Profile

Sanden continues to create new value through
Challenge & Innovation based on the “Environment”
The Sanden Group continues to develop and deliver products, systems, and services thatprovide constant satisfaction to its customers around the world.
Automotive Systems Business

Heat pump system

Intercooler
Electric Coolant
Heater

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

Electric
compressor

PX compressor

HVAC module

Car

Truck

Construction Machinery

Commercial Store Systems BusinessOpen Showcase

CoffeeMachineTemperature Humidity
Monitoring Service
Flat Design Showcase

Electronic
Money
Terminal

The Sanden Group will continue to grow through theAutomobile Systems Business.
All Commercial Store Systems Business including
freezing and refrigerating showcases, vending
machines, and coffee machines were transferred to
SDRS Holdings Corporation as of October 1, 2019.

Vending
MachineCorporate Philosophy
Sanden’s Corporate Philosophy, which was adopted in 2003, sets forth our universal shared­values and basic stance. By putting this Corporate Philosophy into practice, the Sanden Groupaims 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 Spirit“Let Us Develop with Wisdom
and Prosper in Harmony”“Let Us Develop with Wisdom andProsper in Harmony” means that weshould use our intelligence in combining our development and pioneering
abilities to win prosperity for us all.

Management Principles

Founding
Spirit• Satisfy our customers’ needs
with high-quality productsManagement
Principles
Corporate Philosophy
Corporate Vision
Management Policies
Mid-Term Plan, Execution Plan

STQM
STQM SANDEN WAY• Contribute to the social andcultural improvement of the­community through businessactivity• Build a company of which all
are proud, through the efforts
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.
Basic Principles(Universal Values Shared by
the Global Community)

1. G ood Corporate Citizenship and Harmony
with Society 
We will grow as good corporate citizens, trusted by soci-Basic Stance toward Stakeholders
6. Customers 
We will stand on the admired ability of engineering d­ evelopment and manufacturing, and can offer products, systems, and s­ ervices, based on the QUALITYFIRST, that provide constant satisfaction to our customers around the world.

ety and in ­harmony with the international community.

2. R espect for Human Rights
 e will build a corporate culture founded on respect forW­individuals and human rights.

3. T he Environment 
We will endeavor to preserve the environment in every

7. Employees 
We will grow together with our employees by creating an organizational culturethat encourages free and vigorous c­ ommunication imbued with a spirit of respectfor humanity in line with our corporate culture of challenge and innovation.

8. Shareholders and Investors
We will respond to the trust and expectations of our s­ hareholders and investors by
expanding the Sanden Group, enhancing our corporate value and making our management more transparent.

aspect of our corporate activities to ensure that future
generations will inherit our beautiful, irreplaceable earth.

4. C orporate Ethics
 e will conduct our corporate activities in a spirit of sinW
cerity and ­fairness based on a strong sense of ethics.

5. S afety and Health 
We will enable our employees to achieve a healthy life-

9. Communities
 e will respect regional customs and cultures around the world and contribute toW
the social and cultural development of the communities, which we are related with.

10. Suppliers

style by ­creating an environment that assures their healthand safety.

 e will grow together with our suppliers as business partners who provide ourWcustomers with the best possible products, systems, and services on the basis offair and transparent relationships.

Contents
Corporate Philosophy.................................................1
Highlights of the Fiscal Year.........................................2
Top Message..............................................................4
Performance Overview................................................8
CSR............................................................................9

Directors/Audit & Supervisory Board Members/
Corporate Officers....................................................13
Highlight....................................................................14
Financial Section.......................................................15
Corporate Data/Stock Information............................41

ESG..........................................................................10SANDEN Holdings Corporation1

Highlights of the Fiscal Year
Millions of yen

FY2014FY2015FY2016FY2017FY2018Net sales................................................................................ ¥ 306,984¥ 294,237¥ 282,061¥ 287,609¥ 273,934

Operating income...................................................................

9,407

5,494

1,582

5,469

889

Net income (loss) attributable to ownersof the parent.........................................................................

5,580

6,965

(22,488)

4,255(23,060)

Comprehensive income (loss).................................................

11,713

2,044(24,232)

1,884(27,070)

Total net assets...................................................................... ¥   75,677¥   75,503¥   49,159¥   50,957¥   23,538

299,265

301,325

280,194

275,649

246,401

Net assets per share (yen)...................................................... ¥2,554.01¥2,537.79¥1,576.34¥1,633.99¥  685.04

Total assets............................................................................

Net income (loss) per share (yen)............................................

202.00252.15(814.10)154.00(833.58)

Capital adequacy ratio (%)......................................................

23.6

23.3

15.5

16.4

7.7

Return on equity (%)...............................................................

8.5

9.9

(39.6)

9.6(71.9)

Price earnings ratio (%)...........................................................

13.3

6.4

-

9.9

-

Cash flows from operating activities........................................ ¥  16,223¥   6,304¥  10,048¥   7,140¥   3,043

Cash flows from investing activities.........................................

(13,301)(14,932)(10,371)

4,093(11,362)

Cash flows from financing activities.........................................

(2,022)

6,066(2,479)(6,536)

2,679

Cash and cash equivalents at the end of the year.....................

20,58817,482

14,04018,776

13,030Gross profit............................................................................. ¥  57,246¥  53,311¥  49,319¥  52,654¥  46,922

Gross profit ratio (%)...............................................................

18.6

18.1

17.5

18.3

17.1

Ratio of SG&A expenses (%)..................................................

15.6

16.3

16.9

16.4

16.8

Total net assets ratio (%).........................................................

25.3

25.1

17.5

18.5

9.6

Note: T he Company implemented a 5-for-1 share consolidation on October 1, 2017. Net assets per share and Net income (loss) per share are stated as if the share consolidation was
implemented at the beginning of fiscal year 2014.

Environmental Figures
FY2014FY2015FY2016FY2017FY2018Energy usage (in GJ)......................................

2,764,352

2,803,609

2,829,938

2,853,787

2,713,787

CO2 emissions (in t-CO2)................................

129,026

130,335

132,505

136,629

129,527

FY2014FY2015FY2016FY2017FY2018Japan............................................................

4,340

4,168

3,836

3,622

3,844

Asia-Pacific....................................................

5,901

5,655

5,634

5,630

5,329

Americas.......................................................

1,464

1,251

1,186

1,019

829

Europe..........................................................

1,810

2,152

2,742

2,869

2,683

Total..............................................................

13,515

13,226

13,39813,14012,685

Number of Employees by Region

2

ANNUAL REPORT 2019

Net Sales

Gross Profit Ratio

Operating Income(Millions of yen)(%)

(Millions of yen)

400,000

20

300,000

306,984 294,237
282,061 287,609 273,934

10,000

18.6
18

18.1

18.3

17.5

9,407

8,000

17.1
5,494

6,000
200,000

16

100,000

14

0

12

5,469

4,000

2014

2015

2016

2017

2018 (FY)

1,582

2,000

2014

2015

2016

2017

2018

0

(FY)

2014

2015

Ordinary Income (Loss)Net Income (Loss) Attributableto Owners of the Parent

Total Assets(Millions of yen)

(Millions of yen)

(Millions of yen)

12,0008,000

10,314

6,000

9,000

6,138

6,000

2017

2018 (FY)

5,580

300,000

4,255

299,265 301,325

280,194 275,649

246,401

200,000
2,000

3,000

564

(2,262)0-3,000

2014

2015

2016

2017

2018 (FY)-24,000(23,060)(22,488)

0

2014

2015

2016

2017

2018

100,000

0(FY)

Total Net Assets

Capital Adequacy Ratio

ROE(Millions of yen)

(%)

(%)

40

15

30

10

80,0002016

400,000

6,965

4,000

4,411

889

75,677 75,503

60,00049,159 50,957

23.6

23,53820,000

10

0

0

2014

2015

2016

2017

2018

15.5

(FY)

2015

2016

2017

2018

(FY)

2014

(GJ)

(t CO2)(Persons)

3,000

140,000

14,0002,500

120,000

12,000100,000

10,00080,0008,000

60,0006,000

40,0004,000

500

20,000

2,000

0

0

1,000

2014

Japan
China

2015

EuropeAmericas

2016

2017

Asia-Pacific2018 (FY)

Japan
China

2014

2018 (FY)

9.6(39.6)-50

CO2 Emissions by Region

1,500

9.9

2017

0

Energy Usage by Region

2,000

2016

5

16.4

7.7
2014

8.5

2015

23.3

20

40,0002014

2015

EuropeAmericas

2016

2015

2016

(71.9)

2017

2018

(FY)

Number of Employees by Region

2017

Asia-Pacific2018 (FY)

0

2014

2015

2016

Japan
EuropeAsia-Pacific (including China)

20172018 (FY)

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

SANDEN Holdings Corporation

3

Top Message

Sanden Group will continue to strive
to be a Group that is trusted by all
the people by opening new era andsolving social issues.
Katsuya Nishi
Representative Director & President
Sanden Holdings Corporation

1. Fiscal 2018 Results
During Fiscal Year 2018, the Sanden Group implemented comprehensive structural reforms under the concept of“Shrink to Grow.” Initiated in May 2017, these reforms enabled Sanden to achieve its management targets in thefirst quarter of fiscal 2018. Consistent with the “Shrink to Grow” initiative, the Sanden Group reorganized its basesin China, the United States, and Asia. In addition, the Group completed its withdrawal from the living & environmental systems business as planned. As a result, comprehensive structural reforms generated returns totaling ¥8.0
billion, up ¥5.0 billion compared with the previous fiscal year, contributing to a V-shape recovery.
However, the business environment changed dramatically from the summer of fiscal 2018 due to a larger-than-expected influence from trade disputes and economic sanctions. These changes made it even more important for theGroup to thoroughly promote ‘comprehensive cost transformation’ to improve profitability, ‘asset efficiency enhancement’ to strengthen the overall financial structure, ‘optimization of the business portfolio’ to create corporate value, and‘management system reform’ to achieve sustainable growth to survive under a harsh business environment and to continue to make sustainable growth.

2. Determination as President of the GroupIn June, I was newly appointed as Representative Director and President of Sanden Holdings Corporation. I establisheda new management team in order to overcome the harsh business environment. My mission is to execute our New Midterm Management Plan ‘SCOPE 2023’ thoroughly formulated in this April together with our associates.

New Mid-termManagement Plan

4

Basic policy

Create the new Sanden by carrying out ‘structural reform’ forre-establishment of management foundation and promoting‘collaborative creation’ for sustainable growth.

Implementation period

5 years from April 1, 2019 to March 31, 2024

ANNUAL REPORT 2019

3. Committed to Sustainable Growth
Since its establishment in 1943, the Group has focused on Automotive
Systems and Retail Systems Businesses as its main business pillars. For
76 years the Group has been guided by the company principles of ‘Let us
Develop with Wisdom and Prosper in Harmony’ and a corporate culture ofchallenge and innovation.
In this fiscal year, the Group developed a new vision “Open up a new era
and become a company that is trusted by all the people so that we will beable to create an enriched society in which environment and comfort areharmonized.” We are committed to execute SCOPE2023 thoroughly andrealize the vision. Our associates around the world are taking actions
based on our belief, “people who make new changes are able to survive.”
We will enable the next generation of leaders and associates to pursue
new challenges aggressively.

Founding Spirit

5 Key Activities

Priority Measures

1

Comprehensive
reorganization of
production system

Reorganize the global bases and establish optimal personnel structure2

Enhancement ofbasic earning powerPursue synergic “cost creation capability”.

3

Growth by actively
promoting ‘collaborative
creation’ oncentrate operating resources to the environment-consciousC
product area.

4

Cash flow creation
through capital
reinforcement and reformof assets structure

5

System innovation for
implementation

Regain the “workplace capabilities” through production innovation.

Accelerate development in collaboration with other companies.

Reinforce the capital.
Streamline the working assets.

Reform the corporate organization to enhance the corporate value.
Reform the personnel system to sustain continual growth.
Contribute to achievement of SDGs through our business activities.

SANDEN Holdings Corporation

5Top Message

4. Strategy for Sustainable Growth
The automotive industry has entered a new phase with major changes that occur once a century, and the industry
structure is changing drastically. It is important for us to expand the sphere of our Automotive Systems Business activities especially concerning electric-driven vehicles and future drivetrain technologies.
Sanden is going to be the Group that provides ‘integrated heat management systems’ by expanding our technology
to include such areas as temperature control for battery, motor as well as by enhancing air conditioning technologies
such as electric-driven compressor, heat pump, and ECH.
In order to realize the business expansion as mentioned above, we must proceed with “Speed.” The Group considers
as its first priority to allocate management resources with speed and strengthen competitiveness. In addition, “Select”
and “Concentration” are also essential to expand business and efficiently manage resources.
Considering our current management situation, however, it is difficult to devote sufficient resources to both theAutomotive Systems Business and the Retail Systems Business so that we will achieve future growth in both businessfields. Therefore, in August 2019, We have determined to concentrate investment in the Automotive Systems Businessfor growth toward next generations and to sell our shares in the Retail Systems Business. In this period of drasticchange, we believe this is the best way for both the Automotive Systems Business and the Retail Systems Business tomake further growth for the future.

100 millions of yen

1,935

2,200

Net sales

5%

Operatingincome0.3%
FY2018FY2023Comprehensive
reorganization of
production
systemEnhancement ofbasic earning
power

Growth byactively promoting ‘collaborative
creation’

6

ANNUAL REPORT 2019Integrate and streamline the global
compressor production system in the world.
 eorganize the bases in China and integrateR
the functions to strengthen collaboration.

 ursue the synergetic “cost creationP
capability”.
-Global optimum procurement, promotion of
VE for clutches, etc.
 egain the “workplace capabilities” throughR
production innovation.
-Technological innovation at the motherplant and overseas development of technologies.

 volution to an integrated air conditioningE
corporation-Launch of the next-generation key devices
to open up new markets.
-Creation of new customer value throughenergy control and optimum heat control
technologies.

Total heat management system
Development of next-generation
devices and value creation throughtotal heat management

Automotive control
Ergonomics

HP systems

Development of HP market
Integrated control of motor, inverter, and battery
Connected technologies
Automated driving

SocialChallenges

Devices

HEV EV

Environmental consciousness
High density & high output battery
Highly efficient power device

ECH

Pursuit of comfort

Long cruising distanceElectric driven compressor

Heat management

Core
Tech.

HEV EV

Highly efficient engine

ICE

Improved power train

Reduction in size and weight

Production at themother factory
Manufacturing of HP
heat exchanger in China

ExpanderGrowth through “Collaborative Creation”

5. Toward the Future
The Group will focus on the “re-establishment of management foundation” to strengthen its financial structure andimprove profitability. On the other hand, by utilizing the concept of backcasting to realize the vision, We are convincedthat it is crucial for the Group to survive by creating new value by aggressively shifting our current approach from“organic growth” to “collaborative creation” to strengthen business competitiveness (Please refer to page 10, E of ESG,
and page 14, Highlight, for our ‘collaborative creation” activities).
In addition, “Contribution to achievement of SDGs through our business activities” is one of our key strategies in
SCOPE2023. We believe that actions for SDGs are indispensable for the Group’s commitment to meeting international
requirements and contributing to society.
So we have clarified the relation between SDGs and our business activity by selecting priority areas based on our
vision “Open up a new era and become a company that is trusted by all the people so that we will be able to create anenriched society in which environment and comfort are harmonized.” The Group will take actions aligned with thesepriority areas.
Sanden Group will continue to strive to be the Group that is trusted by all the people by beginning a new era andsolving social issues.
Katsuya Nishi
Representative Director & President
Sanden Holdings Corporation

SANDEN Holdings Corporation

7

Performance Overview
Automotive
Systems
Business Group

Other Business Group

Overview of Results of Operations

4.0%
In the fiscal year that ended in March 2019, the slow recoveries of the%
global and Japanese economies continued with the support of firm capital
Commercial
expenditures and consumer spending. However, the economic outlook
Store Systems
Business Grouphas become more uncertain because of U.S.-China trade tension, slowing
Net Sales
economic growth in China, problems involving Brexit and other reasons.
%The Sanden Group took many actions during the fiscal year based on(Millions of yen)
the previous four-year mid-term plan that was announced in May 2017.
Although these initiatives are starting to produce benefits, performance inthe current fiscal year declined because of large extraordinary losses andother factors. One reason was the changes in the business climate such as U.S.-China trade tension, slowing economic growthin China, problems involving Brexit and other reasons. In addition, the business climate has become much more challenging
than when the previous mid-term plan was established due to the environmental regulations in Europe, Middle East sanctions
by the United States and other reasons. Sales decreased 4.8% to ¥273,934 million mainly because higher sales in theCommercial Store Systems business were offset by lower sales in the Automotive Systems Business. The performance of thisbusiness was impacted by a market downturn caused by U.S.-China trade friction and the decline in automobile sales, chiefly
outside Japan. Although there were activities to improve the cost structure to boost profitability, earnings were down primarily
because of the decline in sales. Operating income fell 83.7% to ¥889 million, ordinary income was down 87.2% to ¥564 million
and there was a loss attributable to owners of parent of ¥23,060 million compared with a profit of ¥4,255 million in theprevious fiscal year. This loss was largely attributable to provision of allowance for doubtful accounts (an extraordinary loss) forreceivables and other amounts due from an affiliated company in the Middle East and to expenses for structural reforms.

70.6

25.4

¥273,934

Automotive Systems Business
The Sanden Group developed technologically advanced products that precisely matched the needs of the customers concerning environmental sensitivity
and supplied compact, light and energy-efficient products that provide value
for customers. Although sales were higher for environmentally responsible vehicles, mainly in Europe, sales were lower in China and other Asian countries primarily due to U.S. and Chinese actions involving trade and sales to a major
U.S. customer declined. As a result, segment sales were lower than one year
earlier. Earnings also decreased despite cost cutting and a further reexamination of expenses in response to the large downturn in sales. As a result, segment sales decreased 7.4% to ¥193,465 million and operating income fell
91.5% to ¥560 million.

Sales and Operating Income(Billions of yen)
220
200

200

208

199

198

193

180
160
140
120
100
80
60
40

5.6

6.5

4.4

2014

2015

2016

20
0

Sales

0.56

6.6

2018 (FY)2017

Operating Income

Commercial Store Systems BusinessIn the retail store systems sector, the Sanden Group continued to provide comprehensive ideas and solutions encompassing products, systems and services
linked to customers’ growth strategies and needs involving environmental issues.
Sales were higher than one year earlier because of deliveries of coffee servers tocustomers in Japan and for other reasons. In the vending systems sector, sales
were about the same as one year earlier even though Japan’s vending machine
market is continuing to shrink. Performance benefited from the development ofenvironmentally responsible vending machines and the launch of new models.
Segment earnings increased because of the larger scale of operations and otherreasons. As a result, segment sales increased 1.9% to ¥69,423 million andoperating income was up 170.9% to ¥773 million.

Sales and Operating Income (Loss)(Billions of yen)
100

6.2

69

68

0.2

1.8

0

0.77

(0.3)
2014

2015
Sales

ANNUAL REPORT 2019

71

40

-20

8

83

60

20

Note: A ll Commercial Store Systems Business including freezing and refrigerating showcases, vending machines, andcoffee machines were transferred to SDRS Holdings Corporation as of October 1, 2019.

94

80

2016

2017

Operating Income (Loss)2018 (FY)CSR
Materiality

Environment

People• Promotion of environmental technology
development• Responding to lowering the burden on
the environment• Promotion of recycling• Challenges for climate change• Promotion of diversity• Initiatives to achieve a good work/lifebalance• Human resource training• Thorough adherence to compliance

Methods of Establishing Priorities
and the Results
Importance in the light ofsocial requirements(Expectations of stakeholders)

The Sanden Group has been working on to solve CSR issues setting “environment” and “people” as Materiality (our issues). For “environment”, we worked
on reducing the amount of energy used, the amount of waste generated, theamount of water used in manufacturing process. We also worked on educational efforts to overseas facilities and sourcing strategies using Material Flow
Cost Accounting (MFCA) for measures to eliminate generation sources.
Turning next to the “people”, we worked on reducing total working hours andincreasing usage of paid leave through “work style reforms.”

Materiality“Environment”
and“People”

Importance for management

Based on our vision “Open up a new era and become a company that is trusted by all the people so that we will be able tocreate an enriched society in which environment and comfort are harmonized” included in SCOPE2023, the Sanden Group
have clarified the relation between SDGs and our business activity by selecting priority areas from aspects of SDGs.
The Sanden Group is committed to make growth to realize a sustainable society.

Priority areas

Background and reasons

Practical examples

Provide quality
products(customer
satisfaction)

Based on Management Principles “satisfy our customers’
needs with high quality products,” DNA of corporate culture
to practice under customer-first and quality-first handed
down since its foundation.
Mission to provide comfort to society based on core technology “cooling and heating.”

Promote technology development ofenvironmentally friendly productsContinuous material and partsprocurement transformation

Protect the
global environment

After we declared “The Group to be an eco-friendly company” in 1990, the Group has been promoting environmental
management aggressively based on Management Policies“We try to grow with the core of the environment” established in 1997.

Deploy MFCA/
Local environmental conservation
activities (5 main areas)

Ensureoccupationalsafety andhealthPlacing the utmost importance on safety & health, the Group
continuously working on eliminating occupational injuries andimproving working environment while incorporating safety &health into Corporate Philosophy, based on awareness thatassuring safety and health as a corporate responsibility.

Activities in line with the Safety and
Health Charter

Recruit andnurture diversehuman
resources

For further growth as a global company, respect humanrights and diversification of all human resources and promote
to improve working environment and show maximum performance.

Respect regional customs andculturesThoroughly
enforcecompliance

Since compliance with laws and rules to be fulfilled as a member of the international community is a basic condition of a
global company trusted by society, the Group will thoroughly
educate employees to take action with a sense of ethics.

Comply with the international rules,
regulations, and rules
GDPR

Relevant SDGs

The Sanden Group will continue to grow to realize a sustainable society.
SANDEN Holdings Corporation

9

ESG EThe Sanden Group’s Environmental Technologies
Heat Pump System for Electric Vehicles (September 2018)
Electric vehicles are difficult to utilize exhaust heat as a heat source for heating
cabin because electric vehicles have no internal-combustion engine. An electricheater is supplementary used for heating, which runs a drive battery down andconsequently results in decreasing cruising distance. The heat pump system isdesigned to extract thermal energy from the outside so that it is able to perform heating with less power. In addition, the system expands cruising distanceby increasing energy efficiency in the intermediate period (outside temperature
5-25°C). It also contribute to improve comfort in the cabin by adding dehumidifying function to air conditioning system. With electric compressor which waslaunched at earlier stage in the market, Sanden brought as a total system tomarket ahead of other manufacturers.

Electric Coolant Heater for Electric Vehicles(September 2018)
While electric vehicles have no internal-combustion engine and plug-in hybrid
electric vehicles only have smaller engine, it need to have alternative for heating
the cabin. Sanden developed Electric Coolant Heater (ECH) which heats water
as a coolant by electricity. The compact and high efficiency product which ismore suitable for conventional air conditioning system provides heat source inhigh level of safety.

Sanden Provide the Lithium-ion Battery Temperature
Control System for Pikes Peak International Hill Climb(June 2019)
Sanden participated “Pikes Peak International Hill Climb EV Challenge,” which
Sanden also cosponsored. The purpose was to gather data to accelerate theresearch and development of new heat management system. Sanden developed and supplied “lithium-ion battery temperature control system” tuned
exclusively based on convention air conditioning system for battery for theelectric vehicle and repeatedly acquired and analyzed vehicle data under harshconditions. Sanden continues to promote further development of next generation
thermal management system based on the knowledge gained through the race.

10

ANNUAL REPORT 2019

ESG S
Social Contribution
Work Style Reform
In Japan, it is estimated that population is to decrease to 49.59 million due todeclining birthrate and aging population.
Therefore, the Sanden Group has been working on various “work stylereforms” and establishing personnel system which meet various way of working to meet needs of the times and society, such as child support, care support, employment promotion for the elderly, and reduction of total working
hours.
In February 2019, the Group newly introduced “telework” and “flexible shorttime work” which enable diverse working style.

Contribution Activities for Communities and Society
Human resources development programs forrevitalizing local communities
With the goal of realizing a sustainable society, the Sanden Group is committed
to fulfilling its role as a corporate citizen and deepening its ties with local communities.
P Green Children Project (Italy)
P MONOLABO for elementary and junior high school students
P Riko-challe for junior high and high school students
P Isesaki City Business Experience Project “Isesaki Social Design Seminar”
P Waseda University–affiliated business school innovation creation course forhuman resources programs for revitalizing local communities
P Safer with Us (Poland)
P Sanden Maebashi Robocon
Pro Bono activities for regional administration andeducation institution
In order to revitalize local communities and promote technical tradition,
employees with knowledge and experience of the Sanden Group participate
training courses organized by the regional administration, educational institutions and assistance agencies.
The Sanden Group contributes to accelerate technical tradition throughtraining course for new employees at manufacturing sites organized by the
Gunma Industry Support Organization, manufacturing improvement instructor
school, and manufacturing business courses organized by Gunma University
etc. as a manufacturing company in Gunma Prefecture which has many manufacturing companies.

SANDEN Holdings Corporation

11

ESG G
Fundamental Corporate Governance Policies
Employing the “company with auditors” model based on Japan’s Corporate Law, Sanden has created a corporate governance system that includes a Board of Directors, Audit & Supervisory Board Members, an Audit & Supervisory Board, andan accounting auditor. In addition, with the aim of securing the transparency and objectivity of management, Sanden has
also established a Nomination and Compensation Committee as an ­advisory committee to the Board of Directors.
The Board of Directors has nine members, including three outside directors, while the Audit & Supervisory Board has
four members, including three 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 five 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 and one that enables quick responses to changes in the market
environment. Also, by adopting a Corporate Officer system, the Group aims to strengthen business execution functions andincrease management efficiency. Moreover, the Management Committee and Board of Directors deliberate in a timely fashion on important matters in compliance and 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, the Company has judgedthat the current system is appropriate for the corporate governance of the Sanden Group.

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

General Meeting of Shareholders
Appointment/Removal

Board of Directors(9 Directors)

Appointment/Removal

3 Outside Directors(3 Independent Directors)

Supervision/advice

Nomination andCompensation
Committee
Advisory
Committee

Audit & Supervisory Board(4 Audit & Supervisory Board Members)

3 Outside Audit &Supervisory Board Members(2 Independent Audit &Supervisory Board Members)

Representative Director & PresidentManagement Committee
Drafting Management
Strategies[Business Execution]
Directors,
Corporate Officers

Directors
The Company

Business Companies, Subsidiaries,
and Affiliated Companies

12

ANNUAL REPORT 2019

Internal
Auditors

Accounting
AuditorInternal
Auditing

Auditing
Accounting AuditingDirectors/Audit & Supervisory Board Members/
Corporate Officers(Back row, left to right)

Yuzo Ushiyama,(Front row, left to right)

Toru Akima,

Naonori Kimura,

Hideyuki Kobayashi,

Hideto Ozaki,
Tsuguo Ito,

Shinji Ichikawa,
Katsuya Nishi,

Hiroshi Yomo,Mark Ulfig,

Ichiro Yumoto,Kazumichi Matsuki

Hiroshi Takahashi

Directors
Katsuya Nishi

Tsuguo ItoMark Ulfig

Hideyuki Kobayashi

Representative Director &President

Representative Director &Executive Vice President

Director &Executive Vice President

Director &Executive Corporate Officer

Hiroshi Takahashi

Toru Akima

Director &Executive Corporate Officer

Director &Corporate Officer

Hideto Ozaki

Naonori Kimura

Yuzo Ushiyama

Director (Outside)

Director (Outside)

Director (Outside)

Audit & Supervisory Board Members
Shinji Ichikawa

Hiroshi Yomo

Ichiro Yumoto

Kazumichi Matsuki

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

Audit & Supervisory Board
Member (Outside)

Audit & Supervisory Board
Member (Outside)

Corporate Officers
Tadashi Kondo

Takashi Shimomura

Hiroki Terao

Senior Executive Corporate
Officer

Executive Corporate Officer

Corporate Officer

As of June 2019

SANDEN Holdings Corporation

13

Highlight

Sanden Completed ‘Sanden Huayu Heqing New Plant
in Shanghai (July 2018)
Sanden Huayu Automotive Air Conditioning Co., Ltd., a joint venture company
between Sanden Holdings Corporation (Sanden) and Huayu Automotive
Systems Company Co., Ltd. (Huayu Automotive) belonging to Shanghai
Automotive Industry Corporation (SAIC) that has the largest market share in
China and places Shanghai Volkswagen and SAIC-GM under its umbrella,completed its state-of-the-art ‘Huayu Sanden Heqing New Plant’ (New Plant) in
Pudong New Area, Shanghai. The New Plant has a ground area of 116 thousand square meters and a total building area of 105 thousand square meters
including the two-story north building and the south building. Annual production capacity will be 15 million units, which is also the largest in the global
Sanden Group.

Introduce “Telework” and “Flexible Short-Time Work”(February 2019)
It is said that securing labor force will become more severe in the future due tointensifying global business competition and accelerating declining birthrate
and aging population. Sanden recognizes that maintaining and securing humanresources and improving productivity are essential issues. Sanden also recognize that it is a challenge to promote flexible working styles that respond to
employee awareness and diversification of situations. Sanden introduced “telework” and “flexible short-time work” as part of the introduction of flexible work
styles with recognition of diverse values that allow people to continue working
comfortably according to life events.

Sanden Exhibits 67th IAA Commercial Vehicles(September 2018)
Sanden exhibited our automotive equipment system products (compressors,
HVAC units, etc.) at a commercial vehicle show held in Hannover, Germany.
Sanden will continue to promote our products proactively to major commercial
vehicle customers.

Sanden and Gunma University Agree to Enter IndustryAcademia Collaboration Agreement (April 2019)
Sanden and Gunma University held a signing ceremony for the industry-academia collaboration agreement at the Sanden Global Center. Sanden believes
that the agreement will accelerate technological development where making
remarkable progress in the world, especially information technology field suchas AI and IoT. Sanden also expects the agreement to promote human resources development capable for increasingly growing global business.

14

ANNUAL REPORT 2019

Financial
SectionFinancial Section Contents
Management’s Discussion & Analysis.............................. 16

Consolidated Statements of Cash Flows...................... 24

Consolidated Balance Sheets......................................... 20

Notes to Consolidated Financial Statements................25

Consolidated Statements of Operations/
Consolidated Statements of Comprehensive Income.... 22

Independent Auditor’s Report...................................... 40
Corporate Data/Stock Information................................ 41

Consolidated Statements of Changes in Net Assets........ 23
SANDEN Holdings Corporation

15

Management’s Discussion & Analysis
Net Sales

retail store systems sector in Japan. In the Vending Systems

Net sales for fiscal year 2018, ended March 31, 2019

Sector, the Group worked actively to expand business focusing

decreased by 4.8% or ¥13.6 billion, compared with the previ-mainly on the development of environmentally friendly products

ous fiscal year, to ¥273.9 billion on a consolidated basis.

and launch of new products. However, sales were held to theFirst, in the Automotive Systems Business, Sanden contin-

same level recorded in the previous fiscal year mainly because

ued to develop innovative products that reflect the environmen-of the declining trend in the vending machines market in Japan.

tal interests of customers. Group companies sold many

Earnings in this segment were higher than one year earlier.

products that provided value for customers, centering mainlyThis was largely attributable to the effects of an increase inon compact, lightweight, and energy-saving features. Despite

scale. Based on the aforementioned, sales in the Commercial

these factors and an increase in sales of products for environ-Store Systems Business segment came to ¥69.4 billion, an

mentally friendly vehicles mainly in Europe, revenues in thisincrease of 1.9% compared to the previous fiscal year.

business decreased from the previous fiscal year owing largely

Operating income was ¥0.7 billion, a year-on-year improvement

to the downturn in sales in Asia and China as well as to majorof 170.9%.

customers in the US as a result of the impact of such factors
as US-China trade policies. From a profit perspective, earnings

Costs, Expenses, and Earnings

decreased year on year. This was despite efforts to reduce

In the fiscal year under review, net sales totaled ¥273.9 billion,

costs and further review expenses in response to the sudden

down 4.8% compared with the previous fiscal year. Despite an

drop in sales. Accounting for each of these factors, Automotive

increase in sales in the Commercial Store Systems Business,

Systems Business segment sales were ¥193.4 billion, down

this downturn largely reflects trade friction between the US and7.4% from the previous fiscal year. Operating income was ¥0.5

China, which contributed to a slump in the market, and suchbillion, representing a decrease of 91.5% from the previous fis-

factors as the slowdown mainly in overseas automobile sales.

cal year.

While the Sanden Group undertook steps to promote a com-

Turning to the Commercial Store Systems Business, theprehensive cost transformation to improve profitability, operat-

Sanden Group continued to provide comprehensive ideas anding income amounted to ¥0.8 billion, down 83.7% compared

solutions encompassing products, systems, and services

with the previous fiscal year. This was largely due to thelinked to customers’ growth strategies and needs involving

decrease in net sales. In the fiscal year ended March 31, 2019,environmental issues in the retail store systems sector. Sales

Sanden incurred a net loss attributable to owners of the parent

increased compared with the previous fiscal year due to a vari-of ¥23.0 billion. This was compared with net income attribut-

ety of factors including deliveries of new coffee servers in theable to owners of the parent of ¥4.2 billion in the previous fiscal

Breakdown of Net Sales

4.0%
25.4%

Net Sales

Gross Profit Ratio(Billions of yen)
350

(%)
20

300
15

250

Net Sales¥273,934

200
10(Millions of yen)

150

70.6%

100

5

50

Automotive Systems Business Group
Commercial Store Systems Business Group
Other Business Group16

ANNUAL REPORT 2019

0

2013

2014

2015

2016

2017

2018

(FY)

0

2013

2014

2015

2016

2017

2018

(FY)

year. This negative turnaround mainly reflects the posting of aamounted to ¥11.3 billion, which was a turnaround of ¥15.4

provision to the Company’s allowance for doubtful accounts

billion compared with net cash provided by investing activities

associated with trade receivables of an affiliated company inin the previous fiscal year. The principal investing cash outflow

the Middle East as an extraordinary loss.

was purchases of property, plant and equipment of ¥14.1 billion. Net cash provided by financing activities came to ¥2.6 bil-

Financial Position

lion, which was a turnaround of ¥9.2 billion compared with net

Total assets as of March 31, 2019 decreased by ¥29.2 billion

cash used in financing activities in the previous fiscal year. The

compared with the end of the previous fiscal year, to ¥246.4

principal cash outflow was repayment of long-term loans pay-billion. This was largely due to the posting of an allowance forable and redemption of bonds totaling ¥20.4 billion. The major

doubtful accounts and decreases in cash and time deposits,

cash inflow was proceeds from long-term loans payable andproperty, plant and equipment, and deferred income taxes.

proceeds from issuance of bonds together totaling ¥18.8 bil-

Total liabilities decreased by ¥1.8 billion year on year, tolion. Taking into consideration these cash flows, cash and cash

¥222.8 billion. While interest-bearing liabilities increased, thisequivalents at the end of the fiscal year were ¥13.0 billion,

decrease mainly reflects lower trade notes and accounts pay-

which was ¥5.7 billion lower than the cash and cash equiva-

able as well as payables-other. Total net assets decreased bylents as of the end of the previous fiscal year.

¥27.4 billion compared with the previous fiscal year-end, to¥23.5 billion, largely owing to the net loss attributable to own-

(2) Capital Demands

ers of the parent for the fiscal year under review and decrease

The Sanden Group requires working capital primarily for thein foreign currency translation adjustments.

purchase of materials and parts for products manufactured by
the Sanden Group, manufacturing costs, and operating

Liquidity

expenses such as SG&A expenses.

(1) Cash FlowsMoreover, funds for capital investment are mainly required for

Net cash provided by operating activities for the fiscal year

enhancing both local production and self-manufacture tounder review amounted to ¥3.0 billion, which was ¥4.0 billion

strengthen the global production system and developmental

lower than the previous fiscal year. While Sanden incurred afacilities, maintaining and renewing facilities related to stream-

loss before income taxes of ¥20.5 billion, the Company also

lining, and acquiring molds for production. In the fiscal year

recorded reductions in operating assets attributable to such

under review, capital investments principally comprised invest-

factors as an increase in allowance for doubtful accounts andments related to the Group’s Automotive Systems Business in

structural reform cost. Net cash used in investing activities

Japan and overseas.

Net Income (Loss) Attributable to
Owners of the Parent

Net Income (Loss) per Share

(Billions of yen)
10

Total Assets/Capital Adequacy Ratio

(Yen)
300

8

(Billions of yen)
300

(%)
30

250

25

200

20

150

15

100

10

50

5

200
6
4

100

2
0
0
-25

2013

2014

2015

2016

2017

2018

(FY)

-1,000

2013

2014

2015

2016

2017

2018

(FY)

0

2013

2014

2015

2016

2017

2018 (FY)0

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

SANDEN Holdings Corporation

17

Management’s Discussion & Analysis

Sanden procures the funds necessary to meet its essential

these products is affected by economic conditions in the vari-requirement from a variety of sources. In addition to drawing onous countries and regions in which these products are sold. In

its operating cash flows and own resources, these sources

particular, automotive market trends in North America, Europe,

include borrowings from financial institutions and the issuance

Asia, and China, where we operate the Automotive Systems

of corporate bonds.

Business, may affect the Sanden Group’s business results andfinancial 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,

The Sanden Group’s global operations, including Automotive

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

Systems Business, involve foreign currency transactions. In

Sanden Group companies principally secure the required work-

particular, exchange rate fluctuations in the Sanden Group’s

ing capital through short-term bank loans not exceeding a peri-

major transaction currencies, the U.S. dollar and the Euro, andod of 12 months. As of March 31, 2019, short-term bank loans

currency fluctuations in China and other parts of Asia may

amounted to ¥51.5 billion and were denominated primarily inaffect the Sanden Group’s business results and financial posi-

Japanese yen, the U.S. dollar, and the Euro. Meanwhile, thetion.

Group procures long-term financing through long-term debt to

In addition, the currencies stated in the financial statements

fund its capital and other investment activities. As of March 31,

of consolidated overseas subsidiaries and companies account-

2019, the balance of long-term debt stood at ¥71.6 billion. A

ed for by the equity method have been translated intolarge part of the long-term bank loans was borrowed with fixed

Japanese yen and recorded in the Company’s consolidated

interest rates from financial institutions. During the fiscal year

financial statements. Therefore, the translation rate may affectunder review, the Sanden Group undertook long-term debt of

net income and stockholders’ equity as accounted for in the¥17.3 billion mainly in Japan. This was used to fund capital andconsolidated financial statements.

other investments. The Sanden Group considers interest rates,
the market environment, the ratio of direct and indirect(3) Changes in Raw Material and Parts Market

fund-raising, and the business situation between financial insti-

Conditions

tutions and the Sanden Group when deciding on an appropri-

The Sanden Group engages in a wide range of activities includ-

ate long-term fund-raising plan. The Sanden Group aims to

ing the manufacture and sales of products and systems mainly

maintain a sound financial position and believes the net cash

through its Automotive Systems and Commercial Store

provided by operating activities, financing through loans, andSystems businesses. As these activities involve the procure-the issuance of bonds as well as stock provide possible sourc-

ment of raw materials and parts, a variety of factors including

es of funds for future growth.

the shortage of items or sharp upswings in prices attributable
to changes in market conditions that result in higher manufac-

Business and Other Risks

turing costs may affect the Sanden Group’s business results

The following is an overview of major business and other risks

and financial position.

faced by the Sanden Group that may significantly affect investors’ decisions. The Sanden Group examines risks and takes(4) Natural Disasters

appropriate measures to control risks. Please note that for-If the manufacturing and business bases of the Sanden Groupward-looking statements below are based on the Sanden

suffer serious damage as a result of a natural disaster such asGroup’s judgments made at the end of the fiscal year underan earthquake, the Sanden Group’s business results and finan-

review.

cial position may be impacted by the halting of production
activities and delay in the deliveries of materials and parts.

(1) Economic Conditions

18

The Sanden Group mainly sells automotive air-conditioning(5) New Product Development

systems, air-conditioner compressors, vending machines, andBased on its well-measured forecasts of trends and changes inrefrigerated showcases throughout the world. Demand forthe market, the Sanden Group develops cutting-edge technol-

ANNUAL REPORT 2019

ogies, which are then used in its products, and works to glob-(9) Limitations on Intellectual Property Protection

ally expand its business across a wide range of areas including

The Sanden Group has accumulated a wide range of propri-

its Automotive Systems and Commercial Store Systems busi-

etary technologies, know-how, and other intellectual property

nesses. In the event that forecasts differ from trends andthrough its development activities over the long period since itschanges in the market and difficulties in the development andestablishment. Legal restrictions in certain regions may prevent

introduction of products are encountered, these circumstances

the Sanden Group from completely protecting its intellectual

may affect the Sanden Group’s business results and financial

property or restrain the Sanden Group from fundamentally

position.

restricting third parties to manufacture imitations of the SandenGroup’s products through the use of its intellectual property.

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

The operations of the Automotive Systems Business and the

The Sanden Group is continuing quality control initiatives based

Commercial Store Systems Business encompass develop-

on its Sanden Total Quality Management (STQM). However,

ment, manufacturing, and sales bases located in 23 countries

product liability claims related to items manufactured by theand regions in North America, Europe, Asia, and China.

Sanden Group in the past, at present, and into the future could

Business activities in these countries and regions are subject toaffect the Sanden Group’s business results and financial posi-

the following risks:tion.

• Changes in and revisions to laws and regulations in countries
in which the Sanden Group operates,(11) Legal and Regulatory Risks• Changes in the economic and political climate,

The Sanden Group is subject to various governmental regula-• Unstable political situations, including wars,

tions in the countries and regions in which it operates, including• Labor disputes, andthose related to business investment permits, export restric-• Marine transport-related strikes.

tions, taxation, the environment, and other matters. In the event

Any of the aforementioned events may affect the SandenGroup’s business results and financial position.

that these regulations are changed or new regulations are introduced, this could affect the Sanden Group’s business results
and financial position.

(7) Price Competition
The Sanden Group’s operating conditions are marked byincreasingly fierce price competition in the automobile andvending machine industries, and demands from automobile
and beverage manufacturers to lower prices intensify every
year.
The Sanden Group believes that its products possess acompetitive 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 supply of materials and parts, and this may affect
the Sanden Group’s business results and financial position.
(8) Reliance on Customer Performance
The Sanden Group provides products to automobile and beverage manufacturers around the world. Therefore, customer
performance and other factors that are beyond the control ofthe management of the Sanden Group may affect the Group’sbusiness results and financial position.

SANDEN Holdings Corporation

19

Consolidated Balance Sheets
Sanden Holdings Corporation and Consolidated Subsidiaries
March 31, 2019 and 2018
Millions of yen

ASSETS

2019

Current assets:
Cash and time deposits (Notes 6, 9 and 15)���������������������������������������������������������������������������������������������������������������� ¥ 13,030
Receivables (Notes 6, 9 and 12):   Trade notes and accounts�������������������������������������������������������������������������������������������������������������������������������������� 50,223   Unconsolidated subsidiaries and affiliates���������������������������������������������������������������������������������������������������������������� 24,265  Other��������������������������������������������������������������������������������������������������������������������������������������������������������������������
5,078
Inventories (Notes 3 and 9)����������������������������������������������������������������������������������������������������������������������������������������� 48,271
Prepaid expenses and other current assets (Notes 6 and 12)���������������������������������������������������������������������������������������� 14,106
Allowance for doubtful accounts��������������������������������������������������������������������������������������������������������������������������������� (16,562)   Total current assets ����������������������������������������������������������������������������������������������������������������������������������������������� 138,412

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������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Allowance for doubtful accounts���������������������������������������������������������������������������������������������������������������������������������
   Total investments and other assets�������������������������������������������������������������������������������������������������������������������������

¥ 18,776
49,48925,5895,001
47,49013,694(678)
159,363

20,815
1,058
110
2,240
4,078
5,856
(3,606)30,551

21,774
1,186
118
4,641
3,869
6,018
(3,064)34,544

Property, plant and equipment, at cost (Note 9):Land������������������������������������������������������������������������������������������������������������������������������������������������������������������������� 16,805
Buildings and structures��������������������������������������������������������������������������������������������������������������������������������������������� 63,041
Machinery and equipment������������������������������������������������������������������������������������������������������������������������������������������ 104,028
Furniture and fixtures������������������������������������������������������������������������������������������������������������������������������������������������� 45,109
Leased assets����������������������������������������������������������������������������������������������������������������������������������������������������������� 22,673
Construction in progress��������������������������������������������������������������������������������������������������������������������������������������������
6,187  Total��������������������������������������������������������������������������������������������������������������������������������������������������������������������� 257,845
Accumulated depreciation������������������������������������������������������������������������������������������������������������������������������������������ (180,408)   Net property, plant and equipment�������������������������������������������������������������������������������������������������������������������������� 77,436

16,91262,908102,666
44,43823,651
6,699
257,277(175,536)
81,741

Total assets �������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥246,401¥275,649

See accompanying notes.

20

2018

ANNUAL REPORT 2019

Millions of yen

2019

LIABILITIES AND NET ASSETS

Current liabilities:
Short-term bank loans (Notes 6 and 9)������������������������������������������������������������������������������������������������������������������������ ¥ 51,513
Long-term debt due within one year (Notes 6 and 9)���������������������������������������������������������������������������������������������������� 25,209
Payables (Note 6):   Trade notes and accounts�������������������������������������������������������������������������������������������������������������������������������������� 48,830   Unconsolidated subsidiaries and affiliates����������������������������������������������������������������������������������������������������������������
1,320  Other��������������������������������������������������������������������������������������������������������������������������������������������������������������������
7,402
Income taxes payable (Notes 5 and 6)�������������������������������������������������������������������������������������������������������������������������
478
Accrued employees’ bonuses�������������������������������������������������������������������������������������������������������������������������������������
3,347
Allowance for outstanding claims��������������������������������������������������������������������������������������������������������������������������������
432
Accrued liabilities�������������������������������������������������������������������������������������������������������������������������������������������������������
3,209
Lease obligations due within one year (Notes 6 and 9)�������������������������������������������������������������������������������������������������
2,175
Other current liabilities (Note 12)�������������������������������������������������������������������������������������������������������������������������������� 12,789   Total current liabilities�������������������������������������������������������������������������������������������������������������������������������������������� 156,710
Long-term liabilities:
Long-term debt due after one year (Notes 6 and 9)������������������������������������������������������������������������������������������������������
Net defined benefit liability (Note 8)�����������������������������������������������������������������������������������������������������������������������������
Deferred income taxes (Note 5)�����������������������������������������������������������������������������������������������������������������������������������
Lease obligations due after one year (Notes 6 and 9)���������������������������������������������������������������������������������������������������
Other noncurrent liabilities (Note 13)���������������������������������������������������������������������������������������������������������������������������
   Total long-term liabilities����������������������������������������������������������������������������������������������������������������������������������������

2018¥ 45,011
19,011
52,466
1,058
10,998
699
3,759
986
4,189
2,018
10,027150,227

53,772
3,653
245
5,974
2,504
66,151

62,121
3,376
205
6,113
2,647
74,464

11,037
3,579
10,484

11,037
3,731
33,703(877)
24,225(1,126)47,346257(84)(4,297)(1,140)(5,265)292(16)(1,484)(954)(2,161)

Non-controlling interests in consolidated subsidiaries��������������������������������������������������������������������������������������������
4,579
Total net assets���������������������������������������������������������������������������������������������������������������������������������������������������������� 23,538   Total liabilities and net assets��������������������������������������������������������������������������������������������������������������������������������� ¥246,401

5,772
50,957¥275,649

Contingent liabilities (Note 12)
Net assets (Note 10):Stockholders’ equity:
Common stock:   Authorized: 79,200,000 shares  Issued:
28,066,313 shares�����������������������������������������������������������������������������������������������������������������������������
Capital surplus����������������������������������������������������������������������������������������������������������������������������������������������������������
Retained earnings������������������������������������������������������������������������������������������������������������������������������������������������������
Treasury stock, at cost:   389,207 and 413,024 shares in 2019 and 2018, 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������������������������������������������������������������������������������������������������������

Note: The Company implemented a 5-for-1 share consolidation on October 1, 2017. The numbers of shares are stated as if the share consolidation was implemented on April 1,
2017.
See accompanying notes.

SANDEN Holdings Corporation

21

Consolidated Statements of Operations
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018
Millions of yen

2019

2018

Net sales (Note 18)������������������������������������������������������������������������������������������������������������������������������������������������������� ¥273,934
Cost of sales��������������������������������������������������������������������������������������������������������������������������������������������������������������� 227,011
Gross profit����������������������������������������������������������������������������������������������������������������������������������������������������������������� 46,922
Selling, general and administrative expenses (Note 19)����������������������������������������������������������������������������������������������� 46,033
Operating income (Note 18)�����������������������������������������������������������������������������������������������������������������������������������������
889
Other income (expenses):
Interest and dividend income��������������������������������������������������������������������������������������������������������������������������������������
96
Exchange gains (losses), net���������������������������������������������������������������������������������������������������������������������������������������
397
Equity in net income of affiliates���������������������������������������������������������������������������������������������������������������������������������
2,148
Interest expense��������������������������������������������������������������������������������������������������������������������������������������������������������
(2,482)Gain (loss) on sales and disposals of property, plant and equipment, net�����������������������������������������������������������������������
79
Gain on sales of investment securities�������������������������������������������������������������������������������������������������������������������������
63
Provision for doubtful accounts (Note 23)�������������������������������������������������������������������������������������������������������������������� (16,244)
Structure reform cost (Notes 20 and 21)���������������������������������������������������������������������������������������������������������������������
(4,461)
Loss on reversal of foreign currency translation adjustments due to liquidation of overseas subsidiaries��������������������������
(109)
Provision for outstanding claims (Note 22)�������������������������������������������������������������������������������������������������������������������
(432)
Other, net������������������������������������������������������������������������������������������������������������������������������������������������������������������
(512)   Other income (expenses)���������������������������������������������������������������������������������������������������������������������������������������� (21,457)
Income (loss) before income taxes���������������������������������������������������������������������������������������������������������������������������� (20,568)
Income taxes (Note 5):
Current���������������������������������������������������������������������������������������������������������������������������������������������������������������������
686
Deferred��������������������������������������������������������������������������������������������������������������������������������������������������������������������
2,384   Total income taxes�������������������������������������������������������������������������������������������������������������������������������������������������
3,071
Net income (loss)�������������������������������������������������������������������������������������������������������������������������������������������������������� (23,639)
Net income attributable to non-controlling interests�����������������������������������������������������������������������������������������������
(579)
Net income (loss) attributable to owners of the parent�������������������������������������������������������������������������������������������� ¥ (23,060)¥287,609
234,955
52,65447,1855,469
246(1,437)
2,667(2,180)132
5,488—(2,884)—(1,901)
266
398
5,867
1,269
139
1,409
4,458
202
¥  4,255
Yen

2019

2018

Amounts per share of common stock:
Net income (loss):  Basic�������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥(833.58)  Diluted������������������������������������������������������������������������������������������������������������������������������������������������������������������—Cash dividends applicable to the year������������������������������������������������������������������������������������������������������������������������� ¥    —¥154.00—¥   —

Note: The Company implemented a 5-for-1 share consolidation on October 1, 2017. The amounts per share are computed as if the share consolidation was implemented on April
1, 2017.
See accompanying notes.

Consolidated Statements of Comprehensive Income
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018
Millions of yen

2019

Net income (loss)�������������������������������������������������������������������������������������������������������������������������������������������������������� ¥(23,639)
Other comprehensive income (Note 11):
Net unrealized gains (losses) on securities, net of taxes �����������������������������������������������������������������������������������������������
(26)
Unrealized gains (losses) on hedging derivatives, net of taxes ��������������������������������������������������������������������������������������
(68)
Foreign currency translation adjustments ������������������������������������������������������������������������������������������������������������������� (1,014)
Remeasurements of defined benefit plans, net of taxes �����������������������������������������������������������������������������������������������
(186)
Share of other comprehensive income of affiliates accounted for using equity method �������������������������������������������������� (2,134)
Total other comprehensive income���������������������������������������������������������������������������������������������������������������������������������� (3,430)
Comprehensive income���������������������������������������������������������������������������������������������������������������������������������������������� ¥(27,070)
Total comprehensive income attributable to:
Owners of the parent������������������������������������������������������������������������������������������������������������������������������������������������� ¥(26,164)
Non-controlling interests��������������������������������������������������������������������������������������������������������������������������������������������
(906)
See accompanying notes.

22

ANNUAL REPORT 20192018

¥4,458(3,323)
0
1,001
78
(331)
(2,573)¥1,884¥1,574310

Consolidated Statements of Changes in Net Assets
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018
Millions of yen
Stockholders’ equity

Capitalsurplus

Accumulated other comprehensive income

Retainedearnings

Treasurystock,
at costTotal
stockholders'equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes

Foreigncurrencytranslation
adjustments

Remeasure­ments ofdefinedbenefit plans,
net of taxes

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests inconsolidated
subsidiaries

Total
net assets

Year ended March 31, 2018

Commonstock

Balance at beginning of year

¥11,037 ¥3,747¥29,447¥(1,203)¥43,028¥3,618¥(16)¥(2,048)¥(1,032)¥   520¥5,610¥49,159

Net income attributable to ownersof the parent�������������������������������

—

—

4,255

—

4,255

—

—

—

—

—

—

4,255

Decrease in net unrealized gains
(losses) on securities,
net of taxes��������������������������������

—

—

—

—

—

(3,325)———(3,325)—(3,325)

Increase due to changes infair value ofhedging derivatives���������������������

—

—

—

—

—

—

0

—

—

0

—

0

Adjustments from translation offoreign currency financial
statements���������������������������������

—

—

—

—

—

—

—

564

—

564

—

564

Remeasurements ofdefined benefit plans�������������������

—

—

—

—

—

—

—

—

78

78

—

78

Increase in
non-controlling interests��������������

—

—

—

—

—

—

—

—

—

—

161

161

Disposal of treasury stock��������������

—

(15)

—

83

67

—

—

—

—

—

—

67

Acquisition of treasury stock����������

—

—

—

(6)

(6)

—

—

—

—

—

—

(6)

Balance at end of year�������������� ¥11,037 ¥3,731¥33,703¥(1,126)¥47,346¥  292¥(16)¥(1,484)¥  (954)¥(2,161)¥5,772¥50,957

Noncontrollinginterests inconsolidated
subsidiaries

Total
net assets

Millions of yen
Stockholders’ equity

Capitalsurplus

Accumulated other comprehensive income

Retainedearnings

Treasurystock,
at costTotal
stockholders'equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes

Foreigncurrencytranslation
adjustments

Remeasure­ments ofdefinedbenefit plans,
net of taxes

Total
accumulated
othercomprehensive
incomeYear ended March 31, 2019

Commonstock

Balance at beginning of year

¥11,037 ¥3,731¥33,703¥(1,126)¥47,346

¥292

¥(16)

¥(1,484)¥  (954)

Net loss attributable toowners of the parent�������������������

——(23,060)—(23,060)

—

—

—

—

—

—

(23,060)

Decrease in net unrealized gains
(losses) on securities,
net of taxes��������������������������������

—

—

—

—

—

(35)

—

—

—

(35)

—

(35)

Decrease due to changes infair value of hedging derivatives���

—

—

—

—

—

—

(68)

—

—

(68)

—

(68)

Adjustments from translation offoreign currency financial
statements���������������������������������

—

—

—

—

—

—

—

(2,813)—(2,813)—(2,813)Remeasurements ofdefined benefit plans�������������������

—

—

—

—

—

—

—

—

(186)

(186)

—

(186)

¥(2,161) ¥5,772¥50,957

Decrease in
non-controlling interests��������������

—

—

—

—

—

—

—

—

—

—

(1,192)(1,192)

Disposal of treasury stock��������������

—

(24)

(158)

484

301

—

—

—

—

—

—

301

Acquisition of treasury stock����������

—

—

—

(235)

(235)

—

—

—

—

—

—

(235)

Change in ownership interest ofparent due to transactions with
non-controlling interests��������������

—

(127)

—

—

(127)

—

—

—

—

—

—

(127)

Balance at end of year�������������� ¥11,037 ¥3,579¥10,484¥  (877)¥24,225

¥257

¥(84)

¥(4,297)¥(1,140)¥(5,265) ¥4,579¥23,538

See accompanying notes.

SANDEN Holdings Corporation

23

Consolidated Statements of Cash Flows
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018
Millions of yen

2019

Cash flows from operating activities:
Income (loss) before income taxes��������������������������������������������������������������������������������������������������������������������������������� ¥(20,568)

2018¥ 5,867

Adjustments to reconcile net income (loss) to net cash provided by operating activities:   Depreciation and amortization����������������������������������������������������������������������������������������������������������������������������������� 10,914   Amortization of goodwill��������������������������������������������������������������������������������������������������������������������������������������������
46   Equity in net income of affiliates�������������������������������������������������������������������������������������������������������������������������������� (2,148)

11,07971(2,667)   Loss on reversal of foreign currency translation adjustments due to liquidation of overseas subsidiaries�������������������������
   Loss (gain) on sales and disposals of property, plant and equipment, net����������������������������������������������������������������������

109

—

(79)

(132)

   Gain of sales of investment securities������������������������������������������������������������������������������������������������������������������������
   Structure reform cost������������������������������������������������������������������������������������������������������������������������������������������������

(63)(5,478)

4,461

2,884

   Decrease (increase) in assets:    Trade accounts and notes receivable���������������������������������������������������������������������������������������������������������������������
   Inventories�����������������������������������������������������������������������������������������������������������������������������������������������������������

200

6,092

(2,635)(213)   Accounts receivable–other������������������������������������������������������������������������������������������������������������������������������������

(558)

(558)

    Allowance for doubtful accounts���������������������������������������������������������������������������������������������������������������������������� 16,177   Other current assets���������������������������������������������������������������������������������������������������������������������������������������������
(224)

(221)
(1,867)   Increase (decrease) in liabilities:    Trade accounts and notes payable�������������������������������������������������������������������������������������������������������������������������
    Accrued employees’ bonuses��������������������������������������������������������������������������������������������������������������������������������

(2,603)

(1)

(396)

(34)

   Accounts payable–other����������������������������������������������������������������������������������������������������������������������������������������
    Provision for outstanding claims����������������������������������������������������������������������������������������������������������������������������

(1,357)(5,674)

(553)

986

    Other current liabilities and long-term liabilities������������������������������������������������������������������������������������������������������
   Income taxes paid����������������������������������������������������������������������������������������������������������������������������������������������������

2,026(1,259)(1,013)(2,833)

1,311

1,102

3,043

7,140

Purchases of property, plant and equipment������������������������������������������������������������������������������������������������������������������� (14,196)
Proceeds from sale of property, plant and equipment������������������������������������������������������������������������������������������������������ 2,948(8,859)  Other, net�����������������������������������������������������������������������������������������������������������������������������������������������������������������
    Net cash flows from operating activities�����������������������������������������������������������������������������������������������������������������Cash flows from investing activities:

4,028

Purchases of intangible assets���������������������������������������������������������������������������������������������������������������������������������������
Proceeds from sales of investment securities�����������������������������������������������������������������������������������������������������������������

(683)

(374)

807

8,725

Other, net���������������������������������������������������������������������������������������������������������������������������������������������������������������������

(238)

574

    Net cash flows from investing activities������������������������������������������������������������������������������������������������������������������ (11,362)

4,093

Cash flows from financing activities:
Net increase (decrease) in short-term bank loans����������������������������������������������������������������������������������������������������������� 7,055
Proceeds from long-term loans payable������������������������������������������������������������������������������������������������������������������������� 17,368
Repayment of long-term loans payable�������������������������������������������������������������������������������������������������������������������������� (19,590)

29,814(30,382)

Proceeds from issuance of bonds����������������������������������������������������������������������������������������������������������������������������������
Redemption of bonds����������������������������������������������������������������������������������������������������������������������������������������������������

1,466
(862)

—

Repayment of lease obligations�������������������������������������������������������������������������������������������������������������������������������������
Other, net���������������������������������������������������������������������������������������������������������������������������������������������������������������������

(2,537)(2,065)

(219)

(162)

    Net cash flows from financing activities�����������������������������������������������������������������������������������������������������������������
Effect of exchange rate changes on cash and cash equivalents�����������������������������������������������������������������������������������

2,679(6,536)

6,554

(107)

37

Net increase (decrease) in cash and cash equivalents ���������������������������������������������������������������������������������������������� (5,746)
Cash and cash equivalents at beginning of year��������������������������������������������������������������������������������������������������������� 18,776
Cash and cash equivalents at end of year (Note 15)����������������������������������������������������������������������������������������������������� ¥ 13,030

4,736

See accompanying notes.

24(10,294)

ANNUAL REPORT 2019

14,040¥18,776

Notes to Consolidated Financial Statements
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018

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 fromInternational Financial Reporting Standards (“IFRS”) in certain respects as toapplication and disclosure requirements.
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 includedin the Japanese-language statutory consolidated financial statements, but
not required for fair presentation, is not presented in the accompanying consolidated financial statements.
The consolidated financial statements are stated in Japanese yen, thecurrency of the country in which the Company is incorporated and operates.

Equity method— The equity method was applied to the investments in 8
affiliates in 2019 and 7 affiliates in 2018, by using financial statements forthe fiscal years of each affiliate, some of which differ from those of theCompany. Due to new establishment, Sanden (Hefei) Refrigeration Co., Ltd.
was included in the scope of equity method for the year ended March 31,
2019. Investments in all other unconsolidated subsidiaries and affiliatedcompanies including Sanpak Engineering Industries (PVT) Ltd. are stated atacquisition cost. These companies are not accounted for using the equity
method, due to their immaterial impact on the consolidated net income andconsolidated retained earnings. Earnings of such companies are recorded in
the Company’s books only to the extent that cash dividends are received.

2. Significant Accounting Policies
Consolidation— The consolidated financial statements include theaccounts of the Company and its consolidated subsidiaries (50 subsidiaries
in 2019 and 46 subsidiaries in 2018). For the purposes of preparing theconsolidated financial statements, all significant intercompany balances,transactions and unrealized 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 new establishment of companies, Taiwan Sanden Retail Systems
Corporation, SANDEN AUTOMOTIVE SYSTEMS (SINGAPORE) PTE. LTD.,
Sanden International (Europe) GmbH, Sanden Vendo GmbH and Yik Cheng(Singapore) Pte Ltd. were included in the scope of consolidation for the year
ended March 31, 2019. Due to completion of liquidation, PT. SANDEN JAYAINDONESIA was excluded from the scope of consolidation for the year ended
March 31, 2019.
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 Co., Ltd., and SANDEN
MANUFACTURING MEXICO S.A. DE C.V. for the fiscal year ended December
31, 2018 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, 2018 and March 31,
2019. In respect of Choon Tian International (Shanghai) Co., Ltd., whose fiscal year-end is also December 31, financial information of the subsidiary asof and for the 12-month period ended March 31, 2019 is consolidated.

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-forsale securities. The Company and its consolidated subsidiaries do not holdtrading securities or held-to-maturity debt securities.
Equity securities issued by unconsolidated subsidiaries and affiliated companies that are not accounted for using the equity method are stated atacquisition cost and written down to its impaired value if an indication of
impairment is present and the fair value is less than the cost.
Available-for-sale securities for which fair value is readily determinable
are stated at market value. Unrealized gains or losses, net of taxes are posted in a separate component of net assets. Available-for-sale securities forwhich 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.

Allowance for doubtful accounts— Under Japanese accounting standards for financial instruments, allowance for doubtful accounts provided by
the Company 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 remaining receivables.
Consolidated overseas subsidiaries have provided an allowance for doubtful 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 thecost is not expected to be recovered. In such cases, cost is reduced to net
realizable value.

Derivatives and hedges— Derivative financial instruments are stated atfair value and changes in the fair value are recognized as gains and losses in
the consolidated statements of operations.
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”).

SANDEN Holdings Corporation25

Notes to Consolidated Financial Statements

The Company and its consolidated subsidiaries use forward exchange
contracts, interest rate swaps and commodity swaps mainly for the purposeof mitigating (i) fluctuation risk of foreign currency exchange rates withrespect to receivables in foreign currency and future transactions in foreign
currency, (ii) fluctuation risk of interest rates with respect to long-term loans
payable, 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.
Property, plant and equipment— Property, plant and equipment are stated at 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
2 to 50 years (3 to 50 years in 2018)   Machinery and equipment 2 to 18 years (3 to 13 years in 2018)
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
for in accordance with either International Financial Reporting Standards or
US GAAP, which requires long-lived assets and certain identifiable intangibles
to be held and used by an entity to be reviewed for impairment whenever
events of changes in circumstances indicate that the carrying amount of anasset 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.
Income taxes— The provision for income taxes is computed based on pretax income included in the consolidated statements of operations. 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.
Retirement 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 operations using the straight-line method
beginning from the fiscal year in which they are incurred, over years within

26

ANNUAL REPORT 2019average residual periods of service of employees. Actuarial gains and losses
are recognized in the consolidated statements of operations using thestraight-line method over years within the average residual periods of serviceof employees. The Company recognizes actuarial gains and losses in the fiscal year when they are incurred.
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 delivery policy.
Allowance for outstanding claims— Allowance for outstanding claims
represents the amount for future payments of settlement in relation to violations of antitrust laws, etc. with regard to past transactions of certain automotive devices.
Foreign currency translation— Under Japanese GAAP, all receivables
and payables denominated in foreign currencies are translated at theexchange rate prevailing at the year-end, and differences arising from translation are included in the consolidated statements of operations.
Translation of financial statements of overseas subsidiaries— Thebalance sheet accounts of overseas subsidiaries and affiliated companies
are translated 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 in othercomprehensive 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 29, 2017, “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 and events 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 process so thatnet income is accounted 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 (loss) per share of common stock
is computed using the weighted-average number of shares of common stock
outstanding during the year. Diluted net income (loss) 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 potentialof the shares of common stock to be issued upon the exercise of warrants.
Cash dividends per share represent actual amounts declared as applicableto the respective 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
is recognized 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 such cases, sales revenue is recognized when the installation is completed.
Reclassifications— Certain previous year amounts have been reclassified
to conform to the 2019 presentation to reflect the changes of importance onsome accounts. This reclassification had no impact on previously reported
results of operations or retained earnings.
Accounting standards issued but not yet adopted— “AccountingStandard for Revenue Recognition” (Accounting Standards Board of Japan(“ASBJ”) Statement No. 29, March 30, 2018)“Implementation Guidance on Accounting Standard for Revenue Recognition”(ASBJ Guidance No. 30, March 30, 2018)(1) Summary
ASBJ developed a comprehensive accounting standard for revenue recognition. Revenue is recognized by applying the following five steps:
Step 1: Identify the contract
Step 2: Identify the performance obligations under the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the separate performance obligations
Step 5: R ecognize revenue when performance obligations are satisfied oras they are satisfied(2) Effective date
The Company expects to apply the standard and guidance from the beginning of the year ending March 31, 2022.
(3) Effects of application of the guidance
The Company is currently evaluating the effect on the consolidated financial
statements arising from the application of the standard and guidance.
Changes in method of presentation— Adoption of Partial Amendments
to Accounting Standard for Tax Effect Accounting
The Company applied the “Partial Amendments to Accounting Standard
for Tax Effect Accounting” (ASBJ Standard No. 28, revised on February 16,2018) (hereinafter “Partial Amendments to Tax Effect Accounting”) from the
beginning of the year ended March 31, 2019. As a result, deferred tax
assets and deferred tax liabilities are presented in investments and otherassets and long-term liabilities, respectively, on the accompanying balance
sheets and certain changes are made to Note 5. Income Taxes.
As a result of these changes, deferred tax assets of ¥2,575 million previously presented in current assets, deferred tax liabilities of ¥18 million previously presented in current liabilities and deferred tax liabilities of ¥606
million previously presented in long-term liabilities are included in deferred
tax assets in investments and other assets of ¥4,641 million, and deferred

tax assets of ¥15 million previously presented in current assets and deferred
tax liabilities of ¥11 million previously presented in current liabilities areincluded in deferred tax liabilities in long-term liabilities of ¥205 million on
the accompanying consolidated balance sheet as of March 31, 2018.
Certain information is added to Note 5. Income Taxes as described in note
8 (excluding total amount of valuation allowance) and note 9 of explanatory
notes to the “Accounting Standard for Tax Effect Accounting” as prescribedin Paragraphs 3 through 5 of the Partial Amendments to Tax EffectAccounting. However, information for the year ended March 31, 2018 is notpresented in accordance with the transitional treatment prescribed in
Paragraph 7 of the Partial Amendments to Tax Effect Accounting.
Additional Information— The Company has adopted a scheme referred toas the “Executive Compensation Board Incentive Plan 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 of increasing their awareness of contributing to
the growth in business results and corporate value in the medium-to-longterm.
Based on a resolution by the annual shareholders’ meeting on June 21,2018 to continue the BIP, disposal of treasury stock through a third party
allotment was resolved by the meeting of the Board of Directors on August 8,
2018.
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 PITF 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,
in principle, when they retire.
(2) Remaining balance of treasury stock in the trusts
The Company records the remaining balance of the Company’s own stock inthe trusts as treasury stock in net assets section at the carrying amount(excluding ancillary expenses) in the trust. The carrying amount and thenumber of shares of such treasury stock as of March 31, 2019 and 2018are ¥574 million and 273,961 shares and ¥408 million and 142,695
shares, respectively.
3. Inventories
The following is a summary of inventories at March 31, 2019 and 2018.
Millions of yen
2019
2018

Merchandise and finished goods������������������������������ ¥24,142
Work in process������������������������������������������������������ 11,685
Raw materials���������������������������������������������������������
9,249
Other inventories�����������������������������������������������������
3,194
Total����������������������������������������������������������������������� ¥48,271¥21,895
12,08910,065
3,438¥47,490

SANDEN Holdings Corporation

27

Notes to Consolidated Financial Statements

4. Investment in Securities
The following is a summary of the acquisition costs and book values of available-for-sale securities with available fair values as of March 31, 2019 and2018.

The following table summarizes the significant difference between thestatutory tax rate and the Sanden Group’s effective tax rate for accounting
purposes for the year ended March 31, 2018:

Millions of yen
2019
Acquisition
Book
cost
value
Difference

Statutory tax rate:
30.7%
Nondeductible expense���������������������������������������������������������� 2.3
Foreign tax credits����������������������������������������������������������������� 1.9
Different tax rates applied to overseas subsidiaries������������������ (3.5)
Amortization of goodwill��������������������������������������������������������� 0.4
Equity in net income of affiliates��������������������������������������������� (14.3)
Tax effect for unrealized profits on inventories�������������������������� 2.3
Tax credit������������������������������������������������������������������������������ (1.0)
Tax breaks for investment for facilities������������������������������������� (9.1)
Valuation allowance��������������������������������������������������������������� 14.6
Others����������������������������������������������������������������������������������� (0.2)

Securities with book value exceedingacquisition cost

Equity securities��������������������������������������� ¥190
Bonds�����������������������������������������������������
—Others�����������������������������������������������������
—Total�������������������������������������������������������� ¥190

¥585
—
—
¥585

¥395
—
—
¥395

Securities with book value not exceedingacquisition cost

Book
value

Difference

¥135
—
—
¥135

¥(8)
—
—
¥(8)

Acquisition
cost

Equity securities��������������������������������������� ¥144
Bonds�����������������������������������������������������
—Others�����������������������������������������������������
—Total�������������������������������������������������������� ¥144

Securities with book value exceedingacquisition cost

Millions of yen
2018
Acquisition
Book
cost
value
Difference

Equity securities��������������������������������������� ¥552
Bonds�����������������������������������������������������
—Others�����������������������������������������������������
—Total�������������������������������������������������������� ¥552

¥973
—
—
¥973

¥421
—
—
¥421

Securities with book value not exceedingacquisition cost

Book
value

Difference

¥—
—
—
¥—

¥—
—
—
¥—

Acquisition
cost

Equity securities �������������������������������������� ¥ —Bonds ���������������������������������������������������� —Others ���������������������������������������������������� —Total ������������������������������������������������������� ¥ —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, 2019and 2018.
Millions of yen
2019
2018

Unlisted stock�������������������������������������������������������������������� ¥336

¥212

Total sales of available-for-sale securities for the years ended March 31,
2019 and 2018 amounted to ¥304 million and ¥9,187 million, related gains
amounted to ¥63 million and ¥5,488 million, and related losses for the years
ended March 31, 2019 and 2018 amounted to nil and ¥9, 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 30.7% for the years ended
March 31, 2019 and 2018.

2018

Effective tax rate������������������������������������������������������������������������ 24.0%
For the year ended March 31, 2019, disclosure of the difference between
the statutory tax rate and the Sanden Group’s effective tax rate for accounting purposes is omitted due to loss before income taxes.
Significant components of the Sanden Group’s deferred tax assets andliabilities as of March 31, 2019 and 2018 were as follows:
Millions of yen
2019
2018

Deferred tax assets: Net operating loss carryforward(*2)������������������������ ¥13,040 Unrealized gains on inventories
from intercompany sales�����������������������������������
134 Accrued expenses�����������������������������������������������
563
Warranty liabilities�����������������������������������������������
435
Allowance for doubtful accounts �������������������������
3,019 Doubtful accounts written off�������������������������������
677 Loss on devaluation for slow-moving inventory�����
907
Accrued employees’ bonuses������������������������������
720
Tax breaks for investment for facilities������������������
1,384 Unrealized gains on fixed assets
from intercompany sales�����������������������������������
17
Depreciation�������������������������������������������������������
705 Net defined benefit liability����������������������������������
520 Environmental liability�����������������������������������������
65 Impairment loss on long-lived assets���������������������
736 Others����������������������������������������������������������������
1,506
Gross deferred tax assets���������������������������������������� 24,434
Less: Valuation allowance fornet operating loss carryforward(*2)������������������ (12,810)
Valuation allowance fortemporary differences����������������������������������� (8,044)
Total valuation allowance (*1)������������������������������������� (20,854)
Offset against deferred tax liabilities ������������������������� (1,340)
Total deferred tax assets������������������������������������������
2,240
Deferred tax liabilities:
Depreciation�������������������������������������������������������
(419)
Net unrealized gain on securities�������������������������
(120) Effect on retained earnings of foreign affiliates�����
(587)
Others����������������������������������������������������������������
(458)
Gross deferred tax liabilities������������������������������������� (1,586)
Offset against deferred tax assets����������������������������
1,340
Total deferred tax liabilities��������������������������������������

28

ANNUAL REPORT 2019¥13,082
149
1,047
641
630
648
806
756
2,110
70
802
515
73
394
2,193
23,922——(17,305)(1,974)
4,641
(854)
(125)
(682)
(516)
(2,179)
1,974

(245)

(205)

Net deferred tax assets ������������������������������������������ ¥ 1,994¥ 4,436(*1) Valuation allowance increased by ¥3,548 million. Major reason for the increase is due toincrease in valuation allowance for net operating loss carryforward in the Group of¥3,849 million.

(*2) Expiration of net operating loss carryforward and related deferred tax assets as of March
31, 2019, were as follows:
Millions of yen

Year Ending March 31,

Net operating loss
carryforward

Valuation
allowance

Deferredtax assets

2020
2021
2022
2023
2024
2025 and thereafter
Total¥ 1,791
1,069
21
30
41
10,085¥13,040¥ (1,791)(1,069)
(21)
(30)
(41)
(9,855)¥(12,810)

¥ —
—
—
—
—
230
¥230

Note: Net operating loss carryforward was calculated by effective statutory tax rate.

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 speculative purposes.
(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 of customers. Receivables denominated in foreign currencies are exposed to foreign currency exchange risk. In principle, foreign exchange forward contracts
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 bonds, long-term loans payable and leaseobligations are for financing capital investment, and the longest maturity is 9
years after March 31, 2019. A large part of them are borrowed or issued
with fixed interest rates; therefore, there is no interest rate risk. The SandenGroup enters into interest rate swap agreements to reduce exposure to losses resulting from adverse fluctuations in interest rates on the part of longterm loans payable 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 loans payable, and currency and interest rate swap agreements to hedge exchange rate risk and interest rate risk
associated with foreign currency denominated bank loans.
(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, 2019)
Book values of the financial instruments included in the consolidated balance
sheet and their fair values at March 31, 2019 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
2019
Fair value

Difference¥ 13,030
64,941
4,575
721¥ 83,269

¥ —
—
—
—
¥ —

¥ 57,554
51,513

¥ —
—

2,175
478
7,337
71,644

2,246
478
7,357
71,74270—
1997(7) Lease obligations
due after one year�����������������������
5,974
Total liabilities���������������������������������� ¥196,678

6,182¥197,074

207¥396

Derivatives*2������������������������������������ ¥     70¥     70

¥ —Book value(1) Cash and time deposits��������������� ¥ 13,030(2) Receivables*1������������������������������
64,941(3) Consumption taxes receivable������
4,575(4) Investment securities�������������������
721
Total assets������������������������������������� ¥ 83,269(1) Payables������������������������������������� ¥ 57,554(2) Short-term bank loans�����������������
51,513(3) Lease obligations due within
one year�������������������������������������
(4) Income taxes payable������������������
(5) Bonds����������������������������������������
(6) Long-term loans payable�������������

*1: Allowance for doubtful accounts associated with trade notes, accounts receivable andreceivables– other 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 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 on available-for-sale securities is 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
are settled in a short-term period.
2. (3) Lease obligations due within one year, (5) bonds, (6) long-term loans
payable and (7) lease obligations due after one year
Fair value equals to the present value of future cash flows discounted byusing the current interest rate for similar loans payable, bond 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
2019

Investment securities:
Unlisted������������������������������������������������������������������������������� ¥  336Unconsolidated subsidiaries and affiliates������������������������������ 20,815
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.
SANDEN Holdings Corporation

29

Notes to Consolidated Financial Statements

Note 3: The redemption schedule for monetary claims and investment securities with maturities at March 31, 2019 was as follows:
Millions of yen
2019WithinMore than
1 year
1 yearCash and time deposits�������������������������������������������� ¥13,030
Receivables������������������������������������������������������������� 64,941
Consumption taxes receivable�����������������������������������
4,575
Investment securities with maturities(1) Bonds������������������������������������������������������������
—(2) Others������������������������������������������������������������
—Total������������������������������������������������������������������������ ¥82,547

¥—
—
—
—
—
¥—

3. Fair values of financial instruments (at March 31, 2018)
Book values of the financial instruments included in the consolidated balance
sheet and their fair values at March 31, 2018 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
2018
Fair value

Difference¥ 18,776
79,401
4,527
973¥103,679

¥  —
—
—
—
¥  —

¥ 64,523
45,011

¥  —
—

2,018
699
6,700
74,433

2,029
699
6,733
74,138

11
—
33
(295)

(7) L ease obligations
due after one year���������������������������
6,113
Total liabilities�������������������������������������� ¥199,500

6,150¥199,28737¥(213)

Derivatives*2���������������������������������������� ¥    122¥    122¥  —Book value(1) Cash and time deposits������������������� ¥ 18,776(2) Receivables*1���������������������������������� 79,401(3) Consumption taxes receivable����������
4,527(4) Investment securities�����������������������
973
Total assets����������������������������������������� ¥103,679(1) Payables����������������������������������������� ¥ 64,523(2) Short-term bank loans��������������������� 45,011(3) Lease obligations due within
one year�����������������������������������������
(4) Income taxes payable����������������������
(5) Bonds��������������������������������������������
(6) Long-term loans payable�����������������

*1: Allowance for doubtful accounts associated with trade notes and accounts receivable isdeducted.
*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 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 on available-for-sale securities is 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
are settled in a short-term period.
2. (3) Lease obligations due within one year, (5) bonds, (6) long-term loans
payable and (7) lease obligations due after one year
Fair value equals to the present value of future cash flows discounted byusing the current interest rate for similar loans payable, bonds 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
2018

Investment securities:
Unlisted������������������������������������������������������������������������������� ¥   212Unconsolidated subsidiaries and affiliates������������������������������ 21,774
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, 2018 was as follows:
Millions of yen
2018
WithinMore than
1 year
1 yearCash and time deposits�������������������������������������������� ¥ 18,776
Receivables������������������������������������������������������������� 79,401
Consumption taxes receivable�����������������������������������
4,527
Investment securities with maturities(1) Bonds������������������������������������������������������������
—(2) Others������������������������������������������������������������
—������������������������������������������������������������������������
Total¥102,705

¥—
—
—
—
—
¥—

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,
2019 and 2018:(Forward exchange contracts and currency swaps)
Millions of yen
2019
Contract
amountMorethan
1 yearForward exchange contracts��������������������������������������������������������� ¥3,053
Total�������������������������������������������������������������������������������������������� ¥3,053¥—¥—

Transaction

30

ANNUAL REPORT 2019

2018
Fair
value

Unrealized
gains(losses)

¥33
¥33

¥33
¥33

Contract
amountMorethan
1 yearFair
value

Unrealized
gains(losses)¥7,321¥7,321

¥—
¥—

¥113
¥113

¥113
¥113

2. Derivative transactions to which hedging accounting was applied at March 31, 2019 and 2018:(Forward exchange contracts)

Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2019
Deferral hedge accounting
Forward exchange contracts
Accounts payable������������������������������������������ ¥135
Total ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥135

Hedging accounting method

2018
Deferral hedge accounting

Transaction

Hedged items

Fair value

¥—

¥0

¥—

¥0

Millions of yen
Contract amountMore than 1 year

Fair value

Accounts payable������������������������������������������ ¥  102Accounts receivable�������������������������������������� 2,997

¥30
—

121

Total ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥3,099

¥30

¥118

Forward exchange contracts¥ (2)(Currency swaps)

Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2019
Deferral hedge accounting
Currency swaps
Loans payable���������������������������������������������� ¥1,756
Total ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥1,756

Fair value¥1,658¥131¥1,658¥131

There was no currency swaps to which hedge accounting was applied at March 31, 2018.
(Interest rate swaps)

Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2019
Exceptional method
Receiving floating rate and paying fixed rate Long-term loans payable �������������������������� ¥ 2,864
Deferral hedge accounting Receiving floating rate and paying fixed rate Long-term loans payable �������������������������� 7,473
Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥10,337

Fair value¥1,7882,839¥  —*1(94)¥4,627¥(94)*1: F or certain long-term loans payable for which interest rate swaps under the Exceptional method are used to reduce exposure to losses resulting from adverse fluctuations in interest rates, thefair value of such swaps was included in the fair value of such long-term loans payable, which is the hedged item.

Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2018
Exceptional method
Receiving floating rate and paying fixed rate Long-term loans payable �������������������������� ¥ 3,030
Deferral hedge accounting Receiving floating rate and paying fixed rate Long-term loans payable �������������������������� 9,789
Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥12,819

Fair value¥1,6044,542¥  —*1(108)¥6,146¥(108)*1: F or certain long-term loans payable for which interest rate swaps under the Exceptional method are used to reduce exposure to losses resulting from adverse fluctuations in interest rates, thefair value of such swaps was included in the fair value of such long-term loans payable, which is the hedged item.

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, 2019, and therefore theexcess is recorded in net defined benefit asset.
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 orutilize 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 overseas subsidiaries are funded.

SANDEN Holdings Corporation31

Notes to Consolidated Financial Statements

2. D efined benefit plans, including plans to which the simplified
method is applied(1) Movement in retirement benefit obligations(7) Plan assets
a. Plan assets comprise:

Millions of yen
2019
2018

Balance at beginning of year����������������������������������������� ¥7,652
260
Service cost������������������������������������������������������������

¥7,496236

Interest cost������������������������������������������������������������

220

205

Actuarial losses (gains)���������������������������������������������
Benefits paid�����������������������������������������������������������
Exchange differences�����������������������������������������������

314

0

(441)

(318)

284

31

Balance at end of year������������������������������������������������� ¥8,290¥7,652(2) Movements in plan assets
Millions of yen
2019
2018

Balance at beginning of year����������������������������������������� ¥4,394 ¥4,329
Expected return on plan assets���������������������������������
254
257
Actuarial gains (losses)���������������������������������������������
(3)
29
Contributions paid by the employers�������������������������
195
189
Benefits paid����������������������������������������������������������� (257)(208)
Exchange differences�����������������������������������������������
163
(203)
Balance at end of year������������������������������������������������� ¥4,747 ¥4,394(3) Reconciliation from retirement benefit obligations and plan assets to net
defined benefit liability (asset)
Millions of yen
2019
2018

Funded retirement benefit obligations���������������������������� ¥6,858 ¥6,227
Plan assets������������������������������������������������������������������ (4,747) (4,394)
2,111
Unfunded retirement benefit obligations������������������������ 1,432 Net defined benefit liability at end of year������������������ 3,543

1,833
1,424
3,257

Net defined benefit liability��������������������������������������� 3,653
3,376
Net defined benefit asset������������������������������������������ (110)(118) Net defined benefit liability at end of year������������������ ¥3,543 ¥3,257(4) Retirement benefit costs
Millions of yen
2019
2018

Service cost����������������������������������������������������������������������� ¥260 ¥236
Interest cost���������������������������������������������������������������������� 220
205
Expected return on plan assets������������������������������������������� (254) (257)Amortization of actuarial losses (gains)�������������������������������� 131
111
Total retirement benefit costs for the fiscal year������������������� ¥358 ¥295
(5) Remeasurements of defined benefit plans, before tax

Actuarial gains (losses)������������������������������������������������� ¥(186)
Total balance at end of year������������������������������������������ ¥(186)

¥81
¥81

(6) Accumulated remeasurements of defined benefit plans, before tax
Millions of yen
2019
2018

Actuarial gains (losses) that are yet to be recognized������ ¥(1,123)
Total balance at end of year ����������������������������������������� ¥(1,123)

ANNUAL REPORT 2019

2018

42%
51
3
4

¥(937)¥(937)

100%

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 in determining the long-term expected rate of return.
(8) Actuarial assumptions
The principal actuarial assumptions at March 31, 2019 and 2018:
2019

2018

Discount rate�������������������������������������������������� 0.3%–4.0% 0.3%–4.0%
Long-term expected rate of return������������������� 0.3%–7.5% 0.3%–7.5%
3. Defined contribution plans
Contributions to defined contribution plans of the Company and its consolidated subsidiaries were ¥908 million and ¥980 million for the fiscal years
ended March 31, 2019 and 2018, respectively.
9. Short-Term Borrowings, Long-Term Debt and Lease Obligations
Short-term bank loans bore weighted-average interest rates of 1.94% and2.01% at March 31, 2019 and 2018, respectively.
Long-term debt at March 31, 2019 and 2018 consisted of the following:
Millions of yen
2019
2018

Unsecured bonds:
0.17% due in 2022��������������������������������������������� ¥ 1,500
0.17% due in 2022��������������������������������������������� 1,487¥ 2,000
1,700

0.86% due in 2023���������������������������������������������
0.20% due in 2023���������������������������������������������

1,000

1,000

2,000

2,000

0.25% due in 2023���������������������������������������������

1,350

—

Loans from banks, insurance companies anda gricultural cooperatives, bearing weighted-average
rates of 1.51% and 1.59% at March 31, 2019 and2018, respectively������������������������������������������������� 71,644

74,43378,982
Less: Amount due within one year����������������������������� 25,209
Amount due after one year��������������������������������������� ¥53,772

81,13319,011¥62,121

The redemption schedule on bonds subsequent to March 31, 2019 was
as follows:Year ending March 31,

Millions of yen
2019
2018

32

2019

Bonds������������������������������������������������������������������������� 33%
Equity securities����������������������������������������������������������� 64
Cash and time deposits������������������������������������������������
3
Others�������������������������������������������������������������������������
0
Total���������������������������������������������������������������������������� 100%

2020 �������������������������������������������������������������������������������������
2021 �������������������������������������������������������������������������������������
2022 �������������������������������������������������������������������������������������
2023 �������������������������������������������������������������������������������������
2024 �������������������������������������������������������������������������������������
2025 and thereafter�����������������������������������������������������������������

Millions of yen¥1,505
1,985
2,185
1,512
150
—

The aggregate annual maturities of long-term loans payable at March 31,
2019 were as follows:Year ending March 31,

Millions of yen

2020 ������������������������������������������������������������������������������������� ¥23,704
2021 ������������������������������������������������������������������������������������� 21,4802022 ������������������������������������������������������������������������������������� 14,803
2023 �������������������������������������������������������������������������������������
8,401
2024 �������������������������������������������������������������������������������������
2,839
2025 and thereafter�����������������������������������������������������������������
413
The following assets were pledged as collateral for short-term bank loansof ¥1,787 million and long-term loans payable of ¥485 million at March 31,
2019 and short-term bank loans of ¥1,564 million and long-term loans payable of ¥2,226 million at March 31, 2018:
Millions of yen
2019
2018

Inventories and other���������������������������������������������������� ¥4,330
Land and buildings and structures,
machinery and equipment, etc., net���������������������������� 3,645¥4,823

Total���������������������������������������������������������������������������� ¥7,975¥7,852

3,029

The aggregate annual maturities of lease obligations at March 31, 2019were as follows:Year ending March 31,

2020 �������������������������������������������������������������������������������������
2021 �������������������������������������������������������������������������������������
2022 �������������������������������������������������������������������������������������
2023 �������������������������������������������������������������������������������������
2024 �������������������������������������������������������������������������������������
2025 and thereafter�����������������������������������������������������������������

Millions of yen¥2,175
1,898
1,690
1,254
786
344

10. Net Assets
Under the Companies Act of Japan (the “Act”), the entire amount paid for
new shares is required to be designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an amount notexceeding one-half of the amount paid of the new shares as additional paidin capital, which is included in capital surplus.
The Act 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 Act, the legal earnings reserve and additional paid-in capital could be used to eliminate or
reduce a deficit by a resolution at the shareholders’ 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 Act. No distribution of dividends has been
proposed to the annual shareholders’ meeting for the years ended March 31,
2019 and 2018.

11. Comprehensive Income (Loss)
Amounts reclassified to net income in the current year that were recognizedin other comprehensive income for the years ended March 31, 2019 and2018 and tax effects for each component of other comprehensive income
are as follows:
Millions of yen
2019
2018

Net unrealized gains (losses) on securities, net of taxes:
Increase (decrease) during the year�������������������������� ¥     29 ¥ 1,000
Reclassification adjustments�������������������������������������
(63) (5,427)
Sub-total, before tax������������������������������������������������
(34) (4,426)
Tax (expense) or benefit��������������������������������������������
7
1,102
Total, net of tax��������������������������������������������������������
(26) (3,323)
Unrealized gains (losses) on hedging
derivatives, net of taxes:
Increase (decrease) during the year��������������������������
Reclassification adjustments�������������������������������������

106
(214)

(435)
393

(108)
39

(41)
42

(68)

0

Foreign currency translation adjustments:
Increase (decrease) during the year�������������������������� (1,124)
Reclassification adjustments�������������������������������������
109
Total������������������������������������������������������������������������ (1,014)

1,001
—

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

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

1,001

(317)
131

(29)
111

(186)
(0)

81
(3)

(186)

78

Share of other comprehensive income of affiliates
accounted for using equity method:
Increase (decrease) during the year�������������������������� (2,134)
Reclassification adjustments�������������������������������������
—

(57)
(274)

Total������������������������������������������������������������������������ (2,134)(331)

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

Total other comprehensive income�������������������������������� ¥(3,430) ¥(2,573)
12. Contingent Liabilities
At March 31, 2019 and 2018, the Company and its consolidated subsidiaries had the following contingent liabilities:
Millions of yen
2019
2018

Guarantees or reservation of guarantees for loans ofaffiliated companies from banks and other lenders������ ¥357

¥600

In connection with a plea agreement with the U.S. Department of Justicefor breaches of antitrust law by the Company, civil lawsuits (class action lawsuits), etc. demanding compensation for damage from the breaches havebeen filed in North America. Settlements were reached for certain lawsuits
and allowance for outstanding claims has been provided for lawsuits whose
claim amounts are reasonably estimated. The outcome of other lawsuits may
affect the Sanden Group’s business performance, however, it is difficult toreasonably estimate their amount at this moment, and their impacts on the
Sanden Group’s operating results and financial condition are unclear.

SANDEN Holdings Corporation

33

Notes to Consolidated Financial Statements

Liquidated receivables which did not meet criteria for derecognition thus
were accounted for as financing transactions as at March 31, 2019 and2018 and were as follows:
Millions of yen
2019
2018

Trade notes and accounts receivable�������������������������������� ¥1,076
Consumption taxes receivable������������������������������������������
553

Yen
2019

2018

¥825
636

Net assets per share�������������������������������������������� ¥685.04 ¥1,633.99
Net income (loss) per share���������������������������������� (833.58)
154.00Liabilities that correspond to the liquidated receivables above are recorded in “Other current liabilities” amounting to ¥1,630 million and ¥1,461 million at March 31, 2019 and 2018, respectively. The trade notes andaccounts receivable above include factoring associated with self-settled trustof ¥1,076 million and ¥568 million at March 31, 2019 and 2018, respectively.
Trade notes maturing at the end of the consolidated fiscal year are settled
on their clearance dates. As the balance sheet date of the years ended
March 31, 2019 and 2018 was a bank holiday, the following amounts oftrade notes that matured on the balance sheet date were included in the balance of trade notes and accounts receivable at March 31, 2019 and 2018:

Basic and diluted net income (loss) per share of common stock for theyears ended March 31, 2019 and 2018 have been computed based on thefollowing:

Millions of yen
2019
2018

Trade notes and accounts receivable����������������������������������� ¥249

¥284

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
to compensate for 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 estimated obligation relating to the costs for the remediation, which amounted to ¥243
million and ¥273 million at March 31, 2019 and 2018, respectively, andwere 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 and furniture and fixtures. Leased software is included as part of “intangible assets.”
These leased assets are mainly for the Automotive Systems Business andthe Commercial Store Systems Business.
15. Cash Flow Information
Cash and cash equivalents at March 31, 2019 and 2018 consisted of thefollowing:
Millions of yen
2019
2018

Cash and time deposits�������������������������������������������� ¥13,030
Cash and cash equivalents��������������������������������������� ¥13,030¥18,776¥18,776

Trade notes and accounts receivables related to distribution of finishedgoods to Iran market have been experiencing significant delay in collection
affected by the financial sanctions against Iran. Consequently some of thereceivables are being collected in Iran, and cash and cash equivalents at
March 31, 2019 include ordinary deposits denominated in foreign currencies
that the Group holds in Iran.

34

16. Amounts per Share
Net assets and net income (loss) per share as at and for the years ended
March 31, 2019 and 2018, respectively, are as follows:

ANNUAL REPORT 2019

Number of shares
2019
2018

Weighted-average number of sharesof common stock��������������������������������������� 27,664,077

27,635,774

Millions of yen
2019
2018

Net income (loss) attributable to ownersof the parent��������������������������������������������������������� ¥(23,060)
Net income (loss) attributable to owners
of the parent relating to common stock������������������ (23,060)¥4,255
4,255

Yen
2019

Basic net income (loss) per share ofcommon stock������������������������������������������������������ ¥(833.58)

2018¥154.00

Diluted net income per common share for the year ended March 31,
2019 is not presented as the Company recorded a net loss and did not havecommon stock with potential dilutive effect. Diluted net income per commonshare for the year ended March 31, 2018 is not presented as the Company
did not have common stock with potential dilutive effect.
The Company’s shares held by the executive compensation BIP Trust (“BIP
Trust”) are recorded as treasury stock in shareholders’ equity which are
deducted from the weighted-average number of shares outstanding during
the year for the purpose of calculating net income (loss) per share, and fromthe outstanding number of shares issued at the end of the year for the purpose of calculating net assets per share.
The weighted-average number of shares held by the BIP Trust was
227,189 shares and 149,662 shares for the years ended March 31, 2019and 2018, respectively. The total number of shares held by the BIP Trust at
the balance sheet date was 273,961 shares and 142,695 shares as ofMarch 31, 2019 and 2018, respectively.
The Company implemented a 5-for-1 share consolidation on October 1,
2017. Amounts per share are computed as if the share consolidation was
implemented on April 1, 2017.

17. Related Party Transactions
1. Major transactions between the Company and the Company’s directors, certain companies owned by the Company’s directors or affiliates for the year ended
March 31, 2019 are as follows:
Company name or Name of director

Sanden Kankyo Mirai Zaidan(Sanden Environmental Future Foundation)
Sanden Al Salam LLC.

Sanden Huayu Automotive Air-Conditioning Co., Ltd.

Type of business or Occupation

Ownership of
the Company (%)*1
Sales of automotive air-conditioning

Manufacturing and sales ofautomotive air-conditioning

Nature of transaction or
account balance

Millions of yen—

Donation����������������������������������

¥    21

43.0

Sales����������������������������������������
Receivable��������������������������������

2,574
13,134

Other investments*2������������������
Sales����������������������������������������

19,981

Receivable��������������������������������

9,377

43.0

3,795

Donation— Donations contributed to the foundation are 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 objectives of the foundation’s activities are to develop the people’s consciousness and to create new ideas for the environment.
*2 An allowance for doubtful accounts of ¥13,811 million was provided for other investments to Sanden Al Salam LLC.

2. Major transactions between the Company and the Company’s directors, certain companies owned by the Company’s directors or affiliates for the year ended
March 31, 2018 are as follows:
Company name or Name of director

Sanden Kankyo Mirai Zaidan(Sanden Environmental Future Foundation)
Sanden Al Salam LLC.

Sanden Huayu Automotive Air-Conditioning Co., Ltd.

Type of business or Occupation

Ownership of
the Company (%)*1
Sales of automotive air-conditioning

Manufacturing and sales ofautomotive air-conditioning

Nature of transaction or
account balance

Millions of yen—

Donation����������������������������������

¥    20

43.0

Sales����������������������������������������
Receivable��������������������������������

13,883

Other investments*2������������������
Sales����������������������������������������

43.0

6,446
3,633
25,159Receivable��������������������������������
Proceeds for sale of equity
interests in affiliate������������������

9,164
1,141

Gain ons sale of equity
interests in affiliate������������������

572

Donation— Donations contributed to the foundation are 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 objectives of the foundation’s activities are to develop the people’s consciousness and to create new ideas for the environment.
*2 An allowance for doubtful accounts of ¥2,941 million was provided for other investments to Sanden Al Salam LLC.
*3 The sales price of equity interests in an affiliate was determined through negotiation considering independent third-party valuation and the payment term was cash in one installment.

3. The summaries of financial statements of the two significant affiliates for the fiscal years ended March 31, 2019 and 2018 are as follows:
Millions of yen
2019
Sanden Huayu Automotive
Air-Conditioning Co., Ltd.

Sanden Al
Salam LLC.

2018
Sanden Huayu Automotive
Air-Conditioning Co., Ltd.

Sanden Al
Salam LLC.

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

¥54,264
33,082¥26,016
1,681¥61,393
26,575¥40,229
4,363

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

51,097735

28,364—52,208737

39,876450

35,514(666)

35,022

4,266

Sales���������������������������������������������������������������������������������������������������������
Income (loss) before income taxes��������������������������������������������������������������

97,475

18,97985,122

31,155

7,833(4,239)7,626(1,420)Net income (loss)���������������������������������������������������������������������������������������

¥ 6,873¥ (4,239)¥ 6,285¥ (1,422)

SANDEN Holdings Corporation

35

Notes to Consolidated Financial Statements

18. 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

Main product, system, service

Automotive Systems Business

Automotive air-conditioning systems and air-conditioner compressors

Commercial Store Systems Business

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.
Information by reporting segment for the years ended March 31, 2019 and 2018 is summarized as follows:
Millions of yen
2019
Automotive
Systems Business

Reporting segment
Commercial Store
Systems Business

Total¥69,423¥   773

Net sales:
Outside customers������������������������������������������������������������������������� ¥193,465
Operating income (loss)������������������������������������������������������������������ ¥    560Total assets����������������������������������������������������������������������������������� ¥175,234
Depreciation and amortization���������������������������������������������������������
Amortization of goodwill�����������������������������������������������������������������
Equity in net income of affiliates������������������������������������������������������
Impairment loss�����������������������������������������������������������������������������
Investments in equity-method companies����������������������������������������
Increase in property, plant and equipment and intangible assets�������

9,203
46
1,824
3,403
15,051
10,843

OthersTotal
consolidated¥262,888¥11,045¥273,934¥  1,334¥  (445)¥    889¥61,931¥237,165¥ 9,235¥246,401

1,339
—
324
—
5,395
2,212

10,543
46
2,148
3,403
20,447
13,055

371
—
—
—
—
1,067

10,914
46
2,148
3,403
20,447
14,122OthersTotal
consolidated

Millions of yen
2018
Automotive
Systems Business

Reporting segment
Commercial Store
Systems Business

Total¥68,147¥277,003¥10,605¥287,609¥   285¥  6,895¥ (1,426)¥  5,469¥55,419¥265,636¥10,013¥275,649

1,434
—
250
708
4,914
1,023

10,681
71
2,667
938
21,406
11,836

397
—
—
137
—
701

11,079
71
2,667
1,076
21,406
12,537

Net sales:
Outside customers������������������������������������������������������������������������� ¥208,855
Operating income (loss)������������������������������������������������������������������ ¥  6,610
Total assets����������������������������������������������������������������������������������� ¥210,216
Depreciation and amortization���������������������������������������������������������
Amortization of goodwill�����������������������������������������������������������������
Equity in net income of affiliates������������������������������������������������������
Impairment loss�����������������������������������������������������������������������������
Investments in equity-method companies����������������������������������������
Increase in property, plant and equipment and intangible assets�������

9,246
71
2,417
230
16,491
10,812

Notes: 1 . “Others” includes vehicle sales, living & environment systems, electronics and other activities.
2. The Company applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, revised on February 16, 2018)from the year ended March 31, 2019. As a result, segment information for the year ended March 31, 2018 has been retroactively adjusted.
2. Geographic information
Information about geographical areas for the year ended March 31, 2019(1) Sales
Millions of yen
2019
Asia

Japan

Net sales:
Outside customers����������������������������������������

36

ANNUAL REPORT 2019¥90,564Europethereof German

thereof China¥78,151¥47,152¥83,809¥29,251

North America

Total consolidated¥21,408¥273,934

(2) Property, plant and equipment
Millions of yen
2019
Asia

Japan

Property, plant and equipment�����������������������

Europethereof Poland

thereof China¥39,866¥17,997¥10,896¥15,846¥10,178

North America

Total consolidated¥3,725¥77,436

Information about geographical areas for the year ended March 31, 2018
(1) Sales
Millions of yen
2018
Asia

Japan

Net sales:
Outside customers����������������������������������������

¥87,199

EuropeNorth America

Total consolidated¥80,926¥23,572¥287,609

thereof China¥95,910¥58,029(2) Property, plant and equipment
Millions of yen
2018
Asia

Japan

Property, plant and equipment�����������������������

¥38,516¥19,000

19. Supplementary Information
The main items of selling, general and administrative expenses for the years
ended March 31, 2019 and 2018 in the accompanying consolidated statements of operations were as follows:
Millions of yen
2019
2018

Employees’ salaries and bonuses����������������������������� ¥17,209
Freight�������������������������������������������������������������������
3,379
Depreciation�����������������������������������������������������������
2,263
Provision for:
Employees’ bonuses�������������������������������������������
Warranty liabilities�����������������������������������������������
Retirement benefit costs������������������������������������������

Europethereof Poland

thereof China

1,366¥17,446
3,537
2,265
1,702

2,530
870

1,830
833

Research and development expenses are recognized as incurred.
Research and development expenses charged to general and administrative
expenses or total manufacturing costs for the years ended March 31, 2019and 2018 were ¥8,818 million and ¥7,860 million, respectively.
20. Structure Reform Cost
For the year ended March 31, 2019The Sanden Group recorded structure reform costs with regard to selection
and concentration of the overall business portfolio, which is one of the key
initiatives in the Corporate Mid-Term Plan. As a result, in the Automotive
Systems Business, Commercial Store Systems Business and Other Business,
impairment loss on long-lived assets of ¥3,403 million and loss on valuationof inventories of ¥895 million and others were charged to the consolidated
statement of operations as structure reform cost in other expenses for theyear ended March 31, 2019.
For the year ended March 31, 2018
The Sanden Group is currently promoting four key initiatives in order toachieve the Corporate Mid-Term Plan announced on May 11, 2017. With
regard to selection and concentration of the overall business portfolio, which
is one of the key initiatives, a resolution to discontinue manufacturing products of the Living & Environmental Business and other related business has
been passed by the Board of Directors meeting of the Company held on
March 23, 2018. As a result of this resolution, in the Automotive Systems¥11,729¥19,130¥11,357

North America

Total consolidated¥5,093¥81,741

Business, Commercial Store Systems Business and Other Business, impairment loss on long-lived assets of ¥1,076 million and loss on valuation of
inventories of ¥969 million and others were charged to the consolidated
statement of operations as structure reform cost in other expenses for theyear ended March 31, 2018.
21. Impairment Loss
For the year ended March 31, 2019, the Company recorded impairment
losses on asset groups detailed below, which were included in “Structurereform cost” in other expenses.
1. Details of asset groups impaired
Location

Purpose of use

Type of assets

Wylie, Texas, U.S.A.

Automotive Systems
Business

Machinery and equipment
and others

Tinteniac, France

Automotive Systems
Business

Machinery and equipment
and others

2. Method of asset grouping
The Company and its consolidated subsidiaries classify long-lived assets into
groups with reference to units set out for management accounting at which
operational results of the Group are regularly reviewed by management.
3. E vents and circumstances that led to recognition of impairment
loss
The Group has made a fundamental assessment of its production system in
the Automotive Systems Business through changes in production locations
and optimization of human resource placement throughout the globe in
response to changes in environment surrounding automotive markets including trade war between the United States and China, slow down of Chinese
economy, environmental regulations in Europe and others. As a result, production facilities in the asset groups described in “1. Details of asset groups
impaired” above became excessive or no longer recoverable, in terms ofcosts, within remaining useful lives of major assets in the groups, resulting in
the writing down of carrying amounts of the assets to their recoverable
amounts.

SANDEN Holdings Corporation

37

Notes to Consolidated Financial Statements

4. Method of determining recoverable amountThe recoverable amount of the asset group was measured as the higher ofthe net selling value or value in use. Net selling values are primarily based on
appraisal values obtained from real estate appraisers. Business assets thatare not expected to generate future cash flows from their use, or to be soldat values exceeding costs for its disposition, are valued at nominal values.
5. Amount of impairment loss
Amounts of impairment loss by categories of long-lived assets were as follows:
Millions of yen

Millions of yen

Buildings and structures�����������������������������������������������������������
Machinery and equipment��������������������������������������������������������
Furniture and fixtures���������������������������������������������������������������
Others�������������������������������������������������������������������������������������

¥   12900
6157

Total����������������������������������������������������������������������������������������

¥1,076

Buildings and structures�����������������������������������������������������������
Machinery and equipment��������������������������������������������������������
Furniture and fixtures���������������������������������������������������������������
Others�������������������������������������������������������������������������������������

¥   333,169
0200

22. Provision for Outstanding Claims
Provision for outstanding claims represents the amount for future paymentsof settlement in relation to violations of antitrust laws, etc. with regard to pasttransactions of certain automotive devices.

Total����������������������������������������������������������������������������������������

¥3,403

23. Provision of Allowance for Doubtful Accounts
Trade notes and accounts receivables related to distribution of products to
Iran market in the Automotive Systems Business have been experiencing significant delay in collection affected by the economic sanctions against Iranand restrictions on financial transactions caused by the subsequent financial
sanctions. Considering realizability of collection measures against suchreceivables at the moment, allowance for doubtful accounts was provided forthese transactions except for amounts whose collection is firmly expected
within a reasonably estimated period.

For the year ended March 31, 2018, the Company recorded impairment
losses on asset groups detailed below, which were included in “Structurereform cost” in other expenses.
1. Details of asset groups impaired
Location

Purpose of use

Type of assets

Isesaki-shi, Gunma,Japan

Other Business

Machinery and equipment
and others

Tinteniac, France

Automotive Systems
Business, Other
Business

Machinery and equipment
and others

Shanghai, China

Commercial Store
Systems Business,
Other Business

Machinery and equipment
and others

2. Method of asset grouping
The Company and its consolidated subsidiaries classify long-lived assets into
groups with reference to units set out for management accounting at which
operational results of the Group are regularly reviewed by management.
3. E vents and circumstances that led to recognition of impairment
loss
The Sanden Group is currently promoting four key initiatives in order toachieve the Corporate Mid-Term Plan announced on May 11, 2017. With
regard to selection and concentration of the overall business portfolio, which
is one of the key initiatives, a resolution to discontinue manufacturing products of the Living & Environmental Business and other related business has
been passed by the Board of Directors meeting of the Company held on
March 23, 2018. As a result of changes in the Group’s production frameworks, the consolidations or reorganizations in the Group, and the selections
and concentrations of further assets investments, production facilities in theasset groups described in “1. Details of asset groups impaired” above
became excessive or no longer recoverable, in terms of costs, within theremaining useful lives of major assets in the groups, resulting in the writing
down of carrying amounts of the assets to their recoverable amounts.
4. Method of determining recoverable amountThe recoverable amount of the asset group was measured as the higher ofthe net selling value or value in use. Net selling values are primarily based on
appraisal values obtained from real estate appraisers. Business assets thatare not expected to generate future cash flows from their use, or to be soldat values exceeding costs for its disposition, are valued at nominal values.

38

5. Amount of impairment loss
Amounts of impairment loss by categories of long-lived assets were as follows:

ANNUAL REPORT 201924. Subsequent Event
At the Board of Directors meeting held on February 7, 2019, the Company
resolved the execution of a company split (hereinafter referred to as the“Company Split”) by means of the absorption-type company split in whichshares etc. of subsidiaries operating the Automotive Systems Business andCommercial Store Systems Business, respectively, and certain rights andobligations relating to administration of those business are to be succeededby the Company’s wholly owned subsidiaries, Sanden Automotive
Components Corporation (hereinafter referred to as “SDAC”), Sanden
Automotive Climate Systems Corporation (hereinafter referred to as “SDAS”),
and Sanden Retail Systems Corporation (hereinafter referred to as “SDRS”).
The Company entered into an agreement of absorption-type company split
on the same date. The Company Split has become effective on April 1, 2019.
Outline of the Company Split is as follows:
1. Objectives for the Company Split
The Sanden Group moved to a holding company structure on April 1, 2015
and since then has been striving to improve global management functions,strengthen business competitiveness, enhance new product development
capability, and pursue global management efficiency. During this period,
there have been various changes in business environment; the new gas
mileage standard, the excess mileage dispute in Europe, changes in US
trade policy, etc. for Automotive Systems Business, and labor-saving andunmanned store operation, wide use of e-money, popularization of cashlesssystem, etc. for Commercial Store Systems Business. In this rapidly changing
business environment, the Sanden Group has been continuing its internal
reform efforts primarily in four areas which are comprehensive transformation of cost structure to improve profitability, asset efficiency enhancement tostrengthen the overall financial structure, optimization of the business portfolio to create corporate value, and management system reform to achievesustainable growth.

Hence, the Sanden Group has decided to execute the absorption-typecompany splits in which shares of subsidiaries etc. operating the Automotive
Systems Business and Commercial Store Systems Business, respectively,
and certain rights and obligations relating to administration of those business
are to be succeeded by the Company’s wholly owned subsidiaries, SDAC,
SDAS and SDRS so that global management functions, business competitiveness, new product development capability, and group management efficiency will further be strengthened and enhanced by establishing more
consolidated and efficient chain of command that meets business requirements of the respective business companies.

c. SDRS
Address: 20 Kotobuki-cho, Isesaki City, Gunma Prefecture
Name and title of representative: Masuya Mori, Director & President
Business Activities: M anufacturing, sales, etc. of freezing and refrigeration
show cases for commercial use and vending machines
for food and beverage sale
Paid in capital: ¥940 million

2. Method of the Company Split
An absorption-type company splits with the Company as the splitting company and SDAC, SDAS and SDRS as the succeeding companies in whichshares of subsidiaries and other interests operating the automotive air-conditioner compressors and certain rights and obligations relating to administration of such business held by the Company is succeeded by SDAC, shares ofsubsidiaries and other interests operating the automotive air-conditioning
systems and certain rights and obligations relating to administration of suchbusiness held by the Company is succeeded by SDAS and shares of subsidiaries, other interests operating the Commercial Store Systems Business,loans receivable thereto and certain rights and obligations relating to administration of such business held by the Company is succeeded by SDRS.
3. Effective date of the Company Split
April 1, 20194. S hares to be issued and allotment details relating to the Company
Split
At the time of the Company Split, SDAC, SDAS and SDRS will each issue one(1) share of common stock, and allot it to the Company, respectively.
5.Basis for calculating number of shares allotted
The Company determined that it is reasonable to deliver the aforementioned
shares to the Company as the Company holds all of the issued shares of
SDAC, SDAS and SDRS.
6. Assets and liabilities subject to the split (as of March 31, 2019)
Millions of yen
Succeeding company
SDAC
SDAS
SDRS

Assets:Current assets������������������������������������� ¥  —
Fixed assets���������������������������������������� 8,534
Total�������������������������������������������������������� ¥8,534
Liabilities:������������������������������������������������
—

¥ —
356
¥356

¥1,031
3,880¥4,912——

7. Outline of the succeeding companies (as of March 31, 2019)a. SDAC
Address: 20 Kotobuki-cho, Isesaki City, Gunma Prefecture
Name and title of representative: Tsuguo Ito, Director & President
Business Activities: M anufacturing, sales, etc. of compressors for automotive
air conditioning
Paid in capital: ¥500 million
b. SDAS
Address: 20 Kotobuki-cho, Isesaki City, Gunma Prefecture
Name and title of representative: Tadashi Kondo, Director & President
Business Activities: M anufacturing, sales, etc. of automotive air conditioning
systems
Paid in capital: ¥1,985 million

SANDEN Holdings Corporation

39

Independent Auditor’s Report40

ANNUAL REPORT 2019

Corporate Data/Stock Information
Name

SANDEN HOLDINGSCORPORATION

Representative

Katsuya Nishi,
Representative Director & President

Established

July 30, 1943

Capital (As of March 31, 2019)¥11,037 million

Net sales¥273,934 million(Fiscal year ended March 31, 2019)12,685 (consolidated)

Number of employees(As of March 31, 2019)

 0 Kotobuki-cho, Isesaki-shi,
2
Gunma, Japan 372-8502
TEL +81-(0)270-24-1211

Address Headquarters

Securities code

6444

Stock exchange listingFirst Section, Tokyo Stock
Exchange

Shareholder registryadministrator

Sumitomo Mitsui Trust Bank, Ltd.
1-4-1, Marunouchi,
Chiyoda-ku, Tokyo

Total number of shares
outstanding (As of March 31, 2019)28,066,313 shares

Trading unit of shares

100 shares(As of March 31, 2019)*As of October 1, 2017, the Company haschanged the number of shares per trading
unit from 1,000 to 100.

Number of shareholders

10,748(As of March 31, 2019)

Tokyo Headquarters Akihabara Daibiru Building,
1-18-13 Soto Kanda, Chiyoda-ku,
Tokyo, Japan 101-8583
TEL +81-(0)3-5209-3231
Group Companies (Japan) https://www.sanden.co.jp/english/company/domestic.html(Overseas) https://www.sanden.co.jp/english/company/overseas.html
Major shareholders (Top 10) (As of March 31, 2019)

Distribution of shares by type of shareholder

Name of shareholders

Sanden’s Customers Share Holding Association(As of March 31, 2019)

Number ofshares(Thousands)

Percentage ofvoting rights

5.92
5.86

1
2

BBH (LUX) FOR FIDELITY FUNDS PACIFIC FUND

1,661
1,645

3

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

1,391

4.95

4

Mizuho Corporate Bank, Ltd.

1,017

3.62

5

The Gunma Bank, Ltd.

1,017

3.62

6

Daido Life Insurance Co., Ltd.

694

2.47

7

Sanden’s Employee Share Holding Association

630

2.24

8

Japan Trustee Services Bank, Ltd. (Trust Account)

601

2.14

9

DFA INTL SMALL CAP VALUE PORTFOLIO

585

2.08

10

Japan Trustee Services Bank, Ltd. (Trust Account 5)

477

1.70

Government andLocal Public Bodies

Financial Institutions
86,963 units

31.07%

6 units

0.00%
Individuals and Others
113,164units

40.44%

Foreign Entities,
etc. (individuals)¥279,878

87 units

3,434 units

1.23%

100%

0.03%

Note: The shareholding ratio is calculated excluding treasury stock (12,046 shares).

Financial
Instruments
Business

Total

Foreign Entities, etc.
(Other than individuals)

Other
Corporate

51,642 units

24,582 units

18.45%

8.78%

Note: 805 shares held in the name of the Company are included in“Individual and Others” in the graph above.

Stock price trends and trading volume
Stock price (Yen)

2,800
2,800

2,100
2,100
1,400
1,400
700
700
00
Trading volume (thousand shares)

5,000
5,000
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
00

11
11

12
12
2017
2017

1
1

2
2

3
3

4
4

5
5

6
6

7
7
2018
2018

8
8

9
9

10
10

11
11

12
12

1
1

2
2

3
3

4
4

5
5

6
6

7
7

8
8

9
9

10
10

2019
2019

SANDEN Holdings Corporation

41

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

Printed in Japan