2015
Annual Report
Year ended March 31, 2015

Profile
Denyo Co., Ltd. was founded in 1948. Since its creation, it has been involved in
the manufacture and sales of Engine Generators, Engine Welders and Engine Aircompressors, along with the repair parts associated with these. The Company andCorporate Group is made up of ten subsidiaries and one affiliate company, along with its
production facilities, including after-sales service in Japan, Southeast Asia and the U.S.
The second factory in Denyo Vietnam Co., Ltd., a member of the Company andCorporate Group, was completed and production started.
Until now, Denyo Vietnam, established in May 2010, has manufactured and provided
generator parts to group companies in Japan and the U.S. The second factory was built
in order to make a full line of production up to the finished engine generator productand the construction was completed in February 2015. The gross floor area of thissecond factory is 16,211m2.
In March 2015 the first machine was completed, after which a product evaluation
meeting was held locally by related persons. The same strict inspections used in Japan
were applied at the product evaluation meeting, and the same high-quality product as
produced in Japan was achieved.

Denyo Vietnam Co., Ltd. and commemorative ceremony for the first completed generator

CONTENTS

1 Consolidated Financial Highlights
2 To Our Shareholders
4 Review of Operations
7 Consolidated Financial Statements
8 Financial Review
32 Independent Auditor’s Report
33 Company Data
36 Investor Information

DENYO CO., LTD.

DENYO CO., LTD. and Consolidated Subsidiaries

Consolidated Financial Highlights
Years ended March 31, 2015, 2014 and 2013

Thousands of
U.S. dollars

Millions of yen

2015

2014

2013

2015

Net Sales ...............................................................................

¥ 52,267¥ 49,832

47,672$434,581

Total Assets ...........................................................................

67,32461,51855,715559,775

Total Net Assets ....................................................................

49,19544,32440,153409,040

Operating Income ..................................................................

5,349

5,407

4,652

44,472Net Income ............................................................................

3,858

3,726

3,399

32,076Per Share Data¥

Yen

U.S. dollars

Total Net Assets ....................................................................

¥2,215.29¥1,990.19¥1,723.43

Net Income ............................................................................

179.38165.21149.001.49

Cash Dividends ......................................................................

28.00

24.00

22.00

0.23

$

18.42

44,32440,15335,89967,32461,51833,31845,16055,715

3,858

963

33,28851,916

3,399

13

2,855

12

3,726

(¥ million)

52,267

Total Net Assets(¥ million)

49,832

Total Assets(¥ million)

47,672Net Income(¥ million)

48,107

Net Sales

49,195

Note: Transaction into U.S. dollars has been made, solely for the reader’s convenience, at the rate of ¥120.27 to U.S.$1,
prevailing on the Tokyo Foreign Exchange Market on March 31, 2015.

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2

DENYO CO., LTD.

To Our Shareholders

Hideaki Kuboyama

Shigeru Koga

Chairman and CEO

President

Business Environment and Results
Fiscal 2015, the term ending March 31, 2015 marks the Denyo Group’s 67th
business term.
For Japan’s economy in this consolidated accounting year, while the effects
on individual consumption as a result of the increase in consumption tax wereapparent, due to economic measures by the government and financial policies
put in place by the Bank of Japan, improvements were still seen in corporate
earnings and employment/income, resulting in a shift to a gradual recovery. In
the world economy, slow-down was seen in emerging economies, but with
the U.S. shifting to a steady economic stance and some regions in Europe also
showing signs of recovery, there was also a gradual overall recovery.
Regarding the business environment of the Company and Corporate Groupin Japan, the major construction-related areas have seen an increase in public
spending for infrastructure maintenance and disaster prevention, and capital
investments in private corporate sector have increased steadily. Even overseas
and mainly the U.S. market there has been a steady increase in overall demand.

DENYO CO., LTD.

Under these circumstances, as a result of actively selling eco-friendly
products both domestically and overseas by the Company and Corporate
Group, consolidated net sales were ¥52,267 million (US$434,581 thousand).
This is a 4.9% increase from the previous term. In consideration of profits, theconsolidated operating income was ¥5,349 million (US$44,472 thousand), a 1.1%
decrease under the previous term. Income before income taxes and minority
interests was ¥6,054 million (US$50,340 thousand), a 2.1% increase comparedto the previous term. Consolidated net income this term was ¥3,858 million(US$32,076 thousand), a 3.5% increase compared to the previous term and we
posted our highest sales and net income in history.
The term-end dividend was an ordinary dividend of ¥16 (US$0.13) per share,a ¥3 (US$0.02) increase from the previous period. The interim dividend was an
ordinary dividend of ¥12 (US$0.10) per share, making the total payout for theyear ¥28 (US$0.23) per share, a ¥4 (US$0.03) increase from the previous term.
As a result, the Company’s dividend payout ratio was 15.6%.

Future Focus
In regards to future business outlook, we expect the gradual economic recovery
to continue in Japan with a recovery of individual consumption and improved
corporate profit. While China and emerging economics are uncertain factors, theglobal economy is expected to continue with a gradual recovery based on thefavorable U.S. economy.
Under these conditions, the Company and Corporate Group endeavors to
improve and optimize productivity while also strengthening sales activities inconstruction-related fields, promoting expansion in non-construction related
fields and at the same time focus attention on new business development andmarket expansion in overseas markets.
We would like to take this opportunity to express our sincere gratitude to ourshareholders for their continued patronage and support.
June 26, 2015

Hideaki Kuboyama,

Shigeru Koga,

Chairman and CEO

President

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4

DENYO CO., LTD.

Review of Operations

Research and Development Activities
The Company and Corporate Group always works with a pioneering
attitude and creativity, and actively executes research anddevelopment activities, striving for technological innovation as a basic
principle, carrying out aggressive R&D to develop products from our
new technology research.
Research and development in the Company and Corporate
Group has close and mutual cooperation between both domestic
and overseas Group companies, centralized in the Development
division at the Company in Japan. There are a total of 93 research anddevelopment staff members in the entire Group, which make up about
10% of the employees.
Research and development costs in this consolidated accounting
period was ¥535 million (US$4,448 thousand) and the number ofindustrial property rights owned by the Company during this period is481, domestically and overseas.
Major achievements in research and development this term areoutlined below.

New Engine TIG Welder DAT-200 x 2LSE

DAT-200 x 2LSE

Denyo began sales of the 2-man engine-driven TIG welder DAT-200 x
2LSE in December 2014.
This engine welder allows for two persons to TIG weld
simultaneously, and is made possible by Denyo’s technology – as
the top manufacturer in engine welders. Also, when two persons
are using it for hand-welding or simultaneous TIG welding and handwelding, the welding operations are even more effective because it
can be arranged for the client’s needs.
Plenty of considerations for safety and environmental issues havealso been taken. If welding rods short out for more than one second,
the welding current is decreased and the welding machine will be
prevented from overheating as well as a shock preventer, to protectfrom electric shock accidents even in high places or in high humidity
environments. Also, if there is fuel leak when refueling or there is an oil
leak etc., the device is equipped with an eco-base as standard, which
controls external flow as much as possible by stopping it with an oil
guard base on the bottom of the main device.
Denyo will continue to take safety and environmental precautions
while striving to expand our lineup of welders to suit the needs of ourcustomers.

DENYO CO., LTD.

New Engine Compressor DIS-200VPS-D

DIS-200VPS-D

The Company has newly developed DIS-200VPS-D dry-air specificationin variable compression/variable capacity-type engine-driven
compressors, and categorized them to the DIS series.
The basic DIS-200VPS model uses Denyo’s own technology, the full
digital control offered by the Variable Pressure & Speed Control System(VPS), and since discharge pressure and the amount of discharge air
can be set freely, this single machine can be used on a wide variety ofsites, from operations requiring high pressure to high-volume and low
pressure sites.
Also, the DIS-200VPS-D adopted the full digital control VPS systemtechnology, making it possible to supply dry, compressed air. Thismachine is optimum for sites requiring differing discharge pressuresand amounts of discharge air, such as down the hole construction
method, installed pile construction method, etc. and for works whichhate humidity, such as sand blasting, painting, etc.

Super Soundproof Stand-by Generating Sets

DCA-100SSG

Denyo, along with the group company Nishinihon Generator Mfg. Co.,
Ltd., has put efforts into development and sales of stand-by generating
sets.
Stand-by generating sets include emergency back up generators
which is equipped at large commercial facilities and welfare facilities
with large crowds, for disaster prevention to provide power for fire
extinguishing facilities and stand-by generating sets to provide powerfor office devices and electric appliances during power outages.
This super soundproof generator for general power outages
was made to meet the demand of customers with consideration ofsurrounding, and is a product that has merged technology cultivatedover many years by Nishinihon Generators and the soundproofing
technology that Denyo is expert at. Noise during operation is 65dB at
a distance of 1m and when operating in a small distance, the soundis virtually inaudible. Furthermore, the black smoke characteristic todiesel engines when starting is virtually non-existent in consideration
for the environment.
Denyo and its Group Companies as a whole always endeavor tomeet the needs of our customers.

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DENYO CO., LTD.

Overview of
Product Segment
Business Performance by Product Category and Domestic Market ShareEngineGenerators(Mobile type)EngineWelders

EngineCompressors

Other
Products

65

In the engine generators segment, while for the domestic market,
shipment of stand-by generating sets runs on LP gas decreased,sales of medium and large sized generators increased thanks to a
background of steady, construction demand and overseas, the U.S.
market and Middle Eastern market have shifted to bullish tones.
The result of this was sales of ¥40,079 million (US$333,243
thousand) in this segment, a 4.8% increase over the previous term.
This product segment’s domestic market share is 65%.

55

In the engine welders segment, sales of small engine welders
responding to the environment for the domestic market haveincreased. Overseas, shipment to the U.S. and Asian markets has
increased.
The result of this was sales of ¥5,556 million (US$46,198
thousand) in this segment, a 5.6% increase compared to theprevious term.
This product segment’s domestic market share is 55%.

20

In the compressors segment, shipments have increased to theleasing and rental industry domestically.
The result of this was sales of ¥1,127 million (US$9,368
thousand) in this segment, a 13.4% increase over the previous
term.
This product segment’s domestic market share is 20%.

%

%

%

In other products segment, sales of self-propelled lifters increased.
The result of this was sales of ¥5,505 million (US$45,772 thousand) in this segment, a
3.2% increase compared to the previous term.

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

DENYO CO., LTD.

Consolidated
Financial Statements
Fiscal Year 2015
Year ended March 31, 2015

7

DENYO CO., LTD.

Financial Review
Also, looking at results of the segment information by
area, with a steady increase of sales of engine generators
for the domestic major leasing and rental industry in Japan
as well as an overall increase (overseas) in generators for
the Middle Eastern markets with the weak yen, sales were¥38,101 million (US$316,793 thousand), which is a 2.1% or¥777 million (US$6,462 thousand) over the previous term.
On the other hand, Operating income was ¥3,245 million(US$26,985 thousand), which was a 24.8% or ¥1,072 million(US$8,914 thousand) decrease from the previous term. This isdue to factors such as the rise in cost ratio.
Further, results in the U.S., due to settling of purchasing
restraints from exhaust gas regulations in America, sales of
new generators made for the exhaust gas regulations forthe rental market increased, bringing sales to ¥8,981 million(US$74,675 thousand), which is a 24.3% or ¥1,754 million(US$14,584 thousand) increase over the previous term.
Operating income was ¥1,185 million (US$9,854 thousand),a huge increase of 233.3% or ¥829 million (US$6,897
thousand) compared with the previous term.
In addition, while the demand for generators forinfrastructure maintenance construction and corporate
equipment in Asia was steady, due to reduced demand ingenerators for Australia’s mine development, sales were
¥4,706 million (US$39,130 thousand), which was a 5.3%
decrease or ¥262 million (US$2,178 thousand) fall in income.
On the other hand, due to effects of the weakened yen andoperations of factories in Vietnam, there were improvements
in cost ratio, bringing operating income for the term to ¥705
million (US$5,861 thousand), which is an increase of 22.8%
or ¥131 million (US$1,088 thousand) over the previous term.
In Europe, there was recovery seen in some regions anddue to an increase in sales of generators, sales were ¥479
million (US$3,984 thousand). This was a 52.8% or ¥166
million (US$1,377 thousand) increase over the previous termand Operating loss for the previous term was ¥40 million(US$334 thousand) while this term we made a profit of ¥7
million (US$56 thousand) as operating income.

Business Environment and Results
Regarding the business environment of the Company
and Corporate Group in Japan, the major constructionrelated areas have seen an increase in public spending forinfrastructure maintenance and disaster prevention, andcapital investments in the private corporate sector haveincreased steadily. Even overseas and mainly the U.S. market
there has been a steady increase in overall demand.
In these circumstances, the Company and Corporate
Group aims to make eco-friendly products and actively
develop both domestic and international sales activities.
The result of this was consolidated net sales of ¥52,267
million (US$434,581 thousand). This is a 4.9% increase
from the previous term. Also, in consideration of profits,
the consolidated operating income was ¥5,349 million(US$44,472 thousand), a 1.1% decrease under the previous
term. Income before income taxes and minority interests was
also ¥6,054 million (US$50,340 thousand) a 2.1% increase
compared to the previous term. Consolidated net income
this term was ¥3,858 million (US$32,076 thousand), a 3.5%
increase compared to the previous term and we posted ourhighest sales and net income in history.
Segment Information
Looking at sales by segment, in the engine generators segment,
while sales of stand-by generating sets for the domestic market
that run on LP gas decreased, as sales of medium and large
sized generators increased thanks to a background of steady,construction demand and overseas, the U.S. market andMiddle Eastern market have shifted to firm tones, sales cameto ¥40,079 million (US$333,243 thousand), which was a 4.8%
increase over the previous term.
For the welders segment, there has been a steadyshift of small welders in response to environmental issues
domestically and due to the strong U.S. and Asian markets
overseas, sales were ¥5,556 million (US$46,198 thousand),
which was a 5.6% increase compared to the previous term.
For the compressors segment, with the increase ofsales for the domestic major leasing and rental industry, thecompressors segment had sales of ¥1,127 million (US$9,368
thousand), which was a 13.4% increase compared to theprevious term.
In other segments, due to the increase in the shipment ofself-propelled lifters, sales were ¥5,505 million (US$45,772
thousand), which was a 3.2% increase compared to theprevious term.

Financial Position
Total assets for the end of year consolidated accounting
were ¥67,324 million (US$559,775 thousand) and increasedby ¥5,806 million (US$48,273 thousand). The equity ratio
was 70.3%, an increase of 0.7 points from the previous
consolidated accounting year.

70.4

69.6

70.3

72.1

28.00

24.00

67.6

13.00

22.00

(%)

18.00

(¥)

179.38(¥)
165.21Equity Ratio

149.00Cash Dividends
per Share

123.82Net Income per Share

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41.35

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DENYO CO., LTD.

(US$20,135 thousand), and payables increased by ¥1,260
million (US$10,475 thousand), etc.
The results of investment activities and used capitalcame to ¥2,642 million (US$21,967 thousand). Used capitalin the previous financial year were ¥1,777 million (US$14,772
thousand). This was mainly due to expenditures of ¥2,611
million (US$21,707 thousand) from acquisition of tangible
fixed assets for buildings, machines, equipment, etc.
Also, the result of financial activities was a used capital of¥1,789 million (US$14,872 thousand). Used capital increasedby ¥278 million (US$2,309 thousand) compared with theprevious financial year. This is mainly due to net decreaseof short-term loans payable of ¥476 million (US$3,960
thousand), expenditures of ¥280 million (US$2,327 thousand)for purchase of treasury stock, dividend payments of ¥559
million (US$4,648 thousand), etc.
The result was cash and cash equivalent on aconsolidated basis at the end of this consolidated accounting
year, in other words a capital balance, increase of ¥945
million (US$7,855 thousand) over the previous end of term to¥10,776 million (US$89,602 thousand). This is mainly due tothe summing up of income before income taxes and minority
interests of ¥6,054 million (US$50,340 thousand), theincrease of payables, etc.

Total current assets for the end of the year were ¥40,856
million (US$339,703 thousand), which increased by ¥2,229
million (US$18,537 thousand) compared with the previous endof term. This was mainly due to an increase in cash and savingsof ¥1,145 million (US$9,518 thousand) and an increase of
inventory of ¥1,874 million (US$15,579 thousand), etc.
Also, the fixed assets at the end of year consolidated
accounting were ¥26,468 million (US$220,072 thousand),
which was an increase of ¥3,576 million (US$29,736
thousand) over the previous end of term. This was mainly
due to the fact that tangible fixed assets increased by ¥2,216
million (US$18,429 thousand), the increase of investments
in securities from revaluation was ¥1,296 million (US$10,774
thousand), etc.
On the other hand, total liabilities at the end of thisconsolidated accounting year were ¥18,129 million(US$150,735 thousand), which is a ¥934 million (US$7,768
thousand) increase compared to the previous end of term.
Current liabilities at the end of this term were ¥13,396 million(US$111,386 thousand), which was a ¥559 million (US$4,649
thousand) increase over the previous term. This was mainly
due to an increase in bills payable and accounts payable of¥1,651 million (US$13,723 thousand), etc.
Also, the fixed liabilities at the end of this term were ¥4,733
million (US$39,349 thousand), which was an increase of ¥375
million (US$3,118 thousand) compared to the previous term. Thiswas mainly due to the increase of liabilities related to retirement
benefits of ¥224 million (US$1,866 thousand), etc.
Total equity for the end of year consolidated accounting
year, including minority shareholders’ interest was ¥49,195
million (US$409,040 thousand), an increase of ¥4,872 million(US$40,505 thousand) over the previous term. This is mainly due
to the net income for this term of ¥3,858 million (US$32,076
thousand) and the ¥826 million (US$6,868 thousand) increase ofother difference in Securities valuation, etc.

Dividends
In its profit sharing, Denyo recognizes the importanceof returning profits to shareholders, while investing inequipment and research & development in order tostrengthen and maintain product competitiveness and its
policy is to strive to improve profitability and strengthen
financial structure while implementing both interim andterm-end dividend payouts of distribution of results
comprehensively calculated by achievement and payout ratio.
Based on this policy, dividends for this term were interim
dividends of ¥12 (US$0.10) per share and end of year
dividends were distributed at ¥16 (US$0.13) per share. The
result of this was, including interim dividends, total dividendsof ¥28 (US$0.23) per share for the year, which is an increaseof ¥4 (US$0.03) over the previous term. As a result, theconsolidated dividend payout ratio was 15.6%.

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12

13

10.0

11

10.7

15

8.2

12

8.3

6.4

13

29.6

6.3

5.9

14

3.0

11

Price Earnings Ratio

2.2

13

8.6

(%)
9.1

(%)
9.1

Return on Average
Assets (ROA)

8.4

Return on Average
Shareholders’ Equity

6.0

Cash Flows
Looking at the cash flow situation, funds gained as a result of
operating activities in this consolidated accounting year were
¥5,078 million (US$42,225 thousand). This is an increase of¥2,722 million (US$22,629 thousand) over the previous term.
The main factors were that the income before income taxes
and minority interests came to ¥6,054 million (US$50,340
thousand), receivables decreased by ¥932 million (US$7,747
thousand), payment of income taxes were ¥2,422 million

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10 DENYO CO., LTD.
DENYO CO., LTD. and Subsidiaries

Consolidated Balance Sheets
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen

2015

2014

2015

¥10,776¥ 9,832$ 89,602

6,349
10,628
2,198
177
(43)
10,062575
134
40,856

5,667
11,576
2,500
36
(56)
8,189
735
148
38,627

52,79288,36818,2781,475(360)
83,666
4,779
1,103
339,703

Property, Plant and Equipment:
Land .........................................................................................................
Buildings and structures ..........................................................................
Machinery and equipment (Note 13) ........................................................
Furniture and ﬁxtures ...............................................................................
Construction in progress ..........................................................................
Total ..............................................................................................
Accumulated depreciation .......................................................................
Net property, plant and equipment ...............................................

4,863
12,072
5,722
1,684
1,079
25,420(9,613)15,807

4,826
10,263
4,967
1,534
507
22,097(8,507)
13,59040,430100,370
47,577
14,014
8,971
211,362(79,929)
131,433

Investments and Other Assets:
Investment securities (Notes 4 and 14) ...................................................
Investments in associated companies (Note 6) .......................................
Deferred tax assets (Note 11) ..................................................................
Other assets ............................................................................................
Total investments and other assets ..............................................

9,326
621
58
656
10,661

8,074
577
48
602
9,301

77,541
5,166
486
5,446
88,639Total .............................................................................................................

¥67,324¥61,518$559,775

AssetsCurrent Assets:
Cash and cash equivalents (Note 14) .......................................................
Receivables (Note 14):
Trade notes ..........................................................................................
Trade accounts ....................................................................................
Associated companies (Note 19) ..........................................................
Other ....................................................................................................
Allowance for doubtful receivables ......................................................
Inventories (Note 5) .................................................................................
Deferred tax assets (Note 11) ..................................................................
Prepaid expenses and other current assets .............................................
Total current assets .......................................................................

See notes to consolidated ﬁnancial statements.

DENYO CO., LTD.

Thousands of
U.S. dollars(Note 1)Millions of yen

Liabilities and Equity
Current Liabilities:
Short-term bank loans (Notes 7 and 14) ..................................................
Current portion of long-term debt (Notes 7 and 14) .................................
Payables (Note 14): ..................................................................................
Trade notes ...........................................................................................
Trade accounts .....................................................................................
Associated companies .........................................................................
Other ....................................................................................................
Accrued income taxes (Note 11) ..............................................................
Accrued expenses ....................................................................................
Provision for product warranties ..............................................................
Other current liabilities .............................................................................
Total current liabilities ....................................................................
Long-Term Liabilities:
Long-term debt (Notes 7 and 14) .............................................................
Liability for retirement beneﬁts (Note 9) ..................................................
Deferred tax liabilities (Note 11) ...............................................................
Other long-term liabilities .........................................................................
Total long-term liabilities ................................................................

2014

2015
¥

233
400

¥

708
400

2015
$

1,936
3,326

1,817
8,375
14
145
519
1,530
90
273
13,396

1,749
6,787
19
314
1,075
1,256
267
262
12,837

15,106
69,637
116
1,210
4,315
12,725746
2,269
111,386

1,215
471
2,195
852
4,733

1,434
247
2,124
552
4,357

10,0993,916
18,248
7,086
39,3491,955
1,754
39,873

1,955
1,754
38,45816,254
14,588331,532(1,359)(2,861)(11,303)

4,034
1
1,087
(9)
47,336
1,859

3,208
288
18
42,8201,504

33,545
10
9,030
(76)
393,580
15,46049,195¥67,324

44,324¥61,518

409,040$559,775

Commitments and Contingent Liabilities (Notes 13 and 15)
Equity (Note 10):
Common stock – authorized, 97,811,000 shares;
issued, 22,859,660 shares in 2015 and 24,359,660 shares in 2014 .......
Capital surplus .........................................................................................
Retained earnings ....................................................................................
Treasury stock – at cost, 1,491,904 shares in 2015
and 2,844,532 shares in 2014 (Note 3) ...................................................
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities .....................................
Deferred gain on derivatives under hedge accounting .........................
Foreign currency translation adjustments ............................................
Deﬁned retirement beneﬁt plans .........................................................
Total ..............................................................................................
Minority interests ........................................................................................
Total equity ....................................................................................
Total .............................................................................................................

11

12 DENYO CO., LTD.
DENYO CO., LTD. and Subsidiaries

Consolidated Statement of Income and Comprehensive Income
Consolidated Statement of Operations
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen

2015¥52,267
39,155
13,112
7,763
5,349

2014
¥49,832
36,883
12,949
7,542
5,407

2015
$434,581
325,557
109,024
64,55244,472

181
(42)
1
(3)
300
104
61
56
(7)

1,505
(353)
8
(27)
2,492
867
508
468
(58)

54
705

151
(22)
110
(6)
51
45
63
59
(38)
51
58
522

Income Before Income Taxes and Minority Interests ..................................

6,054

5,929

50,340

Income Taxes (Note 11):
Current .....................................................................................................
Deferred ...................................................................................................
Total income taxes ........................................................................
Net income before minority interests ..........................................................
Minority interests ........................................................................................
Net income ..................................................................................................
Minority interests ........................................................................................
Net income before minority interests ..........................................................

1,863
131
1,994
4,060
202
3,858
202
¥ 4,060

2,062
21
2,083
3,846
120
3,726
120
¥ 3,846

15,491
1,090
16,58133,7591,683
32,076
1,683$ 33,759

826
1
992
(27)

1,083
(2)
1,093

Net Sales (Note 18) .....................................................................................
Cost of Sales ...............................................................................................
Gross proﬁt ...................................................................................
Selling, General and Administrative Expenses (Note 12) .............................
Operating income .........................................................................
Other Income (Expenses):
Interest and dividend income ...................................................................
Interest expense ......................................................................................
Gain on sale of property, plant and equipment ........................................
Loss on sale or disposal of property, plant and equipment ......................
Gain on sale of investment securities (Note 4) ........................................
Foreign exchange gain .............................................................................
Equity in earnings of associated companies ............................................
Rent income .............................................................................................
Commitment fee ......................................................................................
Gain on step acquisitions .........................................................................
Other – net ...............................................................................................
Other income – net .......................................................................

458
5,868

Other Comprehensive Income (Note 16):
Unrealized gain on available-for-sale securities ............................................
Deferred gain (loss) on derivatives under hedge accounting ...................
Foreign currency translation adjustments ................................................
Deﬁned retirement beneﬁt plans .............................................................
Share of other comprehensive income in associates ..............................
Total other comprehensive income ...............................................

1,792

35
2,209

6,866
10
8,243
(225)
2
14,896Comprehensive Income ..............................................................................

¥ 5,852¥ 6,055$ 48,655

Total Comprehensive Income Attributable To:
Owners of the parent ...............................................................................
Minority interests .....................................................................................

¥5,458394¥5,806249$45,381
3,274
U.S. dollars(Note 1)Yen

Per Share of Common Stock:
Basic net income (Note 17) ......................................................................
Cash dividends applicable to the year ......................................................
See notes to consolidated ﬁnancial statements.

¥179.38
28.00¥165.21
24.00

$1.49
0.23

DENYO CO., LTD.

DENYO CO., LTD. and Subsidiaries

Consolidated Statements of Changes in Equity
Years ended March 31, 2015 and 2014

Accumulated Other Comprehensive Income

Number of
Shares ofCommon Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock

Unrealized
Gain onAvailablefor-Sale
Securities(Thousands)

Balance, March 31, 2013
(April 1, 2013, as previously
reported) ...............................
Cumulative effect ofaccounting change ............
Balance, April 1, 2013 ..........
(as restated) .........................
Net income ...........................
Cash dividends,¥24 per share .....................
Purchase of treasury stock ...
Selling of treasury stock ......
Change of scope of equity
method Net change inthe year ..............................
Balance, March 31, 2014
(April 1, 2014, as previously
reported) ...............................
Cumulative effect ofaccounting change ............
Balance, April 1, 2014(as restated) .........................
Net income ...........................
Cash dividends,¥28 per share .....................
Purchase of treasury stock ...
Selling of treasury stock ......
Retirement of treasury stock ...
Net change in the year ........
Balance, March 31, 2015 ......

Deferred
Gain
Foreign(Loss) on
Currency
Derivatives
under Hedge Translation
Accounting Adjustments

DeﬁnedRetirement
Beneﬁt Plans

Total

Minority
Interests

Total Equity¥39,210¥ 943¥40,153

Millions of yen

22,751¥1,95522,751

1,955¥1,755¥35,398¥(1,312) ¥2,118

(1)

(123)

143

1,754

35,275
3,726(1,169)¥2¥ (706)

19
2,118

2

(706)

39,2293,726(543)(1,238)
2

1,090
1,955

1,754

38,458(2,861)

(2)

3,208

1,955

1,754

38,355
3,858

¥ 18

2,100

561

2,661

288

18

42,8201,504

44,324

3,208

288

18

(559)
(150)
3
(1,781)
21,368¥1,955¥1,754¥39,873(543)(1,693)1(103)(2,861)

42,717
3,858

(103)
1,504

(559)
(281)
2

(281)
2
1,781
826
¥(1,359) ¥4,034

1¥1

40,172
3,726

994

(103)
21,515943(543)(1,693)
1(1,693)
1

21,51519799¥1,087(27)
1,599¥ (9) ¥47,336

44,221
3,858
(559)
(281)
2

355
¥1,8591,954¥49,195

Thousands of U.S. dollars (Note 1)

Balance, March 31, 2014
(April 1, 2014, as previously
reported) ...............................
Cumulative effect ofaccounting change ............
Balance, April 1, 2014(as restated) .........................
Net income ...........................
Cash dividends,$0.23 per share ..................
Purchase of treasury stock ..
Selling of treasury stock ......
Retirement of treasury stock ...
Net change in the year ........
Balance, March 31, 2015 ......

$16,254 $14,588 $319,767 $(23,787) $26,676$2,378$149 $356,025 $12,509 $368,534(852)
16,254

14,588318,915
32,076(852)(23,787) 26,676

2,378(4,648)(14,811)

See notes to consolidated ﬁnancial statements.

355,173
32,076(4,648)(2,343)16(2,343)
16
14,811

6,869$16,254 $14,588 $331,532 $(11,303) $33,545

149

$10
$10

6,652
$9,030(852)
12,509367,682
32,076(4,648)(2,343)16(225) 13,306 2,951
16,257$(76) $393,580 $15,460 $409,040

13

14 DENYO CO., LTD.
DENYO CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows
Years ended March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen

Operating Activities:
Income before income taxes and minority interests ...............................
Adjustments for:
Income taxes paid ................................................................................
Depreciation and amortization ..............................................................
Loss (gain) on sale or disposal of property, plant and equipment – net ...
Gain on step acquisitions .....................................................................
Equity in earnings of associated companies ........................................
Changes in assets and liabilities, net of effects: ..................................
Decrease (increase) in trade notes and accounts receivable ............
Increase in inventories ......................................................................
Decrease in interest and dividend receivable ...................................
Increase (decrease) in trade notes and accounts payable ................
Increase (decrease) in interest payable ............................................
(Decrease) increase in provision for allowancefor doubtful accounts ......................................................................
Increase (decrease) in liability for retirement beneﬁts ......................
Other – net ...........................................................................................
Total adjustments ..........................................................................
Net cash provided by operating activities .....................................
Investing Activities:
Proceeds from sales of property, plant and equipment ...........................
Purchase of property, plant and equipment .............................................
Proceeds from sales of securities ............................................................
Purchase of securities ..............................................................................
Investment in loans receivable .................................................................
Collections of loans receivable .................................................................
Increase in cash of newly consolidated subsidiary ..................................
Other – net ...............................................................................................
Net cash used in investing activities .............................................
Financing Activities:(Decrease) increase in short-term loans – net .........................................
Proceeds from long-term debt .................................................................
Repayment of long-term debt ..................................................................

2015

2014

2015

¥ 6,054¥ 5,929$ 50,340(2,422)999
2(20,135)
8,303
19

(61)

(2,139)
838
(103)
(51)
(63)

932
(1,470)
14
1,260
2

(957)
(547)
9
(986)
(3)

7,747
(12,221)120
10,475
16

(15)
60
(277)
(976)
5,078

4
(273)
699
(3,572)
2,357

(128)
500
(2,303)(8,115)42,2252(2,611)
396
(371)
(7)
15

144
(2,158)
192
(2)
(12)
14
106
(61)
(1,777)18(21,707)
3,294(3,087)
(54)
123

(66)
(2,642)

(508)

(554)
(21,967)(3,960)

(400)

161
1,029
(400)

Purchase of treasury stock ......................................................................
Dividends paid ..........................................................................................
Other – net ...............................................................................................
Net cash used in ﬁnancing activities .............................................

(280)
(559)
(74)
(1,789)(1,691)(543)(67)(1,511)(2,327)(4,648)(611)(14,872)

Foreign currency translation adjustments on cash and cash equivalents ....

297

242

2,470

Net increase (decrease) in cash and cash equivalents ................................

944

(689)

7,856

Cash and cash equivalents, beginning of year .............................................

9,832

10,52181,746

Cash and cash equivalents, end of year ......................................................

¥10,776¥ 9,832$ 89,602

See notes to consolidated ﬁnancial statements.

(476)(3,326)

DENYO CO., LTD.

DENYO CO., LTD. and Subsidiaries

Notes to Consolidated Financial Statements
Years ended March 31, 2015 and 2014

1. Basis of Presentation of Consolidated Financial Statements
more familiar to readers outside Japan.
The accompanying consolidated ﬁnancial statements have
The consolidated ﬁnancial statements are stated in Japabeen prepared in accordance with the provisions set forth innese yen, the currency of the country in which Denyo Co.,the Japanese Financial Instruments and Exchange Act and its
Ltd. (the “Company”) is incorporated and operates. The
related accounting regulations and in accordance withtranslations of Japanese yen amounts into U.S. dollar
accounting principles generally accepted in Japan (“Japaamounts are included solely for the convenience of readersnese GAAP”), which are different in certain respects as tooutside Japan and have been made at the rate of ¥120.27 to
the application and disclosure requirements of International
U.S.$1, the approximate rate of exchange at March 31, 2015.
Financial Reporting Standards.
Such translations should not be construed as representations
In preparing these consolidated ﬁnancial statements,that the Japanese yen amounts could be converted into U.S.
certain reclassiﬁcations and rearrangements have been
dollars at that or any other rate.
made to the consolidated ﬁnancial statements issued
domestically in order to present them in a form which is

2. Summary of Signiﬁcant Accounting Policies
a. Consolidation
The consolidated ﬁnancial statements as of March 31, 2015,
include the accounts of the Company and its 10 subsidiaries,
including mainly “Denyo Kosan Co., Ltd.,” “Nishinihon Generator Mfg. Co., Ltd.,” “Denyo America Corporation,” “Denyo
Manufacturing Corporation,” “Denyo Asia Pte. Ltd.,” “Denyo
United Machinery Pte. Ltd.,” “Denyo Europe B.V.,” “Denyo
Vietnam Co., Ltd.” and “P.T. Dein Prima Generator” (together,
the “Group”).
Under the control and inﬂuence concepts, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated, andthose companies over which the Group has the ability to
exercise signiﬁcant inﬂuence are accounted for by theequity method.
The investment in “New Japan Machinery Corporation”
associated company, is accounted for by the equity method.
All signiﬁcant intercompany balances and transactions
have been eliminated in consolidation. All material unrealized
proﬁt included in assets resulting from transactions within
the Group is also eliminated.
“Denyo America Corporation,” “Denyo Manufacturing
Corporation,” “Denyo Asia Pte. Ltd.,” “Denyo United Machinery Pte. Ltd.,” “Denyo Europe B.V.,” “Denyo Vietnam Co.,
Ltd.” and “P.T. Dein Prima Generator” and one other wereconsolidated using the ﬁnancial statements as of December
31 because the difference between the ﬁscal yearend dateof the subsidiaries and that of the Company does not exceed
three months. Signiﬁcant transactions between December
31 and March 31 are reﬂected in the accompanying consolidated ﬁnancial statements.
b. Uniﬁcation of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements
In May 2006, the Accounting Standards Board of Japan (the“ASBJ”) issued ASBJ Practical Issues Task Force (PITF)

No. 18, “Practical Solution on Uniﬁcation of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements.” PITF No. 18 prescribes that theaccounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events
under similar circumstances should in principle be uniﬁed forthe preparation of the consolidated ﬁnancial statements.
However, ﬁnancial statements prepared by foreign subsidiaries in accordance with either International Financial ReportingStandards or generally accepted accounting principles in the
United States of America tentatively may be used for the
consolidation process, except for the following items thatshould be adjusted in the consolidation process so that net
income is accounted for in accordance with Japanese GAAP,
unless they are not material: (a) amortization of goodwill;(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development
costs of R&D; (d) cancellation of the fair value model ofaccounting for property, plant and equipment and investment
properties and incorporation of the cost model of accounting;and (e) exclusion of minority interests from net income, if
contained in net income.
c. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, bankdeposits able to be withdrawn on demand and short-term
investments with an original maturity of three months or lessand that are exposed to a minor risk of ﬂuctuations in value.
d. Marketable and Investment Securities
Marketable and investment securities are classiﬁed andaccounted for depending on management’s intent. Availablefor-sale securities are reported at fair value, with unrealized
gains and losses, net of applicable taxes, reported in a separate component of equity.

15

16 DENYO CO., LTD.

Nonmarketable available-for-sale securities are stated atcost determined by the moving-average method. For otherthan-temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.
e. Allowance for Doubtful Accounts
The allowance for doubtful accounts is stated in amounts
considered to be appropriate based on the Company’s pastcredit loss experience and an evaluation of potential losses in
the receivables outstanding.
f. Inventories
Inventories are stated at the lower of cost, determined by
the ﬁrst-in, ﬁrst-out method for ﬁnished products and work inprocess, and by the average method for raw materials, or net
selling value.
g. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciationof property, plant and equipment of the Company and its
consolidated domestic subsidiaries is computed by the declining-balance method at rates based on the estimated useful
lives of the assets, while the straight-line method is applied tobuildings of the Company and its consolidated domestic subsidiaries after April 1, 1998, and all property, plant and equipment of consolidated foreign subsidiaries. The range of useful
lives is principally from 7 to 47 years for buildings and structures, and from 2 to 11 years for machinery and equipment.
h. Provision for Product Warranties
The provision for product warranties is recorded to provide for
future potential costs, such as costs related to after-sales services within the warranty period based on past experience.
i. Accrued Bonuses
Accrued bonuses to employees are provided for at the estimated amounts that the Company and its domestic subsidiaries are obligated to pay to employees after the ﬁscal yearend,
based on services provided during the current period.
j. Retirement and Pension Plans
The Company, its domestic subsidiaries and a certain foreignsubsidiary maintain deﬁned beneﬁt pension plans. Some foreign subsidiaries maintain deﬁned contribution pension plans.
Accrued severance indemnities are accrued based on an
estimated retirement beneﬁt obligation, considering theestimated fair value of plan assets at the balance sheet date.
The unrecognized actuarial gains and losses are amortized on a straight-line basis over a period of 5 years from theyear incurred.
In May 2012, the ASBJ issued ASBJ Statement No. 26,“Accounting Standard for Retirement Beneﬁts” and ASBJ

Guidance No. 25, “Guidance on Accounting Standard for
Retirement Beneﬁts,” which replaced the accounting standard for retirement beneﬁts that had been issued by theBusiness Accounting Council in 1998 with an effective dateof April 1, 2000, and the other related practical guidance, andwere followed by partial amendments from time to timethrough 2009.
(a) Under the revised accounting standard, actuarial gains
and losses and past service costs that are yet to be recognized in proﬁt or loss are recognized within equity(accumulated other comprehensive income), after adjusting for tax effects, and any resulting deﬁcit or surplus isrecognized as a liability (liability for retirement beneﬁts) or
asset (asset for retirement beneﬁts).
(b) The revised accounting standard does not change how torecognize actuarial gains and losses and past service
costs in proﬁt or loss. Those amounts are recognized in
proﬁt or loss over a certain period no longer than the
expected average remaining service period of the employees. However, actuarial gains and losses and past service
costs that arose in the current period and have not yet
been recognized in proﬁt or loss are included in othercomprehensive income and actuarial gains and losses andpast service costs that were recognized in other comprehensive income in prior periods and then recognized in
proﬁt or loss in the current period shall be treated asreclassiﬁcation adjustments.
(c) The revised accounting standard also made certain
amendments relating to the method of attributing expected beneﬁt to periods, the discount rate, and expected
future salary increases.
This accounting standard and the guidance for (a) and (b)above are effective for the end of annual periods beginningon or after April 1, 2013, and for (c) above are effective for the
beginning of annual periods beginning on or after April 1,
2014, or for the beginning of annual periods beginning on orafter April 1, 2015, subject to certain disclosure in March
2015, both with earlier application being permitted from the
beginning of annual periods beginning on or after April 1,
2013. However, no retrospective application of this accounting standard to consolidated ﬁnancial statements in priorperiods is required.
The Company applied the revised accounting standard andguidance for retirement beneﬁts for (a) and (b) above, effective
March 31, 2014, and for (c) above, effective April 1, 2014.
With respect to (c) above, the Company changed themethod of attributing the expected beneﬁt to periods from astraight-line basis to a beneﬁt formula basis, the method ofDENYO CO., LTD.

determining the discount rate from using the period whichapproximates the expected average remaining service period
to using a single weighted average discount rate reﬂecting
the estimated timing and amount of beneﬁt payment and themethod of estimating expected future salary increases fromsalary increases “expected to be certain” to salary increases“expected,” and recorded the effect of (c) above as of April 1,
2014, in retained earnings. As a result, liability for retirement
beneﬁts as of April 1, 2014, increased by ¥159 million(U.S.$1,323 thousand), and retained earnings as of April 1,
2014, decreased by ¥103 million (U.S.$852 thousand), andoperating income and income before income taxes andminority interests for the year ended March 31, 2015,
increased by ¥6 million (U.S.$53 thousand). In addition, theeffect on basic net income per share is immaterial.
k. Employee Stockownership Plan
In December 2013, the ASBJ issued PITF No. 30, “Practical
Solution on Transactions of Delivering the Company’s Own
Stock to Employees etc. through Trusts.” This PITF is effective
for the beginning of annual periods beginning on or after April
1, 2014, with earlier application permitted from the beginningof annual periods ﬁrst ending after the date of issuance of
this PITF, and applied retrospectively.
In accordance with the PITF, upon transfer of treasury
stock to the employee stockownership trust (the “Trust”) by
the entity, any difference between the book value and fairvalue of the treasury stock shall be recorded in capital surplus. At yearend, the entity shall record (1) the entity stock
held by the Trust as treasury stock in equity, (2) all otherassets and liabilities of the Trust on a line-by-line basis, and(3) a liability/asset for the net of (i) any gain or loss on deliveryof the stock by the Trust to the employee shareholding association, (ii) dividends received from the entity for the stock
held by the Trust, and (iii) any expenses relating to the Trust.
The Company applied this PITF effective April 1, 2014,
retrospectively. As a result, other current liabilities as of March
31, 2014, increased by ¥42 million (U.S.$345 thousand), liability for retirement beneﬁts, capital surplus, retained earnings
and treasury stock as of March 31, 2014, decreased by¥139 million (U.S.$1,153 thousand), ¥1 million (U.S.$9 thousand), ¥76 million (U.S.$633 thousand) and ¥142 million(U.S.$1,185 thousand), respectively, and operating income
and income before income taxes and minority interests forthe year ended March 31, 2014, increased by ¥86 million(U.S.$722 thousand), as compared to those previously reported, and capital surplus, retained earnings and treasury stock
as of April 1, 2013, decreased by ¥0 million (U.S.$2 thousand),¥123 million (U.S.$1,020 thousand) and ¥143 million(U.S.$1,192 thousand), respectively, after retrospective application. In addition, basic net income per share for the year
ended March 31, 2014, increased by ¥2.88 (U.S.$0.03).

l. Research and Development Costs
Research and development costs are charged to income as
incurred.
m. Leases
In March 2007, the ASBJ issued ASBJ Statement No. 13,“Accounting Standard for Lease Transactions,” which revised
the previous accounting standard for lease transactions.
Under the previous accounting standard, ﬁnance leases
that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other ﬁnanceleases were permitted to be accounted for as operatinglease transactions if certain “as if capitalized” information
was disclosed in the notes to the lessee’s ﬁnancial statements. The revised accounting standard requires that all
ﬁnance lease transactions should be capitalized to recognize
lease assets and lease obligations in the balance sheet. In
addition, the revised accounting standard permits leases thatexisted at the transition date and do not transfer ownershipof the leased property to the lessee to continue to beaccounted for as operating lease transactions.
The Company applied the revised accounting standard
effective April 1, 2008.
All other leases are accounted for as operating leases.
n. Bonuses to Directors and Audit & Supervisory Board
Members
Bonuses to directors and Audit & Supervisory Board members are accrued at the yearend to which such bonuses are
attributable.
o. Income Taxes
The provision for income taxes is computed based on thepretax income included in the consolidated statement ofincome and comprehensive income. The asset and liability
approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basesof assets and liabilities. Deferred taxes are measured byapplying currently enacted income tax rates to the temporary
differences.
p. Foreign Currency Transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation
are recognized in the accompanying consolidated statementof income and comprehensive income.

17

18 DENYO CO., LTD.

q. Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current
exchange rate as of the balance sheet date except for equity,which is translated at the historical rate. Differences arisingfrom such translation are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity. Revenue andexpense accounts of consolidated foreign subsidiaries aretranslated into Japanese yen at the average exchange rate.
r. Derivatives and Hedging Activities
The Group uses derivative ﬁnancial instruments to manage
its exposures to ﬂuctuations in foreign exchange, interest
rates and raw material costs. Foreign exchange forward contracts, currency swaps, interest rate swaps and commodity
swaps are utilized by the Group to reduce the risk of ﬂuctuation of foreign currency exchange, interest rate and raw
material costs. The Group does not enter into derivatives for
trading or speculative purposes.
Derivative ﬁnancial instruments are classiﬁed andaccounted for as follows: (a) all derivatives, except for thosethat qualify for hedge accounting, are recognized as either
assets or liabilities and measured at fair value, and gains orlosses on derivative transactions are recognized in theincome statement and (b) for derivatives used for hedging
purposes, if derivatives qualify for hedge accounting because

3. Stock Granting Trust (“J-ESOP”)
The Company has introduced a Stock Granting Trust (“J-ESOP”)
for the purpose of enhancing the beneﬁt package to employees
and providing incentives for raising corporate value.
The Company grants employees points according to theircontinued services and results, and when the employeesof high correlation and effectiveness between the hedging
instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
Interest rate swaps which qualify for hedge accounting
and meet speciﬁc matching criteria are not remeasured atmarket value but the differential paid or received under theswap agreements is recognized and included in interest
expense.
The commodity swaps which qualify for hedge accounting are measured at market value at the balance sheet date
and the unrealized gains or losses are deferred until maturity
as deferred gain (loss) on derivatives under hedge accounting
as a separate component of equity.
s. Per Share Information
Basic net income per share is computed by dividing net
income available to common shareholders by the weightedaverage number of common shares outstanding for theperiod, retroactively adjusted for stock splits.
Cash dividends per share presented in the accompanying
consolidated statement of income and comprehensive
income are dividends applicable to the respective ﬁscal
years, including dividends to be paid after the end of the year.
t. Consumption Taxes
Consumption taxes are not included in sales, cost of sales
and selling, general and administrative expenses, etc.

retire, the Company delivers them its own stock (or pays
equivalent cash) corresponding to the number of their accumulated points through the Trust.
The Trust held the treasury stock as follows which was
included in the consolidated balance sheet of the Company:
Thousands of
U.S. dollars

Millions of yen

Treasury stock ..................................................................................................
(shares) ............................................................................................................

2015
¥478
793,000

2014¥480
796,000

2015$3,975

4. Investment Securities
Investment securities as of March 31, 2015 and 2014, consisted of the following:Thousands of
U.S. dollars

Millions of yen

Non-current:
Marketable equity securities ....................................................................
Marketable trust fund investments and other ..........................................
Nonmarketable equity securities ..............................................................
Total

2015

2014

2015

¥8,162141
1,023¥9,326¥6,893158
1,023¥8,074$67,866
1,168
8,507$77,541

DENYO CO., LTD.

The cost and aggregate fair values of marketable and investment securities at March 31, 2015 and 2014, were as follows:
March 31, 2015

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

March 31, 2014

Securities classiﬁed as available-for-sale:
Equity securities
Trust fund investments and otherCost¥2,238157

Cost¥1,963
165

Millions of yen
Unrealized Unrealized
Gains
Losses¥5,9242¥18

Millions of yen
Unrealized Unrealized
Gains
Losses¥4,930
13

¥20

Fair
Value

¥8,162
141

Cost

Thousands of U.S. dollars
Unrealized Unrealized
Gains
Losses$18,607 $49,259
1,308
15

$156

Fair
Value

$67,866
1,167

Fair
Value

¥6,893
158

The information of available-for-sale securities which were sold during the years ended March 31, 2015 and 2014, is as follows:
March 31, 2015

Available-for-sale – Equity securities ..................................

March 31, 2014

Available-for-sale – Equity securities ..................................

Millions of yen
Realized
Realized
Proceeds
Gains
Loss

¥396

¥300

Thousands of U.S. dollars
Realized
Realized
Proceeds
Gains
Loss

$3,294$2,492Millions of yen
Realized
Realized
Proceeds
Gains
Loss

¥192

¥51

5. Inventories
Inventories at March 31, 2015 and 2014, consisted of the following:Thousands of
U.S. dollars

Millions of yen

Finished products ............................................................................................
Work in process ...............................................................................................
Raw materials and supplies .............................................................................
Total .............................................................................................................

2015¥ 5,214894
3,954¥10,062

2014¥4,497812
2,880¥8,1892015$43,350
7,436
32,880$83,666

6. Investments in Associated Companies
Investments in associated companies at March 31, 2015 and 2014, were as follows:
Thousands of
U.S. dollars

Millions of yen

Investments – New Japan Machinery Corporation ..........................................
Total ..........................................................................................................

2015
¥621
¥621

2014
¥577
¥577

2015
$5,166$5,16619

20 DENYO CO., LTD.

7. Short-Term Bank Loans and Long-Term Debt
Short-term bank loans at March 31, 2015 and 2014, consistedof bank overdrafts. The weighted-average interest rate applicable to the short-term bank loans was 0.8% at March 31,

2015 and 2014.
Long-term debt at March 31, 2015 and 2014, consisted of
the following:
Millions of yen

Unsecured loans from banks, with interest rates ranging from 1.5% to 3.5% ...
Obligations under ﬁnance leases .....................................................................
Total ..................................................................................................
Less current portion ........................................................................................
Long-term debt, less current portion ...............................................................

2015¥1,603
12
1,615
(400)
¥1,215

Thousands of
U.S. dollars

2014¥1,829
5
1,834
(400)
¥1,4342015$13,326
99
13,425(3,326)$10,099

Millions of yen

Thousands of
U.S. dollars¥ 400$ 3,326

1,203¥1,603

10,000$13,326

Annual maturities of long-term debt at March 31, 2015, were as follows:Year ending March 31

2016 .........................................................................................................................................
2017 .........................................................................................................................................
2018 .........................................................................................................................................
2019 .........................................................................................................................................
2020 and thereafter .................................................................................................................
Total ..........................................................................................................................

8. Commitment Line Contracts
In order to raise funds efﬁciently, the Company has enteredinto a commitment line contract with four ﬁnancial institutions, of which Mizuho Bank, Ltd. is the arranger. The contract provided the Company with a commitment line of

9. Retirement and Pension Plans
The Company has a deﬁned beneﬁt pension plan anddomestic subsidiaries also participate in the same plan. A
certain foreign subsidiary has its own deﬁned beneﬁt pension plan and other foreign subsidiaries have deﬁned contribution plans. In addition, the Company and domestic¥3,000 million (U.S.$24,944 thousand) as of March 31, 2015.
The Company had no borrowings outstanding under theagreement as of March 31, 2015.

subsidiaries have a stock granting retirement plan.
The projected beneﬁt obligation of a certain domestic
subsidiary is calculated using a simpliﬁed method, which ispermitted for small companies in accordance with theaccounting standard for retirement beneﬁts.

(1) The changes in deﬁned beneﬁt obligation for the years ended March 31, 2015 and 2014, were as follows:
Millions of yen

Balance at beginning of year ............................................................................
Cumulative effect of accounting change ......................................................
Balance at beginning of year (as restated) .......................................................
Current service cost .....................................................................................
Interest cost .................................................................................................
Actuarial (gains) losses .................................................................................
Beneﬁts paid ................................................................................................
Others ..........................................................................................................
Balance at end of year .....................................................................................

2015¥2,520
159
2,679
194
21
49
(212)
3
¥2,7342014¥2,451
2,451
137
46
(29)
(146)
61
¥2,520Thousands of
U.S. dollars

2015$20,957
1,323
22,280
1,610
176
410
(1,762)
24$22,738

DENYO CO., LTD.

(2) The changes in plan assets for the years ended March 31, 2015 and 2014, were as follows:
Thousands of
U.S. dollars

Millions of yen

Balance at beginning of year ............................................................................
Expected return on plan assets ...................................................................
Actuarial (gains) losses .................................................................................
Contributions from the employer .................................................................
Beneﬁts paid ................................................................................................
Others ..........................................................................................................
Balance at end of year .....................................................................................

2015¥2,350
31
(4)
172
(199)
5
¥2,3552014¥2,065
27
14
330
(134)
48
¥2,3502015$19,537
260
(34)
1,430
(1,656)48$19,585(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of deﬁned beneﬁt obligation and plan assets
Thousands of
U.S. dollars

Millions of yen

Funded deﬁned beneﬁt obligation ...................................................................
Plan assets ......................................................................................................
Unfunded deﬁned beneﬁt obligation ...............................................................
Liability for stock granting retirement ..............................................................
Net liability (asset) arising from deﬁned beneﬁt obligation ..............................

2015¥2,616
2,355
261
118
92
¥ 471

2014
¥2,417
2,350
67
103
76
¥ 246

Thousands of
U.S. dollars

Millions of yen

Liability for retirement beneﬁts ........................................................................
Net liability (asset) arising from deﬁned beneﬁt obligation ..............................

2015
¥471
¥471

2015
$21,755
19,585
2,170
983
763
$ 3,916

2014
¥246
¥246

2015
$3,916$3,916(4) The components of net periodic beneﬁt costs for the years ended March 31, 2015 and 2014, were as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost .....................................................................................................
Interest cost ....................................................................................................
Expected return on plan assets .......................................................................
Recognized actuarial (gains) losses .................................................................
Stock granting cost ..........................................................................................
Net periodic beneﬁt costs ................................................................................

2015
¥194
21
(31)
32
¥216

2014
¥137
46
(27)
(8)
28
¥176

2015
$1,610
176
(260)
268
$1,794(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of deﬁned retirement beneﬁtplans as of March 31, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial (gains) losses ..............................................................

2015
¥(41)

2014

2015
$(343)

21

22 DENYO CO., LTD.

(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of deﬁned retirement beneﬁt plans as of March 31, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial (gains) losses ..............................................................

2015
¥(14)

2014
¥28

2015
$(112)

2015
98.3%
1.7
100.0%

2014
98.2%
1.8
100.0%(7) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2015 and 2014, consisted of the following:
General account managed by a life insurance company .....................................................
Others .................................................................................................................................
Total ....................................................................................................................................

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are expectedcurrently and in the future from the various components of the plan assets.
(8) Assumptions used for the years ended March 31, 2015 and 2014, were set forth as follows:
2015
Discount rate .................................................................................................................. Mainly 0.60%
Expected rate of return on plan assets ........................................................................... Mainly 1.25%
Expected rate of future salary increase .......................................................................... Mainly 1.90%

10. Equity
Japanese companies are subject to the Companies Act ofJapan (the “Companies Act”). The signiﬁcant provisions in
the Companies Act that affect ﬁnancial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends
at any time during the ﬁscal year in addition to the yearend
dividend upon resolution at the shareholders’ meeting. For
companies that meet certain criteria including (1) having a
Board of Directors, (2) having independent auditors,(3) having an Audit & Supervisory Board, and (4) the termof service of the directors being prescribed as one year
rather than the normal two-year term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during theﬁscal year if the company has prescribed so in its articles
of incorporation. The Company meets all the above criteria.
The Companies Act permits companies to distributedividends-in-kind (noncash assets) to shareholders subject
to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a
year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The

2014
Mainly 2.00%
Mainly 1.25%
Mainly 1.90%

Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is deﬁned as the amount available for distribution to the shareholders, but the amountof net assets after dividends must be maintained at noless than ¥3 million.
b. Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Companies Act requires that an amount equal to 10%
of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in
capital (a component of capital surplus) depending on theequity account that was charged upon the payment ofsuch dividends, until the aggregate amount of the legal
reserve and additional paid-in capital equals 25% of thecommon stock. Under the Companies Act, the total
amount of additional paid-in capital and legal reserve may
be reversed without limitation. The Companies Act also
provides that common stock, legal reserve, additional paidin capital, other capital surplus and retained earnings canbe transferred among the accounts within equity undercertain conditions upon resolution of the shareholders.

DENYO CO., LTD.

c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stockby resolution of the Board of Directors. The amount oftreasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a speciﬁc formula. Under the Companies Act,

11. Income Taxes
The Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in theaggregate, resulted in a normal effective statutory tax rate of
approximately 35.6% and 38.0% for the years ended Marchstock acquisition rights are now presented as a separate
component of equity. The Companies Act also provides
that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

31, 2015 and 2014, respectively.
The tax effects of signiﬁcant temporary differences andtax loss carryforwards which resulted in deferred tax assets
and liabilities at March 31, 2015 and 2014, are as follows:
Thousands of
U.S. dollars

Millions of yen

2014

2015

220
96
75
73
16
85
34
353
344
(424)
872

$ 1,838
245
375
627
167
1,180
210
579
2,427
(1,092)
6,556

403
1,728
81
2,212
¥(1,340)

3,039
15,683817
19,539$(12,983)

2015
Deferred tax assets:
Accrued bonuses .........................................................................................
Provision for product warranties ..................................................................
Accrued enterprises taxes ...........................................................................
Unrealized gain on sale of inventory ............................................................
Unrealized gain on sale of property ..............................................................
Liability for retirement beneﬁts ....................................................................
Loss on revaluation of investment securities ...............................................
Tax loss carryforwards .................................................................................
Other ............................................................................................................
Less valuation allowance .............................................................................
Total .............................................................................................................
Deferred tax liabilities:
Reserve for deferred gains on sales of property .............................................
Unrealized gain on available-for-sale securities ............................................
Other ............................................................................................................
Total ..................................................................................................
Net deferred tax liabilities ................................................................................

¥

221
29
45
75
20
142
25
70
292
(131)
788

366
1,886
98
2,350
¥(1,562)¥

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reﬂected in the accompanying consolidated statement of income and comprehensive income for the year ended March 31, 2015, with the corresponding
ﬁgures for 2014, is as follows:
Normal effective statutory tax rate ..............................................................................................
Expenses not deductible for income tax purposes .....................................................................
Income not recognizable for income tax purposes ......................................................................
Per capita portion of inhabitants’ taxes ........................................................................................
Tax credits ...................................................................................................................................
Lower income tax rates applicable to income in certain foreign countries ..................................
Valuation allowance .....................................................................................................................
Effect of reduction of income tax rates on deferred tax assets ...................................................
Other – net ..................................................................................................................................
Actual effective tax rate ...............................................................................................................

2015
35.6%
1.4
(0.3)
0.9
(2.9)
(1.7)
(0.7)
0.2
0.4
32.9%

2014
38.0%
1.3
(0.2)
0.5
(2.2)
(1.7)
(0.6)
0.6
(0.6)
35.1%

23

24 DENYO CO., LTD.

New tax reform laws enacted in 2015 in Japan changed thenormal effective statutory tax rate for the ﬁscal year beginning on or after April 1, 2015, to approximately 33.1% and forthe ﬁscal year beginning on or after April 1, 2016, to approximately 32.3%. The effect of these changes was to decreasedeferred tax liabilities, net of deferred tax assets, by¥182 million (U.S.$1,517 thousand) and increase accumulated other comprehensive income for unrealized gain on
available-for-sale securities by ¥195 million (U.S.$1,622 thousand), deferred gain on derivatives under hedge accountingby ¥0 million (U.S.$0 thousand) in the consolidated balance
sheet as of March 31, 2015, and to increase income taxes—
deferred in the consolidated statement of income and comprehensive income for the year then ended by ¥13 million(U.S.$105 thousand).
At March 31, 2015, some subsidiaries have tax loss carryforwards aggregating approximately ¥248 million(U.S.$2,061 thousand) which are available to be offset against
taxable income of such subsidiaries in future years. These tax
loss carryforwards, if not utilized, will expire as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

¥103
30
115
¥248

$ 857
250
954
$2,0612018 .......................................................................................................................................
2019 .......................................................................................................................................
2020 and thereafter ...............................................................................................................
Total ........................................................................................................................

12. Research and Development Costs
Research and development costs charged to income were ¥535 million (U.S.$4,452 thousand) and ¥578 million for the years
ended March 31, 2015 and 2014, respectively.

13. Leases
The Group leases certain vehicles.
Lease payments under ﬁnance leases for the years ended March 31, 2015 and 2014, were ¥3 million (U.S.$21 thousand)and ¥21 million, respectively.
Thousands of
U.S. dollars

Millions of yen

Due within one year ........................................................................................
Due after one year ...........................................................................................
Total ..................................................................................................

14. Financial Instruments and Related Disclosures(1) Group Policy for Financial Instruments
The Group invests cash surpluses in low-risk ﬁnancial
assets. Bank loans are used to fund its ongoing operations.
Derivatives are used, not for speculative purposes, but tomanage exposure to ﬁnancial risks as described in Note 15.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables such as trade notes and trade accounts are
exposed to customer credit risk. Receivables in foreign
currencies are exposed to the market risk of ﬂuctuation inforeign currency exchange rates.
Investment securities, mainly equity instruments ofcustomers and suppliers of the Company, are exposed to
the risk of market price ﬂuctuations.
Payment terms of payables, such as trade notes andtrade accounts, are almost less than six months. Payables

2015
¥ 3
9
¥12

2014
¥2
3
¥5

2015
$29
70
$99

in foreign currencies are exposed to the market risk of
ﬂuctuation in foreign currency exchange rates.
Maturities of bank loans are less than seven years
after the balance sheet date. Although a part of such bankloans is exposed to market risks from changes in variableinterest rates, those risks are mitigated by using derivatives of interest rate swaps.
Derivatives mainly include interest rate swaps, commodity swaps, forward foreign currency contracts andcurrency swap contracts, which are used to manage
exposure to market risks from changes in interest rates ofbank loans, from changes in raw material (copper) prices,and from changes in foreign currency exchange rates ofreceivables and advances. Please see Note 15 for moredetail about derivatives.

DENYO CO., LTD.

(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from acounterparty’s failure to repay or service debt according
to the contractual terms. The Company manages its credit
risk from receivables on the basis of internal guidelines,
which include monitoring of payment terms and balancesof major customers by the Sales Planning department to
identify the default risk of customers at an early stage.
Each consolidated subsidiary also manages its credit risk
from receivables by an equivalent method.
Market risk management (foreign exchange risk andinterest rate risk)
Foreign currency receivables and payables are exposed tomarket risk resulting from ﬂuctuations in foreign currency
exchange rates. The Group reduces such foreignexchange risk by balancing foreign currency trade receivables and payables. Forward foreign currency contracts
and currency swap contracts are used for some foreign
currency trade receivables and advances.
Interest rate swaps are used to manage exposure tomarket risks from changes in interest rates of loan payables and commodity swaps are used to manage exposure to market risks from changes in raw material(copper) prices.

The Company continuously reviews portfolios of securities by periodically monitoring fair values of each security
and the ﬁnancial condition of the issuer as well as market
conditions and the relationship with the issuer.
In conducting derivative transactions, the division in
charge of each derivative transaction follows the internal
policies, which prescribe the authority and the limit foreach transaction. The transaction data is reported to the
management meeting on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Company cannot
meet its contractual obligations in full on maturity dates.
The Company manages its liquidity risk by holding adequate volumes of liquid assets, along with adequateﬁnancial planning by the corporate treasury department.
(4) Fair Values of Financial Instruments
Fair values of ﬁnancial instruments are based on quoted
prices in active markets. If a quoted price is not available,
other rational valuation techniques are used instead. Additionally, notional amounts of derivate transactions, which
are presented in Note 15, “Derivatives,” do not indicate
market risk of derivative transactions. Also, please see
Note 15 for the details of fair value for derivatives.

(a) Fair value of ﬁnancial instruments
Millions of yen
March 31, 2015

Carrying
AmountFair Value

Thousands of U.S. dollars
Carrying
Unrealized
AmountFair Value
Loss

Unrealized
Loss

Cash and cash equivalents ...................................... ¥10,776 ¥10,776
Receivables ............................................................. 19,309 19,309
Investment securities ..............................................
8,303
8,303
Total .......................................................... ¥38,388 ¥38,388$ 89,602 $ 89,602
160,553 160,553
69,034
69,034$319,189 $319,189

Short-term bank loans ............................................. ¥ 233 ¥ 233
Payables ................................................................... 10,351 10,351
Long-term debt ........................................................
1,615
1,664
Total .......................................................... ¥12,199 ¥12,248

$
¥(49)
¥(49)

Derivatives ............................................................... ¥ (707) ¥ (707)$ (5,880) $ (5,880)

Millions of yen
March 31, 2014

Carrying
AmountFair Value

Unrealized
Loss

Cash and cash equivalents ...................................... ¥ 9,832 ¥ 9,832
Receivables ............................................................. 19,723 19,723
Investment securities ..............................................
7,051
7,051
Total .......................................................... ¥36,606 ¥36,606
Short-term bank loans ............................................. ¥ 708 ¥ 708
Payables ...................................................................
8,869
8,869
Long-term debt ........................................................
1,834
1,838
Total .......................................................... ¥ 11,411 ¥ 11,415
Derivatives ............................................................... ¥(372) ¥

(372)

1,936 $ 1,936
86,06986,06913,425
13,834$101,430 $101,839

¥(4)
¥(4)

$(409)$(409)

25

26 DENYO CO., LTD.

Cash and Cash Equivalents
The carrying values of cash and cash equivalents approximate fair value because of their short maturities.
Investment Securities
The fair values of investment securities are measured at thequoted market price of the stock exchange for the equity
instruments.
Receivables and Payables
The carrying values of receivables and payables approximate
fair value because of their short maturities.

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

(b) Carrying amount of ﬁnancial instruments whose fair value cannot be reliably determined
Thousands of
U.S. dollars

Millions of yen

Investments in equity instruments that do not have a quoted market
price in an active market ...........................................................................

2015

2014

2015

¥1,023¥1,023$8,507(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

March 31, 2015

Cash and cash equivalents ......................................................
Receivables .............................................................................
Investment securities ..............................................................
Total ..........................................................................

Millions of yen
Due after One
Due in One Year
Year throughor Less
Five Years¥10,776
19,309¥30,085

Thousands of U.S. dollars
Due after One
Due in One Year
Year throughor Less
Five Years$ 89,602
160,553¥81¥81$250,155

$675
$675

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

15. Derivatives
The Group enters into derivatives, in the normal course ofbusiness, to reduce the exposure to ﬂuctuations in foreignexchange rates, raw material prices and interest rates. The
primary derivative instruments used by the Company areforeign currency forward contracts, currency swap contracts,
commodity swaps and interest rate swaps.
It is the Group’s policy to use derivatives only for the
purpose of reducing market risks associated with assets

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

DENYO CO., LTD.

Derivative Transactions to Which Hedge Accounting Is Not Applied

At March 31, 2015

Contract
AmountForeign currency forward contracts:
Selling U.S.$ ............................................ ¥1,016
Currency swap contracts:
Selling U.S.$ ............................................ 1,414

At March 31, 2014

Contract
AmountForeign currency forward contracts:
Selling U.S.$ ............................................ ¥ 386
Currency swap contracts:
Selling U.S.$ ............................................ 1,414

Millions of yen
Contract
Amount due
after One Year Fair Value

Unrealized
Gain/Loss¥1,016¥ (48)¥ (48)

1,414

(661)

(661)

Millions of yen
Contract
Amount due
after One Year Fair Value

Unrealized
Gain/Loss¥¥1,414

6

(379)

¥

Contract
AmountThousands of U.S. dollars
Contract
Amount due
after One Year Fair Value

Unrealized
Gain/Loss$ 8,448 $ 8,448 $ (401) $ (401)
11,76011,760(5,493)(5,493)6(379)

Derivative Transactions to Which Hedge Accounting Is Applied
Contract
Amount

At March 31, 2015

Hedged Item

Commodity swaps(ﬁxed price payment, quoted price receipt) ....

Inventories¥ 27

Interest rate swaps
Long-term(ﬁxed rate payment, ﬂoating rate receipt) .......
debt

400

At March 31, 2014

Hedged Item

Interest rate swaps
Long-term(ﬁxed rate payment, ﬂoating rate receipt) ......
debt
The above interest rate swaps which qualify for hedge
accounting and meet speciﬁc matching criteria are notremeasured at market value, but the differential paid or
received under the swap agreements is recognized andAt March 31, 2015

Contract
Amount¥800

Millions of yen
Contract
Amount due
after One Year

Fair Value

Thousands of U.S. dollars
Contract
Contract
Amount due
Amountafter One Year
Fair Value¥2$10,000
Millions of yen
Contract
Amount due
after One Year

Fair Value¥400

Thousands of U.S. dollars
Contract
Contract
Amount due
Amountafter One Year
Fair Value$10,000$10,000

included in interest expense or income. In addition, the fairvalue of such interest rate swaps in Note 14 is included inthat of hedged items (i.e., long-term debt).

Hedged Item

Thousands of U.S. dollars
Contract
Contract
Amount due
Amountafter One Year
Fair Value

Commodity swaps (ﬁxed price payment, quoted price receipt) ................... Inventories$ 228
Interest rate swaps (ﬁxed rate payment, ﬂoating rate receipt) ..................... Long-term debt
3,326Interest rate swaps (ﬁxed rate payment, ﬂoating rate receipt) ..................... Long-term debt 10,000
The fair value of derivative transactions is measured at thequoted price obtained from the ﬁnancial institution.
The contract or notional amounts of derivatives which are$10,000$14$10,000

shown in the above table do not represent the amounts
exchanged by the parties and do not measure the Group’s
exposure to credit or market risk.

27

28 DENYO CO., LTD.

16. Other Comprehensive Income
The components of other comprehensive income, including reclassiﬁcation adjustments and tax effects for the years ended
March 31, 2015 and 2014, were as follows:
Thousands of
U.S. dollars

Millions of yen

Unrealized gain on available-for-sale securities:
Gains arising during the year ........................................................................
Reclassiﬁcation adjustments to proﬁt or loss ..............................................
Amount before income tax effect ................................................................
Income tax effect .........................................................................................
Total ......................................................................................................

2015

2014

2015

¥1,283
(299)
984
(158)
¥826

¥1,733
(51)
1,682
(599)
¥1,083$10,672(2,492)
8,180(1,314)$ 6,866$

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

¥

2

¥

¥

2
(1)
1

¥

Foreign currency translation adjustments:
Adjustments arising during the year ............................................................
Total ......................................................................................................

¥ 992
¥ 992

Deﬁned retirement beneﬁt plans:
Adjustments arising during the year ............................................................
Amount before income tax effect ................................................................
Income tax effect .........................................................................................
Total ......................................................................................................

¥

Share of other comprehensive income in associates:
Gains arising during the year ........................................................................
Total ......................................................................................................
Total other comprehensive income ...................................................

¥¥¥1,792

¥

(1)
(2)
(3)
1
(2)

$

¥1,093¥1,093

15
(1)
14
(4)
10

$ 8,243$ 8,243

(41)
(41)
14
(27)

$

$

¥ 35
¥ 35
¥2,209

(343)
(343)
118
(225)

$
2
$
2
$14,896

17. Net Income Per Share
Basis for the computation of net income per share (“EPS”) for the years ended March 31, 2015 and 2014, is as follows:
Millionsof yenNet
IncomeThousandsof Shares
Weighted
Average Shares

Yen
EPS

Year Ended March 31, 2015
Basic EPS
Net income available to common shareholders ...........................

¥3,85821,506¥179.38

Year Ended March 31, 2014
Basic EPS
Net income available to common shareholders ...........................

¥3,72622,551¥165.21

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

U.S. dollars$1.49

effective April 1, 2014. In calculating the number of weightedaverage shares above, the number of shares that are held by
the Trust is reﬂected.

DENYO CO., LTD.

18. Segment Information
Under ASBJ Statement No. 17, “Accounting Standard for
Segment Information Disclosures” and ASBJ Guidance
No. 20, “Guidance on Accounting Standard for Segment
Information Disclosures,” an entity is required to report ﬁnancial and descriptive information about its reportable segments. Reportable segments are operating segments oraggregations of operating segments that meet speciﬁed
criteria. Operating segments are components of an entity
about which separate ﬁnancial information is available andsuch information is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and inassessing performance. Generally, segment information isrequired to be reported on the same basis as is used internally for evaluating operating segment performance anddeciding how to allocate resources to operating segments.

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

2015
Japan

Sales:
Sales to external customers .....................
Intersegment sales or transfers ................
Total ...............................................
Segment proﬁt ..............................................
Segment assets ............................................
Other:
Depreciation and amortization ..................
Investments in associated companies ......
Increase in property, plant and equipment
and intangible assets ..............................

¥38,101
4,675¥42,776¥ 3,245
56,336

Reportable Segment
U.S.A.
Asia
Europe¥8,981 ¥ 4,706
368
2,911
¥9,349 ¥ 7,617¥1,185 ¥ 705
5,989 12,219

520
621

100

379

660

52

1,818

¥479
4
¥483
¥ 7
459

Total

¥52,267
7,958¥60,225¥ 5,142
75,003

1

Reconciliations

Consolidated¥52,267¥(7,958)¥(7,958)¥ 207(7,679)¥52,267¥ 5,349
67,324

999
621

999
621

2,531

2,531

Millions of yen

2014
Japan

Sales:
Sales to external customers .....................
Intersegment sales or transfers ................
Total ...............................................
Segment proﬁt ..............................................
Segment assets ............................................
Other: ...........................................................
Depreciation and amortization ..................
Investments in associated companies ......
Increase in property, plant and equipment
and intangible assets ..............................

Reportable Segment
U.S.A.
Asia
Europe¥314
1¥315¥ (40)
435

Total¥49,832
7,553¥ 57,385¥ 5,207
68,065Reconciliations

Consolidated¥ 37,323
5,354¥42,677¥ 4,31753,355¥7,227224¥7,451¥ 356
4,726¥4,968
1,974¥6,942¥ 574
9,549¥49,832

429
577

90

319

838
577

838
577

956

5

1,492

2,453

2,453

¥(7,553)¥(7,553)¥ 200(6,547)¥49,832¥ 5,407
61,51829

30 DENYO CO., LTD.

Thousands of U.S. dollars

2015
Japan

Reportable Segment
U.S.A.
Asia
EuropeSales:
Sales to external customers ..................... $316,793 $74,675 $39,129 $3,984
Intersegment sales or transfers ................
38,8683,062 24,201
33
Total ............................................... $355,661 $ 77,737 $63,330 $4,017
Segment proﬁt .............................................. $ 26,985 $ 9,854 $ 5,861 $ 56
Segment assets ............................................ 468,412 49,801 101,595
3,815
Other:
Depreciation and amortization ..................
4,323
833
3,146
1
Investments in associated companies ......
5,166
Increase in property, plant and equipment
and intangible assets ..............................
5,488
432
15,1185
Related Information(1) Information about Products and Services
Information about products and services for the years
ended March 31, 2015 and 2014, is omitted since sales toexternal customers of a single product line (generators,

Total

Reconciliations

Consolidated$434,581
66,164$500,745$ 42,756
623,623$434,581$(66,164)$(66,164) $434,581$ 1,716 $ 44,472(63,848) 559,775

8,303
5,166

8,303
5,166

21,04321,043welders, compressors, and other related products)
accounted for more than 90% of the total consolidated
sales.

(2) Information about Geographical Areas
Sales to external customers and property, plant and equipment by geographical areas for the years ended March 31, 2015
and 2014, are summarized as follows:
Millions of yen

2015
Sales to external customers .......................................................
Property, plant and equipment ...................................................

Japan

North andCentral America

Asia

Other Areas

Total¥31,468
9,398¥11,234
945¥6,6195,463¥2,9461¥52,267
15,807

Millions of yen

2014
Sales to external customers .......................................................
Property, plant and equipment ...................................................

Japan

North andCentral America

Asia

Other Areas

Total¥31,728
9,419¥9,008874¥6,9593,297¥2,137¥49,832
13,590Thousands of U.S. dollars

2015
Japan

Sales to external customers ....................................................... $261,645
Property, plant and equipment ...................................................
78,139North andCentral America

Asia$93,409
7,860$55,038
45,426

Other Areas

Total$24,489 $434,581
8 131,433

Note: Sales are classiﬁed by country or region based on the location of customers.

(3) Information about Major Customers
Sales to major customers for the years ended March 31, 2015 and 2014, are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Name of customers
Multiquip Inc. ...............................................................

2015

2014

2015

¥8,981¥7,227$74,675

Related Segment

United Statesof America

DENYO CO., LTD.

19. Related-Party Transactions
The Company sold its products to New Japan Machinery Corporation, an associated company.
The transactions were made under the usual terms and conditions.
The transactions with the associates for the years ended March 31, 2015 and 2014, and related balances at March 31, 2015
and 2014, were mainly as follows:
Thousands of
U.S. dollars

Millions of yen

Transactions:
Sales ............................................................................................................

2015

2014

2015

¥2,923¥3,570$24,304
Thousands of
U.S. dollars

Millions of yen

Balances:
Trade notes receivable .................................................................................
Trade accounts receivable ............................................................................

2015

2014

2015

¥1,666515¥1,674811$13,855
4,283

20. Subsequent EventAppropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2015, was approved at the Company’s Board of Directors’ meeting held on May 21, 2015:
Year-end cash dividends, ¥16 (U.S.$0.13) per share ................................................................

Millions of yen

Thousands of
U.S. dollars¥355$2,95531

32 DENYO CO., LTD.

To the Board of Directors of Denyo Co., Ltd.
We have audited the accompanying consolidated balance sheet of Denyo Co., Ltd. and its subsidiaries
as of March 31, 2015, and the related consolidated statements of income and comprehensive income,changes in equity, and cash ﬂows for the year then ended, and a summary of signiﬁcant accounting policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated ﬁnancial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated ﬁnancial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated ﬁnancial statements based on our
audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated ﬁnancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated ﬁnancial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated ﬁnancial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the consolidated ﬁnancial statements in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated ﬁnancial statements.
We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis
for our audit opinion.
OpinionIn our opinion, the consolidated ﬁnancial statements referred to above present fairly, in all material respects, the consolidated ﬁnancial position of Denyo Co., Ltd. and its subsidiaries as of March 31, 2015,
and the consolidated results of their operations and their cash ﬂows for the year then ended in accordance with accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in
our opinion, such translation has been made in accordance with the basis stated in Note 1 to the consolidated ﬁnancial statements. Such U.S. dollar amounts are presented solely for the convenience of readers
outside Japan.
June 26, 2015

Deloitte Touche Tohmatsu LLC

DENYO CO., LTD.

Company Data

Company Outline(As of March 31, 2015)

Company name

Denyo Co., Ltd.

Established

July 2, 1948

Head office

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

Paid-in capital¥1,954,833,520 (U.S.$16,253,708)

Authorized shares

97,811,000

Issued shares

22,859,660

Shareholders

4,482

Financial year

April 1 ~ March 31

Employees

510 (1,121 consolidated)

Branch and sales offices

26

Board of Directors and Corporate Auditors
Chairman and CEO

Corporate Auditors

Hideaki Kuboyama

Toru Masui
Masaru Sugiyama
Akira Yamada*
Yoshio Takeyama*

President and Representative Director

Shigeru Koga
Directors

Shoichi Shiratori
Yoji Eto
Teruo Yashiro
Yasuo Mizuno
Toshiaki Tanaka
Haruhito Takada*(As of June 26, 2015)

Asterisk* indicates an external director orexternal corporate auditor.

33

34 DENYO CO., LTD.

Business Lines
Manufacture and sales of:Generators

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

Welders

Engine-driven Welders
Welding Generators
Welding Jigs
Automatic Welding Equipment

Compressors

Engine-driven Air Compressors
Motor-driven Air Compressors

Other Products

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

Plants and R&D Center

Fukui Plant

Fukui Plant

Wakasa-cho, Fukui Prefecture

Shiga Plant

Konan, Shiga Prefecture

Laboratory & Training Center

Sakado, Saitama Prefecture

Laboratory & Training Center

DENYO CO., LTD.

Denyo Group Companies
Denyo Kosan Co., Ltd.
2-8-5, Nihonbashi-horidomecho, Chuo-ku, Tokyo 103-8566, Japan
Paid-in Capital: ¥50 million
Business: Services and sales of industrial electrical machinery and parts
Nishinihon Generator Mfg. Co., Ltd.
140 Chichika, Karatsu, Saga 847-0831, Japan
Paid-in Capital: ¥50 million
Business: Manufacture and sales of industrial electrical machinery
Denyo America Corporation
1450 Minor Road, Danville, Kentucky 40422, U.S.A.
Paid-in Capital: US$5 million
Business: Sales of parts for industrial electrical machinery
Denyo Manufacturing Corporation
1450 Minor Road, Danville, Kentucky 40422, U.S.A.
Paid-in Capital: US$6 million
Business: Manufacture and sales of industrial electrical machinery to the U.S. market
Denyo Asia Pte. Ltd.
No. 9 Neythal Road, Singapore 628614
Paid-in Capital: ¥600 million
Business: Sales of industrial electrical machinery
Denyo United Machinery Pte. Ltd.
No. 9 Neythal Road, Singapore 628614
Paid-in Capital: S$3 million
Business: Sales of industrial electrical machinery
Denyo Europe B.V.
Molensteyn 48, 3454 PT De Meern, The Netherlands
Paid-in Capital: €4 million
Business: Services and sales of industrial electrical machinery and parts
Denyo Vietnam Co., Ltd.
Plot A3 Thang Long Industrial ParkII, Yen My District, Hung Yen Province, Vietnam
Paid-in Capital: US$10 million
Business: Manufacture and sales of industrial electrical machinery
P.T. Dein Prima Generator
JL. Raya Bekasi Km. 28, Medan Satria, Bekasi 17132 Jawa Barat, Indonesia
Paid-in Capital: Rp13,563 million
Business: Manufacture and sales of industrial electrical machinery to the Indonesia
marketNew Japan Machinery Corporation
3-6-5 Shinyokohama, Kohoku-ku, Yokohama, Kanagawa 222-0033, Japan
Paid-in Capital: ¥495 million
Business: Sales and rental service of industrial electrical machinery35

36 DENYO CO., LTD.

Investor Information(As of March 31, 2015)

Business Lines

Head Office

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

Financial Year

April 1 ~ March 31

Common Stock

Authorized shares: 97,811,000
Issued shares: 22,859,660(Included 650,381 shares of Company’s own stock)

Stock Listing

Tokyo Stock Exchanges, First Section (Code: 6517)

Shareholders

4,482

Transfer Agency

Tokyo Securities Transfer Agent Co., Ltd.
Nihon Bldg. 4F, 2-6-2, Otemachi, Chiyoda-ku,
Tokyo 100-0004, Japan

Major Shareholders
Shares held
(thousands)

Voting rightratio (%)

Kyuei Corporation

1,600

7. 20

Mizuho Bank, Ltd.

1,116

5.02

The Dai-ichi Life Insurance Co., Ltd.

872

3.92

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

792

3.57

Denyo Shin-eikai Group

638

2.87

Japan Trustee Services Bank, Ltd. (Trust Account)

563

2.53

Tsurumi Manufacturing Co., Ltd.

543

2.44

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

540

2.43

KUBOTA Corporation

500

2.25

Sumitomo Mitsui Banking Corporation

352

1.58

Shareholders

DENYO CO., LTD.

37

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

Printed in Japan (J&A)