CKD Corporation andConsolidated Subsidiaries
Consolidated Financial Statements
for the Years Ended
March 31, 2010 and 2009

CKD Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2010 and 2009

Millions of Yen
2010
2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Time deposits

Thousands of
U.S. Dollars(Note 1)2010

¥ 5,581101¥ 4,458
58$ 60,011
1,086

4,809
13,951
188(49)
18,89912,914
1,124
426
39,045

5,114
10,9091,525(29)17,51914,19922643
36,89951,710150,0112,021(527)
203,215
138,860
12,086
4,581
419,839

Accumulated depreciation
Net property, plant and equipment

4,638
21,57523,924
10,270627
112
61,146(41,911)
19,235

4,634
21,527
24,265
9,967
570
258
61,221(39,763)
21,45849,871
231,989
257,247
110,430
6,742
1,204
657,483(450,656)
206,827

INVESTMENTS AND OTHER ASSETS:
Investment securities
Investments in non-consolidated subsidiaries
Deferred tax assets
Prepaid expense
Other assets
Allowance for doubtful accounts
Total investments and other assets

3,577
47
61
129
830
(55)
4,589

2,676
47
162
186
1,453
(79)
4,445

38,462
505
656
1,387
8,925
(591)
49,344¥ 62,869¥ 62,802$ 676,010

Notes and accounts receivable:
Trade notes
Trade accounts
Other
Allowance for doubtful accounts
Inventories
Deferred tax assets
Prepaid expenses and other current assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT:Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Lease assets
Construction in progress

TOTAL(Continued)

1

CKD Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2010 and 2009

Millions of Yen
2010
2009
LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans
Current portion of long-term debt
Notes and accounts payable:
Trade notes
Trade accounts
Acquisition on property and equipment
Other
Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIESLong-term debt
Liability for retirement benefits
Long-term deposits
Accrued expense
Other long-term liabilities
Total long-term liabilities

Thousands of
U.S. Dollars(Note 1)2010

¥ 3,312700¥ 7,516
1,065

1,624
7,994
210
900
10,728
561
509
1,903
17,713

1,803
4,969
519
632
7,923
1,821
94
724
19,143

17,462
85,957
2,258
9,677
115,354
6,032
5,473
20,462
190,461

2,000
607
873
196
3,676

2,700
217
868
200
80
4,065

21,505
6,527
9,387
2,109
39,52811,016
12,611
22,655472(335)

11,016
12,612
21,658(360)(394)

118,452
135,602
243,602
5,075(3,602)(4,939)41,480¥ 62,869(4,938)39,594¥ 62,802(53,108)
446,021$ 676,010-$

35,613
7,527

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 10, 11 and 12
EQUITY :Common stock:
Authorized - 233,000 thousand shares in 2010 and 2009
Issued - 69,429 thousand shares as of March 31, 2010
and 69,429 thousand shares as of March 31, 2009
Capital surplus
Retained earnings
Unrealized (loss) gain on available-for-sale securities
Foreign currency translation adjustments
Treasury stock - at cost: 7,261 thousand shares as of March 31, 2010
and 7,260 thousand shares as of March 31, 2009
Total equity
TOTAL

Note: *The U.S.dollar amounts represent translations,for convenience, of yen amounts at the rate of ￥93＝$1.
*Any amount less than one million yen is rounded off.

(Concluded)2

CKD Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
Years Ended March 31, 2010 and 2009

Millions of Yen
2010
2009
NET SALESCOST OF SALES
Gross profit

Thousands of
U.S. Dollars(Note 1)
2010

¥ 50,036
38,615
11,421¥ 68,176
52,38015,796$ 538,022
415,215
122,807

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating income

11,087334

13,9701,826

119,215
3,592

OTHER INCOME AND EXPENSES:Interest and dividend income
Interest expense
Foreign exchange (loss) gain - net
Prior period adjustments (loss) gain - net
Loss on sales and disposals of long-lived assets - net
Gain on sales of investment securities
Write-down of investment securities
Gain on contribution of securities to retirement benefit trust
Other-net
Other income (expenses) - net

78
(109)
105
(17)
(28)
(158)
619
490

136
(137)
(878)
98
108
(1,776)(479)(2,928)839(1,172)
1,129
(173)
(301)
0
(1,699)
6,646
5,269

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

824(1,102)

8,861

479(1,150)
(671)

102
1,645
1,747

5,151
(12,366)(7,215)¥ 1,495(2,849)INCOME TAXES :Current
Deferred
Total income taxes
NET INCOME¥ 24.04
6.00

Note: *The U.S.dollar amounts represent translations,for convenience, of yen amounts at the rate of ￥93＝$1.
*Any amount less than one million yen is rounded off.

3

16,076

U.S. Dollars

Yen
PER SHARE OF COMMON STOCK :Basic net income
Diluted net income
Cash dividends applicable to the year$

(45.28)16.00$ 0.26
0.06

CKD Corporation and Consolidated Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended March 31, 2010 and 2009
Thousands
Outstanding
Number of
Shares ofCommon Stock
BALANCE AT APRIL 1, 2008
Net income

CommonStockMillions of Yen
Unrealized(Loss) gain on
Retained
Available-for-saleEarnings
Securities

CapitalSurplus

Foreign
Currency
Translation
Adjustments

Treasury
Stock

Total
Equity63,856¥ 11,016¥ 12,612¥ 25,869¥ ( 322)¥ 431¥ (4,113)¥ 45,493---(2,849)---(2,849)Conversion of convertible bonds

-

-

-

-

-

-

-

0

Cash dividends

-

-

-

(1,392)---(1,392)

Net increase in treasury stock
Net change in the year
BALANCE AT MARCH 31, 2009
Net income
Conversion of convertible bonds
Cash dividends
Net increase in treasury stock
Net change in the year
BALANCE AT MARCH 31, 2010

(1,688)

-

-

-

-

(825)

(825)

-

-

-

30

(38)

(825)

-

(833)

62,169(1)
62,16811,016¥ 11,016

12,612(2)¥ 12,610

21,6581,494(497)¥ 22,655

(360)
831
¥ 472

(394)
59
¥ (334)(4,938)0¥ (4,938)

39,594
1,494
0
(497)
0
890
¥ 41,480

CommonStock

Thousands of U.S. Dollars (Note 1)
Unrealized(Loss) gain on
Retained
Available-for-saleEarnings
Securities

CapitalSurplus

BALANCE AT MARCH 31, 2009
Net income
Conversion of convertible bonds
Cash dividends
Net increase in treasury stock
Net change in the year

$ 118,452-$ 135,613-22$ 232,882
16,065(5,344)-$ (3,871)
8,935

BALANCE AT MARCH 31, 2010

$ 118,452$ 135,591$ 243,603$ 5,0644Foreign
Currency
Translation
Adjustments$

Treasury
Stock

Total
Equity(4,237)634$ (53,097)
0-$ 425,742
16,0650(5,344)0
9,547$ (3,603)$ (53,097)$ 446,010

CKD Corporation and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Years Ended March 31, 2010 and 2009
Thousands of
U.S. Dollars(Note 1)
2010

Millions of Yen
2010
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes-received (paid)
Depreciation（Gain)Loss on sales and disposals of long-lived assets - net
Write-down of investment securities
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in inventories
Increase (decrease) in allowance for doubtful accounts(Decrease) increase in notes and accounts payable - trade
Increase(Decrease) in liability for retirement benefits
Other - net
Total adjustments
Net cash provided by operating activities¥

INVESTING ACTIVITIES:
Purchases of investment securities
Proceeds from sales of investment securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Other - net
Net cash used in investing activities
FINANCING ACTIVITIES:
Increase(Decrease) in short-term loans - net
Proceeds from long-term debt
Repayment of long-term debt
Redemption of bonds
Increase in treasury stock
Dividends paid
Other - net
Net cash used in financing activities

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARIES, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR¥

NON-CASH INVESTING AND FINANCING ACTIVITY
Convertible bonds converted into common stock
Fair value of contribution of securities to retirement benefit trust

2009
824

(1,102)$ 8,860

1,221
2,918
28
157
(2,627)
1,340
(5)
2,732
779
408
6,951
7,775

(1,705)
3,314
(108)
1,800
5,850
1,933
11
(5,599)228(2,438)
3,286
2,184

13,12931,376301
1,688(28,247)
14,409(54)
29,376
8,376
4,387
74,741
83,601

(5)
(869)
39
4
(831)

(525)
2
(2,088)430(95)(2,276)(54)(9,344)419
43(8,936)(4,231)
(705)
(360)
0
(499)
(43)
(5,838)

1,474
3,500
(1,405)(825)(1,392)(40)
1,312(45,495)(7,580)(3,871)0(5,366)(462)(62,774)

17

(390)

184

1,123

830

12,075

-

22

-

3,606
4,458

47,935$ 60,010

-

-

4,458
5,581

-

5

¥

¥

CKD Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial and Instruments and Exchange Law (formerly, theJapanese Securities and Exchange Law) and its related accounting regulations and in conformity
with accounting principles generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present
them in a form which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2009 financial statements to conform to the classifications
used in 2010.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich CKD Corporation (the “Company”) is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers
outside Japan and have been made at the rate of ¥93 to $1, the approximate rate of exchange at
March 31, 2010. Such translations should not be construed as representations that the Japanese
yen amounts could be converted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements at March 31, 2010 include the accountsof the Company and its 11 significant (12 in 2009) subsidiaries (together, the “Group”).
Under the control or influence concept, those companies in which the Company, directly or
indirectly, is able to exercise control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise significant influence are accounted
for by the equity method.
Three tec Ltd.that was the consolidated subsidiary in the pre-consolidated fiscal year has been
excluding it from scope of consolidation because it completed liquidation in January, 2010.
Statement of income until completing liquidation is included in the consolidation scope.
Investments in 2 non-consolidated subsidiaries (two in 2009) are stated at cost. If the equity
method of accounting had been applied to the investments in these companies, the effect on
the accompanying consolidated financial statements would not be material.
The difference of the cost of an acquisition over the fair value of the net assets of the acquired
subsidiary at the date of acquisition is being amortized over five years.
All significant intercompany balances and transactions have been eliminated in consolidation.
All material unrealized profit included in assets resulting from transactions within the Group iseliminated.
b. Cash Equivalents—Cash equivalents are short-term investments that are readily convertible
into cash and that are exposed to insignificant risk of changes in value. Cash equivalents
include time deposits and investment trusts, which mature or become due within three monthsof the date of acquisition.

6

c. Inventories—Inventories are stated at cost determined by the weighted average method forfinished goods of components and raw materials, and by the specific identification method forwork in process and finished goods of automated machines. Inventories held by foreignsubsidiaries are stated at the lower of cost or market rule, determined by the first-in, first-out
method, or weighted average.
d. Marketable and Investment Securities—Investment securities with market quotation areclassified as available-for-sale securities and are reported at fair value, with unrealized gains
and losses, net of applicable taxes, reported in a separate component of equity. The cost of the
securities sold is determined based on the moving-average method. Non-marketableavailable-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, the securities are reduced to net realizablevalue, and charged to income.
e.

Property, Plant and Equipment—Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment of the Company and its domestic consolidated
subsidiaries is computed by the declining-balance method while the straight-line method isapplied to building acquired on and after April 1, 1998. The straight-line or declining-balancemethod is applied to property, plant and equipment held by consolidated foreign subsidiaries.
The range of useful lives is principally from 3 to 50 years for buildings and structures, andfrom 3 to 17 years for machinery and equipment.

f.

Long-lived Assets － The Company and domestic consolidated subsidiaries review theirlong-lived assets for impairment whenever events or changes in circumstance indicate thecarrying amount of an asset or asset group may not be recoverable. An impairment loss would
be recognized if the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss would be measured as the amountby which the carrying amount of the asset exceeds its recoverable amount, which is the higherof the discounted cash flows from the continued use and eventual disposition of the asset or
the net selling price at disposition.

g.

Other Assets—Intangible assets are carried at cost less accumulated amortization, which is
calculated by the straight-line method. Self-use software is calculated by the straight-line
method based on the estimated useful lives of five years.

h.

Retirement and Pension Plans—The Company and a certain consolidated subsidiary havefunded defined benefit pension plans and defined contribution plans for employees. The
Company has a retirement benefit trust. A certain consolidated subsidiary has funded pension
plan. Certain consolidated subsidiaries have unfunded retirement benefit plans. Certain foreign
consolidated subsidiaries have defined contribution plans.
Liability for retirement benefit for employees is accounted for based on projected benefit
obligations and plan assets at the balance sheet date.

i.

Income Taxes—The provision for current income taxes is computed based on the pretax
income included in the consolidated statements of income. The asset and liability approach isused to recognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted tax laws to the temporary
differences. A valuation allowance is recorded to reduce the carrying amounts of deferred tax
assets if there is uncertainty regarding their realization.

7

j.

Foreign Currency Transactions—All short-term and long-term monetary receivables andpayables 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 arerecognized in the statements of income to the extent that they are not hedged by forward
exchange contracts.

k.

Foreign Currency Financial Statements—The balance sheet and statement of income
accounts of the consolidated foreign subsidiaries are translated into Japanese yen at thecurrent exchange rate as of the balance sheet date except for equity, which is translated at thehistorical rate. Differences arising from such translation were shown as “Foreign currencytranslation adjustments” in a separate component of equity. Revenue and expense accountsof consolidated foreign subsidiaries are translated into yen at the average exchange rate.

l.

Per Share Information—Basic 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 period, retroactively adjusted for stock splits.
Cash dividends per share presented in the accompanying consolidated statements of income
are dividends applicable to the respective years including dividends to be paid after the end of
the year.

m.

Percentage-of-completion method－On December 27, 2007, The ASBJ Statement No.15,“Accounting Standard for Construction Contract” and ASBJ Guidance No.18, “Guidance for
the Application of Accounting Standard for Construction Contracts”, which is effective forfiscal years beginning on April 1, 2009. Changes in the scope of construction contracts toapply the percentage-of-completion method.
The Company had adopted the percentage-of-completion method for contracts withconstruction when reliable estimates of the degree of completion are possible and thecompleted contract method for other contracts.
The effect of this change was to increase Net sales by ¥862 million ($9,268 thousand), andGross profit, Operating income, Ordinary income and Income before income taxes by￥177 million($1,903 thousand) from what they had been if the former method was
used.

8

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities at March 31, 2010 and 2009 consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2010
2009
2010
Non-current:
Equity securities
Debt securities
Other
Total

¥ 3,475101¥ 3,576¥ 2,57699¥ 2,675$ 37,365
1,086$ 38,451

The carrying amounts and aggregate fair values of securities at March 31, 2010 and 2009 were as
follows:
Millions of Yen
Unrealized Unrealized
Fair
March 31, 2010
Cost
Gains
LossesValue
Securities classified as:
Available-for-sale:¥ 37¥ 3,411Equity securities¥ 2,719¥ 729
101
Debt securities
100
1
Total
¥2,819¥730¥37¥3,512

March 31, 2009
Securities classified as:
Available-for-sale:
Equity securities
Debt securities
Total

March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities
Debt securities
Other
Total

¥ 2,872100¥ 2,972

Cost

¥ 126
¥ 126

¥ 484
1
¥ 485

Thousands of
U.S. Dollars
Unrealized Unrealized
Gains
Losses¥ 2,51499¥ 2,613

Fair
Value

$ 29,236
1,075$ 7,838
10

$ 397
-

$ 36,677
1,085$30,311$7,848$397$37,762

Impairment loss amounted to ¥157 million ($16,881 thousand) was excluded from the amount ofcost as of March 31, 2010.

9

Available-for-sale securities whose fair value was not readily determinable at March 31, 2010 and2009 were as follows:
Carrying AmountThousands ofMillions of Yen
U.S. Dollars
2010
2009
2010
Available-for-sale:
Equity securities

¥

63

¥

62

$ 677

4. INVENTORIESInventories at March 31, 2010 and 2009 consisted of the following:

2010

2009

Thousands of
U.S. Dollars
2010¥ 2,8281,542
8,543¥12,913¥ 3,532
1,819
8,848¥14,199$ 30,408
16,58091,860$ 138,848

Millions of Yen

Finished products
Work in process
Raw materials and supplies
Total

5. SHORT-TERM LOANS AND LONG-TERM DEBT
Short-term loans at March 31, 2010 and 2009 consisted of bank overdrafts and the other bank loans.
The weighted average rates of annual interest applicable to the short-term loans at March 31, 2010
and 2009, were 1.0 % and 1.2%, respectively.
Long-term debt at March 31, 2010 and 2009 consisted of the following:

Zero coupon JPY convertible bonds due 2009
Loans from banks and others,
due serially to 2010 with weighted average interest
rates of 1.5% (2010) and 1.5% (2009)
Total
Less current portionLong-term debt, less current portion

10

Millions of Yen
2010
2009
¥
0
¥
360

Thousands of
U.S. Dollars
2010
$
0

2,700
3,405
2,700
3,765
(700)
(1,065)¥ 2,000 ¥ 2,700

29,032
29,032(7,526)$ 21,506

Additional information with respect to the Company’s convertible bonds is as follows:
Unsecured
zero coupon
convertible bonds
Issued on
April 20, 2005
Initial principal¥ 4,500 million
Maturity
April 20, 2009
Term of conversion
April 27, 2005 to April 6, 2009
Conversion price per share¥ 839
Balance of debt at March 31, 2009
¥ 360 million
Accumulated number of shares issued upon conversion
through March 31, 2009
- shares
Number of additional shares that would be issued upon
conversion at March 31, 2009
- shares

The conversion price of the convertible bonds is subject to adjustments in certain circumstances.

Annual maturities of long-term debt at March 31, 2010 were as follows:Year Ending
Millions ofThousands ofMarch 31
Yen
U.S. Dollars
2011
2012
2013
2014
Total

¥

700
700
700
600
¥ 2,700

$

7,526
7,526
7,526
6,451
$ 29,029

Lease obligations at March 31, 2010 and 2009 consisted of the following:
Millions of Yen
2010
2009
¥
197
241
(96)
(89)
¥
101 ¥
152

Lease obligations
Less current portion
Lease obligations, less current portion

Annual maturities of Lease obligations at March 31, 2010 were as follows:Year Ending
Millions ofThousands ofMarch 31
Yen
U.S. Dollars

2011
2012
2013
2014
2015
Total

¥

¥

96
64
16
12
7
195

11

$

$

1,032
688
172
129
75
2,096

Thousands of
U.S. Dollars
2010$ 2,118(1,032)$ 1,086

6.

RETIREMENT AND PENSION PLANS
Under most circumstances, employees terminating their employment are entitled to retirement
benefits determined based on the rate of pay at the time of termination, years of service andcertain other factors.
The liability for employees' retirement benefits at March 31, 2010 and 2009 consisted of thefollowing:

Millions of Yen
2010
2009
¥ 15,184¥15,890(822)(637)(11,278)(10,930)
3,070
3,179
(5,546)(7,675)
390
¥
607
¥
217

Projected benefit obligation
Retirement benefit trust

Fair value of plan assets
Unrecognized prior service benefit
Unrecognized actuarial loss
Prepaid pension cost
Liability for employees’ retirement benefits

Thousands of
U.S. Dollars
2010$ 163,268(8,838)(121,268)
33,010(59,634)$ 6,538

The components of net periodic benefit costs for the years ended March 31, 2010 and 2009 were as
follows:
Thousands of
U.S. Dollars
Millions of Yen
2010
2009
2010
Service cost
¥ 649
¥ 658
$ 6,978
Interest cost
312
333
3,354
Expected return on plan assets
(272)
(593)
(2,924)
Amortization of prior service benefit
(470)
(470)
(5,053)
Recognized actuarial loss
1,061
771
11,408Net periodic retirement benefit costs¥ 1,280¥ 699$ 13,763
Contribution to defined contribution
pension plans
146
151
1,569
Total
¥ 1,426¥ 850$ 15,332
Assumptions used for the years ended March 31, 2010 and 2009 were set forth as follows:
2010
2009
Discount rate
2.0%
2.0%
Expected rate of return on plan assets
2.5%
4.0%
Recognition period of actuarial gain / loss
12 years
12 years
Amortization period of prior service benefit
12 years
12 years

12

7.

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income
taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately
40.6% for the year ended March 31, 2010 and 2009.
The tax effects of significant temporary differences and tax loss carryforwards which resulted
in deferred tax assets and liabilities at March 31, 2010 and 2009 were as follows:

Millions of Yen
2010
Deferred tax assets:
Transfer of securities to retirement benefit trust
Write-down of available-for-sale securities
Unrealized loss on available-for-sale securities
Inventories
Offsetting of unrealized intercompany transactions
Liability for retirement benefits
Accrued bonuses
Tax loss carryforwards(subsidiaries)
Accrued expenses
Enterprise tax payable
Other
Less: valuation allowance
Total

¥

798
150
527
19
238
511
369
124
53
199
(1,315)¥ 1,673

Deferred tax liabilities:
Prepaid pension cost
¥ Gain on contribution of securities to retirement benefit
trust
329
Undistributed earnings of overseas subsidiaries
6
Other
221
Total
¥ 556
Net deferred tax assets¥ 1,117

2009¥

Thousands of
U.S. Dollars
2010

799
87
146
293
5
80
550
769
111
2
343
(2,433)
¥ 752

$

8,580
1,612
5,666
204
2,559
5,494
3,967
1,333
569
2,139
(14,139)$ 17,984

¥

159

$

-

¥
¥

329
2
80
570
182

$
$

3,537
64
2,376
5,977
12,007As the difference between the normal statutory tax rate and the effective tax rate reflected in theaccompanying consolidated statement of income was not considered significant for the year
ended March 31, 2010 and 2009, a reconciliation between the normal statutory tax rate andeffective tax rate was not disclosed.
8.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥ 1,731 million ($18,612 thousand)and ¥2,149 million for the years ended March 31, 2010 and 2009, respectively.

13

9.

LEASESThe Group leases certain machinery, computer equipment and other assets.
Total rental expenses under finance leases for the years ended March 31, 2010 and 2009 were
¥ 142 million ($ 1,526 thousand) and ¥ 196 million, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation,
obligation under finance lease, depreciation expense and interest expense of finance leases that
do not transfer ownership of the leased property to the lessee on an "as if capitalized" basis forthe years ended March 31, 2010 and 2009 was as follows:

MachineryandEquipment
Acquisition cost¥5
Accumulated depreciation
4
Net leased property¥
1Millions of Yen
2010
Furniture
andFixtures
Other
¥ 410
¥ 42
334
33
¥ 76
¥ 9

Total
¥ 458
372
¥ 86

MachineryandEquipment
Acquisition cost
¥ 85
Accumulated depreciation
58
Net leased property¥ 27

Millions of Yen
2009
Furniture
andFixtures
Other
¥ 460
¥ 78
263
55
¥ 197
¥ 23

Total
¥ 623
376
¥ 247

MachineryandEquipment
Acquisition cost
$ 53
Accumulated depreciation
43
Net leased property$ 10

Thousands of U.S. Dollars
2010
Furniture
andFixturesOther$ 4,408
$ 451
3,591
354
$ 817
$
97

Total
$ 4,924
4,000
$ 924

Obligations under finance leases:
Millions of Yen
2010
2009
¥
77
¥ 164
12
90
¥
89
¥ 254

Due within one year
Due after one year
Total

14

Thousands of
U.S. Dollars
2010
$
827
129
$
956

Depreciation expense under finance leases:
Millions of Yen
2010
2009
¥ 135
¥ 170

Depreciation expense

Thousands of
U.S. Dollars
2010$ 1,451

Depreciation expense, which is not reflected in the accompanying statements of income, iscomputed by the straight-line method.

10.

DERIVATIVESThe Group enters into derivatives, in the normal course of business, to reduce the exposure tofluctuations in foreign exchange rates and interest rates. It is the Company’s policy to use
derivatives only for the purpose of reducing market risks associated with assets and liabilities.
The Company does not hold or issue derivatives for trading purposes.
Because the counter parties to those derivatives are limited to major financial institutions, theGroup does not anticipate any losses arising from credit risk.
All derivative transactions were accounted for under hedge accounting and are not subject tothe disclosure of market value information.

11.

COMMITMENTS
The Group has line of credit agreements with two banks to obtain working capital efficiently.
The details of the agreements at March 31, 2010 were as follows:
Thousands ofMillions of Yen
U.S. Dollars
Line of credit amount¥
5,000$ 53,763
Balance used
1,300
13,97812.

NET INCOME PER SHARE
Reconciliations of the differences between basic and diluted net income per share (“EPS”) for
the years ended March 31, 2010 and 2009 were as follows:
Yen inMillions

For the year ended March 31,
2010:
Basic EPS
Net income available to commonshareholders
Effect of Dilutive Securities
Convertible bonds
Diluted EPS
Net income for computation

Net income¥¥

Thousand of
shares
Weighted
average shares

1,494

62,167

-

-

1,494

62,167

15

Yen

Dollars
EPS¥ 24.04

-

$

0.25

-

For the year ended March 31,
2009:
Basic EPS
Net income available to commonshareholders
Effect of Dilutive Securities
Convertible bonds
Diluted EPS
Net income for computation

13.

¥

¥

(2,849)62,923--(2,849)62,923¥ (45.28)¥-

SUBSEQUENT EVENTS(a) Appropriation of Retained Earnings
The following appropriations of retained earnings at March 31, 2010 were approved at theCompany’s Board of Directors meeting held on May 12, 2009:
Millions of
Yen
¥
186

Year-end cash dividends, ¥ 3 ($ 0.03) per share(b) Acquisition of treasury stockThousands of
U.S. Dollars$ 2,000

14. SEGMENT INFORMATIONThe Group operates in the following industries:“Automated machines” consists of sales and production of lamp and bulb making machines,
automatic packing machines, capacitor production systems, lithium ion battery making
machines, image process inspection machines, and 3D solder print inspection machines.
“Machine components” consists of sales and production of labor saving machines, pneumatic
valves, pneumatic actuators, pneumatic auxiliary components and liquid control systems.
Information about business segments, geographical segments and sales to foreign customers of
the Group for the years ended March 31, 2010 and 2009 was as follows:(1) Industry Segments
a. Sales and Operating Income
Millions of Yen
2010

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income

Automated
Machines

MachineComponents¥ 11,967
7
11,974
10,534¥ 1,440¥ 38,068
160
38,22837,315¥ 913

Total¥50,035
168
50,20347,849¥ 2,354

16

Eliminations/Corporate

Consolidated¥ (168)(168)
1,852¥ (2,020)¥ 50,035
50,03549,702¥ 333

b. Total Assets, Depreciation and Capital Expenditures
Millions of Yen
2010

Total assets
Depreciation
Capital expendituresa.

Automated
Machines

MachineComponents¥ 10,007
389
52¥ 44,505
2,302
478

Total
¥ 54,512
2,692
531

Eliminations/Corporate

Consolidated¥ 8,356226
65¥62,869
2,918
597

Sales and Operating Income

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income

Automated
Machines

Thousands of U.S. Dollars
2010
MachineEliminations
Components
Total/Corporate$ 128,677
75
128,752
113,268$ 15,484$ 409,333
1,720
411,053401,236$ 9,817$ 538,010
1,806
539,816
514,505$ 25,311

Consolidated$ (1,806)(1,806)
19,913$ (21,719)$ 538,010
538,010534,418$ 3,592

Thousands of U.S. Dollars
2010
MachineEliminations
Components
Total/Corporate

Consolidated$ 478,548
24,752
5,139$ 89,849
2,430
698$ 676,010
31,376
6,419

Total

Eliminations/Corporate

Consolidated¥ 68,176
379
68,55564,293¥ 4,262¥ (379)(379)
2,057¥ (2,436)¥ 68,176
68,176
66,350¥ 1,826b. Total Assets, Depreciation and Capital Expenditures

Automated
Machines
Total assets$ 107,602
Depreciation
4,182
Capital expenditures559$ 586,150
28,946
5,709

a. Sales and Operating Income
Millions of Yen
2009

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income

Automated
Machines

MachineComponents¥ 16,732
48
16,78014,701¥ 2,079¥¥

51,444331
51,77549,592
2,183

17

b. Total Assets, Depreciation and Capital Expenditures
Millions of Yen
2009

Total assets
Depreciation
Capital expenditures

Automated
Machines

MachineComponents¥ 15,057
357
123¥ 40,203
2,707
1,713

Total

Eliminations/Corporate

Consolidated¥ 55,260
3,064
1,836

¥ 7,524250
43¥ 62,802
3,314
1,879

The Company changed its measurement of inventories to the cost method, or at the lower of cost or
market. The effect of this change was to increase operating income of Machine Components by¥148 million ($1,510 thousand), for the year ended March 31, 2008. In addition, the company
changed the policy that revenue and expense accounts of consolidated foreign subsidiaries aretranslated into yen at the average exchange rate. The effect of this treatment was to increase net
sales of Machine Components by 1,707 million ($17,418 thousand), to decrease operating incomeof Machine Components by 76 million ($776 thousand), for the year ended March 31, 2008.

(2) Geographical Segments
The geographical segments of the Group for the years ended March 31, 2010 and 2009 weresummarized as follows:

Japan
Sales to customers
Interarea transfer
Total sales
Operating expenses
Operatingincome(Loss)
Total assets

Sales to customers
Interarea transfer
Total sales
Operating expenses
Operatingincome(Loss)
Total assets

Asia

Millions of Yen
2010
North
America
Total

Eliminations/Corporate

Consolidated¥ 43,455
4,827
48,282
46,901¥ 1,381

¥

6,048
836
6,884
6,962
¥ (78)

¥ 532
532
596
¥ (64)¥ 50,035
5,664
55,69954,461¥ 1,238¥ (5,664)(5,664)(4,759)¥ ( 905)¥ 50,035
50,03549,702¥333¥ 55,272

¥

6,628

¥

¥ 62,187¥681¥ 62,869

Japan

Asia

Thousands of U.S. Dollars
2010
North
Eliminations
America
Total/Corporate

Consolidated$ 467,258
51,903519,161
504,311$14,850$ 65,032
8,989
74,021
74,860$(839)$5,7205,720
6,408$ (688)$ 538,010
60,903598,913585,602$13,311$ (60,903)(60,903)(51,172)$ (9,731)$ 538,010
538,010534,430$ 3,580$ 594,322$71,268$ 3,075$668,677$$ 676,010

286

Millions of Yen
18

7,322

2009

Sales to customers
Interarea transfer
Total sales
Operating expenses
Operating income
Total assets

Japan

Asia

North
America¥ 57,470
5,407
62,87759,510¥ 3,367¥ 55,043¥ 9,744
1,966
11,71011,864¥ (154)¥ 6,684

¥ 962
962
993
¥ (31)
¥ 423

Total

Eliminations/Corporate

Consolidated¥ 68,176
7,373
75,54972,367¥ 3,182¥ 62,150¥ (7,373)(7,373)(6,017)¥ (1,356)¥ 652¥ 68,176
68,176
66,350¥ 1,826¥ 62,802

The Company changed its measurement of inventories to the cost method, or at thelower of cost or market. The effect of this change was to increase operating income ofJapan by ¥148 million ($1,510 thousand), for the year ended March 31, 2008. In
addition, the company changed the policy that revenue and expense accounts of consolidated
foreign subsidiaries are translated into yen at the average exchange rate. The effect of thistreatment was to increase net sales of Asia by 1,591 million ($16,235 thousand) andNorth America by 115 million ($1,173 thousand), to increase operating loss of Asia by 57
million ($582 thousand) and North America by 3 million ($31 thousand), and operating
income of Elimination/Corporate by 14 million ($143 thousand), for the year ended
March 31, 2008.

(3) Sales to Foreign Customers
Sales to foreign customers of the Group for the years ended March 31, 2010 and 2009 weresummarized as follows:
Millions of Yen
2010

Overseas sales
Net sales
Ratio of overseas sales to net salesAsia¥ 6,907

Other¥1,006

13.8%

2.0%

Total
¥ 7,91350,035
15.8%

Thousands of U.S. Dollars
2010

Overseas sales
Net sales
Ratio of overseas sales to net sales

Asia$ 74,268

Other$ 10,817

13.8%

2.0%

Total
$ 85,086
538,010
15.8%

Millions of Yen
2009

Overseas sales
Net sales
Ratio of overseas sales to net salesAsia¥ 13,305

Other¥ 1,658

19.5%

2.4%

******

19

Total¥14,963
68,17521.9%