Appendix

BANDO CHEMICAL INDUSTRIES, LTD.
and Subsidiaries
Fiscal year ended March 31, 2018
(April 1, 2017 ― March 31, 2018)

Consolidated financial statements,
Notes to consolidated financial statements

Consolidated Balance Sheets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2017

Thousands of
U.S. dollars(Note 4)

Millions of yen

Assets2018

Current Assets:
Cash and cash equivalents (Note 6)
Time deposits (Note 6)
Notes and accounts receivable (Note 6):
Trade
Other
Electronically recorded monetary claims - operating
Allowance for doubtful accounts
Inventories (Note 5)
Deferred tax assets (Note 11)
Other current assets
Total Current Assets￥

Property, Plant and Equipment:
Land
Buildings and structures
Machinery and equipment
Construction in progress
Other
Accumulated depreciation
Property, Plant and Equipment, Net

Other Assets:
Intangible assets
Investments in securities (Notes 6 and 7)
Investments in affiliates (Note 6)
Deferred tax assets (Note 11)
Other, net (Note 6)
Total Other Assets
Total Assets￥

See accompanying notes to consolidated financial statements.

1

18,477
471

2017

￥

18,936
587

2018

$

173,900
4,433

18,951
161
2,835
( 38)
11,890570
1,021
54,337

18,824
261
1,789
( 39)
10,904551
988
52,801

178,362
1,519
26,678( 355)
111,899
5,360
9,610
511,406

6,417
28,30658,412
1,795
14,250109,180( 79,771)
29,4096,436
27,85756,9601,168
13,701
106,122( 76,985)
29,13760,394266,409549,758
16,892
134,1211,027,574( 750,783)
276,791

1,564
6,845
5,598
178
1,305
15,49099,236

1,549
6,183
5,305
404
1,316
14,757
96,695

14,71964,41952,692
1,671
12,288145,789
933,986￥$

Thousands of
U.S. dollars(Note 4)

Millions of yen

Liabilities and Net Assets

2018

2017

2018

Current Liabilities:
Short-term borrowings (Notes 6 and 9)￥
Current portion of long-term debt (Notes 6 and 9)
Notes and accounts payable (Note 6):
Trade
Electronically recorded obligations - operating
Construction and other
Income taxes payable (Note 6)
Allowance for stock-based compensation
Provision for loss on liquidation of subsidiaries and associates
Other current liabilities (Notes 6 and 11)
Total Current Liabilities

9,966
4,441
3,660
926
16
－
3,086
25,044

9,259
3,407
3,627
1,065
－
10
2,873
24,77393,801
41,79834,4498,713
146－
29,039235,704

Long-term Liabilities:
Long-term debt (Notes 6 and 9)
Allowance for stock-based compensation
Net defined benefit liability (Note 10)
Other long-term liabilities (Notes 6 and 11)
Total Long-term Liabilities

9,287
40
1,123
348
10,798

10,98229
2,007
163
13,18187,403376
10,572
3,277
101,628

10,952
2,995
49,372

10,952
2,995
45,923103,077
28,190464,673( 1,421)61,898( 1,356)
58,514( 13,374)
582,566

2,553－( 1,545)
257
1,265
231
63,394
99,2362,060
1( 1,644)( 410)
7
220
58,741
96,69524,026－( 14,546)
2,426
11,9062,182
596,654
933,986

Net Assets (Note 12):
Common stock
Authorized: 187,000,000 shares
Issued 2017 and 2018 － 47,213,536 shares
Capital surplus
Retained earnings
Treasury stock, at cost2017 － 1,367,394 shares2018 － 1,415,326 shares
Total Shareholders' Equity
Accumulated other comprehensive income
Unrealized gains on available-for-sale securities
Deferred gains on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total Accumulated Other Comprehensive Income
Non-controlling interests
Total Net Assets
Total Liabilities and Net Assets

￥

2

1,145
1,804

￥

￥

1,421
3,111

$

$

10,77816,980Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017
Thousands of
U.S. dollars(Note 4)

Millions of yen

Consolidated Statements of Income

2018

Net Sales
Cost of Sales
Gross profit￥

Selling, General and Administrative Expenses (Note 13)
Operating Income
Other Income (Expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Foreign exchange losses, net
Gain on sale of investments in securities
Loss on disposal of property, plant and equipment
Impairment loss (Note 17)
Other, net
Income before income taxes
Income Taxes (Note 11):
Current
DeferredProfitProfit Attributable to Non-Controlling Interests
Profit Attributable to Shareholders of the Parent
See accompanying notes to consolidated financial statements.

￥

91,26363,731
27,532

2017￥

88,38761,596
26,791

2018$

858,954599,824
259,130

21,196
6,336

20,895
5,896

199,493
59,637273( 208)
477( 340)
48( 112)( 185)
124
77
6,413

239
( 232)
592
( 41)
80
( 63)
( 18)
100
657
6,553

2,566
( 1,958)
4,486( 3,197)448( 1,059)( 1,739)
1,178
725
60,362

1,675
( 93)
1,582
4,831

1,737
( 164)
1,573
4,980

15,763( 873)
14,89045,472

35
4,796

29
4,951

￥

$

U.S. dollars(Note 4)

Yen
2018

336
45,1362017

2018

Per Share of Common Stock (Note 14)
Basic net income
Cash dividends￥

104.6930.00￥

107.9026.00

Consolidated Statements of Comprehensive Income

Comprehensive Income Attributable to:Shareholders of the parent
Non-controlling interests
See accompanying notes to consolidated financial statements.

3

2018
￥

4,831

￥

496
( 1)
47
667
34
1,243
6,074

￥

6,053
21

2017
￥

4,980

￥

629
0
( 365)
823( 112)
975
5,955

￥

0.99
0.28

Thousands of
U.S. dollars(Note 4)

Millions of yen

ProfitOther Comprehensive Income (Note 15):
Unrealized gains (losses) on available-for-sale securities
Deferred gains on derivative instruments
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates
Total other comprehensive income
Comprehensive Income

$

5,929
26

2018
$

45,472

$

4,664
( 5)
441
6,281
319
11,70057,172$

56,975
197

Consolidated Statements of Changes in Net Assets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017
Thousandsof shares

Millions of yen

Number ofgains (losses) on

Deferred gains

currency

RemeasurementsstockCommonCapitalRetained

Treasury

available-for-(losses) on

transactionof defined benefit

Non-controllingTotal

outstandingstock

surplusearnings

stock, at costsale securities

hedgesadjustments

plansinterests

net assets

commonBalance at April 1, 2016

Foreign

Unrealized

shares of47,214¥10,952¥2,970¥42,091¥(257)¥1,431¥1\( 1,170)\( 1,232)¥419

Profit attributable to shareholders of the parent

－

－

－

4,952

－

－

－

－

－

－

¥55,205
4,952

Cash dividends

－

－

－

( 1,120)

－

－

－

－

－

－

( 1,120)

Purchases of treasury stock

－

－

－

－

( 1,643)

－

－

－

－

－

( 1,643)

Disposal of treasury stock

－

－

5

－

544

－

－

－

－

－

549

Change in ownership interest of the parent
arising from transactions with non-controllingshareholders

－

－

20

－

－

－

－

－

－

－

20

Net change in the year

－

－

－

－

－

629

0

( 474)

822( 199)

778

Balance at April 1, 2017

58,741

47,214

10,952

2,995

45,923( 1,356)2,060

1( 1,644)( 410)

220

Profit attributable to shareholders of the parent

－

－

－

4,796

－

－

－

－

－

－

4,796

Cash dividends

－

－

－

( 1,347)

－

－

－

－

－

－

( 1,347)( 156)

Purchases of treasury stock

－

－

－

－

( 156)

－

－

－

－

－

Disposal of treasury stock

－

－

－

－

91

－

－

－

－

－

91

Net change in the year

－

－

－

－

－

493

( 1)

99

667

11

1,269

47,214¥10,952¥2,995¥49,372¥(1,421)¥2,553\ －¥(1,545)

¥257

¥231

¥63,394

Balance at March 31, 2018

Thousands of U.S. dollars (Note 4)
Foreign

Unrealized

Balance at April 1, 2017

gains (losses) on

Deferred gains

currency

Remeasurements

CommonCapitalRetained

Treasury

available-for-(losses) on

transactionof defined benefit

Non-controlling

Total

stock

surplusearnings

stock, at costsale securities

hedgesadjustments

plansinterests

net assets$103,077$28,190$432,215$(12,765)$19,389$5$(15,472)$( 3,855)$2,074

Profit attributable to shareholders of the parent－－

45,136

－

－

－

－

－

－

$552,858
45,136

Cash dividends－－( 12,678)

－

－

－

－

－

－

( 12,678)( 1,470)

Purchases of treasury stock

－

－

－

( 1,470)

－

－

－

－

－

Disposal of treasury stock

－

－

－

861

－

－

－

－

－

861

Net change in the year

－

－

－

－

4,637

( 5)

926

6,281

108

11,947$103,077$28,190$464,673$(13,374)$24,026$ －$(14,546)$2,426$2,182$596,654

Balance at March 31, 2018

See accompanying notes to consolidated financial statements.

4Consolidated Statements of Cash Flows
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017

Thousands of
U.S. dollars(Note 4)

Millions of yen
2018

Cash Flows from Operating Activities:
Income before income taxes
Adjustments for:
Income taxes paid
Income taxes refunded
Depreciation and amortization
Amortization of goodwill and negative goodwill
Impairment loss
(Decrease) increase in allowance for doubtful accounts
Increase in provision for stock-based compensation
Decrease in provision for loss on liquidation of subsidiaries and associates
Increase in liability for retirement benefits
Foreign exchange losses (gains), net
Equity in earnings of affiliates
Loss on sales and disposal of property, plant and equipment
Changes in assets and liabilities:
Increase in notes and accounts receivable－trade
Increase in inventories
Increase in notes and accounts payable - trade
Other, net
Net Cash Provided by Operating Activities

￥

6,413

2017

￥

6,553

2018

$

60,362( 1,912)
12
4,384
10
185
( 4)
26
( 11)
80
67
( 477)
109( 1,523)
85
4,101
9
18
19
29
( 17)
277
( 52)
( 592)
58( 17,997)
117
41,258
91
1,739
( 38)
248
( 99)
754
628
( 4,486)
1,030( 1,189)( 1,033)
1,749
586
8,995

( 2,519)( 542)
172
724
6,800

( 11,194)( 9,721)
16,463
5,505
84,660Cash Flows from Investing Activities:
Decrease (Increase) in time deposits
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Other, net
Net Cash Used in Investing Activities

126( 4,465)30( 575)
( 51)
136
( 3)
( 4,802)( 50)( 4,004)105( 515)( 20)110( 265)( 4,639)

1,184( 42,021)
283( 5,413)( 478)
1,278( 29)( 45,196)

Cash Flows from Financing Activities:
Decrease in short-term borrowings
Proceeds from long-term borrowings
Payments on long-term borrowings
Proceeds from issuance of bonds
Redemption of bonds
Purchases of treasury stock
Proceeds from sales of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Other, net
Net Cash Provided by (Used in) Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year( 207)
100( 3,048)－－( 155)
95( 1,347)( 9)( 35)( 4,606)( 46)( 459)
18,936
18,477( 115)
553( 529)
5,957( 3,000)( 1,642)367( 1,119)
( 26)
( 24)
422
( 83)
2,500
16,436￥ 18,936( 1,948)941( 28,691)－－( 1,462)895( 12,678)( 89)( 317)( 43,349)( 432)( 4,317)
178,217173,900

See accompanying notes to consolidated financial statements.

5

￥

$

Notes to Consolidated Financial Statements
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries

1. Description of Business
Bando Chemical Industries, Ltd. (hereinafter, the "Company") is a pioneer belt manufacturer in Japan. The Company
manufactures and sells power transmission belts for automobiles, industrial machines, agricultural machines, home
appliances and information terminal devices, heavy and light duty conveyor belts, products for office automation andhousehold appliances and films for a variety of markets.

2. Basis for Preparation of Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in conformity withaccounting principles generally accepted in Japan, which are different in certain respects as to application anddisclosure requirements from International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to
the financial statements issued domestically in order to present them in a form which is more familiar to readers outside
Japan. In addition, certain reclassifications have been made to the prior year’s financial statements to conform to thecurrent year’s presentation.

3. Summary of Significant Accounting Policies(1) Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 23 subsidiaries(collectively, the “Companies”) as of March 31, 2018 (25 subsidiaries as of March 31, 2017).
Higashinihon Bando Co., Ltd. was excluded from the scope of consolidation as a result of the absorption-type merger
with Nishinihon Bando Co., Ltd. in April 2017. The company name was changed to Bando Industrial Components &Services, Ltd. after the merger.
Bando Asia & Pacific Co., Ltd. was founded in July 2017 and included in the scope of consolidation.
Pengeluaran Getah Bando (Malaysia) Sdn. Bhd. was excluded from the scope of consolidation as its liquidation wascompleted in January 2018.
BL Autotec (Shanghai), Ltd. was excluded from the scope of consolidation as its liquidation was complete in March2018.
Investments in 7 affiliates, on which the Company have significant influence, are accounted for by the equity method
as of March 31, 2018 and 2017, respectively.
Four overseas consolidated subsidiaries with fiscal year-end of December 31 prepare the provisional financial
statements for consolidation purpose as of March 31.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized
profits included in assets resulting from transactions within the Companies are eliminated.

(2) Foreign currency transactions
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange
rate prevailing at the balance sheet date. The foreign currency exchange gains or losses from transactions are charged
to income.
Assets and liabilities of the overseas subsidiaries are translated into Japanese yen at the exchange rate prevailing at
each balance sheet date. Income and expense accounts are translated at the average exchange rate for the year.
Differences arising from such translations are recorded as foreign currency translation adjustments and non-controllinginterests in the consolidated balance sheet.

(3) Cash and cash equivalents
Cash and cash equivalents are composed of cash on hand, demand deposits, and short-term investments with original
maturities of three months or less that are readily convertible to cash and exposed to insignificant risk of fluctuation ofvalues.

(4) Allowance for doubtful accounts
Allowance for doubtful accounts is provided at the amounts calculated based on the past loss experience and an additional
estimate of potential losses in the specific receivables.
(5) Provision for loss on liquidation of subsidiaries and associates
Provision for loss on liquidation of subsidiaries and associates is provided for estimated losses arising from the liquidation

6

of a certain consolidated subsidiary or associate of the Company.
(6) Allowance for stock-based compensation
Allowance for stock-based compensation is provided for the issuance of the Company’s stocks through the Director’sCompensation BIP Trust Plan at the estimated amounts of stocks to be issued based on the points allocated to directors
in accordance with the stocks issuing rules.

(7) Inventories
Finished goods, work in process and raw materials are stated at the lower of cost determined by the first-in, first-out
method or net selling value. Merchandise and supplies are stated at the lower of cost determined by the gross averagemethod or net selling value.
Meanwhile, inventories held by domestic consolidated subsidiaries are stated at the lower of cost determined principallyby the gross average method or net selling value. Inventories held by overseas consolidated subsidiaries are stated at thelower of cost determined mostly by the first-in, first-out method or net selling value.

(8) Investments in securities
Investments in securities are classified into three categories: trading securities, held-to-maturity debt securities oravailable-for-sale securities. Trading securities are carried at fair value. Gain or loss, both realized and unrealized, isrecognized in income. Held-to-maturity debt securities are carried at amortized cost. Marketable securities classified asavailable-for-sale securities are carried at fair value with changes in unrealized holding gain or loss, net of the applicable
income taxes, reported in net assets. Non-marketable securities classified as available-for-sale securities are carried atcost determined by the moving-average method.

(9) Property, plant and equipment
Property, plant and equipment except for lease assets are depreciated principally by the declining-balance method overtheir estimated useful lives. Buildings acquired on or after April 1, 1998 by the Company and its domestic consolidated
subsidiaries are depreciated by the straight-line method over their estimated useful lives. Useful lives are as follows:
three to 50 years for buildings and structures, and five to ten years for machinery and equipment.

(10) Goodwill
Goodwill represents the cost in excess of fair value of net assets acquired in business combination accounted for by thepurchase method. Goodwill is amortized over ten years by the straight-line method.

(11) Other intangible assets
Capitalized computer software costs for internal use are amortized by the straight-line method over five years.

(12) Research and development costs
Research and development costs are charged to income as incurred.

(13) Leases
Leased assets under finance leases which do not transfer ownership to the lessee are capitalized and depreciated oramortized by the straight-line method with no residual value over their lease terms.

(14) Retirement benefits
Employees serving the Company and certain of its consolidated subsidiaries are generally entitled to retirement benefits
determined by reference to current basic rates of pay, length of service and conditions under which the terminations
occur. The Companies principally account for allowance for retirement benefits based on projected benefit obligations
and plan assets at each balance sheet date. The retirement benefit obligations are attributed to each period on a benefit
formula basis over estimated years of the eligible employees.
Prior service cost is amortized by the straight-line method over ten years from the year in which they arise.
Actuarial gain or loss is amortized by the straight-line method over ten years from the next year in which they arise.
Certain consolidated subsidiaries adopt the simplified method to calculate net defined benefit liability and retirement
benefit costs.

(15) Income taxes
The provision for income taxes is computed based on income before income taxes in the consolidated statements ofincome. The liability method is used to recognize deferred tax assets and liabilities for the future tax consequences of
the temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting
purposes. The Companies provide a valuation allowance when they believe that deferred tax assets are not recoverable
based on expected future taxable income.

7

The Company and certain of its domestic consolidated subsidiaries have applied the consolidated taxation system.

(16) Derivatives and hedging activities
The Companies use derivative financial instruments to manage their exposures to changes in foreign currency exchange
rates and interest rates. Interest rate swap contracts are used to reduce interest rate risk. Interest rate and currency
swap contracts are used to reduce interest rate risk and foreign exchange risk. The Companies do not enter into
derivatives for trading or speculative purpose.
If derivatives are used for hedging purpose and qualify for hedging accounting, gains or losses on derivatives are deferred
until maturity of hedged items. The interest rate swap contracts which qualify for hedge accounting and meet certain
hedging criteria are not measured at market value, but the differential paid or received under the swap contracts is
recognized and included in interest expense.

(17) Per share information
Net income per share is computed by dividing net income available to common shareholders by the weighted-average
number of common shares outstanding for the year.
Cash dividends per share presented in the consolidated statements of income are dividends attributable to therespective years including dividends to be paid after the year-end.

（18） Accounting standards and implementation issued not yet applied
Application of Implementation Guidance on Tax Effect Accounting (ASBJ Guidance No.28, February 16, 2018)
Application of Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No.26, February 16,2018)(a) Outline
These guidances reviewed the treatment of future taxable temporary differences related to stocks of subsidiaries,
etc. in non-consolidated financial statements and clarified the treatment of recoverability of deferred tax assets incompanies falling under (Category 1).
(b) Planned date of application
To be applied from the beginning of the fiscal year ending March 31, 2019(c) Impact of the application of these accounting standards, etc.
The amount of the impact is being evaluated at the time of preparing the consolidated financial statements.
Accounting Standard for Revenue Recognition (ASBJ Statement No.29, March 30, 2018)
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No.30, March 30, 2018)(a) Outline
These are comprehensive accounting standards for revenue recognition. Revenue will be recognized through thefollowing five steps.
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligation in the contract
Step 5: Recognize revenue when (or as) the performance obligation is satisfied(b) Planned date of application
To be applied from the beginning of the fiscal year ending March 31, 2022(c) Impact of the application of these accounting standards, etc.
The amount of the impact is being evaluated at the time of preparing the consolidated financial statements.

(19) Transactions to issue own shares to employees through a trust
From the current fiscal year, the Company has introduced an employee incentive plan, “Employee Stock Ownership Plan
Trust (“ESOP”)” for the purpose of enhancing corporate value for the medium and long-term perspective.
The Company has applied “Practical Solution on Transactions to Issue Own Shares to Employees through Trusts”(ASBJ PITF No.30, March 26, 2015) for accounting of the Trust contract.
(a) Outline
The Company has established a trust (“Trust”) for certain employees who participate in the “Bando Chemical
Industries Employee Stock Ownership Plan (“Company’s ESOP”)” and meet certain requirements as its
beneficiaries. The Trust has acquired the total number of the Company’s shares expected to be acquired by theCompany’s ESOP over five years during the predetermined acquisition period, and will subsequently sell theseshares to the Company’s ESOP on a certain date of every month.
(b) The Company’s shares held by the Trust
The Company’s shares held by the Trust are included in net assets as treasury stock at the carrying amount at theTrust (excluding ancillary expenses). The carrying amount and number of the Company’s shares held by the Trust8as of March 31, 2018 are ¥283 million ($2,666 thousand) and 275 thousand shares, as of March 31, 2017 were ¥367
million and 357 thousand shares, respectively.
(c) The carrying amount of the borrowing recorded in the gross price method
As of March 31, 2018: \317 million ($2,984 thousand)As of March 31, 2017: \408 million(20) Performance-based Stock Compensation Plan for Directors, etc.
The Company has introduced the “Directors Compensation Board Incentive Plan (BIP) Trust” as the Performance-based
Stock Compensation Plan (“Plan”) for directors (excluding non-executive directors and overseas residents) and executive
officers (collectively, “Directors, etc.”), with the purpose of further clarifying the linkage between the remuneration of
Directors, etc. and the value of the Company’s shares and increasing their motivation to improve performance andincrease the corporate value in the mid- to long-term.
The Company accounts for the Trust contract in accordance with “Practical Solution on Transactions to Issue Own
Shares to Employees through Trusts” (ASBJ PITF No.30, March 26, 2015).
(a) Outline
The Plan is a performance-based stock compensation plan under which a trust purchases the Company’s shareswith the fund contributed by the Company and issues those shares to the Company’s Directors, etc. based on theirlevel of performance achievement. However, in principle, Directors, etc. can receive the Company’s shares upon
their retirement.
(b) The Company’s shares held by the Trust
The Company’s shares held by the Trust are included in net assets as treasury stock at the carrying amount at theTrust (excluding ancillary expenses). The carrying amount and number of the Company’s shares held by the Trust
as of March 31, 2018 are ¥276 million ($2,598 thousand) and 276 thousand shares, as of March 31, 2017 were ¥284
million and 283 thousand shares respectively.
The estimated amount of the aforementioned officers’ remuneration attributable to the current fiscal year isrecorded as Allowance for stock-based compensation.

4. U.S. Dollar Amounts
The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers
outside Japan. These translations should not be construed as representations that the Japanese yen amounts actually
represent, or have been or could be converted into U.S. dollars.
The rate of \106.25 = U.S.$1.00, the approximate rate of exchange as at March 31, 2018, has been used for the
purpose of such translations.

5. Inventories
Inventories held by the Companies as of March 31, 2018 and 2017 consisted of the following:
Millions of yen
2018
2017

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

\

\

7,100
1,708
3,081
11,890

\

\

6,755
1,509
2,640
10,904

Thousands of
U.S. dollars
2018

$

$

66,82316,08028,996
111,899

6. Financial Instruments(1) Policy for financial instruments
The Companies raise funds from stable and low-cost financing sources, mainly bank borrowings and bonds, as needed inlight of the financial plan developed as a part of the annual management plan. The Companies invest temporary cash
surplus in highly liquid and secured financial instruments. The Companies use derivatives to the extent necessary for
financial risk management purposes.

(2) Nature and extent of risks arising from financial instruments
Receivables such as notes and accounts receivable-trade, Electronically recorded monetary claims - operating are
exposed to customers’ credit risk. Receivables denominated in foreign currencies are exposed to foreign exchange risk.
Investments in securities, mainly equity instruments, are exposed to market risk. The Companies quarterly review fairvalues of marketable securities.
Payables such as notes and accounts payable-trade, Electronically recorded obligations - operating are generally paid
within four months. Payables denominated in foreign currencies are exposed to foreign exchange risk.

9Bank borrowings and bonds are used to fund working capital and capital expenditures. Some of them are exposed tointerest rate risk. The Companies reduce such risk arising from certain long-term borrowings by interest rate swap
contracts.
Derivatives include foreign currency forward contracts used to hedge foreign exchange risk on receivables and payables
denominated in foreign currencies, and interest rate swap contracts used to hedge interest rate risk on bank borrowings,
and interest rate and currency swap contracts used to hedge interest rate risk and foreign exchange risk on bankborrowings.

(3) Risk management for financial instruments(a) Credit risk management
The Companies regularly monitor the financial position of customers to reduce the risk of defaults.
Since the Companies enter into derivative transactions only with highly-rated financial institutions, they believe there islittle risk of defaults.
(b) Market risk management
The Companies use foreign currency forward contracts to hedge foreign exchange risk identified by currency and monthfor receivables and payables denominated in foreign currencies. With respect to investments in securities, the Companies
regularly monitor fair values and the financial positions of the issuers and review the holding purpose of these securities.
(c) Liquidity risk management in financing activities
The Companies prepare and update the cash management plan in a timely manner, and maintain a certain level of liquidity
on hand to reduce liquidity risk.

(4) Fair values of financial instruments
Fair values of financial instruments include market prices and values calculated reasonably when market prices are notreadily available. As calculation of such value incorporates variable factors, using different assumptions may result indifferent values. The contract amounts and other information described in Note 8, “Derivatives” are not indicative of
market risk exposure to derivative transactions.
Book values and fair values of the financial instruments as of March 31, 2018 and 2017 were as follows:
Financial instruments whose fair values were not readily available were excluded from the following table:
Millions of yen
2018Book value

2017

Fair value

Difference

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims operating
Investments in securities
Available-for-sale securities

\

Total

\

47,444\47,444\

Notes and accounts payable-trade

\

9,966

\

9,966

\

Contracts to which hedge accounting
was applied

471

18,951

18,951

2,835

2,835

－

\

6,710

Electronically recorded obligations operating
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds due after one year
Total
Derivative transactions
Contracts to which hedge accounting
was not applied

471

－
－
－

18,477

18,477

\

6,710

－
－
－

926

926

－
－
－

5,003
6,000

5,014
6,008

11
8

4,441
1,145

4,441
1,145

Book value\

Fair value

Difference

587

587

18,824

18,824

－
－
－

1,789

1,789

－

18,936\

6,047

18,936

\

6,047

\

46,183\

46,183

\

\

9,259

\

9,259

\

－
－
－

3,407
1,421
1,065

1,065

－
－
－

7,992
6,000

8,023
6,001

31
1

3,407
1,421

\

27,481\

27,500\19\

29,144\29,176

\

32

\

9

\

9

\

－

\

4

\

4

\

－

－

－

10

－

12

12

－

Thousands of U.S. dollars
2018Book value

Fair value

Difference

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims operating
Investments in securities
Available-for-sale securities

$

Total

$

446,524$

446,524$

Notes and accounts payable-trade
Electronically recorded obligations operating
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds due after one year
Total
Derivative transactions
Contracts to which hedge accounting
was not applied$

93,801$93,801$

Contracts to which hedge accounting
was applied

4,433

4,433

178,362

178,362－－－

26,67826,678－173,900$

63,151

173,900$

63,151

－
－
－

8,713

8,713

－
－
－

47,08456,47047,18956,540105
70

41,798
10,77841,798
10,778$258,644$258,819

$

175

$

87

$

87

$

－

－

－

－

Cash and cash equivalents, Time deposits, Notes and accounts receivable-trade, Electronically recorded monetaryclaims - operating
The fair values approximate book values because of the short-term maturities of these instruments.

Investments in securities
The fair values are measured at the quoted market prices of the stock exchange.

Notes and accounts payable-trade, Electronically recorded obligations – operating, Short-term borrowings, Income
taxes payable
The fair values approximate book values because of the short-term maturities of these instruments.

Long-term borrowings
The fair values represent present values of the aggregated interest and principal discounted at interest rates that would
be applied to new similar borrowings. Long-term borrowings include the current portion of long-term borrowings.

Bonds
The fair values are measured at the quoted market prices.

Derivative transactions
Please see Note 8, “Derivatives.”

11

Financial instruments whose fair values were not available as of March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Available-for-sale securities
Unlisted equity securities
\
135 \
136 $
1,267
Investments in affiliates
5,598
5,305
52,692
Total\
5,733 \
5,441 $
53,959The above items were not included in investments in securities (available-for-sale securities) because their market price
was not available and it was extremely difficult to determine their fair values.
Monetary assets and investments in securities with maturities as of March 31, 2018 and 2017 were as follows:
Millions of yen

2018
Due within 1 year

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims - operating
Total

\

\

Due after 1 year
through 5 years

18,477 \471
18,951
2,835
40,734 \Due after 5years
through 10 years

－ \
－
－
－
－ \

Due after 10 years

－ \
－
－
－
－ \

－
－
－
－
－

Millions of yen

2017
Due within 1 year

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims - operating
Total

\

\

Due after 1 year
through 5 years

18,936 \587
18,824
1,789
40,136 \Due after 5years
through 10 years

－ \
－
－
－
－ \

Due after 10 years

－ \
－
－
－
－ \

－
－
－
－
－

Thousands of U.S. dollars

2018
Due within 1 year

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims - operating
Total

$

$

Due after 1 year
through 5 years

173,900 $4,433
178,362
26,678383,373 $

－ $
－
－
－
－ $

Due after 5years
through 10 years

Due after 10 years

－ $
－
－
－
－ $

Please see Note 9, “Short-term Borrowings and Long-term Debt” for annual maturities of long-term debt.

12

－
－
－
－
－

7. Investments in Securities
Marketable securities classified as available-for-sale securities as of March 31, 2018and 2017 were as follows:
Millions of yen
2018
Acquisition
cost

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

2017

Fair value(Book value)\

3,103 \\

3,103 \

Unrealized
gains (losses)

6,710

-

Acquisition
cost

\

3,607

\

3,607

-

\

2,032

\

3,169

-

6,710

Fair value(Book value)

\

4,920

\

6,047

1,137

Unrealized
gains (losses)

\

2,888

\

2,878

1,127

(10)

Thousands of U.S. dollars
2018
Acquisition
cost

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Fair value(Book value)$

29,206 $$29,206 $Unrealized
gains (losses)

63,151-$

33,945$33,945--

63,151

Information about available-for-sale securities sold during the years ended March 31, 2018 and 2017 were as follows:
Millions of yen
2018
2017

Proceeds
Realized gains
Realized losses

\

136 \
48
0

Thousands of U.S.
dollars
2018

110 $
80
－

1,278
448
4

The Companies recognize impairment losses on available-for-sale securities when the market value declines by morethan 30 percent and the possibility of market value recovery is remote.

8. Derivatives
Derivative transactions to which hedge accounting was not applied for the years ended March 31, 2018 and 2017 were as
follows:(1) Currencies
Millions of yen

2018
Contract
amount due
after 1 year

Contract
amountForeign currency
forward contracts:
Sell:
U.S. Dollar
Euro
Buy:
Japanese yen
U.S. Dollar

2017
Fair value

Unrealized
gains (losses)

Contract
amountContract
amount due
after 1 year

Fair value

Unrealized
gains (losses)

\

138 \
230

－ \
－

3 \
6

3
6

\

210 \
121

－ \
－

2 \
(0)

2
(0)

\

38 \
3

－ \
－

0 \
0

0
0

\

74 \
8

－ \
－

2 \
(0)

2
(0)

Thousands of U.S. dollars

2018
Contract
amountContract
amount due
after 1 year

Fair value

Unrealized
gains (losses)

Foreign currency
forward contracts:
Sell:
U.S. Dollar$ 1,297 $
－ $
28 $
Euro
2,161
－
55
Buy:
Japanese yen
$
362 $
－ $
4 $
U.S. Dollar
25－0* The fair value is based on prices provided by financial institutions.

13

28
55
4
0

Derivative transactions to which hedge accounting was applied for the years ended March 31, 2018 and 2017 were as
follows:(1) Interest rate
Millions of yen

2018
Main hedged
itemInterest rate
swap contracts:
Floating rate receipt,
fixed rate payment

Long-term
borrowings

Contract
amount\2017
Contract
amount due
after 1 year

2,200 \

1,500

Main hedged
item

Fair value

Long-term
borrowings*

Contract
amount due
after 1 year

Contract
amount\ 4,900\

2,200

Fair value*

Thousands of U.S. dollars

2018
Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Interest rate
swap contracts:
Floating rate receipt, Long-termborrowings$ 20,706 $ 14,118*
fixed rate payment* The fair value of such derivative transactions was included in that of hedged items.
(2) Interest rate and currencies
Millions of yen

2018
Main hedged
item

Contract
amount2017
Contract
amount due
after 1 year

Interest rate
swap contracts:
Floating rate receipt,
fixed rate payment:
\
－ \
－ \
Japanese yen receipt/India rupee payment
Long-term
borrowings
U.S. dollar receipt－－/India rupee payment
Total
\
－ \
－ \
* The fair value is based on prices provided by financial institutions.

14

Fair value

Main hedged
item

\

－
－
－

Contract
amountLong-term
borrowings\

Contract
amount due
after 1 year

Fair value

80 \

－ \

13

176

－

(1)

256 \

－ \

12

9. Short-term Borrowings and Long-term Debt
Short-term borrowings as of March 31, 2018 and 2017 represented bank overdrafts with weighted average interest
rates of 3.93% and 3.75%, respectively.
Long-term debt as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars
2018

Millions of yen
2018

Unsecured long-term borrowings from banks andother financial institutions with weighted averageinterest rate of 0.93% in 2018 and 0.99% in 2017
Unsecured bonds due 2022, 0.24% and due 2024, 0.40%
Obligations under finance leases\

Less current portion of long-term debt
Total

\

5,003
6,000
88
11,091
1,804
9,287

2017

\

\

7,992
6,000
101
14,093
3,111
10,982$$47,80456,471
828
104,383
16,98087,403

Annual maturities of long-term debt outstanding as of March 31, 2018 were as follows:Year ending at March 31

Millions of yen

2019
2020
2021
2022
2023
2024 and thereafter
Total

\

\

15

1,804
1,611
1,409
3,162
103
3,002
11,091Thousands of
U.S. dollars$$

16,98015,165
13,26529,746972
28,255
104,383

10. Retirement Benefits
The details of retirement benefits for the year ended March 31, 2018 and 2017 were as follows:
The Company and certain of its consolidated subsidiaries have defined contribution pension plans and defined benefit
pension plans for employees. The Company places plan assets in an employee retirement benefit trust. Certain domestic
consolidated subsidiaries join the Smaller Enterprise Retirement Allowance Mutual Aid system.
Certain consolidated subsidiaries adopt the simplified method to calculate net defined benefit liability and retirement
benefit costs.
(1) Defined benefit plans(a) Movement in retirement benefit obligations, except defined benefit plans to which the simplified method was appliedThousands of
U.S. dollars
2018

Millions of yen
2018

Beginning balance
Service cost
Interest cost
Actuarial losses (gains) arising during the year
Retirement benefits paid
Prior year service cost arising during the year
Other
Ending balance

\

\

2017

11,557
559
65
364
(627)
0
(6)
11,912\\

11,735
561
48
(53)
(749)
4
11
11,557$

108,773
5,261
609
3,429
(5,896)1(60)
112,117$(b) Movement in plan assets, except defined benefit plans to which the simplified method was appliedThousands of
U.S. dollars
2018

Millions of yen
2018

Beginning balance
Expected return on plan assets
Actuarial gains arising during the year
Contributions paid by the employer
Retirement benefits paid
Other
Ending balance

\

\

2017

9,917
174
879
817
(621)
(4)
11,162

\

\

9,151
158
518
820
(743)
13
9,917

$

93,340
1,640
8,273
7,691
(5,850)(40)
105,054$(c) Movement in net defined benefit liability of defined benefit plans to which the simplified method was appliedThousands of
U.S. dollars
2018

Millions of yen
2018

Beginning balance
Retirement benefit costs
Retirement benefit paid
Contributions to the plans
Ending balance

\

\

16

367
170
(28)
(136)
373

2017

\

\

333
170
(8)
(128)
367

$

$

3,455
1,601
(269)
(1,278)3,509

(d) Reconciliation of retirement benefit obligations and plan assets with net defined benefit liability and net defined benefit
asset on the Consolidated balance sheets
Thousands of
U.S. dollars
2018

Millions of yen
2018

Retirement benefit obligations under the funded plans
Fair value of plan assets\

Retirement benefit obligations under the unfunded plans
Net liabilities or assets recorded on the Consolidated balance sheets

2017

12,655(11,681)
974
149
1,123

\

12,331(10,447)
1,884
123
2,007

Net defined benefit liability
1,123
2,007
Net defined benefit asset(0)
Net liabilities or assets recorded on the Consolidated balance sheets \
1,123
\
2,007
* Defined benefit plans to which the simplified method was applied are included in the above table.

$$

119,107(109,945)
9,162
1,410
10,572
10,572
10,572(e) Retirement benefit costs
Thousands of
U.S. dollars
2018

Millions of yen
2018

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses
Amortization of prior service cost
Retirement benefit costs based on the simplified method
Total retirement benefit costs of defined benefit plans

\

\

2017

559
65
(174)
449
(2)
170
1,067

\

\

561
48
(158)
616
2
170
1,239

$

$

5,261
609
(1,640)
4,225
(18)
1,602
10,039(f) Remeasurements of defined benefit plans (Other comprehensive income)Breakdown of remeasurements of defined benefit plans (before tax effects)
Thousands of
U.S. dollars
2018

Millions of yen
2018

Prior service cost
Actuarial losses
Total

\
\

2017

(2)
964
962

\
\

(2)
1,187
1,185

$
$

(19)
9,069
9,050

(g) Remeasurements of defined benefit plans (Accumulated other comprehensive income)Breakdown of remeasurements of defined benefit plans (before tax effects)
Thousands of
U.S. dollars
2018

Millions of yen
2018

Unrecognized prior service cost
Unrecognized actuarial losses (gains)
Total

\
\

24
347
371

2017

\
\

27
(617)
(590)

$
$

234
3,262
3,496

(h) Plan assets
Plan assets consisted of the following:
2018

2017

Equity securities
42%
43%
Bonds
38
38
General account
11
10
Cash and deposits
6
6
Other
3
2
Total
100%
100%
* Employee retirement benefit trust set up for the corporate pension plan accounts for 16% and 17% of total plan assets forthe year ended March 31, 2018 and 2017.
Expected rate of return on plan assets
The long-term expected rate of return on plan assets is determined based on the current and expected allocation of plan
assets and on the current and expected future long-term rates of return on various assets composing plan assets.

17

(i) Actuarial assumptions
The principal actuarial assumptions at March 31, 2018 were as follows:
2018

2017

Discount rate
Mainly 0.6%
Mainly 0.4%
Expected rate of return on plan assets
Mainly 2.1%
Mainly 2.0%
* Expected salary increase rate was not used in calculation of projected benefit obligation under the point-based benefit
system.
(2) Defined contribution pension plans
Contributions to the defined contribution pension plans were \194 million ($1,823 thousand) and \193 million for the year
ended March 31, 2018 and 2017, respectively.

11. Income Taxes
Deferred tax assets and liabilities as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

Deferred tax assets:
Contributions to retirement benefit trust
\
1,146
\
1,135
$
10,787
Net defined benefit liability
316
580
2,976
Loss on valuation of shares of subsidiaries and associates
647
Tax loss carryforwards
123
376
1,158
Non-deductible valuation loss
502
526
4,723
Impairment loss
214
194
2,014
Elimination of gains arising from intercompany transactions
668
633
6,290
Other
522
444
4,913
Valuation allowance for deferred tax assets(412)(1,260)(3,879)
Total
\
3,079
\
3,275
$
28,982
Deferred tax liabilities:
Gain on set-up of retirement benefit trust\(928) \(928) $
(8,733)
Unrealized gain on available-for-sale securities(1,052)(819)(9,905)
Elimination of losses arising from intercompany transactions
(302)
(281)
(2,839)
Other
(304)
(327)
(2,865)
Total\(2,586) \(2,355) $(24,342)
Net deferred tax assets*
\
493
\
920
$
4,640
* Net deferred tax assets were included in the following accounts in the consolidated balance sheets as of March 31, 2018and 2017:
Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

Current assets - Deferred tax assets
Other assets - Deferred tax assets
Current liabilities – Other
Long-term liabilities – Other

\

570
178
0
254

\

551
404
3
32

$

5,360
1,671
3
2,388

Reconciliation of the statutory tax rate to the effective income tax rate for the years ended March 31, 2018 and 2017 was
as follows:
2018

Statutory tax rate
Different income tax rates applicable to income in certain foreign countries
Equity in earnings of affiliates
Nondeductible expenses
Tax deduction
Foreign withholding tax
Change in valuation allowance
Adjustment on deferred tax assets at year-end due to tax rate change
Undistributed earnings of foreign subsidiaries
Other, net
Effective income tax rate

18

30.8%
(4.0)
(2.3)
1.1
(1.3)
0.4
(1.8)
1.2
0.6
24.7%

2017

30.8%
(5.5)
(2.8)
1.2
(1.9)
0.2
(1.6)
0.0
1.1
2.5
24.0%

Change in the method of presentation“Prior year income taxes” which was separately presented for the year ended March 31, 2017 is included in “Other, net”
for the year ended March 31, 2018 because it became immaterial.
Some figures for the year ended March 31, 2017 in the table above were reclassified to reflect this change in presentation.
As a result, 0.1% presented as “Prior year income taxes” for the year ended March 31, 2017 was reclassified into “Other,net.”

12. Net Assets
Significant provisions in the Act that affect financial and accounting matters are summarized below:(1) Dividends
The Act allows Japanese companies to pay dividends at any time during the year in addition to the year-end dividend
upon resolution at the shareholders’ meeting.
The Act permits Japanese companies to distribute dividends in kind (non-cash assets) to shareholders subject tocertain limitations 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 Act continues toprovide certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation isdefined as the amount available for distribution to the shareholders, but the amount of equity after dividends must be
maintained at no less than ¥3 million.

(2) Increases/decreases and transfer of common stock, reserve and surplus
The Act requires that an amount equal to 10% of dividends must be appropriated as legal reserve (of retained earnings) or
as additional paid-in capital (of capital surplus) depending on the equity account charged upon the payment of such
dividends until the sum of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Act,
additional paid-in capital and legal reserve may be reversed without limitation. The Act also provides that common stock,legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts
under certain conditions upon resolution of the shareholders.

(3) Treasury stock and treasury stock acquisition rights
The Act also permits Japanese companies to repurchase/dispose of treasury stock by resolution of the Board of
Directors. The amount of treasury stock to be purchased cannot exceed the amount available for distribution to theshareholders which is determined by specific formula.
Under the Act, stock acquisition rights are presented as a separate component of equity.
The Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Suchtreasury stock acquisition rights are presented as a separate component of equity or deducted directly from stockacquisition rights.

13. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2018 and 2017 principally consisted of thefollowing:Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

Salaries
Packing and delivery expenses
Research and development costs
Retirement benefit costs
Allowance for stock-based compensation
Provision for doubtful accounts

\

19

6,113
2,398
1,153
608
34
-

\

5,906
2,324
1,124
677
29
29

$

57,532
22,566
10,8485,718
318-

14. Net Income per Share
The Companies had no dilutive securities for the years ended March 31, 2018 and 2017.
Basic net income per share for the years ended March 31, 2018 and 2017 was as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018Profit attributable to shareholders of the parent

\

2017

4,796

\

4,951

$

45,136

Thousands of shares

2018
Weighted-average number of shares

2017
45,80845,890Yen

Net income per share2018
104.69\U.S. dollars

2017
107.90

\

2018
0.99

$

Effective October 1, 2016, the Company carried out a share consolidation at a rate of one share for every two shares. Net
income per share is calculated assuming that the share consolidation had been carried out at the beginning of the fiscal
year ended March 31, 2017.

15. Consolidated Statements of Comprehensive Income
Reclassification adjustments regarding other comprehensive income and related income tax effects for the years ended
March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018
Unrealized gains (losses) on available-for-sale securities:
Recognized during the year
Reclassification adjustments
Before tax effects adjustments
Income tax effects
Unrealized gains (losses) on available-for-sale securities

\

2017

777
(48)
729
(233)
496

\

2018

986
(80)
906
(277)
629

$

7,312
(448)
6,864
(2,200)
4,664

Deferred gains on hedges:
Recognized during the year
Before tax effects adjustments
Income tax effects
Deferred gain on hedges

(1)
0
(1)

0
0
(0)
0

(7)
2
(5)

Foreign currency translation adjustments:
Recognized during the year
Reclassification adjustments
Foreign currency translation adjustments

5
42
47

(351)
(14)
(365)

46
395
441

Remeasurements of defined benefit plans:
Recognized during the year
Reclassification adjustments
Before tax effects adjustment
Income tax effects
Remeasurements of defined benefit plans

492
470
962
(295)
667

574
612
1,186
(363)
823

4,631
4,419
9,050
(2,769)
6,281

34

(112)

319

Share of other comprehensive income in affiliates accounted for by theequity method:
Recognized during the year
Share of other comprehensive income in affiliates accounted for by
the equity method
Total other comprehensive income
\

20

34
1,243

\

(112)
975

$

319
11,70016. Segment Information(1) Description of reportable segments
The Companies' reportable segments are components for which separate financial information is available, whose
operating results are reviewed regularly by the chief operating decision maker in order to decide allocations ofresources and assess segment performance.
The Companies have adopted the division system. Each operating division develops a comprehensive strategy for
respective products/services for domestic and overseas markets and conducts business activities. Therefore, theCompanies consist of three reportable segments according to products based on operating divisions: "Automotive Parts
Business," "Industrial Products Business," and "Advanced Elastomer Products Business."
The main products of each segment are as follows:
Segment nameAutomotive Parts Business

Main products
Automotive power transmission belt products (accessory
drive power transmission belts and system products),
motorcycle power transmission belt products (variable
speed belts for scooters, etc.)
Industrial power transmission belt products (industrial
machinery V-belts, toothed belts, pulleys, etc.), otherpower transmission products, conveyor belts (conveyor
belts, resin conveyor belts, synchronous conveyor belts),
conveyor system products, rice-hulling rolls, etc.
Cleaning blades, high-performance rollers, precision belts,
polyurethane functional parts, precision polishing materials,
films for construction materials, medical films, decorative
display films, industrial films, etc.

Industrial Products Business

Advanced Elastomer Products Business(2) Methods of measurement for sales, profit or loss, assets and other items by reportable segments
The accounting treatments applied to the reportable segments is the same as those described in Note 3, "Summary of
Significant Accounting Policies." Segment profit is based on operating income. Intersegment sales are based on market
prices.

(3) Sales, profit or loss, assets and other items by reportable segments
Millions of yen

2018

Automotive
Parts Business

Reportable segments
Industrial
Advanced
Total reportable
Products
Elastomer Products
segments
Business
Business

Other

Total

Adjustments

Consolidated
Financial
Statements

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)\ 41,617 \ 32,281 \84
88\ 41,701 \ 32,369 \\ 3,264 \ 1,907 \

15,128 \33
15,161 \429 \89,026 \205
89,231 \
5,600 \

2,237 \ 91,263 \495
700
2,732 \ 91,963 \317 \ 5,917 \Segment assets\ 35,459 \ 31,817 \

11,532 \78,808 \2,424 \ 81,232 \ 18,004 \ 99,236

1,239 \

751 \

4,320 \

98 \

4,418 \

49 \

4,467

988 \
－ \

574 \
185 \

4,430 \
185 \

113 \
－ \

4,543 \
185 \

587 \
－ \

5,130
185

Other:
Depreciation and amortization \ 2,330 \Increase in property,
plant and equipment
and other intangible assets\ 2,868 \Impairment loss
\
－ \

21

－ \ 91,263(700)(700) \ 91,263
419 \ 6,336

Millions of yen

2017

Automotive
Parts Business

Reportable segments
Industrial
Advanced
Total reportable
Products
Elastomer Products
segments
Business
Business

Other

Total

Adjustments

Consolidated
Financial
Statements

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)\ 40,233 \ 31,368 \88
78\ 40,321 \ 31,446 \\ 2,937 \ 1,992 \

14,777 \137
14,914 \294 \86,378 \303
86,681 \5,223 \

2,009 \ 88,387 \501
804
2,510 \ 89,191 \427 \ 5,650 \Segment assets\ 34,001 \ 29,159 \

11,000 \74,160 \2,403 \ 76,563 \ 20,132 \ 96,695

1,184 \

686 \

4,042 \

102 \4,144 \

38 \

4,182

950 \
－ \

672 \
18 \

3,672 \
18 \

15 \
－ \

3,687 \
18 \

872 \
－ \

4,559
18

Other:
Depreciation and amortization \ 2,172 \Increase in property,
plant and equipment
and other intangible assets\ 2,050 \Impairment loss\
－ \－ \ 88,387(804)－(804) \ 88,387
246 \ 5,896

Thousands of U.S. dollars

2018

Automotive
Parts Business

Reportable segments
Industrial
Advanced
Total reportable
Products
Elastomer Products
segments
Business
Business

Other

Total

Adjustments

Consolidated
Financial
Statements

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)$391,686 $ 303,829 $ 142,379 $ 837,894 $ 21,060 $858,954 $－ $858,954
794
827
309
1,930
4,654
6,584
(6,584)－$392,480 $ 304,656 $ 142,688 $ 839,824 $ 25,714 $865,538 $ (6,584) $ 858,954$ 30,715 $ 17,952 $
4,041 $ 52,708 $ 2,982 $ 55,690 $
3,947 $ 59,637

Segment assets$333,727 $ 299,456 $ 108,538 $ 741,721 $ 22,817 $764,538 $ 169,448 $933,986

Other:
Depreciation and amortization $ 21,927 $ 11,658 $Increase in property,
plant and equipment
and other intangible assets$ 27,000 $ 9,299 $Impairment loss
$
- $
- $

7,074 $

40,659 $924 $ 41,583 $460 $ 42,043

5,399 $
1,739 $

41,698 $
1,739 $

1,063 $ 42,761 $- $ 1,739 $5,526 $ 48,287- $ 1,739*1 "Other" category represents operating segments not included in reportable segments.
*2 "Adjustments" are as follows:(a) Adjustments of segment profit (loss) include \12 million ($115 thousand) and \16 million of the elimination ofintersegment transactions, and \407 million ($3,882 thousand) and \230 million of corporate expenses for the years
ended March 31, 2018 and 2017, respectively. Corporate expenses represent differences between the estimatedgeneral administrative expenses and research and development costs allocated to each reportable segment and theactual amount incurred.
(b) Adjustments of segment assets include \(4,690) million ($(44,143) thousand) and \(3,522) of the elimination ofintersegment balances, and \22,694 million ($213,591 thousand) and \23,654 of corporate assets for the years ended
March 31, 2018 and 2017, respectively.
(c) Adjustments of "Increase in property, plant and equipment and other intangible assets" is principally related to those
not attributable to reportable segments.
*3 "Segment profit (loss)" is adjusted to operating income described in the consolidated statements of income.
*4 "Depreciation and amortization" includes amortization of long-term prepaid expenses.
*5 "Increase in property, plant and equipment and other intangible assets" includes an increase in long-term prepaid
expenses.

22

Information related to reportable segments
Information about geographic areas was as follows:(a) Net sales
Millions of yen
2018
China
\9,034

Japan\45,964

Asia\25,871

Other\10,394

Total\91,263Japan$432,607

Thousands of U.S. dollars
2018
Asia
China
Other
$243,493$85,030$97,824

Total$858,954

Japan\45,787

Asia\22,2072017
China\10,264

Other\10,129

Total\88,387

Asia\7,4262017
China\1,281Other\2,665

Total\29,137(b) Property, plant and equipment
Millions of yen
2018
China
\1,390Japan\17,680

Asia\8,055Other\2,284

Total\29,409Japan$166,396

Thousands of U.S. dollars
2018
Asia
China
Other
$75,816$13,078 $21,501

Total$276,791

Japan\17,765

17. Impairment loss
The details of Impairment loss for the year ended March 31, 2018 and 2017 were as follows:
For the year ended March 31, 2018

Purpose of use

Business assets

Location

Ashikaga, Tochigi

Asset type

Buildings and structures
Machinery and equipment
Construction in progress
Other

Total

AmountThousands ofMillions of yen
U.S. dollars

\

\

85
96
4
0
185

$

$

797
902
38
2
1,739

For the year ended March 31, 2017
AmountPurpose of use

Business assets

Location

Ashikaga, Tochigi

Asset type

Machinery and equipment
Construction in progress
Other

Total

Millions of yen

\

\

8
9
1
18

In reviewing impairment loss, the Companies classify their operating assets mainly by operating division and idle assets byindividual property.
As the recoverable amount of business assets, which is the aggregate of the undiscounted future cash flow, fell below
the book value due to continued operating loss, the Company wrote down their book value and recognized impairment loss
for the amount written down.
Recoverable amounts are measured using value in use, and value in use is determined as zero due to negative future
cash flow.

2318. Business combination(Transaction under common control)
Merger of Nishinihon Bando Co., Ltd. and Higashinihon Bando Co., Ltd.,
1.
Overview of business combination(1) Names and business description of the merging companies
Surviving company
Name of company:
Nishinihon Bando Co., Ltd.
Business description:
Processing and sales of power transmission belt products, conveyor belts, polyurethane
functional parts
Absorbed company
Name of company:
Business description:

Higashinihon Bando Co., Ltd.
Processing and sales of power transmission belt products, conveyor belts, polyurethane
functional parts(2)

Date of business combination
April 1, 2017(3)

Legal form of business combination
Absorption-type merger with Nishinihon Bando Co., Ltd. as the surviving company and Higashinihon Bando Co., Ltd.
as the absorbed company(4)

Name of company after the business combination
Bando Industrial Components & Services, Ltd(5)

Other matters
The aims of merging the Company’s two domestic sales subsidiaries are to expand business as a nationwide
company while firmly maintaining community-based sales system and to enhance the Group’s profitability throughsecuring consistent sales strategies among the Group and further improving management efficiency.

2.

Outline of accounting treatment applied
The Company accounted for the business combination as a transaction under common control in accordance with
"Accounting Standard for Business Combinations" and "Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures".

24