CKD Corporation andConsolidated Subsidiaries
Consolidated Financial Statements
for the Years Ended
March 31, 2009 and 2008

CKD Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2009 and 2008

Millions of Yen
2009
2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Time deposits

Thousands of
U.S. Dollars(Note 1)2009

¥ 4,458
58¥ 3,6066$ 45,490
592

5,114
10,9091,525(29)17,51914,19922643
36,8992,949
19,881322(24)
23,128
16,591
1,343
476
45,15052,184111,316
15,561(296)
178,765
144,888
224
6,561
376,520

Accumulated depreciation
Net property, plant and equipment

4,634
21,527
24,265
9,967
570
258
61,221(39,763)
21,4584,606
21,766
24,747
10,590346
62,055(38,591)
23,46447,286219,663247,602
101,704
5,816
2,633
624,704(405,745)
218,959

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)
Investments in non-consolidated subsidiaries
Deferred tax assets (Note 8)
Prepaid expense
Other assets (Note 6)
Allowance for doubtful accounts
Total investments and other assets

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

3,747
142
698
827
1,268
(89)
6,593

27,306
480
1,653
1,898
14,827(806)
45,358¥ 62,802¥ 75,207$ 640,837

Notes and accounts receivable:
Trade notes
Trade accounts
Other
Allowance for doubtful accounts
Inventories (Note 4)
Deferred tax assets (Note 8)
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, 2008 and 2007

Millions of Yen
2009
2008
LIABILITIES AND EQUITYCURRENT LIABILITIESShort-term loans (Note 5)
Current portion of long-term debt (Note 5)
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 (Note 5)
Liability for retirement benefits (Note 6)Long-term deposits
Accrued expense (Note 5)
Other long-term liabilities
Total long-term liabilities

Thousands of
U.S. Dollars(Note 1)
2009

¥ 7,516
1,065¥ 6,271
1,305$

76,694
10,867

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

2,842
10,7401,016
1,253
15,851
2,554
453
1,608
28,042

18,39850,704
5,296
6,449
80,847
18,582
959
7,388
195,337

2,700
217
868
200
80
4,065

365
196
897
199
14
1,671

27,551
2,214
8,857
2,041
816
41,47911,016
12,612
21,658(360)(394)

11,017
12,61325,869(322)
431

112,408
128,694
221,000(3,673)(4,020)(4,938)39,594¥ 62,802(4,114)45,494¥ 75,207(50,388)404,021$ 640,837

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 10, 11 and 12
EQUITY (Note 7):
Common stock:
Authorized - 233,000 thousand shares in 2009 and 2008
Issued - 69,429 thousand shares as of March 31, 2009
and 69,429 thousand shares as of March 31, 2008
Capital surplus
Retained earnings
Unrealized (loss) gain on available-for-sale securities
Foreign currency translation adjustments
Treasury stock - at cost: 7,260 thousand shares as of March 31, 2009
and 5,573 thousand shares as of March 31, 2008
Total equity
TOTAL
See notes to consolidated financial statements.
(Concluded)2

CKD Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
Years Ended March 31, 2009 and 2008

Millions of Yen
2009
2008
NET SALESCOST OF SALES
Gross profit

Thousands of
U.S. Dollars(Note 1)
2009

¥ 68,176
52,38015,796¥ 93,705
68,48425,221$ 695,673
534,490
161,183

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 9)
Operating income

13,9701,826

15,7399,482

142,551
18,632OTHER 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

136
(137)
(878)
98
108
(1,776)(479)(2,928)

133
(118)
(282)
(55)
36
(351)
811
(145)
29

1,388
(1,398)(8,959)
1,000
1,102
0
(18,122)(4,888)(29,877)

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS(1,102)

9,511(11,245)

INCOME TAXES (Note 8):
Current
Deferred
Total income taxes

102
1,645
1,747

2,775
1,189
3,964

1,041
16,785
17,826

5,546($29,071)

NET INCOME¥(2,849)¥Yen
PER SHARE OF COMMON STOCK (Note 2(q) and 13):
Basic net income
Diluted net income
Cash dividends applicable to the year

(45.28)16.00

See notes to consolidated financial statements.

3

U.S. Dollars¥ 84.95
83.51
22.00

$ (0.46)
0.16

CKD Corporation and Consolidated Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended March 31, 2009 and 2008
Thousands
Outstanding
Number of
Shares ofCommon Stock
BALANCE AT APRIL 1, 2007

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

CapitalSurplus

Foreign
Currency
Translation
Adjustments

Treasury
Stock

Total
Equity66,131¥ 10,400¥ 11,998¥ 21,978¥ 1,009¥ 345¥ (768)¥ 44,964

-

-

-

5,546

-

-

-

5,546

Conversion of convertible bonds

1,466

616

614

-

-

-

-

1,230

Cash dividends, \18.0 per share

-

-

-

(1,656)---(1,656)(3,741)

-

0

-

-

-

(3,345)(3,345)

-

-

-

-

(1,331)86-(1,245)63,856(1,688)62,16911,016¥ 11,016

12,612(0)¥ 12,612

25,869(2,849)(1,392)30¥ 21,658

(322)
(38)
¥ (360)431(825)¥ (394)(4,113)(825)¥ (4,938)

45,493(2,849)0(1,392)(825)(833)¥ 39,594

Net income

Net increase in treasury stock
Net change in the year
BALANCE AT MARCH 31, 2008
Net income
Conversion of convertible bonds
Cash dividends, \25.0 per share
Net increase in treasury stock
Net change in the year
BALANCE AT MARCH 31, 2009

CommonStock

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

CapitalSurplus

Foreign
Currency
Translation
Adjustments

Treasury
Stock

Total
EquityBALANCE AT MARCH 31, 2008
Net income
Conversion of convertible bonds
Cash dividends, $0.25 per share
Net increase in treasury stock
Net change in the year

$ 112,408-$ 128,694(0)-$ 263,969(29,071)(14,204)306$ (3,286)(388)$ 4,398(8,418)$ (41,969)(8,418)-$ 464,214(29,071)0(14,204)(8,418)(8,500)

BALANCE AT MARCH 31, 2009

$ 112,408$ 128,694$ 221,000$ (3,674)$ (4,020)$ (50,387)$ 404,021

See notes to consolidated financial statements.

4

CKD Corporation and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Years Ended March 31, 2009 and 2008
Thousands of
U.S. Dollars(Note 1)
2009

Millions of Yen
2009
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes-paid
Depreciation
Loss on sales and disposals of long-lived assets - net
Write-down of investment securities
Gain on sales of investment securities
Gain on contribution of securities to retirement benefit trust
Changes in assets and liabilities:
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
Decrease in liability for retirement benefits
Other - net
Total adjustments
Net cash provided by operating activities2008(¥ 1,102)

9,511($11,245)(1,705)
3,314
(108)
1,800
-

(5,466)
3,569
55
351
(36)
(811)

(17,398)
33,816(1,102)
18,367
-

5,850
1,933
11
(5,599)228(2,438)
3,286
2,184

6,573
1,381
2
(2,080)(879)(2,057)602
10,11359,694
19,724
112(57,133)
2,327(24,878)
33,52922,284(525)
2(2,088)430(1,805)147(8,540)42(5,357)
20(21,306)
4,388

(95)
(2,276)(92)(71)(10,319)(969)(23,224)

1,474
3,500
(1,405)(825)(1,392)
(40)
1,312

4,219
(6)
(3,345)(1,653)(15)(800)

15,04135,714(14,336)(8,418)(14,204)(408)
13,389FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS

(390)

149

(3,979)NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

830

(857)

8,470

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARIES, BEGINNING OF YEAR

22

-

224

4,463
3,606

36,796$ 45,490

1,230
1,968

-

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
Acquisition of additional shares of an unconsolidated subsidiary
and an associated company
Other - net
Net cash used in investing activities
FINANCING ACTIVITIES:
Increase in short-term loans - net
Proceeds from long-term debt
Repayment of long-term debt
Increase in treasury stock
Dividends paid
Other - net
Net cash used in financing activities

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 (*)

3,606
4,458

-

See notes to consolidated financial statements.

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 2008 financial statements to conform to the classifications
used in 2009.
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 ¥98 to $1, the approximate rate of exchange at
March 31, 2009. 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, 2009 include the accountsof the Company and its 12 significant (12 in 2008) 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.
Investments in 2 non-consolidated subsidiaries (two in 2008) 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.
c. Inventories—Inventories are stated at cost determined by the average method for finishedproducts of components and raw materials, and by the specific identification method for workin process and finished products of automated machines. Inventories held by foreignsubsidiaries are stated at the lower of cost, determined by the first-in, first-out method, ormarket.
6

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.
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 method is applied
to property, plant and equipment held by consolidated foreign subsidiaries.
The range of useful lives had been principally from 11 to 12 years for a part of machinery.
However, in accordance with the revised corporate tax law, which is effective for fiscal years
beginning on and after April 1, 2008, the company changed the range of useful lives to 10
years.
The effect of this change was to decrease operating income and ordinary income by 76
million ($776 thousand), to increase loss before income taxes by ¥76 million ($776
thousand), respectively, for the year ended March 31, 2008.

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 theamount by which the carrying amount of the asset exceeds its recoverable amount, which is
the higher of the discounted cash flows from the continued use and eventual disposition of theasset 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 principally over 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 fundedpension 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.
As plan assets surpluses projected benefit obligations at the end of March 31, 2009, thesurplus was accounted for as prepaid pension cost, which was included in the other asset in the
consolidated balance sheet.

i.

Presentation of Equity―On December 9, 2005, the ASBJ published a new accounting
standard for presentation of equity. Under this accounting standard, certain items which werepreviously presented as liabilities or assets, as the case may be, are now presented ascomponents of equity. Such items include stock acquisition rights, minority interests, and7

any deferred gain or loss on derivatives accounted for under hedge accounting. This standard
was effective for fiscal years ending on or after May 1, 2006. The balances of such items asof March 31, 2006 were reclassified as separate components of equity as of April 1, 2006 in
the consolidated statement of changes in equity.
j.

Bonuses to Directors and Corporate Auditors－Bonuses to directors and corporate auditors
are accrued at the year end to which such bonuses are attributable.

k.

Research and Development Costs—Research and development costs are charged to income
as incurred.

l.

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 approachis used to recognize deferred tax assets and liabilities for the expected future tax consequencesof temporary differences between the carrying amounts and the tax bases of assets andliabilities. Deferred taxes are measured by applying currently enacted tax laws to thetemporary differences. A valuation allowance is recorded to reduce the carrying amounts ofdeferred tax assets if there is uncertainty regarding their realization.

m.

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.

n.

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.

o.

Derivatives and Hedging Activities—The Group uses derivative financial instruments tomanage its exposures to fluctuations in foreign exchange and interest rates. Foreignexchange forward contracts and interest rate swaps are utilized by the Group to reduce
foreign currency exchange and interest rate risks. The Group does not enter into derivatives
for trading or speculative purposes. Derivative financial instruments and foreign currencytransactions are classified and accounted for by hedge accounting because of high correlationand effectiveness between the hedging instruments and the hedged items.
The foreign exchange forward contracts are utilized to hedge foreign exchange exposures inexport of finished goods to overseas customers and in procurement of raw materials fromoverseas suppliers. Trade receivables and payables denominated in foreign currencies aretranslated at the contracted rates if the forward contracts qualify for hedge accounting.
Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are
not remeasured at market value, but the differential paid or received under the swap
agreements are recognized and included in expenses or income.

p.

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.
Diluted net income per share reflects the potential dilution that could occur if securities were
exercised or converted into common stock. Diluted net income per share of common stock
assumes full conversion of the outstanding convertible notes and bonds at the beginning of the8year (or at the time of issuance) with an applicable adjustment for related interest expense, netof tax, and full conversion of outstanding warrants.
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.
q.

New Accounting Pronouncements
Measurement of Inventories―Under generally accepted accounting principles in Japan(“Japanese GAAP”), inventories are currently measured either by the cost method, or at thelower of cost or market. On July 5, 2006, the ASBJ issued ASBJ Statement No. 9,“Accounting Standard for Measurement of Inventories,” which is effective for fiscal years
beginning on or after April 1, 2008 with early adoption permitted. This standard requiresthat inventories held for sale in the ordinary course of business be measured at the lower ofcost or net selling value, which is defined as the selling price less additional estimatedmanufacturing costs and estimated direct selling expenses. The replacement cost may be
used in place of the net selling value, if appropriate. The standard also requires thatinventories held for trading purposes be measured at the market price.
The effect of this change was to increase operating income and ordinary income by
148 million ($1,510 thousand), loss before income taxes by ¥247 million ($2,520
thousand), respectively, for the year ended March 31, 2008.

Lease Accounting―On March 30, 2007, the ASBJ issued ASBJ Statement No. 13,“Accounting Standard for Lease Transactions,” which revised the existing accounting
standard for lease transactions issued on June 17, 1993. The revised accounting standard forlease transactions is effective for fiscal years beginning on or after April 1, 2008 with early
adoption permitted for fiscal years beginning on or after April 1,2007.
Under the existing accounting standard, finance leases that deem to transfer ownership of theleased property to the lessee are to be capitalized, however, other finance leases are permitted
to be accounted for as operating lease transactions if certain “as if capitalized” information isdisclosed in the note to the lessee’s financial statements.
The revised accounting standard requires that all finance lease transactions shall becapitalized recognizing lease assets and lease obligations in the balance sheet.
Foreign Currency Financial Statements—Statement of income accounts of the consolidated
foreign subsidiaries are translated into Japanese yen at the current exchange rate as of thebalance sheet date as in the past. However, the company changed the policy that revenue andexpense accounts of consolidated foreign subsidiaries are translated into yen at the averageexchange rate.
The effect of this change was to increase net sales by 1,707 million ($17,418 thousand),to decrease operating income by 76 million ($776 thousand) and ordinary income by
223 million ($2,276 thousand), to increase loss before income taxes by ¥222 million($2,265 thousand), respectively, for the year ended March 31, 2008.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements―Under Japanese GAAP, a company currently can use the financial
statements of its foreign subsidiaries which have been prepared in accordance with generally
accepted accounting principles in their respective jurisdictions for its consolidation processunless they are clearly unreasonable. On May 17, 2006, the ASBJ issued ASBJ Practical
Issues Task Force (PITF) No.18, “Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for the Consolidated Financial Statements.” The newstandard prescribes: 1) the accounting policies and procedures applied to a parent company
9and its subsidiaries for similar transactions and events under similar circumstances should in
principle be unified for the preparation of the consolidated financial statements, 2) financial
statements prepared by foreign subsidiaries in accordance with either International Financial
Reporting Standards or the generally accepted accounting principles in the United States
tentatively may be used for the consolidation process, 3) however, the following items should
be adjusted in the consolidation process so that net income is accounted for in accordancewith Japanese GAAP unless they are not material:
(1)
(2)
(3)
(4)

Amortization of goodwill
Actuarial gains and losses of defined benefit plans recognized outside profit or loss
Capitalization of intangible assets arising from development phases
Fair value measurement of investment properties, and the revaluation model for
property, plant and equipment, and intangible assets(5) Retrospective application when accounting policies are changed(6) Accounting for net income attributable to a minority interest

The new task force is effective for fiscal years beginning on or after April 1, 2008 with early
adoption permitted.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities at March 31, 2009 and 2008 consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2009
2008
2009
Non-current:
Equity securities
Debt securities
Other
Total

¥ 2,57699¥ 2,675¥ 3,747¥ 3,747$ 26,286
1,010$ 27,296

The carrying amounts and aggregate fair values of securities at March 31, 2009 and 2008 were as
follows:
Millions of Yen
Unrealized Unrealized
Fair
March 31, 2009
Cost
Gains
LossesValue
Securities classified as:
Available-for-sale:¥ 484¥ 2,514
Equity securities¥ 2,872¥ 126
1
99
Debt securities
100
Total
¥2,972¥126¥485¥2,613

March 31, 2008
Securities classified as:
Available-for-sale:
Equity securities¥ 4,245

10

¥ 150

¥ 690

¥ 3,705

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

Cost

Thousands of
U.S. Dollars
Unrealized Unrealized
Gains
LossesFair
Value$ 29,306
1,020$ 1,286-$ 4,93910$ 25,653
1010$30,326$1,286$4,949$26,663

Impairment loss amounted to ¥1,776 million ($18,122 thousand) was excluded from the amount ofcost as of March 31, 2009.
Available-for-sale securities whose fair value was not readily determinable at March 31, 2009 and2008 were as follows:
Carrying AmountThousands ofMillions of Yen
U.S. Dollars
2009
2008
2009
Available-for-sale:
Equity securities
¥
62
¥
42
$ 633

4. INVENTORIESInventories at March 31, 2009 and 2008 consisted of the following:

2009

2008

Thousands of
U.S. Dollars
2009¥ 3,532
1,819
8,848¥14,199¥ 4,230
3,122
9,239¥16,591$ 36,041
18,56190,286$ 144,888

Millions of Yen

Finished products
Work in process
Raw materials and supplies
Total

11

5. SHORT-TERM LOANS AND LONG-TERM DEBT
Short-term loans at March 31, 2009 and 2008 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, 2009
and 2008, were 1.2 % and 1.5%, respectively.
Long-term debt at March 31, 2009 and 2008 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% (2009) and 1.5% (2008)
Total
Less current portionLong-term debt, less current portion

Millions of Yen
2009
2008
¥
360 ¥
360
3,405
3,765
(1,065)¥ 2,700

1,310
1,670
(1,305)¥365

Thousands of
U.S. Dollars
2009$ 3,673
34,74538,418(10,867)$ 27,551

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, 2009 were as follows:Year Ending
Millions ofThousands ofMarch 31
Yen
U.S. Dollars
2010
2011
2012
2013
2014
Total

¥ 1,065
700
700
700
600
¥ 3,765$ 10,867
7,143
7,143
7,143
6,122
$ 38,418

Lease obligations at March 31, 2009 and 2008 consisted of the following:
12Millions of Yen
2009
2008
¥
241
(89)
¥
152
-

Lease obligations
Less current portion
Lease obligations, less current portion

Thousands of
U.S. Dollars
2009$ 2,459(908)$ 1,551

Annual maturities of Lease obligations at March 31, 2009 were as follows:Year Ending
Millions ofThousands ofMarch 31
Yen
U.S. Dollars
2010
2011
2012
2013
2014
Total

6.

¥

¥

89
87
55
7
3
241

$

$

908
888
561
71
31
2,459

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, 2009 and 2008 consisted of thefollowing:

Millions of Yen
2009
2008
¥ 15,890¥16,909(637)(1,122)(10,930)(14,867)
3,179
3,650
(7,675)(4,966)
390
592
¥
217
¥
196

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
2009$ 162,143(6,500)(111,531)
32,438(78,316)
3,980$ 2,214

The components of net periodic benefit costs for the years ended March 31, 2009 and 2008 were as

13

follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service benefit
Recognized actuarial loss
Net periodic retirement benefit costs
Contribution to defined contribution
pension plans
Total

Millions of Yen
2009
2008
¥ 658
¥ 661
333
360
(593)
(482)
(470)
(471)
771
578
¥ 699
¥ 646
151
¥ 850

149
¥ 795

Thousands of
U.S. Dollars
2009$ 6,714
3,398(6,051)(4,796)
7,868$ 7,133
1,540$ 8,673

Assumptions used for the years ended March 31, 2009 and 2008 were set forth as follows:
2009
2008
Discount rate
2.0%
2.0%
Expected rate of return on plan assets
4.0%
3.0%
Recognition period of actuarial gain / loss
12 years
12 years
Amortization period of prior service benefit
12 years
12 years

7.

EQUITY
Since May 1, 2006, Japanese companies have been subject to the Corporate Law of Japan (the“Corporate Law”), which reformed and replaced the Commercial Code of Japan. The
significant provisions in the Corporate Law that affect financial and accounting matters are
summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in
addition to the year-end dividend upon resolution at the shareholders meeting. For
companies that meet certain criteria such as; (1) having the Board of Directors, (2) having
independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of serviceof the directors is prescribed as one year rather than two years of normal term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends in kind) at
any time during the fiscal year if the company has prescribed so in its articles of incorporation.
The Company meets all the above criteria. The Corporate Law permits companies to
distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation
and additional requirements. Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporation of the company so stipulate.
The Corporate Law provides certain limitations on the amounts available for dividends or thepurchase of treasury stock. The limitation is defined as the amount available for distribution
to the shareholders, but the amount of equity after dividends must be maintained at no lessthan ¥ 3 million.
(b) Increases / decreases and transfer of common stock, reserve and surplus
The Corporate Law requires that an amount equal to 10% of dividends must be appropriatedas a legal reserve (a component of retained earnings) or as additional paid-in capital (acomponent of capital surplus) depending on the equity account charged upon the payment ofsuch dividends until the total of aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Corporate Law, the total amount ofadditional paid-in capital and legal reserve may be reversed without limitation. The

14

Corporate Law also provides that common stock, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferred among the accounts undercertain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase treasury stock and dispose ofsuch treasury stock by resolution of the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution to the shareholders which isdetermined by specific formula. Under the Corporate Law, stock acquisition rights, whichwere previously presented as a liability, are now presented as a separate component of equity.
The Corporate Law also provides that companies can purchase both treasury stock acquisitionrights and treasury stock. Such treasury stock acquisition rights are presented as a separate
component of equity or deducted directly from stock acquisition rights.

8.

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, 2009 and 2008.

The tax effects of significant temporary differences and tax loss carryforwards which resulted indeferred tax assets and liabilities at March 31, 2009 and 2008 were as follows:

Millions of Yen
2009
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

¥

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

Deferred tax liabilities:
Prepaid pension cost
¥ 159
Gain on contribution of securities to retirement benefit
trust
329
Undistributed earnings of overseas subsidiaries
2
Other
80
Total
¥ 570
Net deferred tax assets
¥ 182

2008
¥

Thousands of
U.S. Dollars
2009

799
251
218
163
120
68
713
174
173
58
413
(365)
¥ 2,785

8,153
888
1,490
2,990
51
816
5,612
7,847
1,133
20
3,500
(24,827)
$
7,673

¥

$

1,623

$
$

3,357
20
816
5,816
1,857

240

329
171
4
¥ 744
¥ 2,041$

As the difference between the normal statutory tax rate and the effective tax rate reflected in the15accompanying consolidated statement of income was not considered significant for the year
ended March 31, 2009 and 2008, a reconciliation between the normal statutory tax rate andeffective tax rate was not disclosed.
9.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥ 2,149 million ($21,929 thousand)and ¥2,443 million for the years ended March 31, 2009 and 2008, respectively.

10.

LEASESThe Group leases certain machinery, computer equipment and other assets.
Total rental expenses under finance leases for the years ended March 31, 2009 and 2008 were
¥ 196 million ($ 2,000 thousand) and ¥239 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, 2009 and 2008 was as follows:

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
¥ 150
Accumulated depreciation
117
Net leased property¥ 33

Millions of Yen
2008
Furniture
andFixtures
Other
¥ 873
¥ 58
510
31
¥ 363
¥ 27

Total
¥ 1,081658¥ 423

MachineryandEquipment
Acquisition cost
$ 867
Accumulated depreciation
592
Net leased property$ 275

Thousands of U.S. Dollars
2009
Furniture
andFixturesOther$ 4,694
$ 796
2,684
561
$ 2,010
$ 235

Total
$ 6,357
3,837$ 2,520

Obligations under finance leases:
16

Due within one year
Due after one year
Total

Millions of Yen
2009
2008
¥ 164
¥ 194
90
255
¥ 254
¥ 449

Thousands of
U.S. Dollars
2009$ 1,674918$ 2,592

Millions of Yen
2009
2008
¥ 170
¥ 200

Thousands of
U.S. Dollars
2009$ 1,735

Depreciation expense under finance leases:

Depreciation expense

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

11.

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.

12.

COMMITMENTS
The Group has line of credit agreements with three banks to obtain working capital efficiently.
The details of the agreements at March 31, 2009 were as follows:
Thousands ofMillions of Yen
U.S. Dollars
Line of credit amount¥
12,500$ 127,551
Balance used
4,000
40,81613.

NET INCOME PER SHARE
17

Reconciliations of the differences between basic and diluted net income per share (“EPS”) for
the years ended March 31, 2009 and 2008 were as follows:
Yen inThousand ofMillions
sharesYen
Dollars
Weighted
For the year ended March 31,
Net income
average shares
EPS
2009:
Basic EPS
Net income available to common
62,923
shareholders¥ (2,849)¥ (45.28)$ (0.46)
Effect of Dilutive Securities
Convertible bonds
Diluted EPS¥ (2,849)
Net income for computation
62,923For the year ended March 31,
2008:
Basic EPS
Net income available to commonshareholders
Effect of Dilutive Securities
Convertible bonds
Diluted EPS
Net income for computation

14.

¥

¥

5,547

65,294

-

1,126

5,547

66,420¥ 84.95¥ 83.51

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

Year-end cash dividends, ¥ 5 ($ 0.05) per share(b) Acquisition of treasury stock

Millions of
Yen
¥
310

Thousands of
U.S. Dollars$ 3,163

On Nov 7, 2008, the Company's board of directors resolved to purchase up to ¥ 500 million($ 5,102 thousand) and 1,000 thousand shares of its common stock during the period from
Nov 10, 2008 to Dec 31, 2008.

15. 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 of18

the Group for the years ended March 31, 2009 and 2008 was as follows:(1) Industry Segments
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¥ 51,444
331
51,77549,592¥ 2,183

Total¥68,176
379
68,55564,293¥ 4,262

Eliminations/Corporate

Consolidated¥ (379)(379)
2,057¥ (2,436)¥ 68,176
68,176
66,350¥ 1,826

Eliminations/Corporate

Consolidated¥ 7,542250
43¥62,802
3,314
1,879

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

Total assets
Depreciation
Capital expendituresa.

Automated
Machines

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

Total
¥ 55,260
3,064
1,836

Sales and Operating Income

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income

Automated
Machines

Thousands of U.S. Dollars
2009
MachineEliminations
Components
Total/Corporate$ 170,734
490
171,224
150,010$ 21,214$ 524,939
3,378
528,317506,041$ 22,276$ 695,673
3,868
699,541
656,051$ 43,490$ (3,868)(3,868)20,990$ (24,858)

b. Total Assets, Depreciation and Capital Expenditures
Thousands of U.S. Dollars

19

Consolidated$ 695,673
695,673
677,041$ 18,632

2009
Automated
Machines
Total assets$ 153,643
Depreciation
3,643
Capital expenditures
1,255

MachineComponents$ 410,235
27,622
17,480Total

Eliminations/Corporate

Consolidated$ 563,878
31,26518,735$ 76,959
2,551
439$ 640,837
33,816
19,174

Total

Eliminations/Corporate

Consolidated¥93,705570
94,275
81,978¥ 12,297¥ (570)(570)
2,245¥ (2,815)¥ 93,705
93,70584,223¥ 9,482

a. Sales and Operating Income
Millions of Yen
2008

Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income

Automated
Machines

MachineComponents¥ 22,193
122
22,31518,326¥ 3,989¥¥

71,512448
71,96063,652
8,308

b. Total Assets, Depreciation and Capital Expenditures
Millions of Yen
2008

Total assets
Depreciation
Capital expenditures

Automated
Machines

MachineComponents

Total

Eliminations/Corporate

Consolidated¥ 14,274
369
194¥ 53,695
2,911
2,248

¥ 67,969
3,280
2,442

¥ 7,238289
29¥ 75,207
3,569
2,471

As discussed in Note 2 (q), 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 ofconsolidated foreign subsidiaries are translated into yen at the average exchange rate. The effectof this treatment was to increase net sales of Machine Components by 1,707 million ($17,418
thousand), to decrease operating income of 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, 2009 and 2008 weresummarized as follows:
Millions of Yen
2009
20

Asia

North
America

Total

Eliminations/Corporate

Consolidated

9,744
1,966
11,71011,864¥ (154)¥ 6,684

¥ 962
962
993
¥ (31)¥ 423¥ 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

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

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

Sales to customers
Interarea transfer
Total sales
Operating expenses
Operating income
Total assets¥ 57,470
5,407
62,87759,510¥ 3,367¥ 55,043

¥

Japan

Asia

$ 586,428
55,173641,601
607,245$34,356$ 561,663$ 99,429
20,061
119,490
121,061$(1,571)$68,204

Thousands of U.S. Dollars
2009
North
Eliminations
America
Total/Corporate

Consolidated$9,816
9,816
10,133$ (317)$ 4,317$ 695,673
75,234
770,907738,439$32,468$634,184$ (75,234)(75,234)(61,398)$ (13,836)$ 6,653$ 695,673
695,673
677,041$ 18,632$ 640,837

Eliminations/Corporate

Consolidated¥ (8,818)(8,818)(5,235)¥ (3,583)¥ 294¥ 93,705
93,70584,223¥ 9,482¥ 75,207

Japan

Asia

Millions of Yen
2008
North
America
Total¥ 82,886
6,291
89,17776,404¥ 12,773¥ 66,175¥ 9,3422,527
11,86911,596¥ 273¥ 8,069¥ 1,477
1,477
1,458
¥
19
¥ 669

¥ 93,705
8,818
102,523
89,458¥ 13,065¥ 74,913

As discussed in Note 2 (q), the Company changed its measurement of inventories to thecost method, or at the lower of cost or market. The effect of this change was to increase
operating income of Japan 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 ofconsolidated foreign subsidiaries are translated into yen at the average exchange rate. The
effect of this treatment was to increase net sales of Asia by 1,591 million ($16,235
thousand) and North 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, 2009 and 2008 weresummarized as follows:
Millions of Yen
21

2009
Overseas sales
Net sales
Ratio of overseas sales to net salesAsia¥ 13,305

Other¥1,658

19.5%

2.4%

Total
¥ 14,963
68,175
21.9%

Thousands of U.S. Dollars
2009
Overseas sales
Net sales
Ratio of overseas sales to net salesAsia$135,765

Other$ 16,918

19.5%

2.4%

Total
$ 152,693
695,673
21.9%

Millions of Yen
2008
Overseas sales
Net sales
Ratio of overseas sales to net sales

Asia¥ 17,469

Other¥ 2,341

18.6%

2.5%

******

22

Total¥19,81093,70521.1%