lower demand in Japan
associated with capital expenditures.
Although we continued to use a variety of actions for
improving operations in this segment, chiefly by cutting
costs and boosting productivity, the decline in sales
caused earnings to fall.
As a result, segment sales decreased 11.5% to¥83,988 million and operating income was down 69.5%
to ¥1,894 million.

Based on our core strategies for future growth, we arecontinuing to work on increasing sales of Eco Cute, aheat pump hot water supply system using a natural CO2
refrigerant, on a global scale. In addition, we continued
to make substantial capital expenditures for the innovative technologies needed for hot water heaters and otherproducts that use environmental technologies. The goalof these activities is extending operations to morebusiness domains.
Accompanying the rising awareness of the naturalenvironment on a global scale, in recent years, manylaws have been passed with aims that include not only
reducing electric power consumption of products but
also reducing the environmental burden over the fullproduct life cycle. Sanden also, through further development of its lineup of products, is responding quickly toneeds arising along with market growth.

Sales and Operating Income

Sales and Operating Income (Loss)(Billions of yen)(Billions of yen)

100

15

94
83

81

80

80

65

9

60

11.8

11.8

11.5

12

9.0

8.1

6
40

3

20
0

3.7

0.5
2011

2012
Sales

3.5
2013
Operating Income

6.2
2014

0

1.8
2015 (FY)

–3

(1.9)

(1.4)
2011

2012
Sales

(2.4)

(2.4)
2013

2014

(2.9)
2015 (FY)Operating Income (Loss)

Sanden Holdings Corporation

7

Topics

The following introduces the Company’s activities from April 2015 to March 2016.

SANDEN BE

SANDEN AT

SANDEN EP

SANDEN LS

SANDEN RS

SANDEN AC

SANDEN AS

SANDEN HOLDINGS CORPORATION

April 2015: Transformation to holding company configuration
To enhance global management functions, increase business competitiveness,
strengthen new product development, and improve group management efficiency,
the Company made the transformation to a holding company configuration as ofApril 1.

May 2015: Began production of compact, energy-saving
compressors for car air conditioners
The Company developed a new type of variable compressor for car air conditioners and began to supply units to PSA Peugeot Citroen. Sanden Manufacturing
Europe S.A.S. produces the units locally.

SN compressor

May 2015: New office opens in Paris, France
SandenVendo France Branch, a new office opened in Paris, France, will engage in
the Commercial Store Systems Business.

SandenVendo France

August 2015: New HVAC line begins production in the Polishplant
A new production line for car air conditioners of Sanden Manufacturing Poland
Sp.z o.o. began production. It will supply air conditioners to truck manufacturers in
Europe.

Sanden Manufacturing Poland Sp.z o.o.

February 2016: New production line added for compressor
production in the Polish plant
Sanden Manufacturing Poland Sp.z o.o. has added a second compressor production line. With two lines, the Polish plant has doubled its previous capacity.

Exhibited at Global Trade Shows

8

São Paulo, Brazil

Milan, Italy

Orlando, United States

Tokyo, JapanTokyo, Japan

Exhibit of vending machinesand coffee servers at EXPOVENDING

Vending machines on display
at VENDITALIA Special
Exhibition

Heat pump hot water supply
system on exhibit at AHR2016 EXPO

Products using natural refrigerants (CO2) at a Supermarket
Trade Show

Introduction of heat pumps
with cutting-edge technology
and products using CO2 at
Eco Products 2015

Annual Report 2016

CSR

The Sanden Group has established the principle that
“Sanden’s CSR Programs essentially put its Corporate
Philosophy into practice.”
There has been an increasing interest in companies’ CSR
activities among our stakeholders including customers worldwide. Sanden believes that it is necessary to create frameworks that can be implemented easily and formulate thecontent of specific action plans to further its CSR activities.
Accordingly, in fiscal 2014, Sanden established its CSR
Promotion Committee.
With this committee as the focal point, the CSR issues
that the Sanden Group as a whole should address are
selected. Additionally, linkages are drawn between theseissues and the group’s Corporate Philosophy. The CSR
priority issues are then established provisionally based on“analysis of importance for management” and “analysis ofimportance from the perspective of society.”
In fiscal 2015, we prepared a mapping of the importanceof related issues in each division, and, while receiving outside opinions, we have been verifying Sanden’s priority CSR
issues. (Please refer to “Steps toward Identification ofPriority CSR Issues” shown on the right.)

Steps toward Identification of Priority CSR Issues
Step 0

1 Reconfirmation of the Corporate Philosophy

The 10 principles of the Corporate Philosophy (5 Universal Values Sharedby the Global Community and 5 items on Sanden’s Basic Stance toward
Stakeholders) will be reconfirmed, and then, how these principles are being
put into action in the group as a whole will be confirmed.
Step 02 Selection of CSR Items

In this step, reference will be made to international CSR standards andguidelines as they relate to the 10 principles, and the necessary CSR
activities will be selected.
Step 03 Linkages between the Corporate Philosophy and CSR Items

By drawing linkages between the Corporate Philosophy and CSR items,
the necessary action plans and schedules will be prepared in eachbusiness domain.
Step 04 Analysis of Materiality for Sanden Management

In this step, an analysis will be made of the importance (materiality) for
Sanden management of each of the CSR items that have been selected.
Consideration will be given to medium-term industry trends and analyses of
Sanden’s strengths and weaknesses.
Step 05 Analysis of Materiality in Light of Social Requirements

The requests and expectations of stakeholders that have been expressed
to Sanden will be regarded as social requirements, and analysis will be
conducted of the importance (materiality) of each of the selected
CSR items.
Step 06 Identification of Priority CSR Issues

The priority CSR issues will be identified through the six-step processdescribed above, and a report on the process and approach will be made.

CSR Activities
The Sanden Group believes that it is very important for all employees to put the content of its “Corporate Philosophy”
into practice in activities every day and that putting ethics into practice is synonymous with its CSR.
June 2015/Poland

Fire Drill in Poland

June/August 2015/United States

U.S. Study Tour
Sanden Manufacturing Poland
Sp.z o.o. held a “Safe With Us” eventfor primary school children in
Polkowice. The event included a fire
drill to help raise awareness of safety
among the children.

June 2015/Malaysia

Green Wave Activities in Malaysia
Tree-planting activities as part of Green Wave 2015 activities

Sanden International (U.S.A.) Inc.
received middle school students
from Isesaki City in Japan forstudy in the United States. Before
the study tour, the students
learned about the content of
Sanden’s business activities andits history in study meetings.

January 2016/JapanThe First Sanden Cup Soccer Tournament
To promote sports among the children
in the regions and promote vitalizationof the regional community, Sanden held
the First Sanden Cup soccer games in
Sanden Football Park in Isesaki City,
Gunma Prefecture. A total of 10 teamsof primary school students in the prefecture competed in the event.

Sanden Holdings Corporation

9

Corporate GovernanceFundamental Corporate Governance Policies
Employing the “company with auditors” model based onJapan’s Corporate Law, Sanden has created a corporate
governance system that includes a Board of Directors, Audit& Supervisory Board Members, an Audit & Supervisory
Board, and an accounting auditor.
The Board of Directors has 13 members, including
2 outside Directors, while the Audit & Supervisory Board
has 4 members, including 3 outside Audit & Supervisory
Board Members.
To strengthen management oversight functions, Sanden
appoints fully independent outside Directors and outside
Audit & Supervisory Board Members. Currently, Sanden’s 4
outside executives are certified as “independent” under the
Securities Listing Regulations of the Tokyo Stock Exchange.
By setting Directors’ terms to one year, Sanden has put inplace a system to ensure management transparency andone that enables quick responses to changes in the market
environment. Also, by adopting an executive officer system,
the Sanden Group aims to strengthen business executionfunctions and increase management efficiency. Moreover,
the Management Committee and Board of Directors deliberate in a timely fashion on important matters in complianceand risk management. Furthermore, by putting in place internal and external hot lines as an internal reporting system,
Sanden is working to strengthen risk management, corporate ethics, and legal compliance. In view of such factors as
Sanden’s business category, history, and culture, theCompany has judged that the current system is appropriate
for the corporate governance of the Sanden Group.
The Board of Directors made an analysis of whether
the Board of Directors as a whole is functioning effectively from a range of different points of view, and, using
the results of this analysis, made an assessment of thestatus of the Board of Directors system, composition,
operation, and other matters.
As a result, the assessment confirmed that the current
Board of Directors was functioning effectively and recognized that there were issues related to the depth of
discussions of medium- to long-term management strategy and corporate plans.
Going forward, the Company should work to make theBoard of Directors more effective and take initiatives toattain sustainable growth as well as increase corporate
value in the medium-to-long term.

Sanden’s Corporate Governance and Internal Control Organization Units and Their Interrelationships

General Meeting of Shareholders
Appointment/Removal

Appointment/Removal

Audit & Supervisory Board
Board of Directors

2 Outside Directors(13 Directors)(2 Independent Directors)(4 Audit & Supervisory Board Members)

3 Outside Audit &Supervisory Board Members

Supervision/advice(2 Independent Audit &Supervisory Board Members)

Representative Director
PresidentInternal
Auditors

Management
Committee
Drafting Management
Strategies

Business
Execution

Directors

Corporate Officers

Internal
Auditing

Accounting
AuditorAccounting Auditing

Auditing

The Company

Business Companies, Subsidiaries,
and Affiliated Companies
As of June 201610 Annual Report 2016

Directors/Audit & Supervisory Board Members/Officers

DIRECTORSOFFICERS

Masayoshi Ushikubo

Ryuhei Ushikubo

Shinji Ichikawa

Takashi Nogi

Director & Chairman

Senior Director

Senior Corporate Officer

Corporate Officer

Kin-ei Kanda

Toshio Yokomuro

Robert Kheng

Tsuneki Fujikura

Director & President

Director

Senior Corporate Officer

Corporate Officer

Tsutomu Sakakibara

Shinji Maruyama

Tadashi Yoshida

Masanori Kojima

Director & Vice President

Director

Senior Corporate Officer

Corporate Officer

Mark Ulfig

Nobuhiro Umemura

Hiroshi Takahashi

Norio Kamikura

Director & Vice President

Director

Corporate Officer

Corporate Officer

Katsuya Nishi

Hideto Ozaki

Nobuzumi Fujii

Tetsuya Satomi

Director & Vice President

Director (outside)

Corporate Officer

Corporate Officer

Mitsunori Kodaka

Hideo Hohgi

Takashi Shimomura

Akishi Kimura

Senior Director

Director (outside)

Corporate Officer

Corporate Officer

Seiji Shimazaki

Kenichi Yamamoto

Yuri Tsuji

Senior Director

Corporate Officer

Corporate Officer

Yoshihiro Saito
AUDIT & SUPERVISORY BOARD MEMBERS
Mitsugi Takahashi

Ichiro Yumoto

Audit & Supervisory Board
MemberAudit & Supervisory Board
Member (outside)

Hiroshi Yomo

Kazumichi Matsuki

Audit & Supervisory Board
Member (outside)

Audit & Supervisory Board
Member (outside)

Corporate Officer

As of June 2016
Sanden Holdings Corporation 11

Financial Section
Management’s Discussion & Analysis
Net Sales

In the Vending Systems Sector of the Commercial Store Systems

On a consolidated basis of the Sanden Group, net sales for fiscal

Business, Sanden aggressively developed environment-friendly

year 2015, ended March 31, 2016 decreased by 4.2%, or ¥12.7

products, especially its unique vending machines equipped withbillion, compared with the previous fiscal year, to ¥294.2 billion

CO2 heat pumps, and worked to expand into new business areas,($2,611.2 million).

including coffee servers. However, in the domestic market, because

First, in the Automotive Systems Business, Sanden accuratelyof the downturn in capital investment, sales were below theidentified the needs of customers for environment-friendly products,­previous fiscal year.

proceeded with the development of cutting-edge items, and offered

The segment’s operating income was below the level of thevalue-added products focusing especially on more compact, light-­previous year, despite continued initiatives to improve profitability,

er, and more heat-pump type products. As a result, sales in Europe

mainly through reduction in costs and improvements in productivity,and Asia were firm, and higher sales were reported in newly devel-but income declined owing to the decrease in sales.

oped markets in China. However, sales in North America and JapanAs a result, segment sales were ¥83.9 billion ($745.3 million),were below the previous fiscal year because of the decline indown 11.5% from the previous fiscal year, and operating income­automobile sales in those markets.

was ¥1.8 billion ($16.8 million), representing a decrease of 69.5%

Regarding income, although Sanden invested in the developmentfrom the previous fiscal year.

of environmental technologies with an eye to the future and sales

In the Eco Systems and Other Products Business, in line with its

decreased, as a result of shifting to more in-house production andpriority basic strategy, Sanden is promoting the global development

reforms in the structure of procurement toward more global pur-of sales of its “Eco Cute,” natural CO2 refrigerant heat-pumpchasing, income increased because of reduction in costs and the­hot-­water supply system products. In addition, in the field of hot-­results of improvements in productivity.

water supply systems that apply environmental technologies,

As a result, segment sales were ¥198.3 billion ($1,760.6 million),

Sanden is investing aggressively in the development of its own tech-down 0.9% from the previous fiscal year. Operating income was

nologies and is taking initiatives to expand its business domains.

¥6.5 billion ($57.8 million), representing an increase of 16.4% fromthe previous fiscal year.
Second, in the Retail Store Systems Sector of the Commercial

Costs, Expenses, and Earnings

Store Systems Business, Sanden continued to offer comprehensive

Net sales decreased by 4.2%, or ¥12.7 billion, to ¥294.2 billion

proposals for products, systems, and services that respond to ris-($2,611.2 million) as mentioned above. Cost of sales decreased bying environmental awareness and changes in lifestyles. However,

3.5%, or ¥8.8 billion, compared with the previous fiscal year, toin part because the expansion in demand that occurred in the¥240.9 billion ($2,138.1 million). Consequently, gross profit amount-­previous fiscal year paused during the fiscal year under review,ed to ¥53.3 billion ($473.1 million), down 6.9%, or ¥3.9 billion, andsales were below the previous year.

the gross profit ratio fell from 18.6% to 18.1%.

Breakdown of Net Sales

4.0%
28.6%

Net Sales

Gross Profit Ratio(Billions of yen)
350

(%)
20

300

Net Sales

15250¥294,237

200(Millions of yen)

10
150

67.4%

100

5

50

Automotive Systems Business Group
Commercial Store Systems Business Group
Living & Enviroment Systems
and Other Business Group
Note: Percentages have been adjusted to add to 100%.

12 Annual Report 2016

0

2010

2011

2012

2013

2014

2015

(FY)

0

2010

2011

2012

2013

2014

2015

(FY)

offset by decreases in cash and deposits and decreases in notes

SG&A expenses decreased to ¥47.8 billion ($424.3 million), andand accounts receivable-trade.

the ratio of SG&A expenses to net sales rose 0.7 percentage point,
to 16.3%, compared with the previous fiscal year. Research andTotal liabilities rose by ¥2.2 billion, to ¥225.8 billion ($2,004.0

development (R&D) expenses, which are charged to cost of sales

million), mainly reflecting an increase in interest-bearing debt andand SG&A expenses, increased 0.4%, to ¥6.7 billion ($60.0 million).

other factors, which were partially offset by a decline in notes and

The ratio of R&D expenses to net sales rose 0.1 percentage point,

accounts payable-trade and other factors.
Total net assets decreased by ¥0.1 billion, to ¥75.5 billion

to 2.3%, compared with the previous fiscal year.

($670.0 million), as a result of changes in the foreign currency trans-

Although the Company invested aggressively in the developmentof environmental technology concerning CO2 compressors forlation adjustment account and other factors. Thus, the total net

future growth, the Company recorded an increase in income due toassets ratio was 23.3%, compared with 23.6% at the end of thethe effects of continuous improvements in productivity and productprevious fiscal year.

cost reduction, local production, and self-manufacture that werelaunched in the previous year.
Liquidity

Operating income amounted to ¥5.4 billion ($48.7 million),(1) Cash Flows­compared with ¥9.4 billion in the previous fiscal year.
Other income (expenses) amounted to a gain of ¥2.4 billion

Net cash provided by operating activities for the fiscal year under($21.3 million), compared with a loss of ¥1.4 billion in the previous

review amounted to ¥6.3 billion ($55.9 million), which was ¥9.9 bil-fiscal year.

lion lower than the ¥16.2 billion reported in the previous fiscal year.
Principal factors accounting for this were a ¥7.9 billion ($70.1 mil-As a result of the above factors, income before income taxes
was ¥7.9 billion ($70.1 million), compared with ¥7.9 billion in thelion) inflow of income before income taxes and non-controllingprevious fiscal year. Net income attributable to owners of the parent­interests and ¥12.3 billion ($109.8 million) in depreciation andamounted to ¥6.9 billion ($61.8 million), compared with ¥5.5 billion

amortization expenses. These cash inflows were offset in part by anin the previous fiscal year. Return on equity was up from 8.5% toincrease in inventories of ¥5.0 billion ($44.7 million) and an increase

9.9%.

in equity in net income of unconsolidated subsidiaries and affiliatesof ¥4.1 billion ($36.8 million).
Net cash used in investing activities amounted to ¥14.9 billion

Financial Position($132.5 million), which was ¥1.6 billion higher than the ¥13.3 billion

Total assets at March 31, 2016 increased by ¥2.0 billion, to ¥301.3

used in the previous year. Principal factors accounting for this werebillion ($2,674.1 million), mainly reflecting increases in inventory

purchases of property, plant and equipment, mainly for overseas

assets and the effects of changes in the ownership ratios andinvestments related to the transition to local production andincreases in capital in associated companies, which were partiallyin-house production.

Net Income Attributable to Ownersof the Parent

Net Income per ShareTotal Assets/Capital Adequacy Ratio(Billions of yen)
7

(Yen)
50

(Billions of yen)
300

(%)
30

250

25

200

20

150

15

100

10

50

5

6
40
5
30

4
3

20

2
10
1
0

2010

2011

2012

2013

2014

2015

(FY)

0

2010

2011

2012

2013

2014

2015

(FY)

0

2010

2011

2012

2013

2014

2015 (FY)0

Total Assets (left scale)
Capital Adequacy Ratio (right scale)

Sanden Holdings Corporation 13

Net cash provided by financing activities increased to ¥6.0 billion

The Sanden Group aims to maintain a firm financial position and($53.8 million). Factors accounting for this were proceeds frombelieves the net cash provided by operating activities, indirect

long-term loans payable of ¥13.9 billion ($123.8 million) and a net

financing through loans and the issuance of bonds, and direct

increase in short-term loans payable of ¥6.5 billion ($57.9 million),

financing through the issuance of stock provide possible sources ofwhich were offset by the repayment of long-term loans payable offunds for future growth.

¥10.5 billion ($93.3 million).
As a result of these cash flows, cash and cash equivalents at theend of the fiscal year were ¥17.4 billion ($155.1 million), which wasBusiness and Other Risks¥3.1 billion lower than the cash and cash equivalents of ¥20.5 bil-

The following is an overview of major business and other risks

lion at the end of the previous fiscal year.

faced by the Sanden Group that may significantly affect investors’decisions. The Sanden Group examines risks and takes appropri-(2) Capital Demands

ate measures to control risks. Please note that forward-looking

The Sanden Group requires working capital primarily for the pur-statements below are based on Sanden Group judgments made atchase of materials and parts for products manufactured by thethe end of the fiscal year under review.

Sanden Group, manufacturing costs, and operating expenses suchas SG&A expenses.
Moreover, funds for capital investment are mainly required for(1) Economic Conditions
The Sanden Group mainly sells automotive air-conditioning sys-enhancing both local production and self-manufacture to strength-

tems, air-conditioner compressors, vending machines, and refriger-

en the global production system and developmental facilities, main-

ated showcases throughout the world. Demand for these products

taining and renewing facilities related to streamlining, and acquiring

is affected by economic conditions in the various countries andmolds for production. In the fiscal year under review, capital invest-

regions in which these products are sold. In particular, automotive

ments principally comprised investments related to the Group’s

market trends in North America, Europe, China, and elsewhere in

Automotive Systems Business in Japan and overseas.

Asia, where we operate the Automotive Systems Business, may
affect the Sanden Group’s business results and financial position.

(3) Financing
With regard to financing, the Sanden Group makes decisions(2) Fluctuations in Exchange Rates

according to the intended use of funds as well as the timing, dura-

The Sanden Group’s global operations, including its Automotive

tion, and the region in which the funds are required.

Systems Business, involve foreign currency transactions. In particu-

The Sanden Group companies principally secure the requiredlar, exchange rate fluctuations in the Sanden Group’s major trans-

working capital by short-term bank loans. As of March 31, 2016,

action currencies, the U.S. dollar and the Euro, and currency

short-term bank loans amounted to ¥52.8 billion ($469.2 million)

fluctuations in China and other parts of Asia may affect the Sanden

and were denominated primarily in Japanese yen, the U.S. dollar,

Group’s business results and financial position.

and the Euro.

In addition, the currencies stated in the financial statements ofFunds for production facilities are obtained through long-term

consolidated overseas subsidiaries and companies accounted

loans. As of March 31, 2016, long-term bank loans amounted tofor by the equity method have been translated into Japanese yen¥76.0 billion ($675.0 million). A large part of the long-term bankand recorded in the Company’s consolidated financial statements.

loans was borrowed with fixed interest rates from financial institu-

Therefore, the translation rate may affect net income and stock-

tions. It included ¥13.9 billion ($123.8 million), which was borrowed

holders’ equity as accounted for in the consolidated financial

during the fiscal year under review, mainly in Japan for investment­statements.

in facilities.
The Sanden Group considers interest rates, the market environ-(3) Changes in Raw Material and Parts Market Conditions

ment, the ratio of direct and indirect fund-raising, bond ratings, andOperations of the Automotive Systems Business and thethe business situation between financial institutions and the Sanden

Commercial Store Systems Business primarily involve the manufac-

Group when deciding on an appropriate long-term fund-raisingture and supply of products and systems. As these operations

plan.

involve the procurement of raw materials and parts, upswings inthese markets resulting in higher manufacturing costs may affect
the Sanden Group’s business results and financial position.

14 Annual Report 2016

(4) Natural Disasters(8) Reliance on Customer Performance

If the manufacturing and business bases of the Sanden GroupThe Sanden Group provides products to automobile and beverage­suffer serious damage as a result of a natural disaster such as an

manufacturers around the world. Therefore, customer performanceearthquake, the Sanden Group’s business results and financial

and other factors that are beyond the control of the management of

position may be impacted by the halting of production activities andthe Sanden Group may affect the Group’s business results anddelay in the deliveries of materials and parts.

financial position.

(5) New Product Development(9) Limitations on Intellectual Property Protection

The operations of the Automotive Systems Business and the

The Sanden Group has accumulated a wide range of proprietary

Commercial Store Systems Business extend throughout the worldtechnologies, know-how, and other intellectual property through its

and encompass the development of cutting-edge technologies anddevelopment activities over the long period since its establishment.

the application of those technologies to products. At times, theLegal restrictions in certain regions may prevent the Sanden Group

Sanden Group may not be able to fully predict or respond tofrom completely protecting its intellectual property or restrain the­market trends and changes, and this may have an impact on the

Sanden Group from fundamentally restricting third parties to manu-

success of product development and market introduction. These

facture imitations of the Sanden Group’s products through the use

circumstances may affect the Sanden Group’s business resultsof its intellectual property.

and financial position.
(10) Product Liability(6) Potential Risks Associated with International Operations
and Entry into Overseas Markets

The Sanden Group is continuing quality control initiatives based on
its Sanden Total Quality Management (STQM). However, product

The operations of the Automotive Systems Business and theliability claims related to items manufactured by the Sanden Group

Commercial Store Systems Business encompass development,in the past, at present, and into the future could affect the Sanden

manufacturing, and sales bases located in 23 countries and regions

Group’s business results and financial position.

in North America, Europe, China, and elsewhere in Asia. Businessactivities in these countries and regions are subject to the following(11) Legal and Regulatory Risks

risks:The Sanden Group is subject to various governmental regulations in• Changes in and revisions to laws and regulations in countries in

the countries and regions in which it operates, including those relat-

which the Sanden Group operates,

ed to business investment permits, export restrictions, taxation, the• Changes in the economic and political climate,environment, and other matters. In the event that these regulations• Unstable political situations, including wars,

are changed or new regulations are introduced, this could affect the• Labor disputes, andSanden Group’s business results and financial position.

• Marine transport-related strikes.
Any of the aforementioned events may affect the Sanden Group’sbusiness results and financial position.

(12) Financial Covenants of Fund Procurement
The Company has entered into syndicated loan contracts with several financial institutions for stable funding procurement, and such(7) Price Competition

contracts included certain financial covenants. If the Sanden GroupThe Sanden Group’s operating conditions are marked bybreaches such provisions, such loans may be accelerated, which­increasingly fierce price competition in the automobile and vending

may, in turn, affect the Sanden Group’s financial condition. As

machine industries, and demands from automobile and beveragedescribed in Note 9 to the consolidated financial statements, themanufacturers to lower prices intensify every year.

Sanden Group has not breached any of these provisions.

The Sanden Group believes that its products possess a competitive advantage in terms of quality, cost, and technology. However,in the aforementioned difficult business environment, there is no
guarantee of maintaining such advantages, including the supplyof materials and parts, and this may affect the Sanden Group’sbusiness results and financial position.

Sanden Holdings Corporation 15

Consolidated Balance Sheets
Sanden Holdings Corporation and Consolidated Subsidiaries
March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 1)

Millions of yen

2015

2016

¥ 20,597$  155,227

62,99825,3994,189(1,941)47,4192,735
12,349173,749

555,493
207,436
48,793(16,533)
448,926
20,935
114,678
1,534,975

21,343
7,860
115
2,765
4,906
1,816
38,80813,194
12,565
62
2,191
4,823
1,828
34,666

189,41269,7551,020
24,53843,53916,116344,408

Property, plant and equipment, at cost (Note 9):Land����������������������������������������������������������������������������������������������������������������������������������������������������
18,697
Buildings and structures������������������������������������������������������������������������������������������������������������������������
62,489Machinery and equipment��������������������������������������������������������������������������������������������������������������������� 105,423
Furniture and fixtures����������������������������������������������������������������������������������������������������������������������������
42,640
Lease assets����������������������������������������������������������������������������������������������������������������������������������������
20,885Construction in progress�����������������������������������������������������������������������������������������������������������������������
7,943  Total������������������������������������������������������������������������������������������������������������������������������������������������ 258,079
Accumulated depreciation��������������������������������������������������������������������������������������������������������������������� (168,523)   Net property, plant and equipment�����������������������������������������������������������������������������������������������������
89,555

19,24664,096111,930
37,51820,1405,123
258,054(167,205)
90,849165,930
554,570
935,596
378,416
185,347
70,4912,290,370(1,495,589)
794,772

Total assets ����������������������������������������������������������������������������������������������������������������������������������������� ¥301,325¥299,265$2,674,165

ASSETS2016

Current assets:
Cash and time deposits (Notes 6, 9 and 15)������������������������������������������������������������������������������������������� ¥ 17,491
Receivables (Notes 6 and 9):   Trade notes and accounts�����������������������������������������������������������������������������������������������������������������
62,593   Unconsolidated subsidiaries and affiliates�������������������������������������������������������������������������������������������
23,374  Other�����������������������������������������������������������������������������������������������������������������������������������������������
5,498   Allowance for doubtful accounts��������������������������������������������������������������������������������������������������������
(1,863)Inventories (Notes 3 and 9)��������������������������������������������������������������������������������������������������������������������
50,585
Deferred income taxes (Note 5)��������������������������������������������������������������������������������������������������������������
2,359
Prepaid expenses and other current assets��������������������������������������������������������������������������������������������
12,922   Total current assets �������������������������������������������������������������������������������������������������������������������������� 172,961

Investments and other assets:
Investment securities (Notes 4 and 6):   Unconsolidated subsidiaries and affiliates�������������������������������������������������������������������������������������������
  Other�����������������������������������������������������������������������������������������������������������������������������������������������
Net defined benefit asset (Note 8)����������������������������������������������������������������������������������������������������������
Deferred income taxes (Note 5)��������������������������������������������������������������������������������������������������������������
Intangible assets�����������������������������������������������������������������������������������������������������������������������������������
Other���������������������������������������������������������������������������������������������������������������������������������������������������
   Total investments and other assets����������������������������������������������������������������������������������������������������

See accompanying notes.

16 Annual Report 2016

Thousands of
U.S. dollars (Note 1)

Millions of yen

2015

2016

¥ 47,937
10,754$  469,231
181,460

56,9071,142
11,302
828
4,509
3,409
1,325
—
7,805
145,923

488,276
9,771
99,334
6,043
37,974
23,58013,76453
77,946
1,407,463

55,621
3,452
179
305
4,800
2,867
67,22862,962
3,657
179
2,017
4,755
4,091
77,663493,619
30,635
1,588
2,706
42,59825,443596,627

11,037
3,747
54,021

11,037
4,453
48,43897,94933,253
479,419(1,221)
67,584(1,190)62,739(10,835)
599,787

2,496
(147)
1,464
(1,299)
2,513

4,625
(102)
4,934
(1,642)
7,814

22,151(1,304)
12,992(11,528)
22,302

Non-controlling interests in consolidated subsidiaries�������������������������������������������������������������������������
5,405
Total net assets��������������������������������������������������������������������������������������������������������������������������������������� 75,503   Total liabilities and net assets�������������������������������������������������������������������������������������������������������������� ¥301,325

5,123
75,677¥299,265

47,967670,065$2,674,165

LIABILITIES AND NET ASSETS

2016

Current liabilities:
Short-term bank loans (Notes 6 and 9)����������������������������������������������������������������������������������������������������� ¥ 52,873
Long-term debt due within one year (Notes 6 and 9)��������������������������������������������������������������������������������� 20,447
Payables (Note 6):   Trade notes and accounts������������������������������������������������������������������������������������������������������������������� 55,019   Unconsolidated subsidiaries and affiliates���������������������������������������������������������������������������������������������
1,101  Other������������������������������������������������������������������������������������������������������������������������������������������������� 11,193
Income taxes payable (Notes 5 and 6)������������������������������������������������������������������������������������������������������
681
Accrued employees’ bonuses������������������������������������������������������������������������������������������������������������������
4,279
Accrued liabilities������������������������������������������������������������������������������������������������������������������������������������
2,657
Lease obligations due within one year (Notes 6 and 9)������������������������������������������������������������������������������
1,551
Deferred income taxes (Note 5)����������������������������������������������������������������������������������������������������������������
6
Other current liabilities����������������������������������������������������������������������������������������������������������������������������
8,783   Total current liabilities������������������������������������������������������������������������������������������������������������������������� 158,593
Long-term liabilities:
Long-term debt due after one year (Notes 6 and 9)�����������������������������������������������������������������������������������
Net defined benefit liability (Note 8)����������������������������������������������������������������������������������������������������������
Officers’ retirement benefits��������������������������������������������������������������������������������������������������������������������
Deferred income taxes (Note 5)����������������������������������������������������������������������������������������������������������������
Lease obligations due after one year (Notes 6 and 9)��������������������������������������������������������������������������������
Other noncurrent liabilities (Note 13)��������������������������������������������������������������������������������������������������������
   Total long-term liabilities���������������������������������������������������������������������������������������������������������������������
Contingent liabilities (Note 12)
Net assets (Note 10):Stockholders’ equity:
Common stock:   Authorized: 396,000,000 shares  Issued:
140,331,565 shares��������������������������������������������������������������������������������������������������������
Capital surplus���������������������������������������������������������������������������������������������������������������������������������������
Retained earnings�����������������������������������������������������������������������������������������������������������������������������������
Treasury stock, at cost:   2,222,736 and 2,208,161 shares in 2016 and 2015, respectively����������������������������������������������������������
   Total stockholders’ equity��������������������������������������������������������������������������������������������������������������������
Accumulated other comprehensive income:Net unrealized gains (losses) on securities, net of taxes�����������������������������������������������������������������������������
Unrealized gains (losses) on hedging derivatives, net of taxes��������������������������������������������������������������������
Foreign currency translation adjustments�������������������������������������������������������������������������������������������������
Remeasurements of defined benefit plans, net of taxes�����������������������������������������������������������������������������
   Total accumulated other comprehensive income�����������������������������������������������������������������������������������

See accompanying notes.

Sanden Holdings Corporation 17

Consolidated Statements of Income
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 1)

Millions of yen

2016

Net sales (Note 19)������������������������������������������������������������������������������������������������������������������������������������ ¥294,237
Cost of sales�������������������������������������������������������������������������������������������������������������������������������������������� 240,926
Gross profit���������������������������������������������������������������������������������������������������������������������������������������������� 53,311
Selling, general and administrative expenses (Note 20)��������������������������������������������������������������������������� 47,816
Operating income (Note 19)����������������������������������������������������������������������������������������������������������������������
5,494
Other income (expenses):
Interest and dividend income�������������������������������������������������������������������������������������������������������������������
237
Exchange gains (losses), net��������������������������������������������������������������������������������������������������������������������
(1,248)Equity in net income of affiliates��������������������������������������������������������������������������������������������������������������
4,147
Interest expense�������������������������������������������������������������������������������������������������������������������������������������
(2,585)
Allowance for doubtful accounts��������������������������������������������������������������������������������������������������������������
—Taxes and dues���������������������������������������������������������������������������������������������������������������������������������������
(486)
Gain (loss) on sales and disposals of property, plant and equipment, net����������������������������������������������������
218
Loss on antitrust law�������������������������������������������������������������������������������������������������������������������������������
—Extraordinary product warranty cost���������������������������������������������������������������������������������������������������������
—Other, net�����������������������������������������������������������������������������������������������������������������������������������������������
2,128   Other income (expenses)���������������������������������������������������������������������������������������������������������������������
2,410
Income before income taxes�������������������������������������������������������������������������������������������������������������������
7,905
Income taxes (Note 5):
Current��������������������������������������������������������������������������������������������������������������������������������������������������
1,196
Deferred�������������������������������������������������������������������������������������������������������������������������������������������������
(987)   Total income taxes������������������������������������������������������������������������������������������������������������������������������
208
Net income�����������������������������������������������������������������������������������������������������������������������������������������������
7,696
Net income attributable to non-controlling interests����������������������������������������������������������������������������
731
Net income attributable to owners of the parent����������������������������������������������������������������������������������� ¥  6,965

2015

2016

¥306,984
249,738
57,246
47,8389,407$2,611,261
2,138,143
473,118
424,352
48,757

226
1,343
2,518
(2,687)(823)(334)(1,008)
(385)
(896)
629
(1,418)
7,988

2,103
(11,075)
36,803(22,941)—(4,313)
1,934——
18,885
21,38870,154

1,280
629
1,909
6,078
498
¥  5,580

10,614(8,759)1,845
68,2996,487$   61,812

Yen

2016

Amounts per share of common stock:
Net income:  Basic������������������������������������������������������������������������������������������������������������������������������������������������� ¥  50.43  Diluted�����������������������������������������������������������������������������������������������������������������������������������������������—Cash dividends applicable to the year������������������������������������������������������������������������������������������������������ ¥  15.00

U.S. dollars (Note 1)

2015

2016

¥  40.40—¥  10.00$     0.44—$     0.13

See accompanying notes.

Consolidated Statements of Comprehensive Income
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
Millions of yen

Thousands of
U.S. dollars (Note 1)

2016

2015

2016

Net income���������������������������������������������������������������������������������������������������������������������������������������������������� ¥7,696
Other comprehensive income (Note 11):
Net unrealized gains (losses) on securities, net of taxes ��������������������������������������������������������������������������������� (2,111)
Unrealized gains (losses) on hedging derivatives, net of taxes ������������������������������������������������������������������������
(44)
Foreign currency translation adjustments ����������������������������������������������������������������������������������������������������� (2,831)
Remeasurements of defined benefit plans, net of taxes ���������������������������������������������������������������������������������
343
Share of other comprehensive income of affiliates accounted for using equity method ������������������������������������ (1,007)
Total other comprehensive income�������������������������������������������������������������������������������������������������������������������� (5,652)
Comprehensive income�������������������������������������������������������������������������������������������������������������������������������� ¥2,044¥ 6,078$68,299

2,085
(80)
3,121
(1,062)
1,571
5,634¥11,713(18,734)(390)(25,124)
3,044(8,936)(50,159)$18,139¥10,656
1,056$14,767
3,372

Total comprehensive income attributable to:
Owners of the parent����������������������������������������������������������������������������������������������������������������������������������� ¥1,664
Non-controlling interests������������������������������������������������������������������������������������������������������������������������������
380
See accompanying notes.

18 Annual Report 2016

Consolidated Statements of Changes in Net Assets
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Millions of yen
Stockholders’ equity

CommonAs of March 31, 2015stock
Balance at beginning of year
¥11,037
Net income attributable to owners of
the parent������������������������������������������������—Cash dividends paid (¥10.00 per share)�������
—Increase in net unrealized gains (losses)
on securities, net of taxes��������������������������
—Decrease due to changes in fair valueof hedging derivatives�������������������������������
—Adjustments from translation offoreign currency financial statements���������
—Remeasurements of defined benefit plans����
—Increase in non-controlling interests�������������
—Disposal of treasury stock����������������������������
—Acquisition of treasury stock������������������������
—Balance at end of year���������������������������� ¥11,037

Total
stockholders’equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes

Accumulated other comprehensive income
RemeasureTotal
Foreignments ofaccumulated
definedcurrency
othertranslation
benefit plans, comprehensive
adjustments
net of taxes
incomeNoncontrollinginterests inconsolidated
subsidiaries

Total
net assets

CapitalsurplusRetainedearnings

Treasurystock,
at cost¥4,453¥44,239¥(1,178)¥58,553¥2,532¥ (22)¥  807¥  (579)¥2,738¥4,359¥65,651——

5,580(1,382)——

5,580(1,382)

—
—

—
—

—
—

—
—

—
—

—
—

5,580
(1,382)

—

—

—

—

2,093

—

—

—

2,093

—

2,093

—

—

—

—

—

(80)

—

—

(80)

—

(80)

—
—
—
0
—
¥4,453—————¥48,438

—
—
—
0
(12)
¥(1,190)

—
—
—
0
(12)
¥62,739—————¥4,625—————¥(102)

4,126
—
—
—
—
¥4,934—(1,062)———¥(1,642)

4,126(1,062)———¥7,814——764——¥5,123

4,126(1,062)764
0(12)¥75,677

Accumulated other comprehensive income
RemeasureTotal
Foreignments ofaccumulated
definedcurrency
othertranslation
benefit plans, comprehensive
adjustments
net of taxes
incomeNoncontrollinginterests inconsolidated
subsidiaries

Total
net assets

Millions of yen
Stockholders’ equity

As of March 31, 2016
Balance at beginning of year
Change in treasury shares of parent arising from transactions with non-controllingshareholders��������������������������������������������
Net income attributable to ownersof the parent���������������������������������������������Cash dividends paid (¥15.00 per share)�������
Increase in net unrealized gains (losses)
on securities, net of taxes��������������������������
Decrease due to changes in fair valueof hedging derivatives�������������������������������
Adjustments from translation of foreign
currency financial statements��������������������
Remeasurements of defined benefit plans����
Increase in non-controlling interests�������������
Disposal of treasury stock����������������������������
Acquisition of treasury stock������������������������
Balance at end of year��������������������������������

Commonstock

Capitalsurplus¥11,037 ¥4,453

Retainedearnings

Treasurystock,
at costTotal
stockholders’equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes¥48,438¥(1,190)¥62,739¥4,625¥(102)¥4,934¥(1,642)¥7,814¥5,123¥75,677

—

(731)

—

—

(731)

—

—

—

—

—

—

(731)

—
—

—
—

6,965
(1,381)——

6,965(1,381)

—
—

—
—

—
—

—
—

—
—

—
—

6,965
(1,381)

—

—

—

—

—

(2,128)———(2,128)—(2,128)

—

—

—

—

—

—

(44)

—

—

(44)

—

(44)

—
—
—
—
—
—
—
24
—
—
¥11,037 ¥3,747

—
—
—
—
—
¥54,021

—
—
—
456
(488)
¥(1,221)

—
—
—
481
(488)
¥67,584—————¥2,496—————¥(147)(3,470)————¥1,464—343———¥(1,299)(3,470)343———¥2,513——281——¥5,405(3,470)
343
281
481
(488)
¥75,503

Total
stockholders’equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes

Accumulated other comprehensive income
RemeasureTotal
Foreignments ofaccumulated
definedcurrency
othertranslation
benefit plans, comprehensive
adjustments
net of taxes
incomeNoncontrollinginterests inconsolidated
subsidiaries

Total
net assets$(10,560) $556,789$41,045 $  (905)$43,787 $(14,572)

Thousands of U.S. dollars (Note 1)
Stockholders’ equity

As of March 31, 2016
Balance at beginning of year
Change in treasury shares of parent arising from transactions with non-controllingshareholders��������������������������������������������
Net income attributable to ownersof the parent���������������������������������������������Cash dividends paid ($0.13 per share)���������
Increase in net unrealized gains (losses)
on securities, net of taxes��������������������������
Decrease due to changes in fair valueof hedging derivatives�������������������������������
Adjustments from translation of foreign
currency financial statements��������������������
Remeasurements of defined benefit plans����
Increase in non-controlling interests�������������
Disposal of treasury stock����������������������������
Acquisition of treasury stock������������������������
Balance at end of year��������������������������������

Commonstock

CapitalsurplusRetainedearnings$97,949 $39,518 $429,872

Treasurystock,
at cost$69,346 $45,465 $671,609—(6,487)——(6,487)

—

—

—

—

—

—

(6,487)————

61,812(12,255)——

61,812(12,255)

—
—

—
—

—
—

—
—

—
—

—
—

61,812(12,255)

—

—

—

—

—

(18,885)———(18,885)—(18,885)

—

—

—

—

—

—

(390)

—

—

(390)

—

(390)

—
—
—
—
—
—
—
—
—
—
212
—
—
—
—
$97,949 $33,253 $479,419

—
—
—
—
—
—
—
—
—
—
—
—
4,046
4,268
—
—
(4,330)(4,330)——$(10,835) $599,787 $22,151 $(1,304)(30,795)
—
—
3,044
—
—
—
—
—
—
$12,992 $(11,528)(30,795)— (30,795)
3,044
—
3,044
—
2,493
2,493
—
—
4,268
—
—
(4,330)$22,302 $47,967 $670,065

See accompanying notes.

Sanden Holdings Corporation 19

Consolidated Statements of Cash Flows
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Millions of yen

2016

Cash flows from operating activities:
Income before income taxes����������������������������������������������������������������������������������������������������������������������� ¥ 7,905
Adjustments to reconcile net income to net cash provided by operating activities:   Depreciation and amortization���������������������������������������������������������������������������������������������������������������� 12,374   Amortization of goodwill�������������������������������������������������������������������������������������������������������������������������
166   Equity in net income of unconsolidated subsidiaries and affiliates������������������������������������������������������������� (4,147)   Loss (gain) on sales and disposals of property, plant and equipment, net���������������������������������������������������
(218)   Decrease (increase) in assets:    Trade accounts and notes receivable�������������������������������������������������������������������������������������������������� (1,147)   Inventories���������������������������������������������������������������������������������������������������������������������������������������� (5,045)   Accounts receivable–other����������������������������������������������������������������������������������������������������������������� (1,043)    Allowance for doubtful accounts���������������������������������������������������������������������������������������������������������
10   Other current assets��������������������������������������������������������������������������������������������������������������������������
(430)   Increase (decrease) in liabilities:    Trade accounts and notes payable������������������������������������������������������������������������������������������������������
(592)    Accrued employees’ bonuses�������������������������������������������������������������������������������������������������������������
(165)   Accounts payable–other���������������������������������������������������������������������������������������������������������������������
(874)    Other current liabilities and long-term liabilities�����������������������������������������������������������������������������������
184   Income taxes paid��������������������������������������������������������������������������������������������������������������������������������� (1,762)  Other, net���������������������������������������������������������������������������������������������������������������������������������������������� 1,090    Net cash flows from operating activities���������������������������������������������������������������������������������������������� 6,304
Cash flows from investing activities:
Purchases of property, plant and equipment������������������������������������������������������������������������������������������������ (11,141)
Proceeds from sale of property, plant and equipment����������������������������������������������������������������������������������� 1,690
Purchases of intangible assets��������������������������������������������������������������������������������������������������������������������
(950)
Other, net�������������������������������������������������������������������������������������������������������������������������������������������������� (4,530)    Net cash flows from investing activities����������������������������������������������������������������������������������������������� (14,932)
Cash flows from financing activities:
Net increase in short-term bank loans��������������������������������������������������������������������������������������������������������� 6,528
Proceeds from long-term debt�������������������������������������������������������������������������������������������������������������������� 13,960
Repayment of long-term debt��������������������������������������������������������������������������������������������������������������������� (10,516)
Repayment of lease obligations������������������������������������������������������������������������������������������������������������������ (1,713)
Cash dividends paid����������������������������������������������������������������������������������������������������������������������������������� (1,381)
Proceeds from stock issuance to non-controlling shareholders���������������������������������������������������������������������
—Other, net��������������������������������������������������������������������������������������������������������������������������������������������������
(811)    Net cash flows from financing activities���������������������������������������������������������������������������������������������� 6,066
Effect of exchange rate changes on cash and cash equivalents����������������������������������������������������������������
(544)
���������������������������������������������������������������������������
Net increase (decrease) in cash and cash equivalents(3,106)
Cash and cash equivalents at beginning of year�������������������������������������������������������������������������������������� 20,588
Cash and cash equivalents at end of year (Note 15)���������������������������������������������������������������������������������� ¥17,482
See accompanying notes.

20 Annual Report 2016

Thousands of
U.S. dollars (Note 1)

2015

2016

¥ 7,988$  70,154

11,694160(2,518)
1,008

109,815
1,473(36,803)(1,934)(6,181)852(1,191)964
1,431(10,179)(44,772)(9,256)88(3,816)

1,509
803
1,493
(539)
(896)
(355)
16,223(5,253)(1,464)(7,756)
1,632(15,637)
9,673
55,946(12,353)686(1,092)(542)(13,301)(98,872)
14,998(8,430)(40,202)(132,516)

3,817
12,274(15,050)(1,410)(1,382)
195(466)(2,022)610
1,510
19,078¥20,588

57,933
123,890(93,326)(15,202)(12,255)—(7,197)53,833(4,827)(27,564)
182,712$155,147

Notes to Consolidated Financial Statements
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Sanden Holdings
Corporation (the “Company”), a Japanese corporation, and its consolidated
subsidiaries have been prepared in accordance with the provisions set forthin the Japanese Financial Instruments and Exchange Law and its related
accounting regulations, and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different in certain respects
as to application and disclosure requirements of International Financial
Reporting Standards (“IFRS”).
The accounts of the consolidated overseas subsidiaries are prepared inaccordance with either IFRS or generally accepted accounting principles in
the United States (“US GAAP”), with adjustments for four specified items asapplicable. Please refer to “Unification of Accounting Policies Applied toOverseas Subsidiaries for Consolidated Financial Statements” below for
details. The accompanying consolidated financial statements have been
restructured and translated into English (with some expanded descriptions)from the consolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments
and Exchange Law. Some supplementary information included in theJapanese language statutory consolidated financial statements, but notrequired for fair presentation, is not presented in the accompanying­consolidated financial statements.
The consolidated financial statements are stated in Japanese yen, the­currency of the country in which the Company is incorporated and operates.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using the prevailingexchange rate at March 31, 2016, which was ¥112.68 to U.S. $1.00. The
convenience translations should not be construed as representations that theJapanese yen amounts have been, could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
2. Significant Accounting Policies
Consolidation—The consolidated financial statements include the accountsof the Company and its consolidated subsidiaries (52 subsidiaries in 2016
and 55 subsidiaries in 2015). For the purposes of preparing the consolidated
financial statements, all significant intercompany balances, transactions andunrealized profits have been eliminated.
In accordance with the Accounting Principles for Consolidated Financial
Statements (the “Accounting Principles”), all companies are required to consolidate all significant investees, which are controlled through substantial
ownership of majority voting rights or the existence of certain conditions.
The changes in the scope of consolidation are as follows:
Due to completion of liquidation, Sandenvendo (UK) Ltd., Vendo (Europe)Inc., and Kunshan Zhenhua Refrigerating Machine Co., Ltd. were excluded
from the scope of consolidation for the year ended March 31, 2016.
Certain subsidiaries including Sanden Bright Partner Corporation are
excluded from the scope of consolidation because the effect of their sales,
net income or loss, total assets and retained earnings on the accompanying
consolidated financial statements are immaterial.
Financial information of Tianjin Sanden Automotive Air-Conditioning Co.,
Ltd., Sanden Shanghai Refrigeration Co., Ltd., Sanden (Suzhou) PrecisionParts Co., Ltd., Sanden Chongqing Automotive Air Conditioning Co., Ltd.,
Sanden Shanghai Environment Thermal Systems Corp., Sanden Mexicana,

S.A. de C.V., Consorcio Teksan, S.A. de C.V., Sanden Manufacturing Mexico
S.A. de C.V. and Sanden Recursos Mexico SRL. de C.V. for the fiscal year
ended December 31, 2015 is included for the purpose of preparing the consolidated financial statements, with necessary adjustment for significant
transactions that occurred during the period between December 31, 2015
and March 31, 2016.
Equity method—The equity method was applied to the investments in 8
affiliates in 2016 and 2015, by using financial statements for the fiscal yearsof each affiliate some of which differ from those of the Company. Investments
in all other unconsolidated subsidiaries and affiliated companies including
Sanpak Engineering Industries (PVT) Ltd. are stated at acquisition cost. These
companies are not accounted for using the equity method, due to their immaterial impact on the consolidated net income and consolidated retained earnings. Earnings of such companies are recorded in the Company’s books only
to the extent that cash dividends are received.
Allowance for doubtful accounts—Under Japanese accounting standards
for financial instruments, allowance for doubtful accounts provided by theCompany and its domestic subsidiaries consists of the estimated uncollectible amount with respect to identified doubtful receivables and an amountcalculated using an experienced rate with respect to the remaining­receivables.
Consolidated overseas subsidiaries have provided an allowance for­doubtful accounts at the estimated amounts of possible losses.
Inventories—Inventories are principally stated at the weighted-average
cost, unless the market value of inventories declines significantly and the cost
is not expected to be recovered. In such cases, cost is reduced to net realizable value.
Investment securities—Investment securities held by the Company andits consolidated subsidiaries are classified as: a) equity securities issued byunconsolidated subsidiaries and affiliated companies and b) available-for-salesecurities. The Company and its consolidated subsidiaries do not hold trading
securities or held-to-maturity debt securities.
Equity securities issued by unconsolidated subsidiaries and affiliated­companies that are not accounted for using the equity method are statedat acquisition cost and written down to its impaired value if an indicationof impairment is present and the fair value is less than the cost.
Available-for-sale securities for which fair value is readily determinable arestated at market value. Unrealized gains or losses, net of taxes are posted ina separate component of net assets. Available-for-sale securities for which
fair value is not readily determinable are stated at cost.
Those available-for-sale securities which are significantly impaired are
written down to an estimated realizable value regardless whether the fairvalue is readily determinable or not.
Gains and losses on sales of available-for-sale securities are determinedby using the moving average method.
Derivatives and hedges—Derivative financial instruments are stated at fairvalue and changes in the fair value are recognized as gains and losses in the
consolidated statements of income.

Sanden Holdings Corporation 21

If derivative financial instruments are used as hedges and meet certain
hedging criteria, the gains or losses resulting from changes in the fair valueof the derivatives are recorded in accumulated comprehensive income in the
consolidated balance sheets until the related gains and losses on the hedged
items are recognized.
If interest rate swaps used by the Company and its consolidated domestic
subsidiaries meet certain hedge criteria, the net settlement of interest undersuch interest rate swaps is reported as a component of interest on related
hedged assets or liabilities (the “Exceptional method”).
The Company and its consolidated subsidiaries use forward exchange
contracts, currency swaps, interest rate swaps and commodity swaps mainly
for the purpose of mitigating (i) fluctuation risk of foreign currency exchange
rates with respect to receivables in foreign currency and future transactions
in foreign currency, (ii) fluctuation risk of interest rates with respect to longterm debt, and (iii) fluctuation risk of commodity prices of raw materials.
The Company and its consolidated subsidiaries evaluate hedge effectiveness annually by comparing the cumulative changes in fair value of hedged
items with the corresponding changes in the hedging derivatives, except forinterest rate swaps to which the Exceptional method applies.

Income taxes—The provision for income taxes is computed based on­pretax income included in the consolidated statements of income. Deferred
tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the accounting and tax basis ofassets and liabilities. A valuation allowance is recorded to reduce deferred tax
assets to the extent that it is no longer probable that relevant tax benefit will
be realized.

Property, plant and equipment—Property, plant and equipment are statedat cost. Depreciation is computed using the straight-line method. For theCompany and its consolidated domestic subsidiaries, depreciation of assets
whose acquisition costs are between ¥100 thousand and ¥200 thousand isprovided using the straight-line method over three years.
Estimated useful lives are as follows:   Buildings and structures		
8 to 50 years   Machinery and equipment		
3 to 13 years

Provision for directors’ stock compensation—Provision for directors’
stock compensation represents the amounts for future payments of theCompany’s stock to directors. The provision is recognized based on theamount that is expected to be paid, which is determined using the points
allocated to each director as prescribed in the Company’s share delivery­policy.

Goodwill and intangible assets—Goodwill is amortized over a period offive years using the straight-line method. Intangible assets are amortizedusing the straight-line method over the estimated useful lives.
Long-lived assets impairment—Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected to result
from the continued use and eventual disposition of the asset or asset group.
The impairment loss is measured as the amount by which the carrying
amount of an asset or asset group exceeds its recoverable amount, which is
the higher of the discounted cash flows from the continued use and eventual
disposition of the asset or asset group or the net selling price at disposition.
The impairment of assets for certain overseas subsidiaries is accounted forin accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States, which requires longlived assets and certain identifiable intangibles to be held and used by anentity to be reviewed for impairment whenever events of changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Accounting for lease transactions as lessee—For the finance leases
that do not transfer ownership, the Company and its consolidated subsidiaries account for them in the same manner as usual acquisitions. Depreciationof leased assets is computed using the straight-line method over the lease
period with zero residual value.
22 Annual Report 2016Retirement benefits—The Company’s consolidated subsidiaries haveadopted the benefit formula basis for calculation of projected benefit obligation incurred in the current fiscal year. Prior service costs are recognized in
the consolidated statements of income using the straight-line method beginning from the fiscal year in which they are incurred, over years within average
residual periods of service of employees. Actuarial gains and losses are­recognized in the consolidated statements of income using the straight-line
method beginning from the next fiscal year after the year in which they are
incurred, over years within the average residual periods of service of employees. The Company recognizes actuarial gains and losses in the fiscal year
when they are incurred.

Foreign currency translation—Under Japanese GAAP, all receivables andpayables denominated in foreign currencies are translated at the exchange
rate prevailing at the year-end, and differences arising from ­translation are
included in the consolidated statements of income.
Translation of financial statements of overseas subsidiaries—The
balance sheet accounts of overseas subsidiaries and affiliated companies aretranslated into Japanese yen at the year-end rates. Annual revenue andexpense accounts are accumulated amounts of quarterly figures that aretranslated at the quarterly average rates of exchange.
The increase and decrease in net assets resulting from this translation
procedure were reported as foreign currency translation adjustments inother comprehensive income and non-controlling interests in consolidated
subsidiaries.
Unification of Accounting Policies Applied to Overseas Subsidiaries
for Consolidated Financial Statements—The Company adopted Practical
Issues Task Force No. 18, entitled the “Practical Solution on Unification of
Accounting Policies Applied to Overseas Subsidiaries for Consolidated
Financial Statements” (as amended on March 26, 2015, “PITF No. 18”).
PITF No. 18 provides as follows: 1) the accounting policies and procedures
applied to a parent company and its subsidiaries for similar transactions andevents under similar circumstances should, in principle, be unified for the
preparation of the consolidated financial statements; 2) financial statements
prepared by overseas subsidiaries in accordance with either IFRS or US GAAP
tentatively may be used for the consolidation process; and 3) the following
items should be adjusted in the consolidation p­ rocess so that net income isaccounted for in accordance with Japanese GAAP unless they are not material:

(i) Amortization of goodwill(ii)	Actuarial gain and loss of defined benefit plans recognized outside profit
or loss(iii) Capitalization of intangible assets arising from development phases(iv)	Fair value measurement of investment properties and the revaluation
model for property, plant and equipment, and intangible assets
Consolidated statements of cash flows—In preparing the consolidated
statements of cash flows, cash on hand, readily available deposits and highly
liquid short-term investments with maturities not exceeding three months at
the time of purchase are considered to be cash and cash equivalents.
Amounts per share—Basic net income per share of common stock is computed using the weighted-average number of shares of common stock outstanding during the year. Diluted net income per share of common stock is
computed using the weighted-average number of shares of common stock
outstanding during the year after giving effect to the dilutive potential of theshares of common stock to be issued upon the exercise of warrants. Cashdividends per share represent actual amounts declared as applicable to therespective years.
Revenue recognition—The Company and its consolidated domestic subsidiaries generate revenue principally through the sales of finished products.
In the Automotive Systems Business and the Other Business, sales revenue isrecognized when products are shipped and the customer takes ownership. In
the Commercial Store Systems Business, sales revenue is principally recognized when products are shipped. However, certain products require installation by the Company and its consolidated domestic subsidiaries and, in suchcases, sales revenue is recognized when the installation is completed.
Reclassifications—Certain previous year amounts have been reclassified
to conform to the 2016 presentation to reflect the changes of importance onsome accounts. This reclassification had no impact on previously reported
results of operations or retained earnings.
Change in accounting policies(Adoption of revised accounting standards for business combinations in thefiscal year ended March 31, 2016)
Effective from the fiscal year ended March 31, 2016, the Company and its
consolidated domestic subsidiaries have applied “Revised AccountingStandard for Business Combinations” (Accounting Standards Board of Japan(“ASBJ”) Statement No. 21, September 13, 2013 (hereinafter, “Statement No.
21”)), “Revised Accounting Standard for Consolidated Financial Statements”(ASBJ Statement No. 22, September 13, 2013 (hereinafter, “Statement No.
22”)) and “Revised Accounting Standard for Business Divestitures” (ASBJ
Statement No. 7, September 13, 2013 (hereinafter, “Statement No. 7”))
(together, the “Business Combination Accounting Standards”). As a result, theCompany changed its accounting policies to recognize in capital surplus thedifferences arising from the changes in the Company’s ownership interest of
subsidiaries over which the Company continues to maintain control and torecord acquisition related costs as expenses in the fiscal year in which thecosts are incurred. In addition, the Company changed its accounting policy
for the reallocation of acquisition costs due to the completion following provisional accounting to reflect such reallocation in the consolidated financial

statements for the fiscal year in which the business combination took place.
The Company also changed the presentation of net income and the term
“non-controlling interests” is used instead of “minority interests”. Certain
amounts in the prior year comparative information were reclassified to­conform to such changes in the current year presentation.
With regard to the application of the Business Combination AccountingStandards, the Company followed the provisional treatments in Article 58-2
(4) of Statement No. 21, Article 44-5 (4) of Statement No. 22 and Article 57-4
(4) of Statement No. 7 with application from the beginning of the fiscal year
ended March 31, 2016 prospectively.
As a result of the above application, capital surplus as of March 31, 2016
decreased by ¥731 million ($6,487 thousand). Impact of this change on
income before income taxes for the fiscal year ended March 31, 2016 isimmaterial.
In the consolidated statement of cash flows, cash flows from acquisition or
disposal of shares of subsidiaries with no changes in the scope of consolidation are included in “Cash flows from financing activities” and cash flows
from acquisition related costs for shares of subsidiaries with changes in thescope of consolidation or costs related to acquisition or disposal of shares ofsubsidiaries with no changes in the scope of consolidation are included in“Cash flows from operating activities”.
Capital surplus in the consolidated statement of changes in net assets asof March 31, 2016 decreased by ¥731 million ($6,487 thousand).
In addition, impact on per share information is disclosed in “16. Earnings
per Share.”
Additional information(Stock remuneration plan for directors)
Based on a resolution by the meeting of the board of directors on August 7,
2015, the Company introduced a performance-linked stock compensation
scheme, which employs a scheme referred to as the “Executive
Compensation BIP Trust” (hereinafter, the “BIP”), for directors and corporate
officers who have entered into an engagement agreement with the Company(excluding directors and corporate officers residing overseas, outside directors and part-time directors) (hereinafter, “Directors”), for the purpose ofincreasing their awareness of contributing to the growth in business results
and corporate value in the medium-to-long term.
Accounting treatment of the trust is in line with the “Practical Solution on
Transactions of Delivering the Company’s Own Stock to Employees, etc.
through Trusts” (ASBJ Practical Issues Task Force No. 30, March 26, 2015).
(1) Overview of the transaction
The Company entrusts money equivalent to remuneration of Directors underthe BIP. The Company’s shares will be acquired using the entrusted moneyand delivered to Directors based on the attainment of management objectives
and their rank. Directors are eligible to receive the Company’s shares, in­principle, when they retire.
(2) The remaining balance of the Company’s own stock in the trusts
The Company records the remaining balance of the Company’s own stock inthe trusts as treasury stock in the section of net assets by the carrying
amount (excluding the amount of ancillary expenses) in the trust. The carrying
amount and the number of shares of such treasury stock as of March 31,
2016 are ¥478 million ($4,242 thousand) and 837,411 shares, respectively.

Sanden Holdings Corporation 23

(Early adoption of implementation guidance on recoverability of deferred tax
assets)
Effective from the fiscal year ended March 31, 2016, “Revised
Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26, March 28, 2016) is permitted to be applied. The Company
and its domestic subsidiaries adopted Guidance No. 26 from the fiscal year
ended March 31, 2016.
3. Inventories
The following is a summary of inventories at March 31, 2016 and 2015
Millions of yen
2016
2015

Thousands of
U.S. dollars(Note 1)
2016

¥23,304
6,978
13,894
3,241$223,864
75,993
123,961
25,097

Total��������������������������������������������������������� ¥50,585¥47,419$448,926

4. Investment in Securities
The following is a summary of the acquisition costs and book values of availablefor-sale securities with available fair values as of March 31, 2016 and 2015.
Millions of yen
2016
Acquisition
Book
cost
value
Difference

Equity securities���������������������������������������������� ¥2,464
Bonds������������������������������������������������������������
—Others������������������������������������������������������������
—Total��������������������������������������������������������������� ¥2,464¥5,859——¥3,394——¥5,859¥3,394

Acquisition
cost

Book
value

Difference

Equity securities���������������������������������������������� ¥1,523
Bonds������������������������������������������������������������
300
Others������������������������������������������������������������
—Total��������������������������������������������������������������� ¥1,823¥1,476
298
—

¥(46)
(1)
—

¥1,775¥(47)

Securities with book value not exceedingacquisition cost

Securities with book value exceedingacquisition cost

Millions of yen
2015
Acquisition
Book
cost
value
Difference

Equity securities���������������������������������������������� ¥4,422
Bonds������������������������������������������������������������ 1,200
Others������������������������������������������������������������
—Total��������������������������������������������������������������� ¥5,622
Securities with book value not exceedingacquisition cost

Acquisition
cost

Equity securities ��������������������������������������������� ¥   —
Bonds �����������������������������������������������������������
300
Others �����������������������������������������������������������
—Total �������������������������������������������������������������� ¥  300

24 Annual Report 2016

Equity securities���������������������������������������� $21,867
Bonds������������������������������������������������������
—Others������������������������������������������������������
—$51,996——$30,120——

Total��������������������������������������������������������� $21,867$51,996$30,120

Book
value

Difference

Equity securities���������������������������������������� $13,516
Bonds������������������������������������������������������
2,662
Others������������������������������������������������������
—$13,0992,644—$(408)(8)—

Total��������������������������������������������������������� $16,178$15,752$(417)

Securities with book value not exceedingacquisition cost

Merchandise and finished goods���������������� ¥25,225
Work in process���������������������������������������� 8,563
Raw materials������������������������������������������� 13,968
Other inventories��������������������������������������� 2,828

Securities with book value exceedingacquisition cost

Securities with book value exceedingacquisition cost

¥10,837
1,206—¥6,414
6—¥12,043¥6,421Book
value

Difference

¥   —
296
—

¥   —
(3)
—

¥   296¥   (3)Thousands of U.S. dollars (Note 1)
2016
Acquisition
Book
cost
value
Difference

Acquisition
cost

The following is a summary of the book values of available-for-sale securities for which fair value was not readily determinable at March 31, 2016 and2015.
Millions of yen
2016
2015

Unlisted stock������������������������������������������������������� ¥225

¥225

Thousands of
U.S. dollars(Note 1)2016

$1,996

Total sales of available-for-sale securities for the years ended March 31,
2016 and 2015 amounted to ¥3,190 million ($28,310 thousand) and ¥31
million, and related gains amounted to ¥1,531 million ($13,587 thousand)and ¥22 million, respectively.
5. Income Taxes
The Company and its consolidated domestic subsidiaries are subject to corporation, inhabitants’ and enterprise taxes, which, in the aggregate, indicate
the statutory tax rate in Japan of approximately 32.8% and 35.4% for theyears ended March 31, 2016 and 2015, respectively.
The following table summarizes the significant difference between thestatutory tax rate and the Sanden Group’s effective tax rate for accounting
purposes for the years ended March 31, 2016 and 2015:
2016

Statutory tax rate:
32.8%
Nondeductible expense���������������������������������������������������� 1.8
Foreign tax credits����������������������������������������������������������� 1.4
Different tax rates applied to overseas subsidiaries������������ (1.1)
Amortization of goodwill��������������������������������������������������� 0.7 Equity in net income of unconsolidated subsidiaries
and affiliates����������������������������������������������������������������� (17.2)
Tax effect for unrealized profits on inventories�������������������� (6.4)
Tax credit������������������������������������������������������������������������ (2.4)
Tax breaks for investment for facilities������������������������������� (1.4)
Effect from change in tax rates����������������������������������������� 1.7
Valuation allowance��������������������������������������������������������� (9.4)
Others����������������������������������������������������������������������������� 2.1
Effective tax rate������������������������������������������������������������������ 2.6%

2015

35.4%
1.9
0.9
(3.3)
0.5
(11.1)
0.9
(1.7)
(1.3)
2.3
0.2
(0.9)
23.9%

Significant components of the Sanden Group’s deferred tax assets and­liabilities as of March 31, 2016 and 2015 were as follows:
Millions of yen
2016
2015

Deferred tax assets: Unrealized gains on inventories
from intercompany sales��������������������� ¥   121
 Accrued expenses���������������������������������
830
Warranty liabilities���������������������������������
305
Allowance for doubtful accounts �����������
303 Doubtful accounts written off�����������������
691

Thousands of
U.S. dollars(Note 1)
2016¥   153
404
423
337
705

$  1,073
7,365
2,706
2,689
6,132

501
1,075

5,795
8,120

204
1,092
1,733
9,871
242
404
1,243
2,126

1,402
8,404
5,733
95,811
1,322
2,831
13,915
13,702

20,519(14,096)

177,067(111,492)

7,389

6,422

65,575

(806)
(845)

(920)
(1,807)(7,152)(7,499)

(788)
(136)

(609)
(174)

(6,993)(1,206)Gross deferred tax liabilities����������������������� (2,576)
Net deferred tax assets ���������������������������� ¥ 4,813(3,512)(22,861)¥ 2,910$ 42,713 Loss on devaluation for slow-moving
inventory��������������������������������������������
Accrued employees’ bonuses����������������

653
915

 Unrealized gains on fixed assets
from intercompany sales���������������������
158
Depreciation�����������������������������������������
947 Net defined benefit liability��������������������
646 Net operating loss carryforward������������� 10,796 Environmental liability���������������������������
149 Impairment loss on long-lived assets������
319 Tax breaks for investment for facilities���� 1,568 Others�������������������������������������������������� 1,544
Gross deferred tax assets�������������������������� 19,952
Less: Valuation allowance�������������������������� (12,563)
Total deferred tax assets����������������������������
Deferred tax liabilities:
Depreciation�����������������������������������������
Net unrealized gain on securities�����������
 Effect on retained earnings
of foreign affiliates������������������������������
Others��������������������������������������������������

Net deferred tax assets are included in the accompanying consolidatedbalance sheets as follows.
Millions of yen
2016
2015

Assets:Deferred income taxes�������������������������������� ¥2,359 ¥2,735
Deferred income taxes, non-current������������� 2,765
2,191
Liabilities:
Deferred income taxes��������������������������������
(6)—
Deferred income taxes, non-current������������� (305) (2,017)
Net deferred tax assets����������������������������������� ¥4,813 ¥2,910

Thousands of
U.S. dollars(Note 1)
2016

$20,935
24,538(53)(2,706)$42,713

Amendments on deferred tax assets and liabilities resulting from changes
in income tax rates:
On March 29, 2016, amendments to the Japanese tax regulations wereenacted in the Diet session. As a result of these amendments, the statutory
income tax rate utilized for the measurement of deferred tax assets and liabilities expected to be settled or realized from April 1, 2016 to March 31, 2018
and after April 1, 2018 were changed from 32.1% to 30.7% and 30.5%,
respectively, as of March 31, 2016.
Impact of these amendments on net deferred tax assets (after deducting
deferred tax liabilities) as of March 31, 2016 and deferred income tax
expense for the fiscal year ended March 31, 2016 is immaterial.
6. Financial Instruments
1. Qualitative information on financial instruments(1) Policies for using financial instruments
The Sanden Group raises funds according to its medium-term financial plan,and it utilizes diversified financing methods of raising funds through bankloans or issuance of bonds. If surplus funds arise, the Sanden Group uses
highly liquid instruments for the management of funds. The Sanden Groupalso enters into financial derivative transactions to hedge various risks, as
described in detail below and does not use derivatives for speculative­purposes.
(2) Details of financial instruments used and the exposures to risk and how
they arise
Trade notes and accounts receivable are exposed to the credit risks of­customers. Receivables denominated in foreign currencies are exposed
to foreign currency exchange risk. In principle, foreign exchange forward­contracts are used to hedge this risk.
Marketable and investment securities are mostly shares of our related
business partners, and are exposed to stock market fluctuation risk.
Maturities of trade notes and accounts payable are mostly within fourmonths. Payables denominated in foreign currencies are exposed to foreign
currency exchange risk. In principle, foreign exchange forward contracts areused to hedge this risk.
Principally, the purposes of long-term debt and lease obligations are forfinancing capital investment, and the longest maturity is 14 years after March
31, 2016. A large part of them are borrowed or issued with fixed interest
rates; therefore, there is no interest rate risk. The Sanden Group enters into
interest rate swap agreements to reduce exposure to losses resulting fromadverse fluctuations in interest rates on the part of long-term debt with variable interest rates.
The Sanden Group entered into financial derivative transactions such as
forward exchange contracts, to hedge exchange rate risk associated with­foreign currency denominated trade receivables and payables, interest rate
swap agreements to reduce exposure to losses resulting from adverse fluctuations in interest rates on long-term debt, currency and interest rate swap
agreements to hedge exchange rate risk and interest rate risk associatedwith foreign ­currency denominated bank loans, and commodity derivatives tohedge risk of price movement of raw materials.

Sanden Holdings Corporation 25

(3) Supplemental information on fair values
Fair values of financial instruments are measured based on the quoted market prices, if available, or reasonably calculated values if quoted market prices are not available. Fair values of financial instruments for which quoted
market prices are not available are calculated based on certain assumptions,and the fair values might differ if different assumptions are used. In addition,
the contract amount of the derivative transactions described below in “7.
Derivatives” does not represent the market risk of the derivative transactions.
2. Fair values of financial instruments (at March 31, 2016)
Book values of the financial instruments included in the consolidated balance
sheet and their fair values at March 31, 2016 are as follows.
In addition, financial instruments whose fair value cannot be reliably measured are not included. (Please see “Note 2. Financial instruments for which
the fair values cannot be reliably measured.”)Millions of yen
2016Book value
Fair value

Difference(1) Cash and time deposits�������������������������� ¥ 17,491(2) Receivables*1����������������������������������������� 89,602(3) Consumption taxes receivable�����������������
4,581(4) Investment securities������������������������������
7,635
Total assets������������������������������������������������ ¥119,310¥ 17,491
89,602
4,581
7,635

¥ —
—
—
—

¥119,310¥ —(1) Payables������������������������������������������������ ¥ 67,313(2) Short-term bank loans���������������������������� 52,873¥ 67,313
52,873¥ ——(3) Lease obligations due within
one year������������������������������������������������
1,551(4) Income taxes payable�����������������������������
681(5) Long-term debt�������������������������������������� 76,069(6) Lease obligations due after one year�������
4,800
Total liabilities��������������������������������������������� ¥203,290

1,620
681
76,678
5,070

69
—
609
270

¥204,239¥948

Derivatives * ���������������������������������������������� ¥    564¥    564¥ —2

Thousands of U.S. dollars (Note 1)
2016
Book value
Fair value
Difference(1) Cash and time deposits������������������������� $  155,227 $  155,227 $   —(2) Receivables *1��������������������������������������� 795,189
795,189—(3) Consumption taxes receivable����������������
40,65440,654—(4) Investment securities�����������������������������
67,75867,758—
Total assets����������������������������������������������� $1,058,839 $1,058,839 $   —(1) Payables����������������������������������������������� $  597,381 $  597,381 $   —(2) Short-term bank loans��������������������������� 469,231
469,231—(3) Lease obligations due within
one year�����������������������������������������������
(4) Income taxes payable����������������������������
(5) Long-term debt�������������������������������������
(6) Lease obligations due after one year������

13,764
6,043
675,088
42,59814,376
6,043
680,493
44,994

612
—
5,404
2,396

Total liabilities�������������������������������������������� $1,804,135 $1,812,557 $8,413
Derivatives *2��������������������������������������������� $    5,005 $    5,005 $   —*1: Allowance for doubtful accounts associated with trade notes and accounts receivable is deducted.
*2: Derivative assets and liabilities are disclosed on a net basis.

26 Annual Report 2016

Note 1: Fair value measurement of financial instruments
Assets1. (1) Cash and time deposits, (2) receivables and (3) consumption taxes
receivable
The book value of these assets approximates fair value because they aresettled in a short period.
2. (4) Investment securities 
The fair value of equity securities equals to the quoted market price, if
available. The fair value of debt securities equals to the quoted market
price or price provided by financial institutions. More information of available-for-sale securities are described in “4. Investment in Securities.”
Liabilities
1. (1) Payables, (2) short-term bank loans and (4) income taxes payable
The book value of these liabilities approximates fair value because they aresettled in a short-term period.
2.(3) Lease obligations due within one year, (5) long-term debt and (6) leaseobligations due after one year
Fair value equals to the present value of future cash flows discounted byusing the current interest rate for similar debt and lease contracts of comparable maturities and contract conditions.
Note 2: F inancial instruments for which the fair values cannot be reliably
measured are as follows:
Millions of yen
2016

Thousands of
U.S. dollars(Note 1)
2016

Investment securities:
Unlisted���������������������������������������������������������������� ¥   225Unconsolidated subsidiaries and affiliates��������������� 21,343$  1,996
189,412

The above are not included in “(4) investment securities” because theseinvestment securities do not have a quoted price in an active market andwhose fair value cannot be reliably measured.
Note 3: The redemption schedule for monetary claims and investment securities with maturities at March 31, 2016 was as follows:
Millions of yen
2016
WithinMore than
1 year
1 yearCash and time deposits����������� ¥ 17,491
Receivables���������������������������� 89,602
Consumption taxes
receivable�����������������������������
4,581
Investment securities
with maturities(1) Bonds���������������������������
—(2) Others���������������������������
—Total��������������������������������������� ¥111,675

Thousands of
U.S. dollars (Note 1)
2016
WithinMore than
1 year
1 year¥  ——$155,227
795,189

$   —
—

—

40,654

—

300
—

—
—

2,662
—

¥300

$991,080$2,662

3. Fair values of financial instruments (at March 31, 2015)
Book values of the financial instruments included in the consolidated balance
sheet and their fair values at March 31, 2015 are as follows.
In addition, financial instruments whose fair value cannot be reliably measured are not included. (Please see “Note 2. Financial instruments for which
the fair values cannot be reliably measured.”)Millions of yen
2015Book value
Fair value

Difference(1) Cash and time deposits�������������������������� ¥ 20,597(2) Receivables*1����������������������������������������� 90,646(3) Consumption taxes receivable�����������������
3,543(4) Investment securities������������������������������ 12,340
Total assets������������������������������������������������ ¥127,128¥ 20,597
90,646
3,543
12,340¥ ————¥127,128¥ —(1) Payables������������������������������������������������ ¥ 69,352(2) Short-term bank loans���������������������������� 47,937(3) Lease obligations due within one year�����
1,325(4) Income taxes payable�����������������������������
828(5) Long-term debt�������������������������������������� 73,716(6) Lease obligations due after one year�������
4,755¥ 69,352
47,937
1,341
828
74,386
4,808

¥ —
—
16
—
669
52

Total liabilities��������������������������������������������� ¥197,916
Derivatives*2����������������������������������������������� ¥    356

¥198,655¥738¥    356¥ —*1: Allowance for doubtful accounts associated with trade notes and accounts receivable is deducted.
*2: Derivative assets and liabilities are disclosed on a net basis.

Note 1: Fair value measurement of financial instruments
Assets1. (1) Cash and time deposits, (2) receivables and (3) consumption taxes
receivable
The book value of these assets approximates fair value because of theshort maturity of these instruments.
2. (4) Investment securities
The fair value of equity securities equals quoted market price, if available.
The fair value of debt securities equals the quoted market price or priceprovided by financial institutions. Investment securities for long-term
investment purposes are described in “4. Investment in Securities”.

Liabilities
1. (1) Payables, (2) short-term bank loans and (4) income taxes payable
The book value of these liabilities approximates fair value because of theshort maturity of these instruments.
2. (3) Lease obligations due within one year, (5) long-term debt and (6) leaseobligations due after one year
Fair value equals to the present value of future cash flows discounted
using the current interest rate for similar debt and lease contracts of­comparable maturities and contract conditions.
Note 2: F inancial instruments for which the fair values cannot be reliably
measured are as follows:
Millions of yen
2015

Investment securities:
Unlisted�������������������������������������������������������������������������������������� ¥   225Unconsolidated subsidiaries and affiliates������������������������������������� 13,194

The above are not included in “(4) investment securities” because theseinvestment securities do not have a quoted price in an active market andwhose fair value cannot otherwise be reliably measured.
Note 3: The redemption schedule for money claims and investment securities
with maturities at March 31, 2015 was as follows:
Millions of yen
2015
WithinMore than
1 year
1 yearCash and time deposits���������������������������������������������������� ¥ 20,597
Receivables��������������������������������������������������������������������� 90,646
Consumption taxes receivable�������������������������������������������
3,543
Investment securities with maturities(1) Bonds��������������������������������������������������������������������
500(2) Others��������������������������������������������������������������������
—Total�������������������������������������������������������������������������������� ¥115,287

¥   —
—
—
1,000
—
¥1,000

Sanden Holdings Corporation 27

7. Derivatives
1. F orward exchange contracts and currency swaps, which are stated at fair value and to which hedge accounting is not applied, at March 31,
2016 and 2015:(Forward exchange contracts and currency swaps)
Millions of yen
2016

2015

Thousands of U.S. dollars (Note 1)
2016
Unrealized
Contract
More than
Fair
gains
amount1 yearvalue(losses)

Contract
amountMore than
1 yearFair
value

Unrealized
gains(losses)

Contract
amountMore than
1 yearFair
value

Unrealized
gains(losses)

Forward exchange
contracts������������������������� ¥16,728
Currency swaps�����������������
154
Total���������������������������������� ¥16,882

¥ —
154

¥346
62

¥346
62

¥ 9,799
403

¥ —
230

¥102
113

¥102
113

$148,455
1,366

$   —
1,366

$3,070550$3,070
550

¥154

¥409

¥409

¥10,201

¥230

¥216

¥216

$149,822$1,366$3,629$3,629Transaction

Interest rate swaps, which are stated at fair value and to which hedge accounting is not applied, at March 31, 2016 and 2015 were as follows:(Interest rate swaps)
Millions of yen
2016
More than
1 year

2015
Fair
value

Unrealized
gains(losses)

Contract
amountMore than
1 yearFair
value

Unrealized
gains(losses)Thousands of U.S. dollars (Note 1)
2016
Unrealized
Contract
More than
Fair
gains
amount1 yearvalue(losses)

Transaction

Contract
amountReceiving floating rate
and paying fixed rate��������
Total ���������������������������������

¥33

¥—

¥(0)

¥(0)

¥84

¥43

¥(0)

¥(0)

$292

$—

$(0)

$(0)

¥33

¥—

¥(0)

¥(0)

¥84

¥43

¥(0)

¥(0)

$292

$—

$(0)

$(0)

2. Derivative transactions to which hedging accounting was applied at March 31, 2016 and 2015:(Forward exchange contracts)

Hedging accounting method

2016
Deferral hedge accounting

Transaction

Millions of yen
Contract amountMore than 1 year

Hedged items

Fair value

Accounts payable������������������������������������������������������� ¥273
Accounts receivable��������������������������������������������������� 127

¥—
—

1

Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥401¥—

¥4

Hedging accounting method

2016
Deferral hedge accounting

Forward exchange contracts

Transaction

Hedged items¥2

Thousands of U.S. dollars (Note 1)
Contract amountMore than 1 year Fair value

Accounts payable����������������������������������������������������� $2,422
Accounts receivable������������������������������������������������� 1,127

$—

$17

—

  8

Total ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� $3,558

$—

$35

Hedging accounting method

Forward exchange contracts

Transaction

Hedged items

2015
Deferral hedge accounting
Forward exchange contracts
Accounts payable ��������������������������������������������������
Total ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

28 Annual Report 2016

Millions of yen
Contract amountMore than 1 year

Fair value

¥2

¥—

¥0

¥2

¥—

¥0

(Interest rate swaps)

Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2016
Exceptional method
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������ ¥31,900
Deferral hedge accounting
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������
6,436����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total¥38,336

Hedging accounting method

Transaction

Hedged items

Fair value¥18,183
5,631¥ — *1
151¥23,814¥151

Thousands of U.S. dollars (Note 1)
Contract amountMore than 1 year
Fair value

2016
Exceptional method
Receiving floating rate and paying fixed rate Long-term debt ���������������������������������������������� $283,102
Deferral hedge accounting
Receiving floating rate and paying fixed rate Long-term debt ����������������������������������������������
57,117
��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Total$340,220$161,368
49,973$    — *1
1,340$211,341$1,340*1: F or certain long-term debt for which interest rate swaps under the Exceptional method are used to reduce exposure to losses resulting from adverse fluctuations in interest rates, the fair value of suchswaps was included in the fair value of such long-term debt, which is the hedged item.

Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2015
Exceptional method
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������ ¥29,687
Deferral hedge accounting
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������
6,346
Total ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥36,033

Fair value¥28,4356,046¥   — *1
120

¥34,481¥120*1: F or certain long-term debt for which interest rate swaps under the Exceptional method are used to reduce exposure to losses resulting from adverse fluctuations in interest rates, the fair value of suchswaps was included in the fair value of such long-term debt, which is the hedged item.

(Commodity swaps)
There were no commodity swaps at March 31, 2016.

Hedging accounting method

2015
Deferral hedge accounting

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

Fair value

Forecasted transaction���������������������������������������������� ¥223

¥—

¥17

Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������ ¥223

¥—

¥17

Receiving floating rate and paying fixed rate

8. Retirement Benefits
1. Outline of the retirement benefit plans
The Company has adopted the defined contribution pension plan for enrolled
employees since March 1, 2014. Retirement benefit liability to the pensioners
is recorded based on the estimated amount of retirement benefit obligations
and plan assets at the end of the fiscal year. Expected plan assets exceed
retirement benefit obligations at March 31, 2016, and therefore the excess isrecorded in net defined benefit asset.
The post-retirement pension fund is scheduled to be transferred oncea year (in April) over four years.

Consolidated domestic subsidiaries also have their own retirement benefit
plans for employees terminating their employment. Certain consolidated
domestic subsidiaries have a funded defined contribution pension plan or utilize the governmental mutual aid institution to cover a portion of the benefits.
The remaining portion is unfunded and covered by severance payments by
those consolidated domestic subsidiaries.
Consolidated overseas subsidiaries have various retirement and post-­
retirement benefit plans. Such plans consist of defined benefit severance
payment or pension plans, defined contribution pension plans, post-retirement medical plans and defined contribution plans based on government
regulations. Some of these plans adopted by the consolidated overseas­subsidiaries are funded.

Sanden Holdings Corporation 29

2. D efined benefit plans, including plans to which the simplified
method is applied(1) Movement in retirement benefit obligations
Millions of yen
2016
2015

(4) Retirement benefit costs

Thousands of
U.S. dollars(Note 1)
2016

Balance at beginning of year���������������������������� ¥8,095
283
Service cost�����������������������������������������������

¥6,452
187$71,840
2,511

215

204

1,908

(562)

1,214

(4,987)

(330)

(311)

(2,928)Interest cost�����������������������������������������������
Actuarial losses (gains)��������������������������������
Benefits paid����������������������������������������������
 Termination of the defined benefit
retirement plan�����������������������������������������
Exchange differences����������������������������������

—

(66)

—

(236)

413

(2,094)

Balance at end of year������������������������������������ ¥7,465¥8,095$66,249(2) Movements in plan assets
Millions of yen
2016
2015

Thousands of
U.S. dollars(Note 1)
2016

Balance at beginning of year���������������������������� ¥4,500
273
Expected return on plan assets��������������������

¥3,907
120$39,9362,422

Actuarial gains (losses)��������������������������������
Contributions paid by the employers������������

(355)

57

(3,150)

172

147

1,526

Benefits paid����������������������������������������������
Exchange differences����������������������������������

(237)

(245)

(2,103)

(225)

513

(1,996)

Balance at end of year������������������������������������ ¥4,128¥4,500$36,634(3) Reconciliation from retirement benefit obligations and plan assets to net
defined benefit liability (asset)
Millions of yen
2016
2015

Funded retirement benefit obligations��������������� ¥6,140 ¥6,799
Plan assets����������������������������������������������������� (4,128) (4,500)

Thousands of
U.S. dollars(Note 1)
2016

$54,490(36,634)

2,012

2,298

17,855

Unfunded retirement benefit obligations����������� 1,325 Net defined benefit liability at end of year����� 3,337

1,295

11,7583,594

29,614

3,657
Net defined benefit liability�������������������������� 3,452
�����������������������������
Net defined benefit asset
(115)
(62)
 Net defined benefit liability at end of year����� ¥3,337 ¥3,594

30,635(1,020)$29,614

Millions of yen
2016
2015

Service cost���������������������������������������������������������� ¥283 ¥187
Interest cost��������������������������������������������������������� 215
204
Expected return on plan assets������������������������������ (273) (120)
Amortization of actuarial losses (gains)������������������� 90(137)
Others������������������������������������������������������������������
0(10)
Total retirement benefit costs
for the fiscal year������������������������������������������������ ¥316 ¥123

Thousands of
U.S. dollars(Note 1)2016

$2,511
1,908(2,422)798
0$2,804(5) Remeasurements of defined benefit plans, before tax
Millions of yen
2016
2015

Actuarial gains (losses)������������������������������������ ¥349
Total balance at end of year����������������������������� ¥349¥(1,074)¥(1,074)

Thousands of
U.S. dollars(Note 1)
2016

$3,097$3,097(6) Accumulated remeasurements of defined benefit plans, before tax
Millions of yen
2016
2015

Actuarial gains (losses) that are yet
to be recognized������������������������������������������� ¥(1,299) ¥(1,679)
Total balance at end of year ���������������������������� ¥(1,299) ¥(1,679)

Thousands of
U.S. dollars(Note 1)
2016$(11,528)$(11,528)(7) Plan assets
a. Plan assets comprise:
2016

2015

53%
41
4
2

53%
41
4
2

Total������������������������������������������������������������������������������������ 100%100%

Bonds���������������������������������������������������������������������������������
Equity securities�������������������������������������������������������������������Cash and time deposits��������������������������������������������������������
Others���������������������������������������������������������������������������������

b. Long-term expected rate of return
Current and estimated asset allocations and current and long-term expected
returns on various categories of plan assets have been considered in­determining the long-term expected rate of return.
(8) Actuarial assumptions
The principal actuarial assumptions at March 31, 2016 and 2015:
2016

2015

Discount rate���������������������������������������������������������� 0.3%–5.8% 0.3%–6.3%
Long-term expected rate of return��������������������������� 0.3%–7.5% 0.3%–7.5%

30 Annual Report 2016

3. Defined contribution plans
Contributions to defined contribution plans of the Company and its consolidated subsidiaries were ¥2,382 million ($21,139 thousand) and ¥2,521 million for the fiscal years ended March 31, 2016 and 2015, respectively.
4. Assets not transferred to the defined contribution pension plan
Assets of ¥1,229 million ($10,906 thousand), which were not transferred tothe defined contribution pension plan at March 31, 2016, were recorded inother accounts payable (current liabilities). Assets of ¥2,835 million, whichwere not transferred to the defined contribution pension plan at March 31,
2015, were recorded in other accounts payable (current liabilities) and longterm other accounts payable (long-term liabilities).
9. Short-Term Borrowings, Long-Term Debt and Lease Obligations
Short-term bank loans bore weighted-average interest rates of 1.58% and1.95% at March 31, 2016 and 2015, respectively.
Long-term debt at March 31, 2016 and 2015 consisted of the following:
Millions of yen
2016
2015

Loans from banks, insurance companies and agricultural cooperatives, bearing
weighted-average rates of 1.56%
and 1.89% at March 31, 2016
and 2015, respectively����������������������������� ¥76,069 ¥73,716
76,069Less: Amount due within one year��������������� 20,447
Amount due after one year������������������������� ¥55,621

Thousands of
U.S. dollars(Note 1)
2016

$675,088

73,716
10,754

675,088
181,460¥62,962$493,619

The aggregate annual maturities of long-term debt at March 31, 2016
were as follows:
Millions of yen

Thousands of
U.S. dollars(Note 1)2017 ���������������������������������������������������������������������� ¥20,447
2018 ���������������������������������������������������������������������� 30,057
2019 ���������������������������������������������������������������������� 11,656
2020 ����������������������������������������������������������������������
8,328
2021 ����������������������������������������������������������������������
4,812
2022 and thereafter��������������������������������������������������
766$181,460
266,746
103,443
73,90842,705
6,798

Year ending March 31,

The Company has entered into syndicated-loan contracts with several
financial institutions. Financial covenants included in the contracts are as­follows:
Contracts at September 16, 2011 (¥10.0 billion of long-term debt due within
one year)(1) The amount of total net assets (excluding foreign currency translation
adjustments) on the consolidated balance sheet at the end of each fiscal
year and the interim period shall be over ¥39.5 billion and 70% comparedwith the latest period; and(2) Ordinary losses on the consolidated statements of income for each fiscal
year (after fiscal year ended March 31, 2012) shall not be recorded forthree consecutive years.
The amount of total net assets on the consolidated balance sheet aswell as ordinary losses on the consolidated statements of income mentioned above, to be referred to for the financial covenants, are those inconsolidated financial statements of the Company which are prepared andpresented in accordance with Japanese GAAP.
The Sanden Group continued to meet these financial covenants at March 31,
2016 and 2015.
The following assets were pledged as collateral for short-term bank loansof ¥1,624 million ($14,412 thousand) and long-term debt of ¥2,853 million($25,319 thousand) at March 31, 2016 and short-term bank loans of¥1,729 million and long-term debt of ¥3,727 million at March 31, 2015.
Millions of yen
2016
2015

Inventories and other��������������������������������������� ¥3,469 ¥ 3,672
Land and buildings and structures,
machinery and equipment, etc., net��������������� 5,899
7,573
Total��������������������������������������������������������������� ¥9,369 ¥11,245

Thousands of
U.S. dollars(Note 1)
2016

$30,786
52,351$83,146

The aggregate annual maturities of lease obligations at March 31, 2016
were as follows:Year ending March 31,2017 ����������������������������������������������������������������������
2018 ����������������������������������������������������������������������
2019 ����������������������������������������������������������������������
2020 ����������������������������������������������������������������������
2021 ����������������������������������������������������������������������
2022 and thereafter��������������������������������������������������

Millions of yen

Thousands of
U.S. dollars(Note 1)

¥1,551
1,497
1,034
792
600
875

$13,764
13,285
9,176
7,028
5,324
7,765

10. Net Assets
Under the Japanese Corporate Law (the “Law”), the entire amount paid
for new shares is required to be designated as common stock. However, acompany may, by a resolution of the Board of Directors, designate an amountnot exceeding one-half of the amount paid of the new shares as additional
paid-in capital, which is included in capital surplus.
The Law provides that a 10% dividend shall be appropriated as additional
paid-in capital or legal earnings reserve until the aggregate amount of additional paid-in capital and the legal earnings reserve equals 25% of common
stock. The legal earnings reserve is included in retained earnings in theaccompanying consolidated balance sheets. Under the Law, the legal earnings reserve and additional paid-in capital could be used to eliminate or
reduce a deficit by a resolution at the stockholders’ meeting. Additional paidin capital and the legal earnings reserve may not be distributed as dividends.
However, all additional paid-in capital and the entire legal earnings reserve
may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is
calculated based on the non-consolidated financial statements of theCompany in accordance with the Law. At the annual stockholders’ meeting
held on June 22, 2016, the stockholders approved the distribution of dividends amounting to ¥2,092 million ($18,565 thousand). Such appropriations
have not been accrued in the consolidated financial statements as of March
31, 2016. Such appropriations are recognized in the period in which they areapproved by the stockholders.

Sanden Holdings Corporation 31

11. Comprehensive Income
Amounts reclassified to net income in the current year that were recognizedin other comprehensive income for the years ended March 31, 2016 and2015 and tax effects for each component of other comprehensive income areas follows:
Millions of yen
2016
2015

Net unrealized gains (losses) on securities,
net of taxes:
Increase (decrease) during the year������������� ¥(1,539) ¥2,836
Reclassification adjustments������������������������ (1,531)
1
Sub-total, before tax����������������������������������� (3,071) 2,837
Tax (expense) or benefit�������������������������������
960
(751)
Total, net of tax������������������������������������������� (2,111)

Thousands of
U.S. dollars(Note 1)
2016$(13,658)(13,587)(27,254)
8,519

2,085

(18,734)

Unrealized gains (losses) on hedging
derivatives, net of taxes:
Increase (decrease) during the year�������������
Reclassification adjustments������������������������
Sub-total, before tax�����������������������������������Tax (expense) or benefit�������������������������������

202
(285)

82
(199)

1,792
(2,529)

(82)
37

(116)
36

(727)
328

Total, net of tax�������������������������������������������

(44)

(80)

(390)

Foreign currency translation adjustments:
Increase (decrease) during the year������������� (2,831)

3,121(25,124)

Remeasurements of defined benefit plans,
net of taxes:
Increase (decrease) during the year�������������
Reclassification adjustments������������������������

207
143

(1,157)
82

1,837
1,269

349
(6)

(1,074)
11

3,097
(53)

343

(1,062)

3,044

Sub-total, before tax�����������������������������������Tax (expense) or benefit�������������������������������
Total, net of tax�������������������������������������������

Share of other comprehensive income ofaffiliates accounted for using equity method:
Increase (decrease) during the year������������� (1,007) 1,571
Total other comprehensive income������������������� ¥(5,652) ¥5,634

32 Annual Report 2016

(8,936)$(50,159)

12. Contingent Liabilities
At March 31, 2016 and 2015, the Company and its consolidated subsidiaries
had the following contingent liabilities:
Millions of yen
2016
2015

Discounted notes
Guarantees or reservation of guarantees for loans of affiliated companies
from banks and other lenders

Thousands of
U.S. dollars(Note 1)
2016

¥ 34

¥    4$  301¥974¥1,092$8,643

13. Environmental Matters
The Vendo Company, a consolidated subsidiary located in the United Statesof America, was notified of the contamination of groundwater discovered inareas close to its manufacturing facility by the California State Regional Water
Quality Control Board. The Vendo Company entered into an agreement tocompensate to the cost for remedial activities. It also entered into a settlement agreement with neighboring landowners to pay a part of the remediation costs related to the contamination described above.
The Vendo Company provided for the liability based on the estimated­obligation relating to the costs for the remediation, which amounted to¥372 million ($3,301 thousand) and ¥505 million at March 31, 2016
and 2015, respectively, and were included in other non-current liabilities.
14. Leases
The Company and its consolidated subsidiaries account for finance leases
that do not transfer ownership in the same manner as usual acquisitions.
The leased assets consist of structures, machinery and equipment andfurniture and fixtures. Leased software is included as part of “intangible
assets.” These leased assets are mainly for the Automotive Systems Businessand the Commercial Store Systems Business.
15. Cash Flow Information
Cash and cash equivalents at March 31, 2016 and 2015 consisted of the­following:
Millions of yen
2016
2015

Cash and time deposits������������������������������ ¥17,491 ¥20,597
Less: Time deposits with maturities morethan three months�����������������������������������
(9)(9)
Cash and cash equivalents������������������������� ¥17,482 ¥20,588

Thousands of
U.S. dollars(Note 1)
2016

$155,227(79)$155,147

16. Amounts per Share
Net assets and income per share as at and for the years ended March 31,
2016 and 2015, respectively, are as follows:
Yen
2016

2015

Net assets per share����������������������������������� ¥507.56 ¥510.80
Net income per share���������������������������������� 50.43
40.40

U.S. dollars(Note 1)
2016

$4.50
0.44

Basic and diluted net income per share of common stock for the years
ended March 31, 2016 and 2015 have been computed based on the following:
Number of shares
2016
2015

Weighted-average number of sharesof common stock����������������������������������������������� 138,114,721

138,132,950

Millions of yen
2016
2015

Thousands of
U.S. dollars(Note 1)
2016

Net income attributable to ownersof the parent����������������������������������������������� ¥6,965
Net income attributable to ownersof the parent relating to common stock�������� 6,965¥5,580$61,812

5,580

61,8122016

2015

U.S. dollars(Note 1)
2016

Basic net income per share ofcommon stock�������������������������������������������� ¥50.43¥40.40$0.44

Yen

There was no diluted net income per common share for the years ended
March 31, 2016 and 2015 as the Company did not have common stock withpotential dilutive effect.
The Company’s shares held by the executive compensation BIP Trust arerecorded as treasury stock in shareholders’ equity which are deducted fromthe weighted-average number of shares outstanding during the year for the
purpose of calculating net income per share for the year ended March 31,
2016.
The weighted-average number of shares held by the trust was 488,887
shares for the year ended March 31, 2016 and the total number of shares
held by the trust at the balance sheet date was 837,411 shares as of March
31, 2016.
As described in “Change in Accounting Policies”, the Company and its
consolidated domestic subsidiaries adopted the Business Combination
Accounting Standards in the fiscal year ended March 31, 2016. As a result,net assets per share decreased by ¥5.29, while impact of this adoption on
net income per share is immaterial.

17. Business Combination
For the year ended March 31, 2016
Transaction under common control
Additional acquisition of shares in subsidiary
1. Outline of the transaction(1) Name and business of the company under the transaction
Sanden Shanghai Refrigeration Co., Ltd.
(2) Date of the transaction
September 30, 2015 (deemed acquisition date)(3) Legal form of the transaction
Acquisition of shares from non-controlling shareholders(4) Name after the transaction
Unchanged(5) Other matters related to the transaction
Percentage of voting rights of shares additionally acquired was 49.0%
and the ownership percentage of the Company after the acquisition
became 100.0%. The purpose of this additional acquisition was to establish bases for expanding sales and production of Commercial Store
Systems Business in China.
2. Outline of accounting policy applied
The Company accounted for the acquisition as a transaction with non-controlling shareholders within a transaction under common control in compliance with ASBJ Statement No. 21 and the “Revised Guidance on AccountingStandard for Business Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, September 13, 2013).
3. Additional acquisition of shares in subsidiary
Acquisition cost and consideration paid
Cash ¥645 million ($5,724 thousand)
4. C hanges in the portion held by the Company in connection withthe transactions with non-controlling shareholders(1) Major reasons for changes in capital surplus
Additional acquisition of the subsidiary’s share(2) Decreases in capital surplus due to transactions with non-controllingshareholders¥731 million ($6,487 thousand)For the year ended March 31, 2015
There was no significant business combination.

Sanden Holdings Corporation 33

18. Related Party Transactions
Major transactions between the Company and the Company’s directors, certain companies owned by the Company’s directors or affiliates are as follows:

Company Name or Name of director

Type of business or Occupation

Sanden Kankyo Mirai Zaidan (Sanden Environmental Future
Foundation)*1

Sanden Al Salam LLC.

Ownership of
the Company (%)—
Sales of automotive air-conditioning

43.0

Millions of yen
2016
2015

Nature of transaction

Donation����������������������������������������� ¥   20 ¥    15Sales ���������������������������������������������� 6,474 13,613

Thousands of
U.S. dollars(Note 1)
2016$   177
57,454

Donation—Donation contributed to the foundation is determined based on approval of the board of directors.
Sales—The terms and conditions applicable to the above material transactions have been determined on an arm’s length basis and by reference to the normal
market price.
*1: The objective of Zaidan’s activities are to develop the people’s consciousness and to create the new idea for the environment.

The summaries of financial statements of the two significant affiliates for the fiscal years ended March 31, 2016 and 2015 are as follows:
Millions of yen
2016
2015
Shanghai Sanden
Shanghai Sanden
Behr Automotive
Behr Automotive
Air Conditioning
Sanden Al
Air Conditioning
Sanden Al
Co., Ltd.
Salam LLC.
Co., Ltd.
Salam LLC.

Thousands of U.S. dollars (Note 1)
2016
Shanghai Sanden
Behr Automotive
Air Conditioning
Sanden Al
Co., Ltd.
Salam LLC.

Total current assets�������������������������������������������������������������������������������������
Total non-current assets������������������������������������������������������������������������������

¥43,300
21,472¥41,766
1,460¥43,223
17,429¥40,297734$384,274
190,557$370,660
12,957

Total current liabilities����������������������������������������������������������������������������������
Total long-term liabilities������������������������������������������������������������������������������
Total net assets�������������������������������������������������������������������������������������������

36,182798

31,437340

33,441806

36,386263

321,104
7,082

278,993
3,017

27,792

11,44826,404

4,381

246,645

101,597

Sales����������������������������������������������������������������������������������������������������������
Income before income taxes������������������������������������������������������������������������

81,003

26,17876,81326,050718,876

232,321

8,177

700

6,563

(131)

72,5686,212

Net income�������������������������������������������������������������������������������������������������

¥ 6,899¥   700¥ 5,627¥  (142)$ 61,226$  6,212

19. Segment Information
1. Summary of reporting segment(1) Reporting segments
Our reporting segments are constituent units whose segregated financial information is available and reviewed by the Board of Directors for making decisions in
the allocation of operating resources and evaluating the operating performance regularly.
The Company plans the comprehensive strategies and extends business activities for each product, system and service globally.
Therefore, the Company has designated these reporting segments: the “Automotive Systems Business” and the “Commercial Store Systems Business.”
Segment division
Automotive Systems Business
Commercial Store Systems Business

Main product, system, service
Automotive air-conditioning systems and air-conditioner compressors
Automatic vending machines, commercial freezers and refrigerated showcases(2) Method of measurement of sales, profit (loss), assets, and other items for each reporting segment
The accounting policies of the reportable segment are consistent with the description of the accounting policies.

34 Annual Report 2016

Information by reporting segment for the years ended March 31, 2016 and 2015 is summarized as follows:
Millions of yen
2016
Automotive
Systems BusinessNet sales:
Outside customers���������������������������������������������������������������������������������������� ¥198,385
Operating income (loss)��������������������������������������������������������������������������������� ¥  6,523
Total assets�������������������������������������������������������������������������������������������������� ¥215,933
Depreciation and amortization������������������������������������������������������������������������
Amortization of goodwill��������������������������������������������������������������������������������
Equity in earnings of affiliates������������������������������������������������������������������������
Investments in equity-method companies�������������������������������������������������������
Increase in property, plant and equipment and intangible assets����������������������

9,992
64
3,200
17,067
12,668

Reporting segment
Commercial Store
Systems Business

Total

OthersTotal
consolidated¥83,988¥282,373¥11,863¥294,237¥ 1,894¥  8,417¥ (2,922)¥  5,494¥71,581¥287,515¥13,809¥301,325

2,013
101
946
4,007
1,816

12,005
166
4,147
21,074
14,485

369
—
—
—
610

12,374166
4,147
21,07415,095

Millions of yen
2015
Automotive
Systems Business

Reporting segment
Commercial Store
Systems Business

Total

OthersTotal
consolidated

Net sales:
Outside customers���������������������������������������������������������������������������������������� ¥200,222
Operating income (loss)��������������������������������������������������������������������������������� ¥  5,602
Total assets�������������������������������������������������������������������������������������������������� ¥209,211
Depreciation and amortization������������������������������������������������������������������������
Amortization of goodwill��������������������������������������������������������������������������������
Equity in earnings of affiliates������������������������������������������������������������������������
Investments in equity-method companies�������������������������������������������������������
Increase in property, plant and equipment and intangible assets����������������������

9,687
69
2,150
8,911
10,672¥94,893¥295,116¥11,867¥306,984¥ 6,211¥ 11,814¥ (2,406)¥  9,407¥71,258
1,662
90
367
4,062
2,558

¥280,470
11,349160
2,518
12,973
13,230¥18,794
344
—
—
—
899

¥299,265
11,694160
2,518
12,973
14,130

OthersTotal
consolidated$2,611,261

Note: “Other” includes household equipment, car sales and bicycle accessories, etc.

Automotive
Systems BusinessNet sales:
Outside customers�������������������������������������������������������������������������������� $1,760,605
Operating income (loss)������������������������������������������������������������������������� $   57,889
Total assets������������������������������������������������������������������������������������������ $1,916,338
Depreciation and amortization����������������������������������������������������������������
Amortization of goodwill������������������������������������������������������������������������
Equity in earnings of affiliates����������������������������������������������������������������
Investments in equity-method companies�����������������������������������������������
Increase in property, plant and equipment and intangible assets��������������

88,675612
28,399151,464
112,424

Thousands of U.S. dollars (Note 1)
2016
Reporting segment
Commercial Store
Systems Business
Total$745,367$2,505,972$105,280$ 16,808$   74,698$ (25,931)$   48,757$635,259$2,551,606$122,550$2,674,165

17,864896
8,395
35,560
16,116

106,540
1,473
36,803
187,025
128,549

3,274
—
—
—
5,413

109,815
1,473
36,803
187,025
133,963

Sanden Holdings Corporation 35

2. Geographic information
Information about geographical areas for the year ended March 31, 2016
(1) Sales
Millions of yen
2016
Asia
thereof
China

Japan

EuropeNorth
America

Total
consolidated

Net sales:
Outside customers������������� ¥96,089 ¥90,130 ¥48,216 ¥70,292 ¥37,724 ¥294,237

Japan

Thousands of U.S. dollars (Note 1)
2016
Asia
thereofNorth
China
EuropeAmerica

Total
consolidated$852,760 $799,875 $427,902 $623,819 $334,788 $2,611,261(2) Property, plant and equipment
Millions of yen
2016
Asia
Europethereof
thereof
China
PolandJapan

Property, plant andequipment ���������� ¥42,900 ¥17,811 ¥10,191

North
Total
America consolidated¥20,499 ¥11,788 ¥8,344 ¥89,555

Japan

Thousands of U.S. dollars (Note 1)
2016
Asia
Europethereof
thereof
China
PolandNorth
Total
America consolidated$380,724 $158,067 $90,441 $181,922 $104,614 $74,050 $794,772

Information about geographical areas for the year ended March 31, 2015
(1) Sales
Millions of yen
2015
Asia
thereof
China

Japan

EuropeNorth
America

Total
consolidated

Net sales:
Outside customers������������� ¥111,810 ¥88,811 ¥39,022 ¥68,565 ¥37,796 ¥306,984(2) Property, plant and equipment

Japan

Millions of yen
2015
Asia
Europethereof
thereof
China
PolandProperty, plant andequipment����������� ¥41,783 ¥19,660 ¥10,455

North
Total
America consolidated¥19,908 ¥10,508 ¥9,496 ¥90,849

20. Supplementary Information
The main items of selling, general and administrative expenses for the years
ended March 31, 2016 and 2015 in the accompanying consolidated statements of income were as follows:
Millions of yen
2016
2015

Employees’ salaries and bonuses��������������� ¥18,024
Freight����������������������������������������������������� 4,585
Depreciation��������������������������������������������� 2,512
Provision for:
Employees’ bonuses�����������������������������
Warranty liabilities���������������������������������
Retirement benefit costs����������������������������

36 Annual Report 2016

1,698
980
788

Thousands of
U.S. dollars(Note 1)
2016

¥16,586
4,585
2,299

$159,957
40,69022,293

1,886
783
668

15,0698,697
6,993

Research and development expenses are recognized as incurred.
Research and development expenses charged to the cost of selling, generaland administrative expenses for the years ended March 31, 2016 and 2015
were ¥6,771 million ($60,090 thousand) and ¥6,742 million, respectively.

Independent Auditor’s Report

Sanden Holdings Corporation 37

Sanden’s World Network(As of April 1, 2016)

EUROPE SSA (Shanghai)

Vanersborg (Sweden) Basingstoke (United Kingdom) 
Wolfsburg (Germany)
Brussels (Belgium)  Polkowice (Poland)
Tinteniac (France)  Dusseldorf (Germany)
Rennes (France)
Paris (France)   Bad Nauheim (Germany)
München (Germany)
Casale (Italy)  
Turin (Italy)
Barcelona (Spain) Madrid (Spain)  SSB (Shanghai)

 TSA (Tianjin)
Shenyang (China) 

CHINA Tianjin (China)

 Tehran (Iran) Lahore (Pakistan) Delhi (India) Rajasthan (India)

 Chengdu (China)
 Chongqing (China)
Taipei (Taiwan)  Dubai (UAE) SIE (Germany) Seoul (Korea) Shanghai (China)

 SME (France)
Singburi (Thailand)

Laguna (Philippines)  Ayutthaya (Thailand) Kuala Lumpur (Malaysia)
 Johor (Malaysia) Singapore

 SMP (Poland) SVE (Italy) Jakarta (Indonesia)

ASIA/AUSTRALIA SIS (Singapore) STC (Thailand)�

 SVL (India)

 SIM (Malaysia)

38 Annual Report 2016

 SIO (Australia)

Sydney (Australia) JAPAN SIA (USA)

Sales Offices
Head Office Plant / Factory
 Sales branch

AMERICAS

Sapporo Detroit (USA)

Niigata

Shiwa Iwate

SendaiOkayama
Hiroshima

Fukuoka Kumakoto

Maebashi
Utsunomiya
Isesaki 
Kanazawa Matsumoto
Chiba
Nagoya  Suita 

 Wylie (USA) Dallas (USA)SaitamaTokyo
Yokohama SVA (USA)Toyohashi
Shizuoka
Takamatsu

 Saltillo (Mexico) SMM (Mexico)

Matsuyama
KagoshimaNaha SMX (Mexico)

Tokyo Head Office

Sanden Road

Maebashi
Akagi Plant (Maebashi, Gunma)

DUN-COYA (Maebashi, Gunma)São Paulo (Brazil)

History Museum (Isesaki, Gunma)

Head Office (Isesaki, Gunma)

Yattajima Plant (Isesaki, Gunma)

about 30km
IsesakiCommunication Plaza(Honjyo, Saitama)

Honjo

SGCT (Isesaki, Gunma)

A Virtual Road which depicts
Sanden growthover our 70-year history
Over the years, we have grown in amanner which is consistent with ourManagement Policy, “Environment”“Global” “Quality”. Each facility servesa purpose aligned with the policy.

Sanden Holdings Corporation 39

Akihabara Daibiru Building,1-18-13 Soto Kanda,
Chiyoda-ku, Tokyo, Japan 101-8583
Phone: +81-(0)3-5209-3231
URL: http://www.sanden.co.jp/english/index.html

Printed in Japan