Financial Section2018 ANNUAL REPORT
Year Ended March 31, 2018

CONTENTS
Eleven-Year Summary ·····························································
1Financial Review ···································································
5
Consolidated Statement of Financial Position ··································
17
Consolidated Statement of Income ···············································
18
Consolidated Statement of Comprehensive Income ···························
19
Consolidated Statement of Changes in Equity ··································
20
Consolidated Statement of Cash Flows ··········································
22
Notes to the Consolidated Financial Statements ·······························
24
Independent Auditor’s Report ·····················································
68

Eleven-Year Summary
Hitachi Metals, Ltd. and Consolidated Subsidiaries
As of and for the Years Ended March 31

Millions of yen(except as otherwise noted)

IFRS

2018
2017
Results for the period:
Revenues·················································································¥ 988,303¥ 910,486
Cost of sales ············································································(803,607)(731,153)
Selling, general andadministrative expenses ·····························································(119,566)(113,350)
Other income ···········································································
5,401
14,070
Other expenses ·········································································(24,205)(11,786)
Operating income ·····································································
46,326
68,267
Income (loss) before income
taxes and non-controllinginterests ··················································································
46,98566,016
Net income (loss) attributable toshareholders of the parent
company ·················································································
42,21050,593
Cash flows for the period:
Cash flows from operating
activities ·················································································
39,13389,391
Cash flows from investing
activities ·················································································(75,080)(35,864)
Free cash flows ·······································································(35,947)
53,527Growth initiative costs:
Capital expenditures ·································································
91,786
63,843
Depreciation and amortization ····················································
46,13843,039Research and development ·························································
17,74917,971At the period-end:
Total assets ··············································································¥ 1,058,832¥ 1,040,390
Interest-bearing debt ·································································
160,844
194,457
Net assets ················································································
570,192
548,746
Number of outstanding shares(thousands) ··············································································
427,572
427,576
Number of shareholders ····························································
29,14825,302
Number of employees ·······························································
30,39028,754Per share of common stock (yen):
Net income (loss):
Basic ··················································································¥ 98.72¥ 118.32
Cash dividends ····································································
26.00
26.00
Net assets ················································································
1,316.08
1,254.89
Key financial indicators:
Operating income margin (%) ····················································
4.7
7.5
Return on Sales (ROS) (%) ························································
4.3
5.6
Return on Assets (ROA) (%) ······················································
4.5
6.4
Return on Equity (ROE) (%) ······················································
7.7
9.8
Shareholders’ equity ratio (%) ····················································
53.1
51.6
Debt/equity ratio (times) ····························································
0.29
0.36
Notes:

2016

2015

2014

¥ 1,017,584(819,433)¥ 1,004,373(793,517)¥ 807,794(637,081)(122,090)
36,416(12,523)
99,954(126,446)
21,303(21,306)
84,407(106,851)
5,844(16,278)
53,42896,23386,391

55,82069,05670,56948,133

115,742

108,983

99,171(32,147)
83,595(113,750)(4,767)(9,832)
89,33959,602
42,927
19,12151,47439,917
20,90331,98733,762
16,814¥ 1,033,311
220,376
504,675¥ 1,083,450
255,350
476,176¥ 848,772
177,195
382,840

427,579
28,582
29,157

427,601
26,28730,278427,657
29,30826,850¥ 161.50
26.00
1,159.70¥ 165.02
23.00
1,090.64¥ 116.79
17.00
870.36

9.8
6.8
9.1
14.4
48.0
0.44

8.4
7.0
8.9
16.8
43.0
0.55

6.6
6.0
8.0
15.6
43.9
0.48

1. The amounts are accounted for and presented in accordance with the International Financial Reporting Standards.
2. The translation of Japanese yen amounts into U.S. dollars and euros for the fiscal year ended March 31, 2018, is included in this annual report solely for the convenience ofreaders outside Japan. The translation has been made at the rates of ¥106.24 = $1 and ¥130.52 = €1, the approximate exchange rates as of March 31, 2018.
3. Diluted net income per share is not provided for the periods presented as there were no common stock with a dilutive effect.
4. Net income (loss) represents net income (loss) attributable to shareholders of the parent company. Net income (loss) per share is calculated by dividing net income (loss) by
the average number of outstanding shares for the period. Net assets per share are calculated by dividing net assets less non-controlling interests by the number of outstanding
shares as of the period-end.
5. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).
6. Results for the fiscal year ended March 31, 2014 (FY2014) are presented in accordance with both J-GAAP and IFRS.

1

Eleven-Year Summary
Hitachi Metals, Ltd. and Consolidated Subsidiaries
As of and for the Years Ended March 31
Thousands of U.S. dollars(except per share amounts)

Thousands of euros(except per share amounts)

IFRS

2018
Results for the period:
Revenues·················································································$ 9,302,551
Cost of sales ············································································(7,564,072)
Selling, general andadministrative expenses ·····························································(1,125,433)
Other income ···········································································50,838
Other expenses ·········································································(227,833)
Operating income ·····································································436,050
Income (loss) before income
taxes and non-controllinginterests ··················································································442,253
Net income (loss) attributable toshareholders of the parent
company ·················································································397,308
Cash flows for the period:
Cash flows from operating
activities ·················································································368,345
Cash flows from investing
activities ·················································································(706,702)
Free cash flows ·······································································(338,357)
Growth initiative costs:
Capital expenditures ·································································863,950
Depreciation and amortization ····················································434,281
Research and development ·························································167,065
At the period-end:
Total assets ··············································································$ 9,966,416
Interest-bearing debt ·································································
1,513,968
Net assets ················································································
5,367,018
Number of outstanding shares(thousands) ··············································································—
Number of shareholders ····························································—
Number of employees ·······························································—Per share of common stock (U.S. dollars and euros):
Net income (loss):
Basic·················································································· $ 0.93
Cash dividends ···································································· 0.24
Net assets ················································································ 12.39
Key financial indicators:
Operating income margin (%) ····················································—
Return on Sales (ROS) (%) ························································—
Return on Assets (ROA) (%) ······················································—
Return on Equity (ROE) (%) ······················································—
Shareholders’ equity ratio (%) ····················································—
Debt/equity ratio (times) ····························································
—

2

2018
€ 7,572,043(6,156,964)(916,074)
41,381(185,451)
354,934

359,983

323,399

299,824(575,238)(275,414)
703,233
353,494
135,987€ 8,112,412
1,232,332
4,368,618———€ 0.76
0.20
10.08
—
—
—
—
—
—

Millions of yen(except as otherwise noted)

Japanese GAAP

2014
Results for the period:
Net sales ················································································· ¥ 807,952
Cost of sales············································································ (638,872)
Selling, general and administrative expenses ······························· (109,544)
Operating income ···································································· 59,536
Income (loss) before income taxes and minority interests ·············· 50,796
Net income (loss) attributable to shareholders of the parent
company················································································· 39,417
Cash flows for the period:
Cash flows from operating activities ··········································· 100,557
Cash flows from investing activities ··········································· (30,906)
Free cash flows ······································································· 69,651
Growth initiative costs:
Capital expenditures ································································· 31,987
Depreciation and amortization ··················································· 33,639
Research and development ························································ 16,814
At the period-end:
Total assets ············································································· ¥ 840,742
Interest-bearing debt ································································ 175,958
Net assets ··············································································· 373,198
Number of outstanding shares (thousands) ·································· 427,631
Number of shareholders ···························································· 29,308
Number of employees ······························································ 26,850
Per share of common stock (yen):
Net income (loss):
Basic ················································································· ¥ 95.65
Cash dividends ···································································
17.00
Net assets ··············································································· 848.73
Key financial indicators:
Operating income margin (%) ····················································
7.4
Return on Sales (ROS) (%) ·······················································
4.9
Return on Assets (ROA) (%) ·····················································
7.4
Return on Equity (ROE) (%) ·····················································
12.9
Shareholders’ equity ratio (%) ···················································
43.2
Debt/equity ratio (times) ···························································
0.48
Notes:

2013

2012

2011

¥ 535,779(440,684)(74,016)
21,07917,230¥ 556,914(438,930)(73,117)44,86736,414¥ 520,186(406,282)(70,761)
43,14336,061

12,955

17,88622,20462,975(28,718)
34,257

3,008(21,769)(18,761)

42,688(24,607)
18,081

26,68824,21911,07624,30027,544
12,153

20,36928,38912,224¥ 541,286
145,935
259,865
365,419
16,93017,308¥ 579,862
169,232
240,395
352,429
12,417
18,056¥ 529,869
149,822228,010352,442
12,711
18,008¥ 36.20
14.00
684.96¥ 50.75
12.00
625.04¥ 63.00
12.00
591.51

3.9
2.4
3.1
5.5
46.2
0.58

8.1
3.2
6.6
8.3
38.0
0.77

8.3
4.3
6.9
11.0
39.3
0.72

1. The amounts are accounted for and presented in accordance with generally accepted accounting principles in Japan.
2. Diluted net income per share is not provided for the periods presented as there were no dilutive common stock with a dilutive effect.
3. Net income (loss) per share is calculated by dividing net income (loss) by the average number of outstanding shares for the period. Net assets per share are calculated by
dividing net assets less minority interests by the number of outstanding shares as of the period-end.
4. Hitachi Metals, Ltd. adopted the revised accounting standard for presentation of net assets in the consolidated balance sheet, effective from the year ended March 31, 2007.
5. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).

3Millions of yen(except as otherwise noted)

Japanese GAAP2010
Results for the period:
Net sales ················································································· ¥ 431,683
Cost of sales············································································ (352,382)
Selling, general and administrative expenses ······························· (65,952)
Operating income ···································································· 13,349
Income (loss) before income taxes and minority interests ··············
5,727
Net income (loss) attributable to shareholders of the parent
company·················································································
1,937
Cash flows for the period:
Cash flows from operating activities ··········································· 57,012
Cash flows from investing activities ··········································· (21,495)
Free cash flows ······································································· 35,517
Growth initiative costs:
Capital expenditures ································································· 16,485
Depreciation and amortization ··················································· 30,494
Research and development ························································ 10,626
At the period-end:
Total assets ············································································· ¥ 517,984
Interest-bearing debt ································································ 170,664
Net assets ··············································································· 212,783
Number of outstanding shares (thousands) ·································· 352,472
Number of shareholders ···························································· 13,885
Number of employees ······························································ 17,806
Per share of common stock (yen):
Net income (loss):
Basic ·················································································¥ 5.50Cash dividends ···································································
12.00
Net assets ···············································································
548.76
Key financial indicators:
Operating income margin (%) ····················································
3.1
Return on Sales (ROS) (%) ·······················································
0.4
Return on Assets (ROA) (%) ·····················································
1.1
Return on Equity (ROE) (%) ·····················································
1.0
Shareholders’ equity ratio (%) ···················································
37.3
Debt/equity ratio (times) ···························································
0.88

4

2009

2008

¥ 590,704(495,948)(79,698)
15,058(200)¥ 701,075(552,459)(88,918)
59,69851,427(3,016)27,03432,699(37,347)(4,648)

72,106(38,112)33,994

43,76831,81413,08349,327
29,385
13,283¥ 530,191
190,119
214,576
352,498
14,17518,740¥ 619,466
190,427
235,507352,561
13,472
20,308¥ (8.56)13.00
550.79¥ 76.4812.00
604.22

2.5
(0.5)
(0.0)
(1.5)
36.6
0.98

8.5
3.9
8.2
13.1
34.4
0.89

Financial Review
Adoption of International Financial Reporting Standards (IFRS)In the fiscal year ended March 31, 2015, Hitachi Metals, Ltd. (the “Company”) and its consolidated subsidiaries (collectively, the “Group”)
voluntarily adopted IFRS for the purposes of better understanding group management, stronger governance, and more efficient business
operations.

Market Environment
During the fiscal year ended March 31, 2018, the global economy remained on a modest rebound track primarily in developed countries.
Steady economic growth continued in the United States, backed by an improvement in the employment situation and an increase in individual
consumption and capital expenditures. European economies, especially in the euro-zone, continued on a moderate recovery path due to an
improvement in capital investment and productivity. The Chinese economy also showed some signs of strength due to the effects of thegovernment’s various economic measures, and economic growth in other emerging countries in Asia also remained on a recovery track. Amidthese conditions, the Japanese economy recovered gradually as a result of the ongoing improvement in the employment and income situations andincreased exports and capital investment supported by the steady recovery of the global economy.
Among industries in which the Group operates, in the automobile industry, sales in Japan increased, led by strong demand for new models; andEurope and China also showed firm demand, while sales of new vehicles decreased in the United States compared with the fiscal year ended
March 31, 2017. Demand for steel increased mainly in the manufacturing sector, particularly for automobiles and industrial machinery. The
number of new housing starts increased in the United States but was on a declining trend in Japan. In the electronics field, mobile device
shipments increased.

Business Overview
Under the business circumstances described above, for the fiscal year ended March 31, 2018, revenues of the Group increased by 8.5% to¥988,303 million compared with the fiscal year ended March 31, 2017. This result was affected mainly by a rise in raw materials prices (a slidingscale raw materials pricing system) and the depreciation of the yen, in addition to an increase in demand for mainstays. Adjusted operating
income decreased by ¥853 million to ¥65,130 million, compared with the fiscal year ended March 31, 2017, mainly due to a rise in costs
associated with a drop in profitability of heat-resistant exhaust casting components/aluminum wheels and a rise in raw materials prices, despite anincrease in income associated with increased revenue and the effects of cost reduction activities. Operating income decreased by ¥21,941 million
to ¥46,326 million, compared with the fiscal year ended March 31, 2017, due to the recording of a gain on business reorganization and others asother revenue in the fiscal year ended March 31, 2017, as well as the recording of impairment loss as other expenses during the fiscal year ended
March 31, 2018. For the fiscal year ended March 31, 2018, income before income taxes decreased by ¥19,031 million to ¥46,985 million and net
income attributable to shareholders of the parent company decreased by ¥8,383 million to ¥42,210 million, compared with the fiscal year ended
March 31, 2017.

Business Results for the Fiscal Year Ended March 31, 2018
Revenues
Revenues for the fiscal year ended March 31, 2018, increased by ¥77,817 million
to ¥988,303 million, or 8.5% year-on-year.
Domestic sales for the fiscal year ended March 31, 2018, accounted for 43.7% of
total revenues, an increase by ¥27,939 million, or 6.9% year-on-year, to¥431,549 million.
Overseas sales increased globally in the fiscal year ended March 31, 2018,
amounting to ¥556,754 million, an increase by ¥49,878 million, or 9.8% year-onyear. In particular, sales in North America increased to ¥294,836 million, an
increase by ¥18,033 million, or 6.5% year-on-year. Sales in Asia were
¥198,076 million, an increase by ¥23,849 million, or 13.7% year-on-year, and salesin Europe were ¥51,447 million, an increase by ¥8,692 million, or 20.3% year-onyear.
Overseas sales accounted for 56.3% of total revenues in the fiscal year ended
March 31, 2018, which was a similar sales rate to that of the previous year. The
Group has set the percentage of overseas sales as 54.0% for the fiscal year ending
March 31, 2019.
Operating Income
Operating income dropped by ¥21,941 million, or 32.1% year-on-year, to¥46,326 million. The operating income margin was 4.7%, a decrease of
2.8 percentage points year-on-year. The operating income decreased due to therecording of a gain on business reorganization and others as other revenue in thefiscal year ended March 31, 2017, while impairment losses were recognized asother expenses during the fiscal year ended March 31, 2018.
Net Income and ROE
Interest income less interest charges for the fiscal year ended March 31, 2018,
amounted to a net expense of ¥1,885 million, a decrease of ¥579 million, or 23.5% year-on-year. Income before income taxes decreased by¥19,031 million, or 28.8%, to ¥46,985 million and net income attributable to shareholders of the parent company decreased by ¥8,383 million, or
16.6%, to ¥42,210 million, compared with the fiscal year ended March 31, 2017. Net income for the fiscal year ended March 31, 2018, decreasedby ¥8,617 million, or 17.0% year-on-year. Net income per share was ¥98.72, while it was ¥118.32 for the fiscal year ended March 31, 2017.
Return on equity (ROE) decreased to 7.7% for the fiscal year ended March 31, 2018, mainly due to a decrease in net income. Return on assets(ROA) was 4.5%, return on sales (ROS) was 4.3%, and the financial leverage ratio was 1.9 times for the fiscal year ended March 31, 2018.

5

Business Results by Segment
Business Segment Information
Segment revenues include intersegment sales and transfers. Business segment results are as follows:
Revenues by Business Segment
Millions of yen

Years ended March 31
Revenues (including intersegment sales and transfers):
Specialty Steel Products
Magnetic Materials and Applications
Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Consolidated revenues

2018

2017

Percentage
Increase (decrease)¥ 290,599
106,131360,053
230,532
3,417(2,429)¥ 988,303¥ 243,231
99,756
333,509
232,886
2,963(1,859)¥ 910,486

19.5%
6.4
8.0
(1.0)
15.3
‒
8.5%

Operating Income by Business Segment
Millions of yen

Years ended March 31
Operating income:Specialty Steel Products
Magnetic Materials and Applications
Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Consolidated operating income
Operating income margin (%):
Specialty Steel Products
Magnetic Materials and Applications
Functional Components and Equipment
Wires, Cables, and Related Products
Consolidated operating income margin (%)

6

Difference

2018

2017

¥ 26,127
7,286
607
11,183111
1,012¥ 46,326¥ 22,171
9,301
15,92020,059331
485¥ 68,267¥ 3,956(2,015)(15,313)(8,876)(220)
527¥ (21,941)

9.0%
6.9
0.2
4.9
4.7%

9.1%
9.3
4.8
8.6
7.5%

(0.1)%
(2.5)
(4.6)
(3.8)
(2.8)%

Specialty Steel Products
Revenues
Revenues in the Specialty Steel Products segment for the fiscal year ended
March 31, 2018, were ¥290,599 million, an increase of ¥47,368 million, or
19.5%, and adjusted operating income increased by ¥4,328 million, or 18.4%,
to ¥27,865 million year on year. Operating income of the segment increased by¥3,956 million, or 17.8%, to ¥26,127 million for the same period.
Specialty Steels: Sales of tool steel exceeded those for the fiscal year ended
March 31, 2017, due to a recovery in demand in both Japan and othercountries in Asia. Sales of industrial equipment materials increased overall
compared with those for the fiscal year ended March 31, 2017, as sales ofenvironmentally friendly products related to automobiles as well as otherindustrial components, in particular, components for semiconductor-related
equipment, increased. Sales of alloys for electronic products increased
significantly year on year due to strong sales of semiconductor package
components in addition to increased sales of battery-related and organic EL
panel-related components. Aircraft-related and energy-related materials sales
were weak.
Rolls: In September 2016, the Group discontinued production of rolls at a
Chinese subsidiary for the purpose of concentrating management resources onhigh value-added products. Meanwhile, sales of injection molding machineparts recovered resulting from an increase in demand for mobile devices. As aresult, sales of rolls as a whole increased year on year.
Soft Magnetic Materials and Applied Products: Sales of soft magnetic materials and applied products as a whole fell below those for the fiscal
year ended March 31, 2017, due to a drop in demand for amorphous metals, although sales of applied products for mobile devices andautomobiles increased because of robust demand.
Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen
Years ended March 31

2018

2017

Capital expenditures¥ 27.9¥ 17.9Depreciation and amortization

14.2

13.0

Research and development expenses

5.5

5.2

7

Magnetic Materials and Applications
Revenues
Revenues in the Magnetic Materials and Applications segment for the fiscal
year ended March 31, 2018, were ¥106,131 million, an increase of¥6,375 million, or 6.4%, and adjusted operating income increased by¥279 million, or 3.0%, to ¥9,593 million year on year. Operating income of thesegment decreased by ¥2,015 million, or 21.7%, to ¥7,286 million year on year
due to an increase in other expenses owing to the recognition of impairment
losses related to decreased profitability of the businesses of certain subsidiaries.
Magnets: Sales of rare earth magnets overall exceeded those for the fiscal year
ended March 31, 2017. The increase in sales is attributable to increased
demand for automotive electronic components for electric power steering andhybrid automobiles and solid sales of industrial equipment, supported byincreased demand for robots as well as capital investment-related demand fororganic EL panels and semiconductors. Sales of ferrite magnets increased year
on year due to strong demand for automotive electronic components, reflecting
increased automobile production as well as robust demand for household
appliance parts.

Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen
Years ended March 31

2018

2017

Capital expenditures¥ 20.6¥ 13.6

Depreciation and amortization

7.0

6.1

Research and development expenses

3.4

2.5

Functional Components and Equipment
Revenues
Revenues in the Functional Components and Equipment segment for the
fiscal year ended March 31, 2018, were ¥360,053 million, an increase of¥26,544 million, or 8.0% year on year, while adjusted operating income
decreased by ¥5,654 million, or 32.4%, to ¥11,799 million due to declined
profitability of heat-resistant exhaust casting components and aluminum wheels.
Also, operating income in this segment decreased by ¥15,313 million, or by
96.2%, to ¥607 million year on year due to an increase in other expenses, suchas the recording of impairment losses from the aluminum wheel business.
Casting Components for Automobiles: Despite a slowdown in demand forcasting components for pickup trucks and other light trucks as well as
passenger vehicles in North America, sales of casting components forautomobiles increased as a whole year on year. This was due to an increase indemand for casting components for commercial vehicles, farming machinery,and construction machinery in North America, and increased demand forautomobiles in Asia.
Heat-Resistant Exhaust Casting Components: Revenues for heat-resistantexhaust casting components increased year on year due to an increase indemand in the American, European, Asian, and Japanese markets, but profits
decreased for the same period due to productivity issues and other factors.
Aluminum Wheels: Sales of aluminum wheels fell below those for the fiscal year ended March 31, 2017, mainly due to decreased demand forpassenger vehicles in North America and productivity issues.
Piping Components: Sales of pipe fittings as a whole remained strong due to an increased number of new housing starts in the United States, anincrease in large construction projects in Japan, and strong sales performance in devices for semiconductor manufacturing equipment, reflecting
an increase in demand for semiconductor-related equipment year on year.
Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen
Years ended March 31

2018

2017

Capital expenditures¥ 24.7¥ 22.5

Depreciation and amortization

16.7

14.6

Research and development expenses

3.5

2.7

8

Wires, Cables, and Related Products
Revenues
Due to the effects of a reorganization conducted for the purpose of renewing
the Group’s business portfolio to grow the business, revenues in the Wires,
Cables, and Related Products segment for the fiscal year ended March 31,
2018, were ¥230,532 million, a decrease of ¥2,354 million, or 1.0%, while
adjusted operating income increased by ¥266 million, or 1.8%, to¥14,947 million year on year because of the expansion of the focused fields.
Operating income for the segment decreased by ¥8,876 million, or 44.2%, to¥11,183 million for the same period, due to the recording of a gain on businessreorganization and others as other operating revenue in the fiscal year ended
March 31, 2017, while there was an increase in other expenses during the
fiscal year ended March 31, 2018.
Electric Wires and Cables: Sales of wires and cables for rolling stock grewsignificantly, including growth in China. Sales of electric wires forsemiconductor manufacturing equipment and FA/robots increased, and magnet
wires for automobiles and industrial machinery also posted higher sales.
High-Performance Components: Demand for various sensors, harnesses forelectric parking brakes, and hybrid automobiles increased, and demand forbrake hoses was also firm. Sales of probe cables for medical use for the fiscal
year ended March 31, 2018, were higher than those for the fiscal year ended
March 31, 2017, due to increased overseas demand.
Capital Expenditures, Depreciation and Amortization, and R&D expenses

Billions of yen
Years ended March 31
Capital expenditures

2018

2017

¥ 8.7

¥ 7.0

Depreciation and amortization

6.7

8.0

Research and development expenses

5.1

7.5

Financial Conditions and Liquidity
Source of Funds and Liquidity Management
The Company endeavors to generate stable operating cash flows and maintain liquidity to secure sufficient funds for its business activities andbuild a solid financial position. In principle, the Group draws largely on operating cash flows during the normal course of business and liquid
funds to fund working capital and strategic investments to secure sustainable growth. At the same time, the Group implements reliable andflexible methods to minimize opportunity losses, including raising funds on financial and capital markets as an alternative option to fund growth.
In the fiscal year ended March 31, 2018, the funds generated by an increase in earnings or changes in working capital were primarily allocatedto capital expenditure aimed at strengthening the platform to achieve further growth. During the fiscal year ended March 31, 2018, the Groupmade certain repayments on long-term debts to ensure funding stability.
The Company adopted a Group cash pooling system (CPS) to help manage its own working capital and that of its subsidiaries. In principle,
consolidated subsidiaries in Japan procure funds through this CPS system, rather than taking on external debt. By consolidating surplus funds anddebts across the Group, the Group has better positioned itself to become more financially efficient. Group companies in the U.S. and China also
use this CPS system, through which funds of Group companies in these countries are centrally managed to enhance financial efficiency.
As of March 31, 2018, the current ratio was 153%, a liquidity level that management considers adequate.
Rating Information
It is the Company’s top management priority to build and maintain a solid credit rating, and lower financing costs for an appropriate level ofliquidity, mobility, and flexibility of financial policy. Rating and Investment Information, Inc. (R&I), a major credit rating agency in Japan,
assigned a rating of “A+” for the Company’s long-term bonds for the fiscal year ended March 31, 2018. R&I has consistently rated the Company
as “A” or above since the fiscal year ended March 31, 2009.
Rating Information

R&I
RatingLong-term issue rating

2018
A+

2017
A+

Rating Symbols and Definitions:Rating “A+”: Very high creditworthiness supported by some excellent factors.

9

Financial Position
Total assets were ¥1,058,832 million, an increase of ¥18,442 million fromMarch 31, 2017. Current assets were ¥484,032 million, a decrease of¥7,863 million from March 31, 2017. This was mainly attributable toincreases in trade receivables and inventories of ¥32,060 million and¥36,646 million, respectively, and a decrease in cash and cash equivalents of¥84,499 million. Non-current assets were ¥574,800 million, an increase of¥26,305 million from March 31, 2017. This was mainly attributable to anincrease in property, plant and equipment of ¥30,651 million and a decrease ingoodwill and intangible assets of ¥9,299 million.
ROA was 4.5% in the fiscal year ended March 31, 2018, while 6.4% in thefiscal year ended March 31, 2017. The change in ROA is primarily due to adecrease in income before income taxes for the fiscal year ended March 31,
2018.
Total liabilities were ¥488,640 million, a decrease of ¥3,004 million fromMarch 31, 2017. This was mainly attributable to the net effect of decreases in
the current portion of long-term debt and long-term debt of ¥34,515 million in
total, and deferred tax liabilities of ¥5,453 million; and increases in trade
payables of ¥22,209 million, and other financial liabilities of ¥14,015 million.
Total equity was ¥570,192 million, an increase of ¥21,446 million fromMarch 31, 2017. This was mainly attributable to an increase in retained
earnings of ¥31,111 million.
As a result, interest-bearing debt decreased by ¥33,613 million from thefiscal year ended March 31, 2017, to ¥160,844 million as of March 31, 2018,
and the debt-to-equity ratio decreased to 0.29.
Total equity was ¥570,192 million, an increase of ¥21,446 million fromMarch 31, 2017. This was mainly attributable to an increase in retained
earnings of ¥31,111 million from March 31, 2017.
The equity ratio stood at 53.1%, 1.5 percentage points higher than that of the fiscal year ended March 31, 2017, due to an increase in retained
earnings of ¥31,111 million from March 31, 2017. Return on invested capital was 4.4% for the current year, 2.1 percentage points lower than thatof the fiscal year ended March 31, 2017, mainly due to a decrease in operating income by ¥21,941 million.
For the year ending March 31, 2019, management will continue to reinforce the Company’s consolidated financial position by reducing
interest-bearing debts further while improving realization of investment effects.

10Cash Flows
The Company’s operating cash flows are the primary source of funding for
operating capital necessary for business activities and capital expenditures.
Repayments of interest-bearing debts and cash dividends paid to shareholders
are funded mainly from free cash flows.
Cash and cash equivalents as of March 31, 2018, were ¥54,912 million, adecrease of ¥84,499 million from the fiscal year ended March 31, 2017, as aresult of net cash used in investing activities and financing activities exceeding
cash provided by operating activities. The analysis of cash flows for eachcategory as of March 31, 2018, is as follows:<Cash Flows from Operating Activities>
Net cash provided by operating activities was ¥39,133 million. This was
mainly attributable to net income of ¥42,075 million, and depreciation andamortization of ¥46,138 million despite payment of ¥48,343 million associatedwith the increase in working capital, such as inventories.
<Cash Flows from Investing Activities>
Net cash used in investing activities was ¥75,080 million, which was mainly
attributable to payment of ¥76,265 million for the purchase of property, plantand equipment.
<Cash Flows from Financing Activities>
Net cash used in financing activities was ¥47,562 million. This was mainly
attributable to the repayment of long-term debts of ¥35,239 million and thepayment of dividends of ¥11,294 million to shareholders.

Capital Expenditures, Depreciation, and Amortization
The Group invested strategically to innovate its core business processes forenhancement of production capacity and gaining a competitive edge throughstreamlining production efficiency. This is in line with the Group’s goals of
cultivating businesses that focus on products with low environmental impacts
and energy efficiency, growth opportunities, and cost competitiveness ofmarket-dominant products.
For the fiscal year ended March 31, 2018, capital expenditures were¥91,786 million, a 43.8% increase year-on-year, mainly due to enhancing
production capacities and streamlining production efficiency in Japan andestablishing a production structure for high-value added products in theSpecialty Steel Products segment, while building an innovative production line
for NEOMAX® rare earth magnets and ferrite magnets in Japan in the Magnets
and Applied Products segment. The ratio of capital expenditures (CAPEX) to
operating cash flows was 2.35 times for the fiscal year ended March 31, 2018,
and the entire expenditures were covered by own funds.
Capital expenditures for individual business segments were as follows:¥27,974 million for Specialty Steel Products to enhance production capacities
and streamline production efficiency in Japan, and to establish a production
structure for high value-added products; ¥20,619 million for Magnetic
Materials and Applications to build an innovative production line for
NEOMAX® rare earth magnets and ferrite magnets in Japan; ¥24,705 million
for Functional Components and Equipment with respect to investments for
streamlining production efficiency and upgrading production machinery,
primarily overseas; and ¥8,710 million for Wires, Cables, and Related Products
to upgrade large-scale facilities in Japan and to enhance production capacities
overseas.
For the fiscal year ending March 31, 2019, management plans to allocate ¥94,000 million (a 2.4% increase year-on-year) to capital
expenditures (including new and additional expenditures). The Specialty Steel Products segment will continue to enhance production capacities
and streamline production efficiency, while establishing production bases overseas. The Magnetic Materials and Applications segment will
enhance its magnet production capacities in Japan, while reinforcing and expanding the information system component business. The Functional
Components and Equipment segment will enhance production capacities and streamline production efficiency mainly overseas. The Wires, Cables,
and Related Products segment will enhance production capacities with respect to electric wires and cables and production efficiency mainly inJapan.
For both existing and new initiatives, management will endeavor to improve returns on investment and accelerate realization of investment
effects.
Depreciation and amortization for the fiscal year ended March 31, 2018, were ¥46,138 million, which increased by 7.2% year-on-year.
Depreciation and amortization for the fiscal year ended March 31, 2018, for Specialty Steel Products; Magnetic Materials and Applications;
Functional Components and Equipment; and Wires, Cables, and Related Products were ¥14,275 million, ¥7,086 million, ¥16,739 million, and¥6,715 million, respectively.
The Group forecasts depreciation and amortization expenses for the year ending March 31, 2019, to be ¥55,000 million.

11

Capital Expenditures by Business Segment
Millions of yen

Years ended March 31
Specialty Steel Products
Magnetic Materials and Applications
Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Total
Operating cash flows
CAPEX to operating cash flow ratio (times)

2018¥ 27,974
20,61924,705
8,710
207
9,571
¥ 91,786¥ 39,133
2.35

2017¥ 17,968
13,65922,575
7,056
122
2,463
¥ 63,843¥ 89,391
0.71

Depreciation and Amortization by Business Segment
Millions of yen

Years ended March 31
Specialty Steel Products
Magnetic Materials and Applications
Functional Components and Equipment
Wires, Cables, and Related Products
OthersAdjustments
Total

2018
¥ 14,275
7,086
16,739
6,715
298
1,025
¥ 46,138

2017¥ 13,050
6,106
14,650
8,018
390
825
¥ 43,039

Research and Development (R&D) Activities
The Company thrives on becoming a global leading high-performancematerials company and is pursuing R&D activities for materials and processdevelopment, reflecting increasing dynamics of scientific technology and mid- tolong-term market trends. Further, in its quest to become a genuinely
development-driven company, the Company is undertaking reform of its R&D
activities. To supplement reformation efforts, it has completed construction of the
Global Research & Innovative Technology Center (GRIT) in April 2018, locatedin Kumagaya City of Saitama Prefecture in Japan.
R&D workers from each segment will join forces at the GRIT and theCompany will ensure a framework is in place to promote R&D activities that
integrate cutting-edge materials technology and process technology. In addition,
the Company aims to create new businesses and commence commercialization of
the new materials by leading global innovation activities through allocation ofnecessary resources overseas and strengthening existing alliances with Hitachi,Ltd. and research institutions in Japan and overseas.
For the fiscal year ended March 31, 2018, the Group invested ¥17,749 million
in R&D, a 1.2% decrease year-on-year. R&D to revenues was 1.8% in the fiscal
year ended March 31, 2018.
Breaking down R&D expenses by segment, the Group allocated ¥5,558 million
for the Specialty Steel Products segment, ¥3,489 million for the Magnetic
Materials and Applications segment, ¥3,563 million for the Functional
Components and Equipment segment, and ¥5,139 million for the Wires, Cables,
and Related Products segment.
The Group forecasts R&D expenses for the fiscal year ending March 31, 2019,
to be ¥21,000 million.
R&D by Business Segment
Millions of yen

Years ended March 31
Specialty Steel Products
Magnetic Materials and Applications
Functional Components and Equipment
Wires, Cables, and Related Products
Total
Consolidated revenues
R&D to revenues (%)

2018¥ 5,558
3,489
3,563
5,139
¥ 17,749¥ 988,303
1.8%

12

2017
¥ 5,210
2,523
2,731
7,507
¥ 17,971¥ 910,486
2.0%

Outlook
Performance Outlook for the fiscal year ending March 31, 2019
The global economy is expected to continue on a recovery path, although the Group’s business environment is filled with uncertainties
stemming from political instability in many countries, concerns about further economic slowdown in emerging countries such as China, andsudden fluctuations in foreign exchange rates and resource prices.
In this business environment, the Group aims to carry out its global growth strategies and build structures for sustainable growth based on the
Fiscal Year 2018 Medium-Term Management Plan to position itself as one of the world's leading high-performance materials companies.

Business Risk
The following risks may significantly influence investors’ decisions. The forward-looking statements stated below are based on certain
assumptions and predictions determined by the Group as of the issuance date of the Securities Report (available only in Japanese).
(1) Economic Conditions of Market and Product Demand
Demand for the Group’s products is subject to market trends in the following industries: the iron and steel industry; the home electronicsrelated industry, such as personal computers, smartphones, and semiconductors; the automotive industry; the aviation industry; and theconstruction industry. The Group sells its products in Japan; the United States; Asia, such as China; and Europe. Accordingly, economic
conditions in those countries affect the sales of the Group’s products.
The Group endeavors to build a profitable structure that is less subjected to changes in the business climate by raising productivity, reducing
fixed and variable costs, and lowering the break-even point. However, declining demand in related industries or worsening economic conditionsin the countries in which the Group’s products are sold may affect the operating results and financial position of the Group.
(2) Fluctuations in Prices of Raw Materials
Raw materials for the Group’s metal products include scrap iron and copper, as well as cobalt, nickel, molybdenum, and rare metals, such as
rare earths, for which suppliers and production areas are limited. Prices for these raw materials may fluctuate dramatically depending on market
conditions. Trading volume of raw materials may also be affected by resource policies and other factors in production countries.
The Group reflects increases in raw material costs in the selling prices of its products. Nonetheless, there is a time lag between the increase in
raw material costs and the revision of selling prices in response to higher costs, and not all of the increased costs will be reflected in selling prices.
Accordingly, increases in raw material costs, which are not reflected in selling prices, may affect the operating results and financial position of theGroup.
(3) Funding
The Group raises funds through borrowings from financial institutions and long-term financing from capital markets. Accordingly, fluctuationsin interest rates or an increase in credit risks may affect the Group’s operating results and financial position.
(4) Fluctuations in Foreign Exchange Rates
The Group imports raw materials from overseas countries and exports products manufactured in Japan to overseas markets. Thus, fluctuations
in foreign exchange rates affect transactions, assets, and liabilities denominated in foreign currencies. The Group hedges the risks of fluctuations
in foreign exchange rates that affect import and export transactions denominated in foreign currencies using financial instruments, including
forward exchange contracts and currency options. Nonetheless, significant fluctuations in foreign exchange rates may affect the Group’s operating
results and financial position. The Group translates the financial statements of foreign consolidated subsidiaries into yen to prepare its
consolidated financial statements. Therefore, fluctuations in foreign exchange rates may affect the Group’s operating results and financial position.
(5) Fluctuations in Value of Marketable Securities
The Group holds marketable securities which are subject to impairment due to a downturn in securities markets or deteriorating financial
positions of issuing companies, which may affect the Group’s operating results and financial position.
(6) Overseas Expansion
The Group is actively expanding its operations overseas, including in the United States; Asia, such as China; and Europe in response tomaturing Japanese markets and the offshore shifts of customers.
When expanding operations overseas, the Group is required to make large initial investments in manufacturing and other facilities and, in manycases, the Group may require time to commence operations. Overseas expansion entails three inherent risks that may interrupt business activities:(1) regulatory changes in legal and tax systems, (2) underdeveloped social systems and infrastructures, and (3) economic, social, and politicalconditions. If such risks materialize, they may adversely affect overseas operations and the Group’s operating results and financial position.
(7) Competitive Advantage and Development and Commercialization of New Technologies and Products
The Group’s competitors offer similar products in the businesses in which the Group operates. Products in the information systems andelectronic device fields are faced with rapidly changing customer requirements and technologies, and typically in the parts and materials businesssegments of this field, the markets for existing products could shrink in a short period of time. Accordingly, the Group’s competitiveness isaffected by its competitive edge in terms of price, quality, and delivery; and ability to develop and commercialize new technologies and products.
The Group endeavors to maintain its competitiveness by identifying customer needs and developing and commercializing new technologies
and products. However, if the Group is unable to respond properly to changes in technologies and customer needs or if lead times of development
and commercialization for new technologies or products are prolonged, the Group’s growth potential and profitability may deteriorate and theGroup’s operating results and financial position may be affected.
(8) Intellectual Property Rights
The Group owns and licenses numerous intellectual property rights and also exercises those rights based on its business strategy. The Group
respects the intellectual property rights of other companies and when deemed necessary or effective, the Group may obtain licenses to use theintellectual property rights of third parties. If those rights are not protected, maintained, or obtained as planned, the Group’s operations orcompetitiveness may be affected. In cases where the Group becomes a party to litigation regarding intellectual property rights, litigation-related
costs would be incurred and may affect operating results and financial position.

13

(9) Environmental Regulations
The customers who have business with the Group are subjected to extensive environmental and other regulations in their business operations.
Regulations have and will become more stringent, and as a result, the Group is required to ensure regulatory compliance with regard to thematerials and parts for manufacturing its products, and may incur unavoidable expenditures to meet customers’ specifications.
The Group’s businesses are subjected to various environmental and occupational health and safety laws and regulations covering air and waterpollution, using and handling hazardous substances, rationalizing use of energy, disposing waste, and soil and groundwater contamination. The
Group is responsible for risks relating to environment, health, and safety associated with its past, present, and future business activities. As related
laws and regulations become more stringent, any costs incurred as a result of stringent laws and regulations may affect the Group’s operating
results and financial position.
(10) Product Defects
Certain products of the Group, such as important safety components, are required to be exceptionally reliable. The Group has built a rigorous
quality control system to prevent manufacturing and distribution of defective products.
However, in case defective products are released in the market, costs for relevant repairs, replacements, recalls, damage compensation claims,
and litigation may be incurred and, accordingly, such costs may affect the Group’s operating results and financial position.
(11) Laws and Regulations, and Official Restrictions
The Group is subject to economic laws and regulations for trade, foreign exchange, and taxation, and other related regulations and official
restrictions in Japan and other countries in which it operates. The Group endeavors to comply with these laws and regulations, and official
restrictions by designing and improving internal controls. However, in case the Group is considered as failing to comply with these requirements,
administrative penalties would be imposed, or compensation for the damages associated with civil actions may be charged. In cases where theselaws, regulations, and official restrictions are revised, such revision may increase related expenses incurred by the Group. An increase in these
expenditures may affect the Group’s operating results and financial position.
(12) Earthquakes and Other Natural Disasters
The Group may experience turmoil in its logistics or supply chain in case of earthquakes, typhoons, or other natural disasters that damage anddestroy its facilities, or even if such disasters do not have direct impacts on its facilities, they could force the Group to halt operations. Epidemics
of a new strain of influenza virus or other new infectious diseases may also cause turmoil in the Group’s business activities. Should natural
disasters or other events lead to direct or indirect turmoil in the Group’s operations, they may disrupt the Group’s business activities and affect its
operating results and financial position.
(13) Information Security
The Group recognizes the use and increasing importance of information systems in its business activities and enforces measures to enhance
information security. In cases where information systems are corrupted due to computer viruses or other causes, the Group’s operations may be
disrupted, and operating results and financial position may be affected.
The Group holds and manages personal information obtained from customers, and various confidential information on the Group, andcustomers’ technologies, research and development, manufacturing, sales, and marketing activities. The Group manages and protects theconfidential information; however, there is no guarantee that the Group’s information management is effective enough to protect the confidential
information from unforeseeable security events. Should the Group discloses such information without proper authority, it may be charged withcompensation claims or filed a lawsuit. Such events may adversely affect the Group’s operating results, financial position, reputation, or
credibility.
(14) Retirement and Severance Benefits
The Group bears a significant amount of retirement benefit costs and obligations determined by actuarial valuations. Inherent in thesevaluations are key assumptions used in estimating the amount of pension plan assets, including mortality, withdrawal rate, retirement rate,changes in wages, discount rates, and expected return on plan assets. The Group is required to make judgments regarding these key assumptions
by taking into account various factors, including personnel demographics, current market conditions, and expected trends in interest rates.
Although the Group believes that the key assumptions are reasonable in light of the various underlying factors, there is no assurance that the key
assumptions are consistent with actual results. A decrease in the discount rate may result in an actuarial increase in retirement benefit obligations.
Changes in key assumptions may affect the Group’s operating results and financial position.
(15) Business Relationship with the Parent Company
Hitachi, Ltd. is the Company’s parent company and holds 53.5% (including indirect ownership of 0.5%) of the voting rights of the Company asof March 31, 2018. Hitachi, Ltd. has a number of affiliates and engages in a broad range of business activities from product manufacturing tosales and services in segments, including Information & Telecommunication Systems, Social Infrastructure & Industrial Systems, Electronic
Systems & Equipment, Construction Machinery, High Functional Materials & Components, Automotive Systems, Smart Life and Ecofriendly
Systems, and Others ( e.g., manufacture and sale of products including optical disk drives, real estate sales and leasing, and management services
for office and other commercial structures). The Company partially represents the High Functional Materials & Components segment. As of theissuance date of the Securities Report (available only in Japanese), two of eight directors of the Company concurrently serve as directors ofHitachi, Ltd. Further, the Company has continuous trade transactions, rendering of services, provision of technologies, and loan agreements with
Hitachi, Ltd. While securing the Company’s independence, it actively participates in Hitachi Group management and intends to maximize theeffective use of Hitachi Group’s research and development capabilities, as well as brand and other management resources. Thus, the Group’sbusiness may be affected by the management strategy of Hitachi, Ltd.
(16) M&A
The Group may be involved in transactions, including acquiring other entities, establishing joint ventures, and entering into strategic businessalliances aimed at developing new technologies and products, enhancing competitiveness in each of the Group’s business domains, and expanding
business areas. Executing these strategies may require time before the Group creates synergy benefits, as it addresses complex issues involving
integration of businesses, technologies, products, and human resources, a process that entails both time and costs. When the strategic transactions
are not executed in accordance with a plan, there is a possibility that initially expected benefits may not be obtained. Furthermore, businesscollaborations might be adversely affected by factors that are beyond the Group’s control, such as decisions or capabilities of its strategic alliancepartners and market trends. Moreover, significant costs may be incurred owing to post-integration management issues, including restructuring of

14

acquired entities or businesses, which may impair the Group’s operating results and financial position.
(17) Securing Resources
In order to maintain the competitive edge of the Group, it is necessary to secure highly skilled human resources for business operations on an
ongoing basis. Such resources are, however, scarcely available in the market, and competition with other companies for hiring the necessary talentis becoming intense. As a result, if the Group is unable to recruit the necessary individuals with high skills or retain highly skilled workers, thismay cause a shortage in the resources required for business operations and may adversely impact the Group’s operating results and financial
position.

15

Table of Contents

Consolidated Financial Statements and Notes ...................................................................................................................... 17
Consolidated Financial Statements ........................................................................................................................................ 17
1)
Consolidated Statement of Financial Position........................................................................................................ 17
2)
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ................................ 18
3)
Consolidated Statement of Changes in Equity ....................................................................................................... 20
4)Consolidated Statement of Cash Flows .................................................................................................................. 22
Notes to the Consolidated Financial Statements................................................................................................................... 24
Nature of the Reporting Company .................................................................................................................. 24
Basis of Presentation ......................................................................................................................................... 24
Summary of Significant Accounting Policies .................................................................................................. 24
Segment Information ........................................................................................................................................ 30
Trade Receivables .............................................................................................................................................. 35
Inventories ......................................................................................................................................................... 35
Investments Accounted for Using the Equity Method ................................................................................... 35
Property, Plant and Equipment ....................................................................................................................... 36
Goodwill and Intangible Assets ........................................................................................................................ 38
Deferred Taxes and Income Taxes.................................................................................................................... 40
Trade Payables................................................................................................................................................... 42
Provisions ........................................................................................................................................................... 42
Employee Benefits ............................................................................................................................................. 43
Equity ................................................................................................................................................................. 46
Accumulated Other Comprehensive Income and Other Comprehensive Income....................................... 47
Dividends ............................................................................................................................................................ 51
Other Income and Other Expenses .................................................................................................................. 52
Other Financial Income and Expenses ............................................................................................................ 52
Earnings per Share ............................................................................................................................................ 52
Supplementary Explanation on the Consolidated Statement of Cash Flows ............................................... 53
Financial Instruments and Other Related Information ................................................................................. 53
Pledged Assets .................................................................................................................................................... 63
Major Subsidiaries and Associates................................................................................................................... 64
Transactions with Related Parties ................................................................................................................... 66
Commitments and Contingencies (Other Than Liabilities Recognized as Provisions) ............................... 67
Subsequent Events............................................................................................................................................. 67

16

Consolidated Financial Statements and Notes
Consolidated Financial Statements
1)

Consolidated Statement of Financial Position
As ofMarch 31, 2018

As ofMarch 31, 2017

Thousands of
U.S. dollars
As ofMarch 31, 2018

5
6
21

¥ 54,912
207,628
190,202
31,290484,032¥ 139,411
175,568
153,556
23,360491,895$ 516,867
1,954,330
1,790,305
294,522
4,556,024

7

27,863

26,239262,265

21, 228
9
1021,385355,318
141,896
13,28015,058574,800¥ 1,058,832

20,964
324,667
151,195
11,651
13,779548,495¥ 1,040,390

201,290
3,344,484
1,335,617
125,000
141,736
5,410,392$ 9,966,416

21
21
21
11, 21¥ 27,203
27,36841,060172,994
40,313869
7,153
316,960¥ 26,301
35,462
26,360150,785
37,817858
6,002
283,585$ 256,052
257,605
386,483
1,628,332
379,452
8,180
67,3292,983,434

21
21
13
10
12

106,273956
57,807
3,305
3,339
171,680
488,640

132,694
1,641
60,2998,758
4,667
208,059
491,644

1,000,311
8,998
544,117
31,10931,4291,615,964
4,599,398

14
14
14, 1615
1426,284
113,518
407,180
16,896(1,158)26,284
115,806
376,069
19,555(1,151)

247,402
1,068,505
3,832,643
159,036(10,900)

562,720
7,472
570,192¥ 1,058,832

536,563
12,183548,746¥ 1,040,390

5,296,687
70,331
5,367,018$ 9,966,416

Millions of yen
Note
AssetsCurrent assets
Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Total current assets
Non-current assets
Investments accounted for using the equity
methodInvestments in securities and other financial
assetsProperty, plant and equipment
Goodwill and intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Short-term debt
Current portion of long-term debt
Other financial liabilities
Trade payables
Accrued expenses
Advances received
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term debt
Other financial liabilities
Retirement and severance benefits
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
EquityEquity attributable to shareholders of theparent company
Common stock
Capital surplus
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost
Total equity attributable to shareholders of
the parent company
Non-controlling interests
Total equity
Total liabilities and equity

12

See accompanying notes to the consolidated financial statements.

17

2)

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income

For the year ended
March 31, 2018

For the year ended
March 31, 2017

Thousands of
U.S. dollars
For the year ended
March 31, 2018

¥ 988,303(803,607)
184,696¥ 910,486(731,153)
179,333$ 9,302,551(7,564,072)
1,738,479(119,566)
5,401(24,205)
46,326(113,350)
14,070(11,786)
68,267(1,125,433)
50,838(227,833)
436,050449
988(2,334)(1,150)346
248(2,810)(1,189)

4,226
9,300
(21,969)(10,825)

2,706
46,985(4,910)42,075

1,154
66,016(15,324)
50,69225,471
442,253(46,216)
396,037

42,210(135)¥ 42,075

50,59399¥ 50,692

397,308(1,271)$ 396,037

For the year ended
March 31, 2018

For the year ended
March 31, 2017

U.S. dollars
For the year ended
March 31, 2018

¥ 98.72‒¥ 118.32‒$ 0.93‒

Millions of yen
Note
Revenues
Cost of sales
Gross profit
Selling, general, and administrative expenses
Other income
Other expenses
Operating income
Interest income
Other financial income
Interest charges
Other financial expenses
Share of profits of investments accounted forusing the equity method
Income before income taxes
Income taxes
Net income

17
17

18
18
7
10

Net income attributable to:Shareholders of the parent company
Non-controlling interests
Net income

Yen

Earnings per share attributable to shareholders of
the parent company
Basic
Diluted19

See accompanying notes to the consolidated financial statements.

18

Consolidated Statement of Comprehensive Income

For the year ended
March 31, 2018
¥ 42,075

For the year ended
March 31, 2017
¥ 50,692

Thousands of
U.S. dollars
For the year ended
March 31, 2018
$ 396,037

663
2,094

(38)
2,628

6,241
19,710

474

(477)

4,462

3,231

2,113

30,412(6,132)433(1,590)1,114(57,718)
4,076

7

46

(364)

433

15

(5,653)(2,422)¥ 39,653

(840)
1,273
¥ 51,965(53,210)(22,797)$ 373,240¥ 39,569
84¥ 39,653¥ 51,821
144¥ 51,965$ 372,449
791$ 373,240

Note

Net income
Other comprehensive income
Items not to be reclassified into net income
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Share of other comprehensive income ofinvestments accounted for using the equity
methodTotal items not to be reclassified into net
incomeItems that can be reclassified into net income
Foreign currency translation adjustments
Net change in fair value of cash flow hedges
Share of other comprehensive income ofinvestments accounted for using the equity
methodTotal items that can be reclassified into net
incomeTotal other comprehensive income
Comprehensive income

Millions of yen

7

Comprehensive income attributable to:Shareholders of the parent company
Non-controlling interests
Comprehensive income
See accompanying notes to the consolidated financial statements.

19

3)

Consolidated Statement of Changes in Equity
Millions of yen
NoteCommonstock

Balance at April 1, 2016
Changes in equity
Net income
Other comprehensive income
Dividends to shareholders of theparent company
16
Dividends to non-controllinginterests
Acquisition of treasury stock
14
Sales of treasury stock
14
Transactions with non-controllinginterests
Transfer to retained earnings
Total changes in equity
Balance at March 31, 2017
Changes in equity
Net income
Other comprehensive income
Dividends to shareholders of theparent company
16
Dividends to non-controllinginterests
Acquisition of treasury stock
14
Sales of treasury stock
14
Transactions with non-controllinginterests
Transfer to retained earnings
Total changes in equity
Balance at March 31, 2018

¥ 26,284

Capitalsurplus

Total equity
attributable toNonshareholders controllingof the parent
interests
company¥ (1,146)¥ 495,865¥ 8,810

AccumuTreasury
Retained lated otherstock, atearnings comprehencost
sive income¥ 115,806 ¥ 336,141¥ 18,780

Total
equity¥ 504,675

‒
‒

‒
‒

50,593
‒

‒
1,228

‒
‒

50,593
1,228

99
45

50,692
1,273‒‒(11,118)‒‒(11,118)‒(11,118)

‒
‒
‒

‒
‒
0

‒
‒
‒

‒
‒
‒

‒
(5)
0

‒
(5)
0

(190)
‒
‒

(190)
(5)
0

‒
‒
‒
453
0
39,928¥ 115,806 ¥ 376,069

‒
(453)
775
¥ 19,555‒‒(5)¥ (1,151)‒‒
40,698¥ 536,563

3,419
‒
3,373
¥ 12,183

3,419‒
44,071¥ 548,746‒‒‒¥ 26,284‒‒‒‒

42,210‒‒(2,641)‒‒

42,210(2,641)(135)219

42,075(2,422)‒‒(11,117)‒‒(11,117)‒(11,117)

‒
‒
‒

‒
‒
0

‒
‒
‒

‒
‒
‒

‒
(7)
0

‒
(7)
0

(177)
‒
‒

(177)
(7)
0

(2,288)‒‒18(2,288)31,111¥ 113,518 ¥ 407,180‒(18)(2,659)¥ 16,896‒‒(7)¥ (1,158)(2,288)‒26,157¥ 562,720(4,618)‒(4,711)¥ 7,472(6,906)‒
21,446¥ 570,192‒‒‒¥ 26,284

See accompanying notes to the consolidated financial statements.

20

Thousands of U.S. dollars
Note

Commonstock

Capitalsurplus

Balance at March 31, 2017
$ 247,402 $ 1,090,041
Changes in equity
Net income‒‒
Other comprehensive
income‒‒Dividends to shareholdersof the parent company
16‒‒
Dividends to noncontrolling interests‒‒
Acquisition of treasury
stock
14
‒
‒
Sales of treasury stock
14‒
0
Transactions with noncontrolling interests‒(21,536)
Transfer to retained
earnings‒‒
Total changes in equity‒(21,536)
Balance at March 31, 2018
$ 247,402 $ 1,068,505

Total equity
attributable to
NonTotalshareholders controlling
equityof the parent
interests
company$ (10,834) $ 5,050,480 $ 114,674 $ 5,165,154

Accumulated
Treasuryotherstock, atcomprehensive
cost
incomeRetainedearnings$ 3,539,806$ 184,064

397,308‒‒397,308(1,271)

396,037‒(24,859)‒(24,859)

2,061(22,797)(104,640)‒‒(104,640)‒(104,640)

‒

‒

‒

‒

(1,666)(1,666)

‒
‒

‒
‒

(66)
0

(66)
0

‒
‒

(66)
0

‒

‒

‒

(21,536)(43,468)(65,004)(169)‒(25,028)(66)$ 159,036 $ (10,900)‒
246,207$ 5,296,687

169
292,837$ 3,832,643

See accompanying notes to the consolidated financial statements.

21‒‒(44,343)
201,864$ 70,331 $ 5,367,018

4)Consolidated Statement of Cash Flows
For the year ended
March 31, 2018

For the year ended
March 31, 2017

Thousands of
U.S. dollars
For the year ended
March 31, 2018

¥ 42,075¥ 50,692$ 396,037

46,138
10,611

43,0391,063

434,281
99,878(2,706)
2,047
2,340
799
(280)
4,910
(33,542)(37,829)(8,096)23,0283,181(1,154)
3,405
2,276
1,495
(7,657)
15,324
6,092(7,513)
1,257
3,907
670

(25,471)
19,26822,026
7,521(2,636)
46,216(315,719)(356,071)(76,205)
216,755
29,942697(2,975)50,398
1,672(2,583)(628)(9,726)
39,133(2,691)(4,882)
105,323
2,497(2,864)(762)(14,803)
89,391

6,561(28,003)474,379
15,738(24,313)(5,911)(91,547)
368,345(76,265)(1,262)(63,144)(2,074)(717,856)(11,879)

2,073

1,578

19,512

(105)

(773)

(988)

918
(86)
(353)
(75,080)

27,903‒646(35,864)

8,641
(809)
(3,323)(706,702)

Millions of yen
Note
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
Impairment losses
Share of profits of investments accounted forusing the equity method
Financial expenses
Losses on sale of property, plant and equipment
Structural reform expenses
Net gain on business reorganization and others
Income taxes(Increase) decrease in trade receivables
Increase in inventories(Increase) decrease in accounts receivable—other
Increase in trade payables
Increase in accrued expenses
Increase (decrease) in retirement and severance
benefits
Other
SubtotalInterest and dividends received
Interest paid
Payments for structural reforms
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of property, plant andequipment
Purchase of investments in securities and otherfinancial assets (including investments in
subsidiaries and investments accounted for using
the equity method)
Proceeds from sale of investments in securities
and other financial assets (including investments
in subsidiaries and investments accounted forusing the equity method)
Payments for transfer of business
Other
Net cash used in investing activities(Continued)

22

Millions of yen
Note
Cash flows from financing activities:
Net increase in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from payments from noncontrolling interests
Purchase of shares of consolidated
subsidiaries from non-controllinginterests
Dividends paid to shareholders
Dividends paid to non-controllinginterests
Acquisition of common stock fortreasury
Proceeds from sales of treasury stock
Net cash used in financing activities
Effect of exchange rate changes on cash
and cash equivalents
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at the
beginning of the year
Cash and cash equivalents at the end of
the year

20
20
20

16

For the year ended
March 31, 2018

For the year ended
March 31, 2017

Thousands of
U.S. dollars
For the year ended
March 31, 2018

2,335
3,549
(35,239)484‒(26,782)

21,97933,405(331,692)

‒

3,419

‒

(6,906)(11,117)‒(11,118)(65,004)(104,640)

(177)

(190)

(1,666)(7)
0(47,562)(5)
0(34,192)(66)
0(447,684)

(990)

(224)

(9,319)(84,499)

19,111(795,360)

139,411

120,300

1,312,227¥ 54,912¥ 139,411$ 516,867

See accompanying notes to the consolidated financial statements.

23

Notes to the Consolidated Financial Statements
Nature of the Reporting Company
Hitachi Metals, Ltd. (the “Company”) is a Japan-based company whose shares are listed on the First Section of the Tokyo Stock
Exchange. Its principal office is located at 2-70 Konan 1-chome, Minato-ku, Tokyo. The Company’s consolidated financial statements
comprise the financial statements of the Company and its subsidiaries, as well as its share of the profit or loss of associates and joint
ventures. The Company and its subsidiaries (the “Group”) primarily manufacture and sell specialty steel products, magnetic materials
and applications, functional components and equipment, and wires, cables, and related products.
The Group has changed its segment names from “High-Grade Metal Products and Materials” to “Specialty Steel Products” and from“High-Grade Functional Components and Equipment” to “Functional Components and Equipment” effective from April 1, 2017. Thischange in segment names does not affect segment information.

Basis of Presentation
As the Company meets the qualification for a “Specified Company applying Designated IFRSs” pursuant to Article 1-2 of theOrdinance on Terminology, Forms and Preparation Method of Consolidated Financial Statements (Ordinance of Ministry of Finance ofJapan Regulation No. 28, 1976), the consolidated financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, as permitted by theprovision of Article 93 of the above Ordinance.
The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments
measured at fair value, financial instruments measured at fair value through profit or loss (FVTPL), financial instruments measured atfair value through other comprehensive income (FVTOCI), and assets and liabilities associated with defined benefit plans. The
consolidated financial statements are presented in millions of Japanese yen. Amounts are rounded to the nearest million yen forpresentation.
The accompanying consolidated financial statements were approved by Akitoshi Hiraki, President and Chief Executive Officer, on
June 19, 2018.
Management of the Company is required to make a number of judgments, estimates, and assumptions related to the application of
accounting policies and reporting of revenues and expenses, and assets and liabilities to prepare the consolidated financial statementsin accordance with IFRS. Actual results may differ from those estimates.
Estimates and assumptions are continually reviewed. The effects of a change in accounting estimates, if any, are recognized in thereporting period in which the change was made and in future periods.
The translation of Japanese yen amounts into U.S. dollars as of and for the year ended March 31, 2018, is included in this annual reportsolely for the convenience of readers outside Japan. The translation has been made at the rate of ¥106.24 = $1, the approximate
exchange rate as of March 31, 2018.
The following notes include information regarding judgments in applying accounting policies that could materially affect theCompany’s consolidated financial statements:• Note 3. (1) “Basis of Consolidation”• Note 3. (4) “Financial Instruments” and Note 21. “Financial Instruments and Other Related Information”
The following notes include information regarding uncertainties arising from assumptions and estimates that may materially affect theCompany’s consolidated financial statements in the following fiscal year:• Note 3. (9) “Impairment of Non-Financial Assets”• Note 3. (11) “Post-Employment Benefits” and Note 13. “Employee Benefits”• Note 3. (12) “Provisions,” Note 3. (13) “Contingencies,” Note. 12 “Provisions,” and Note 25. “Commitments and Contingencies(Other Than Liabilities Recognized as Provisions)”• Note 3. (15) “Income Taxes” and Note 10. “Deferred Taxes and Income Taxes”

Summary of Significant Accounting Policies(1)

Basis of Consolidation(a) Subsidiaries
Subsidiaries are entities controlled mainly by the Group through direct or indirect ownership of a majority of voting rights.
The Company consolidates all subsidiaries from the date on which the Group acquired control until the date on which the Group loses
control.
The financial statements of the Company’s subsidiaries have been adjusted if accounting policies applied by such subsidiaries differ
from those of the Group, if necessary.
Changes in ownership interest in subsidiaries without a loss of control are accounted for as equity transactions. On the other hand,24changes in ownership interest in subsidiaries with a loss of control are accounted for by derecognizing assets and liabilities, noncontrolling interests, and accumulated other comprehensive income attributable to the subsidiary.
Financial statements of subsidiaries whose fiscal closing dates differ from the consolidated account closing date are included in the
consolidated financial statements on the basis of a provisional account closing as of the consolidated account closing date.
(b) Associates and joint ventures (accounted for using the equity method)
Associates are entities over which the Group has the ability to exercise significant influence over operational and financial policies
mainly by holding 20% to 50% ownership directly or indirectly, but does not control such entities.
Joint ventures are entities jointly controlled by more than one party, including the Group, and decisions about operational and financial
policies require unanimous consent of all parties where the Group has a right to the net assets of the arrangement.
Investments in associates and joint ventures (“equity-method investees”) are accounted for using the equity method.
Consolidated financial statements include changes in net income and other comprehensive income of the equity method investees fromthe date on which the Group obtains significant influence or joint control over the investees to the date on which it loses significant
influence or joint control.
The financial statements of the Group’s equity-method investees have been adjusted, if necessary, when the accounting policies of such
equity-method investees differ from those of the Group.
(2)

Cash Equivalents
The Group considers highly liquid investments with insignificant risk of changes in value and original maturities of three months or lesswhen purchased to be cash equivalents.

(3)

Foreign Currency Translation
The consolidated financial statements are presented in Japanese yen, which is also the Company’s functional currency.
(a) Foreign currency transactions
Foreign currency transactions are translated into each functional currency of the Group using exchange rates prevailing at the dates of
the transactions or rates that approximate such rates. Monetary assets and liabilities denominated in foreign currencies are translatedusing the exchange rate at the end of the reporting period. Foreign exchange gains and losses resulting from currency translation andsettlement are recognized in profit or loss.
(b) Translation of the financial statements of foreign operations
Assets and liabilities of the Company’s foreign operations are translated into Japanese yen using the exchange rate at the end of thereporting period. Income and expense items are translated at the average exchange rate prevailing during the year.
Foreign exchange gains and losses resulting from the translation of financial statements of foreign operations are included in othercomprehensive income.

(4)

Financial Instruments
The Group has applied IFRS 9 Financial Instruments (issued in November 2009, amended in October 2010 and December 2011) earlier
than the mandatory effective date.
(a) Non-derivative financial assets
The Group initially recognizes trade receivables on the actual transaction dates. All other financial assets are initially recognized on thedates on which the Group becomes party to the agreement.
The Group derecognizes financial assets when the contractual rights to cash flows from the financial assets expire or are transferred,
and the risks and rewards of ownership of the financial assets are substantially transferred.
Classification and measurement models of non-derivative financial assets are summarized as follows:
Financial assets measured at amortized cost
Financial assets are subsequently measured at amortized cost when they meet the following requirements:• The financial asset is held in accordance with the Group’s business model, whose objective is to hold the asset in order to collectcontractual cash flows.
• The contractual terms of financial assets give rise on specified dates to cash flows that are solely payments of principal andinterest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction costs). The carrying
amount of financial assets measured at amortized cost is subsequently measured using the effective interest method, less impairment
losses when necessary.

25Impairment of financial assets measured at amortized cost
The Group evaluates financial assets measured at amortized cost for possible impairment on a periodic basis, but no less frequently
than at the end of each quarterly reporting period when there is objective evidence of impairment resulting from one or more eventsoccurring after the initial recognition and when the estimated future cash flows from the financial assets or group of assets can bereliably measured. Objective evidence of impairment includes historical credit loss; the existence of overdue payments; extended
payment terms; a negative evaluation by third-party credit rating agencies; excessive debts; and findings indicating a deteriorating
financial position or operating results.
An impairment loss is estimated based on the present value of estimated future cash flows of the financial asset discounted at theeffective interest rate or an observable market price.
In addition, an impairment loss is recognized based on the actual bad debt ratio calculated based on factors such as historicalexperience, or the estimated collectible amount, after assessing multiple potential risks associated with a country in which a debtor
conducts its business or business environment, including special business customs particular to the region.
In the consolidated statement of financial position, impairment losses of debt securities are directly deducted from their carrying
amount and impairment losses of financial assets other than debt securities are indirectly decreased through the allowance account.
For financial assets other than debt securities, account balances are generally written off against the allowance only after all meansof collection have been exhausted and the recoverability of the assets is considered remote. Write-offs are generally recognized only
when a debtor commences bankruptcy or liquidation proceedings because it is considered that all collection efforts will have been
exhausted by that time.
FVTPL financial assets
The Group classifies equity instruments not designated as FVTOCI financial assets at the initial recognition and debt instruments
not classified as financial assets measured at amortized cost as FVTPL financial assets. These instruments are subsequently
measured at fair value and any changes in fair value are recognized in profit or loss.
FVTOCI financial assets
The Group holds certain equity instruments to expand its revenue base by maintaining and strengthening business relations withinvestees. The Group makes an irrevocable election to designate these equity instruments as FVTOCI financial assets at initialrecognition. They are measured at fair value after initial recognition and changes in fair value are recognized in othercomprehensive income. The cumulative amount of the changes in fair value is recognized in accumulated other comprehensive
income. Dividends from equity instruments designated as FVTOCI are recognized in profit or loss unless it is obviously a return ofinvestment.
Derecognition of financial assets
The Group derecognizes financial assets when the contractual rights to cash flows from the financial assets expire or are transferred,
and the risks and rewards of ownership of the financial assets are substantially transferred.
(b) Non-derivative financial liabilities
The Group initially recognizes debt securities issued on the date of issuance. All other financial liabilities are initially recognized on
the transaction dates on which the Group becomes party to the agreement.
The Group derecognizes financial liabilities when extinguished, that is, when the obligation in the contract is redeemed, or the liability
is discharged, cancelled, or expires.
Non-derivative financial liabilities that the Group holds include bonds, debts, operating payables, and other liabilities. They are
initially measured at fair value (less direct transaction costs) and subsequently measured at amortized cost using the effective interest
method.
(c) Derivatives and hedge accounting
The Group uses derivative instruments, including forward exchange contracts, interest rate swaps, and copper futures trading, in orderto hedge currency risks, interest rate risks, and raw material (copper) price fluctuation risks, respectively.
The Group applies hedge accounting as follows:• Fair value hedge: a hedge against changes in the fair value of a recognized asset or liability, or an unrecognized firm commitment.
The changes in the fair value of the recognized assets or liabilities, or unrecognized firm commitments, and the related derivatives
are recognized in profit or loss if the hedge is considered highly effective.
• Cash flow hedge: a hedge against variability in cash flows attributable to a forecasted transaction or related to a recognized asset or
liability. The changes in the fair value of derivative instruments designated as cash flow hedges are recorded in other comprehensive
income (loss) if the hedge is considered highly effective. This treatment is continued until net income is affected by the variability incash flows or the unrecognized firm commitment of the designated hedged item, at which point changes in fair value of thederivative instruments are recognized in profit or loss.

26

The Group documents risk management objectives and strategies for undertaking various hedge transactions. In addition, the Groupassesses whether the derivative used in hedging activities is highly effective in offsetting changes in fair value or cash flows of thehedged item at the hedge’s inception and periodically on an ongoing basis. Hedge accounting is discontinued for ineffective hedges.
Subsequent changes in the fair value of derivatives related to discontinued hedges are immediately recognized in profit or loss.
(d) Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position only when
the Group currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize theasset and settle the liability simultaneously.
(5)

Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the specific identification method or average cost
method for merchandise and finished products, and work in process, and generally by the moving average cost method or average cost
method for raw materials and supplies. Net realizable value is the estimated selling price in the ordinary course of business, less theestimated costs of completion and the estimated costs necessary to sell.

(6)

Property, Plant and Equipment
The Group applies the cost model to property, plant and equipment and states such assets at cost, less accumulated depreciation andaccumulated impairment losses. The cost of an item of property, plant and equipment includes the direct cost of acquisition, and the cost ofits dismantlement, removal, and restoration. Property, plant and equipment are principally depreciated using the straight-line method overthe following estimated useful lives:
Buildings and structures:
2 to 60 years
Machinery and vehicles:
2 to 20 years
Tools, furniture and fixtures:
2 to 30 years
The estimated useful lives and the method of depreciation are reviewed at each fiscal year-end. Changes in estimated useful lives ordepreciation method are accounted for as a change in an accounting estimate and applied prospectively.

(7)

Goodwill and Other Intangible Assets(a) Goodwill
Goodwill is stated at cost, less any accumulated impairment losses.
(b) Intangible assets (excluding goodwill)
The Group applies the cost model to intangible assets and states such assets at cost, less accumulated amortization and impairment
losses.
Intangible assets with finite useful lives are amortized principally using the straight-line method over the following estimated useful
lives:
Software:2 to 10 years
Other intangible assets:
2 to 20 years(8)

Equity(a) Common stock and capital surplus
The amounts of equity instruments issued by the Company are recognized in common stock and capital surplus at their issued prices,and the costs incurred directly related to the issuance are deducted from capital surplus.
(b) Treasury stock
When the Company acquires treasury stock, the acquisition costs are recognized as deductions from equity. When treasury stock issold, the differences between the carrying amounts and the considerations are recognized in capital surplus.

(9)

Impairment of Non-Financial Assets
The Group performs impairment testing for non-financial assets whenever events or circumstances have occurred that indicate that thecarrying amount of the assets may not be recoverable. The Group tests goodwill and intangible assets with indefinite lives for impairment
annually, generally during the fourth quarter, irrespective of whether there is any indication of impairment. The Group performs
impairment testing by estimating the recoverable amount per cash-generating unit (CGU) to which the asset belongs. When performing an
impairment test, assets are grouped into the smallest identifiable group whose cash flows are independent.
In determining the recoverable amount, the Group uses available quoted market prices or the income approach (a present value technique)based on the estimated future cash flows expected to result from the use of the assets and their eventual disposition. If the carrying amountof the assets allocated to a CGU exceeds the recoverable amount, an impairment loss on the assets of that CGU is recognized.
When there is a significant change in the facts and circumstances used to calculate the recoverable amount of an asset other than goodwill,
and there is an indication that an impairment loss previously recognized on the asset may no longer exist or be decreased, the recoverable
amount of the asset or the CGU is estimated. If the recoverable amount of the asset or the CGU exceeds its carrying amount, then the
impairment loss is reversed to the extent of the carrying amount that would have been determined, net of depreciation or amortization, had
no impairment loss been recognized for the asset in prior years.

27

(10) Assets Held for Sale
The Group classifies an asset or a disposal group of assets whose carrying amount will be recovered through a sales transaction, rather than
through continuing use, as an asset or assets held for sale, if its sale is highly probable and it is available for immediate sale in its present
condition. Assets held for sale are not depreciated or amortized, and are measured at the lower of carrying amount or fair value, less costs
to sell.
(11) Post-Employment Benefits
The Company and its subsidiaries have contributory defined benefit pension plans as well as funded and unfunded lump-sum payment
plans to provide retirement and severance benefits to employees. The present value of defined benefit obligations and retirement benefit
costs are measured based on the projected unit credit method.
The effects of remeasurements of the net defined benefit asset or liability are recognized in other comprehensive income when incurred.
Past service cost is immediately recognized in profit or loss.
The net amount of a defined benefit asset or liability is calculated as the present value of the defined benefit obligation, less the fair valueof the plan assets, and is recognized as an asset or liability in the consolidated statement of financial position.
Additionally, the Company and certain subsidiaries have defined contribution pension plans, recognizing the contributions to the plans as
expenses during the fiscal year when employees have rendered service.
(12) Provisions
The Group recognizes provisions when it has a present obligation (legal or constructive) as a result of a past event, when it is probable thatan outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of obligation can be reliably
estimated.
When the time to settle an obligation is expected to be long and the time value of money is material, the amount of a provision is measured
at the present value of the expenditures expected to be required to settle the obligation. The discount rate used in calculating the present
value is a pre-tax rate that reflects the time value of money and the risks specific to the liability.
The nature and the amount of the provisions that the Group recorded are described in Note 12. “Provisions.”(13) Contingencies
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the Group discloses contingent liabilities in Note 25.
“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” for outflows of resources embodying economic
benefits whose realization is uncertain at the end of the reporting period, if it cannot be determined as a present obligation as of the end of
the reporting period or if it does not meet the recognition criteria of provisions prescribed in (12) “Provisions,” unless the possibility of any
outflow in settlement is remote.
The Group has financial guarantee contracts that require the Group to make specified payments to reimburse the creditor for a loss when
the debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are initiallymeasured at fair value adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initialrecognition, the Group accounts for liabilities related to the financial guarantee contracts at the higher of the best estimate of expenditures
required for settling the present obligation at the reporting date or the amount initially recognized, less cumulative amortization.
(14) Revenue Recognition
The Group recognizes revenue when persuasive evidence of an arrangement exists, it is probable that future economic benefits will flow to
the Group, and these benefits can be measured reliably.
Revenues from the sale of products are measured at the fair value of the consideration received or receivable. The fair value is the amountless discounts and rebates.
Revenue from sales of products is recognized when the significant risks and rewards of ownership of the products have been transferred tothe customer; the Group has no continuing involvement nor effective control over the products; the amount of revenue and the costs
incurred related to the transaction can be measured reliably; and it is probable that the economic benefits associated with the transaction
will flow to the Group. Primarily, the Group recognizes revenue from the sale of products upon delivery to the customer. The Group sells
products, such as high-grade specialty steel products, various mill rolls, injection molding machine parts, structural ceramic products,
steel-frame joints for construction, soft magnetic materials, nanocrystalline magnetic material and related applied products, magnets,
ceramic components, casting components for automobiles, aluminum wheels, other aluminum components, piping and infrastructurecomponents, electric wires and cables, and functional products.
(15) Income Taxes
Deferred tax assets and liabilities arising from temporary differences, unused tax losses, and unused tax credits are recognized based on theasset and liability method. A deferred tax liability is not recognized on the temporary difference arising from goodwill, and the temporary
difference arising from the initial recognition of an asset or liability in a transaction which is not a business combination, and at the time oftransaction, affects neither accounting nor taxable profit or loss. It is also not recognized on outside-basis difference arising from28

investments in subsidiaries and associates when the Group is able to control the timing of the reversal of the temporary difference and it isprobable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured using
enacted tax rates expected to be applied to taxable income in the fiscal year when those temporary differences are expected to be recovered.
The effects of a change in tax rates on deferred tax assets and liabilities are recognized in profit or loss and other comprehensive income in
the fiscal year that includes the date of enactment of the change in the tax rate. Deferred tax assets are recognized to the extent that it isprobable that future taxable income will be available against which any unused tax losses, unused tax credits, and future deductible
temporary difference can be utilized.
(16) Consumption Tax
Consumption tax collected and remitted to taxing authorities is excluded from revenues, cost of sales, and expenses in the consolidated
statements of income.
(17) Earnings per Share
Basic earnings per share (“EPS”) attributable to shareholders of the parent company is calculated based on the weighted-average ofcommon stock outstanding during the period.
(18) Business Combinations
Business combinations are accounted for using the acquisition method. Acquisition cost is determined as the total consideration transferred,measured at the acquisition date fair value and the non-controlling interests in the acquiree. For each business combination, the Groupchooses to measure any non-controlling interest in the acquiree at fair value or on the basis of its proportionate interest in the acquiree’s
identifiable net assets at fair value. Acquisition-related costs are recognized as incurred in profit or loss.
Business combinations under common control, in other words, business combinations in which all the combining entities or businesses areultimately controlled by the same party or parties both before and after the business combinations and when the control is not temporary,
are accounted for based on carrying amounts.
(19) Standards Issued but Not Yet Effective
The Group has not applied the following standards and interpretations that were issued, amended, or revised but not yet effective before
the approval date of the accompanying consolidated financial statements as of and for the year ended March 31, 2018. The potential
impacts of applying IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the consolidated financial
statements are expected to be insignificant. The Company is currently assessing the potential impacts of applying IFRS 16 Leases.
Mandatory effective date(beginning on or after)

Expected
application dateby the Group
Effective from thefiscal year ending
March 31, 2019

IFRS

Title

IFRS 9Financial
Instruments

January 1, 2018

IFRS 15

Revenue
fromContracts
with
Customers
LeasesJanuary 1, 2018

Effective from thefiscal year ending
March 31, 2019

Revision of accounting treatments and disclosures forrevenue recognition

January 1, 2019

Effective from thefiscal year ending
March 31, 2020

Revision of definition of a lease and accounting treatments
for a lessee.

IFRS 16

29

Summary of new or amended standards and interpretations
Revision of hedge accounting (November 2013)
Revision of classification and measurement of financial
instruments and introduction of the expected loss model forthe impairment of financial assets (July 2014)

Segment Information
Business Segments
The Group’s operating segments are components for which independent financial information is available and which are regularly reviewed by
the Board of Directors to assist the Board in making decisions about resources to be allocated to the segments and to assess performance.
The Group has adopted a company-based organizational structure and established seven business headquarters based on the type of products andservices. Each of the seven business units prepares a comprehensive strategy and engages in business activities related to their products andservices for both the domestic and overseas markets.
The Specialty Steel Products segment comprises the Specialty Steel Business, Roll Business, and Soft Magnetic Materials Business. The
Magnetic Materials and Applications segment comprises the Magnet Business. The Functional Components and Equipment segment comprises
the Automotive Components Business and Piping Components Business. The Wire, Cables, and Related Products segment comprises theElectric Wires and Cables Business.
The Group has changed its segment names from “High-Grade Metal Products and Materials” to “Specialty Steel Products” and from “HighGrade Functional Components and Equipment” to “Functional Components and Equipment” effective from April 1, 2017. This change insegment names does not affect the segment information.
The primary products and services included in each segment are as follows:
Reportable segment

Major products and services

Specialty Steel Products

YSSTM brand high-grade specialty steel products (molds and tool steel, alloys for electronic products[display-related materials, semiconductor and other package materials, and battery-related materials],materials for industrial equipment [automobile-related materials and razor and blade materials], aircraft- andenergy-related materials, and precision cast components); rolls for steel mills; injection molding machineparts; structural ceramic products; steel-frame joints for construction; soft magnetic materials (Metglas®
amorphous metals; FINEMET® nanocrystalline magnetic material; and soft ferrite); and applied products

Magnetic Materials andApplications

Magnets (NEOMAX® rare-earth magnets, ferrite magnets, and other magnets and applied products) andceramic components

Functional Components andEquipment

Casting components for automobiles (HNMTM high-grade ductile cast iron products, cast iron products fortransportation equipment, and HERCUNITE® heat-resistant exhaust casting components); SCUBATM
aluminum wheels; other aluminum components; piping and infrastructure components ( Gourd® brand pipe
fittings, valves, stainless steel and plastic piping components, water cooling equipment, precision mass flow
control devices, and sealed expansion tanks)

Wires, Cables, and Related
Products

Electric wires and cables (industrial cables, electronic wires, electric equipment materials, and industrial
rubber products) and functional products (cable assemblies, electronic automotive components, and brakehoses)The same accounting policies as the ones described in Note 3. “Summary of Significant Accounting Policies” are applied to the reportablesegments.
Income by reportable segment is based on operating income. Intersegment revenues are based on prevailing market price.

30

The following tables show business segment information for the years ended March 31, 2018 and 2017:
For the year ended March 31, 2018

Millions of yen
Reportable segment
Specialty
Steel
Products

Magnetic Functional
Wires,
Materials Components Cables, andandandRelatedApplications Equipment
Products

Subtotal

Others

Total

Adjust- Consolidated
ments statement ofincomeRevenues
External customers¥ 290,412¥ 106,119¥ 360,053¥ 229,888¥ 986,472¥ 1,831¥ 988,303¥‒¥ 988,303

187

12

‒

644

843

1,586

2,429

(2,429)‒290,599

106,131360,053

230,532

987,315

3,417

990,732(2,429)988,303

26,127

7,286

607

11,18345,203111

45,314

1,012

46,326

Financial income

‒

‒

‒

‒

‒

‒

‒

‒

1,437

Financial expenses

‒

‒

‒

‒

‒

‒

‒

‒

(3,484)

‒

‒

‒

‒

‒

‒

‒

‒

2,706

‒

‒

‒

‒

‒

‒

‒

‒

46,985

388,098

135,390

341,073

246,805

1,111,366

1,490

1,112,856 (54,024)

1,058,832

Depreciation andamortization

14,275

7,086

16,7396,715

44,815298

45,113

1,025

46,138

Capital expenditure

27,974

20,61924,7058,710

82,008207

82,215

9,571

91,786

Impairment losses

1,193

1,340

8,011

41

10,58526

10,611‒

10,611

Intersegment
transactions
Total revenues
Segment profit

Share of profits ofinvestments accounted
for using the equity
methodIncome before income
taxes
Segment assets
Other items:

Notes: 1. Segment profit is based on operating income.
2. Intersegment transactions are recorded at the same prices used in transactions with third parties. Adjustments represent mainly
allocation variances of general and administrative expenses for corporate assets, which are not allocated to each reportable segment.
3. Adjustments represent mainly cash and cash equivalents, investments in securities, and other financial assets allocated to corporate
assets and eliminations of intersegment transactions.
4. Capital expenditure represents increases in property, plant and equipment, intangible assets, and investment property.
The Company has changed the business segment of SH Copper Products Co., Ltd, a subsidiary of the Company, and another subsidiary from the
Wires, Cables, and Related Products segment to the Specialty Steel Products segment effective from July 1, 2017, aiming to strengthen batteryrelated components in the Specialty Steel Products segment. Associated with this change, the operating results of SH Copper Products and one
other subsidiary for the year ended March 31, 2018, have been recorded under the Specialty Steel Products segment.

31

For the year ended March 31, 2017
Millions of yen
Reportable segment
Specialty
Steel
Products

Magnetic Functional
Wires,
Materials Components Cables, andandandRelatedApplications Equipment
Products

Subtotal

Others

Total

Adjust- Consolidated
ments statement ofincomeRevenues
External customers¥ 243,127¥ 99,754¥ 333,506¥ 232,713¥ 909,100¥ 1,386¥ 910,486¥‒¥ 910,486

104

2

3

173

282

1,577

1,859

(1,859)－243,23199,756

333,509

232,886

909,382

2,963

912,345(1,859)910,486

22,171

9,301

15,92020,05967,451

331

67,782

485

68,267

Financial income

‒

‒

‒

‒

‒

‒

‒

‒

594

Financial expenses

‒

‒

‒

‒

‒

‒

‒

‒

(3,999)

‒

‒

‒

‒

‒

‒

‒

‒

1,154

‒

‒

‒

‒

‒

‒

‒

‒

66,016348,632

117,927

334,241

228,428

1,029,228

5,485

1,034,713

5,677

1,040,390

Depreciation andamortization

13,0506,106

14,6508,018

41,824

390

42,214825

43,039

Capital expenditure

17,96813,65922,575

7,056

61,258122

61,3802,463

63,843

Impairment losses

123

204

‒

730

1,057

‒

1,057

6

1,063

Intersegment
transactions
Total revenues
Segment profit

Share of profits ofinvestments accounted
for using the equity
methodIncome before income
taxes
Segment assets
Other items:

Notes: 1. Segment profit is based on operating income.
2. Intersegment transactions are recorded at the same prices used in transactions with third parties. Adjustments represent mainly
allocation variances of general and administrative expenses for corporate assets, which are not allocated to each reportable segment.
3. Adjustments represent mainly cash and cash equivalents, investments in securities, and other financial assets allocated to corporate
assets and eliminations of intersegment transactions.
4. Capital expenditure represents increases in property, plant and equipment, intangible assets, and investment property.

32Thousands of U.S. dollars
Reportable segment
Specialty Steel
Products

Magnetic
Functional
Materials Components
andandApplications Equipment

Wires,
Cables, andRelatedProducts

Subtotal

Others

Total

Adjust- Consolidated
ments statement ofincomeRevenues
External customers$ 2,733,547$ 998,861

1,760

113

‒

6,062

7,935

14,92822,863(22,863)‒

2,735,307

998,974

3,389,053

2,169,917

9,293,251

32,1639,325,414(22,863)

9,302,551

245,924

68,581

5,713

105,262

425,480

1,045

426,5259,526

436,050

Financial income

‒

‒

‒

‒

‒

‒

‒

‒

13,526

Financial expenses
Share of profits ofinvestments
accounted forusing the equity
methodIncome before
income taxes

‒

‒

‒

‒

‒

‒

‒

‒

(32,794)

‒

‒

‒

‒

‒

‒

‒

‒

25,471

‒

‒

‒

‒

‒

‒

‒

‒

442,253

3,653,031

1,274,379

3,210,401

2,323,089

10,460,900

14,025

10,474,925 (508,509)

9,966,416

Other items:
Depreciation andamortization
Capital expenditure

134,366

66,698

157,558

63,206

421,8282,805

424,633

9,648

434,281

263,309

194,079

232,540

81,984

771,913

1,948

773,861

90,088863,950

Impairment losses

11,22912,61375,405386

99,633245

99,878‒99,878Intersegment
transactions
Total revenues
Segment profit

Segment assets$ 3,389,053 $ 2,163,855 $ 9,285,316 $ 17,235 $ 9,302,551

33$ ‒ $ 9,302,551

Other Related Information
For the year ended March 31, 2018
1. Product and service information
Information is similar to that presented under Segment Information above and is therefore omitted.
2. Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

Europe¥ 431,549¥ 294,836¥ 198,076

Japan

North America

Asia

Other areas¥ 51,447¥ 12,395

Total¥ 988,303

Thousands of U.S. dollars
EuropeOther areas

Total$ 4,062,020$ 2,775,188$ 1,864,420$ 484,253$ 116,670$ 9,302,551
Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥259,683 million (US $2,444,305 thousand) and¥75,323 million (US $708,989 thousand), respectively.
(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America¥ 321,141¥ 170,395

Asia

Europe¥ 44,664

Other areas¥ 278¥ 1,482

Total¥ 537,960

Thousands of U.S. dollars
Japan

North America

Asia

EuropeOther areas

Total$ 3,022,788$ 1,603,869$ 420,407$ 2,617$ 13,950$ 5,063,630
Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and the UnitedStates were not material.
Non-current assets (excluding financial instruments) attributable to the United States were ¥170,395 million(US $1,603,869 thousand).
3. Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2018.
For the year ended March 31, 2017
1. Product and services information
Information is similar to that presented under Segment Information above and is therefore omitted.
2. Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 403,610¥ 276,803¥ 174,227¥ 42,755¥ 13,091¥ 910,486
Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥245,194 million and ¥62,743 million, respectively.
(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 279,130¥ 191,458¥ 42,504¥ 203¥ 1,361¥ 514,656
Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and the UnitedStates were not material.
Non-current assets (excluding financial instruments) attributable to the United States were ¥191,458 million.

34

3. Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2017.

Trade Receivables
Trade receivables as of March 31, 2018 and 2017, are summarized as follows:

March 31, 2018

March 31, 2017

Thousands of
U.S. dollars
March 31, 2018

¥ 180,252¥ 157,564$ 1,696,649

27,573(197)¥ 207,628

18,270(266)¥ 175,568

259,535(1,854)$ 1,954,330

Millions of yen
Accounts receivable
Notes receivable and electronically recordedmonetary claims
Allowance for doubtful accounts
Total

For credit risk control and fair value of trade receivables, see Note 21. “Financial Instruments and Other Related Information.”

Inventories
Inventories as of March 31, 2018 and 2017, are summarized as follows:
Millions of yen
Merchandise and finished products
Work in process
Raw materials and supplies
Total

March 31, 2018
¥ 62,842
75,121
52,239¥ 190,202

March 31, 2017
¥ 54,767
59,141
39,648¥ 153,556

Thousands of
U.S. dollars
March 31, 2018
$ 591,510
707,088491,707$ 1,790,305

The amount of inventories written down for the years ended March 31, 2018 and 2017, was ¥2,942 million (US $27,692 thousand) and¥2,428 million, respectively.

Investments Accounted for Using the Equity Method
The summarized financial information, in aggregate, for individually immaterial associates and joint ventures accounted for using the equity
method as of and for the years ended March 31, 2018 and 2017, is as follows:
These amounts represent the Group’s share of the associates and joint ventures per ownership percentage.
(1) Investments in associates
Millions of yen
Carrying amount of investments

March 31, 2018
¥ 27,863

March 31, 2017
¥ 26,2392017¥ 1,127
(598)
¥ 529

Thousands of
U.S. dollars
2018$ 23,428
4,895$ 28,323

March 31, 2017¥‒

Thousands of
U.S. dollars
March 31, 2018$‒

Millions of yen
Net income
Other comprehensive income
Total comprehensive income

Thousands of
U.S. dollars
March 31, 2018
$ 262,265

2018¥ 2,489520¥ 3,009(2) Investments in joint ventures
Millions of yen
Carrying amount of investments

March 31, 2018¥‒35

Thousands of
U.S. dollars
2018$ 2,043‒$ 2,043

Millions of yen
2018
¥ 217
‒
¥ 217

Net income
Other comprehensive income
Total comprehensive income

2017
¥ 27
(243)
¥ (216)

Property, Plant and Equipment
The following tables show the reconciliation of the carrying amount, acquisition costs, accumulated depreciation, and accumulated impairment
losses of property, plant and equipment as of and for the years ended March 31, 2018 and 2017:
Millions of yen
Tools,
Machineryfurnitureand vehicles
and fixtures

Buildings
andstructures

Land

Other
tangible
assetsConstructionin progress

Total

Carrying amountAt April 1, 2016
Additions
Disposals
Depreciation
Impairment losses
Effects of exchange rate changes
Transfer from construction in progress
Change in the scope of consolidation
Other
At March 31, 2017
Additions
Disposals
Depreciation
Impairment losses
Effects of exchange rate changes
Transfer from construction in progress
Change in the scope of consolidation
Other
At March 31, 2018

¥ 55,919¥ 80,060¥ 129,345¥ 16,700¥ 401¥ 21,867¥ 304,292

‒
(712)

1,848
(796)

2,639
(1,062)

1,354
(296)

‒
‒

55,928(44)

61,769(2,910)‒(182)(6,816)(660)(23,608)(62)(7,102)
(218)

(90)
‒

‒
(17)

(37,616)(1,139)

37
‒

(404)
5,217

(522)
38,260

(82)
7,064

(2)
‒

(12)
(50,541)

(985)
‒

(251)
638

953
384

844
208

(1,076)
2

(85)
(9)

(131)
(221)

254
1,002

¥ 55,449¥ 79,786¥ 146,042¥ 16,346¥ 215¥ 26,829¥ 324,667

14
(200)

418
(538)

2,482
(1,618)

1,506
(616)

‒
(10)

86,068(23)

90,488(3,005)‒‒(6,950)(1,418)(26,708)(6,395)(7,804)
(715)

(83)
‒

‒
(2,178)(41,545)(10,706)

(50)
‒

(997)
8,967

(2,379)44,598

(220)
8,213

1
‒

(332)
(61,778)(3,977)‒‒403‒(1,434)

(3)
(72)

(3)
506

‒
61

(5)
(57)

(11)
(593)

¥ 55,616¥ 77,834¥ 155,947¥ 17,213¥ 184¥ 48,524¥ 355,318

Land

Buildings
andstructures$ 521,922$ 750,998

Thousands of U.S. dollars
Tools,
Other
Machineryfurnituretangibleand vehicles
andassetsfixtures

Constructionin progress

Total$ 2,024$ 252,532$ 3,055,977

Carrying amountAt April 1, 2017
Additions
Disposals$ 1,374,642$ 153,859

132

3,934

23,362

14,175‒810,128

851,732(1,883))‒(5,064)(65,418)(15,230)(251,393)(5,798)(73,456)(94))(781))(216)‒(28,285)(391,049)‒(471))(13,347)(9,384)(60,194)(22,393)(6,730)(2,071)‒
9(20,501)(3,125)(100,772)(37,434)‒‒

84,403‒419,785(28)

77,306(28)‒‒(581,495)
(47)

‒
(104)

3,793

(13,498)

(678)

4,763

574

(537)

(5,582)At March 31, 2018
$ 523,494$ 732,624$ 1,467,875$ 162,020
Note: Property, plant and equipment under construction are presented as construction in progress.

$ 1,732$ 456,739$ 3,344,484

Depreciation
Impairment losses
Effects of exchange rate changes
Transfer from construction in progress
Change in the scope of consolidation
Other

Depreciation charges recognized for the years ended March 31, 2018 and 2017, are included in cost of sales and selling, general andadministrative expenses of the consolidated statement of income. Impairment losses are included in other expenses of the consolidated
statement of income.

36

Millions of yen
Tools,
Other
Machineryfurnituretangibleand vehicles
and fixtures
assetsLand

Buildings
andstructures

At April 1, 2016

¥ 56,837¥250,953¥ 580,858¥ 88,499¥ 1,128¥ 22,047¥ 1,000,322

At March 31, 2017

55,90455,865259,939
260,589

641,348665,225

91,243
98,764944
941

26,84750,687

1,076,225
1,132,071¥ 918¥ 170,893¥ 451,513¥ 71,799

¥ 727

¥ 180

¥ 696,030

455
249

180,153
182,755

495,306
509,278

74,89781,551

729
757

18
2,163

751,558
776,753

Constructionin progress

Total

Acquisition cost

At March 31, 2018
Accumulated depreciation andaccumulated impairment losses
At April 1, 2016
At March 31, 2017
At March 31, 2018Land

Buildings
andstructures

Thousands of U.S. dollars
Tools,
Other
Machineryfurnituretangibleand vehicles
and fixtures
assets$ 525,838$ 2,452,833$ 6,261,530$ 929,631$ 2,344$ 1,720,209$ 4,793,656$ 767,611

Constructionin progress

Total$ 8,857$ 477,099$ 10,655,789$ 7,125$ 20,360$ 7,311,305

Acquisition cost
At March 31, 2018
Accumulated depreciation andaccumulated impairment losses
At March 31, 2018

Items of property, plant and equipment are grouped by the smallest identifiable group of assets that generate cash inflows and that are largely
independent of the cash inflows.
The Group recognized impairment losses of ¥10,706 million (US $100,772 thousand) and ¥1,139 million on property, plant and equipment for
the years ended March 31, 2018 and 2017, respectively.
Impairment losses were recognized for the year ended March 31, 2018, to reduce the carrying amounts of business-use assets (mainly buildings
and machinery), due mainly to a decline in profitability in the aluminum wheels business of the Functional Components and Equipment segment,
to their recoverable amounts for the amount of ¥8,011 million (US $75,405 thousand). The recoverable amount of an asset is determined basedon its fair value less costs of disposal, and the assets above were evaluated as ¥3,514 million (US $33,076 thousand) as of March 31, 2018. The
fair value of an asset is determined mainly under the market approach. The fair value is measured based on real estate appraisals. The fair value
hierarchy for such inputs is classified as Level 3.
Impairment losses were recognized for the year ended March 31, 2017, to reduce the carrying amounts of business-use assets (mainly buildings,
and tools furniture, and fixtures), due to a decline in profitability in part of the Specialty Steel Products segment, and of idle assets (mainly landand buildings) in the Specialty Steel Products segment and Wires, Cables, and Related Products segment to their recoverable amounts.

37

Goodwill and Intangible Assets
The following tables show the reconciliation of the carrying amounts, acquisition costs, and the accumulated amortization and accumulated
impairment losses of goodwill and intangible assets as of and for the years ended March 31, 2018 and 2017:
Software forinternal use

Millions of yen
Software forsale¥ 113,335‒‒¥ 3,937¥ 2,743¥ 38,900¥ 158,915

109

3

1,962

2,074

(1,259)(1,459)(2,572)(5,290)

‒

(32)

‒

(176)

(208)

‒
(369)

(13)
(9)

‒
(11)

(4)
(248)

(17)
(637)

Transfer from software in progress
Change in the scope of consolidation

‒
‒

1,155
(110)

595
(1,877)(1,750)(1,507)‒(3,494)

Other

98

(465)

464

(245)

(148)

¥ 113,064‒¥ 3,313
108

¥ 458
38

¥ 34,360
1,116¥ 151,195
1,262

‒
‒

(1,256)
(9)

(194)
‒

(3,040)(41)(4,490)(50)‒(4,396)

(6)
(8)

‒
(19)

(8)
(1,561)(14)(5,984)

‒
‒

841
(1)

‒
‒

(841)
‒

‒
(1)

(28)

(8)

‒

14

(22)

¥ 108,640¥ 2,974¥ 283¥ 29,999¥ 141,896

Goodwill

Other
intangible assets

Total

Carrying amountAt April 1, 2016
Purchases
Amortization
Impairment losses
Disposals
Effects of exchange rate changes

At March 31, 2017
Purchases
Amortization
Impairment losses
Disposals
Effects of exchange rate changes
Transfer from software in progress
Change in the scope of consolidation
Other
At March 31, 2018

Thousands of U.S. dollars
Software for
Other
sale
intangible assets

Goodwill

Software forinternal use$ 1,064,232$ 31,184$ 4,311$ 323,419$ 1,423,146

‒
‒

1,017
(11,822)358(1,826)

10,505(28,614)

11,879(42,263)

‒
‒

(85)
(56)

‒
‒

(386)
(75)

(471)
(132)

(41,378)
‒

(75)
7,916

(179)
‒

(14,693)(7,916)(56,325)
‒

‒
(264)

(9)
(75)

‒
‒

‒
132

(9)
(207)

$ 1,022,590$ 27,993$ 2,664$ 282,370$ 1,335,617

Total

Carrying amountAt April 1, 2017
Purchases
Amortization
Impairment losses
Disposals
Effects of exchange rate changes
Transfer from software in progress
Change in the scope of consolidation
Other
At March 31, 2018

Amortization recognized for the years ended March 31, 2018 and 2017, was included in the cost of sales and selling, general and administrative
expenses of the consolidated statement of income. Impairment losses are included in other expenses in the consolidated statement of income.

38

Goodwill

Software forinternal use

Millions of yen
Software for
sale

Other intangible
assets

Total

Acquisition cost
At April 1, 2016

¥ 113,830¥ 16,149¥ 18,542¥ 45,408¥ 193,929

At March 31, 2017

113,559
109,135

14,86015,136

1,530
1,489

44,05142,282

174,000
168,042¥ 495¥ 12,212
11,547
12,162¥ 15,799
1,072
1,206

¥ 6,508
9,691
12,283¥ 35,014
22,805
26,146At March 31, 2018
Accumulated amortization andaccumulated impairment losses
At April 1, 2016
At March 31, 2017
At March 31, 2018

495
495

Thousands of U.S. dollars
Software for
Other intangible
saleassetsGoodwill

Software forinternal use$ 1,027,250$ 142,470$ 14,015$ 397,986$ 1,581,721$ 4,659$ 114,477$ 11,352$ 115,616$ 246,103

Total

Acquisition cost
At March 31, 2018
Accumulated amortization andaccumulated impairment losses
At March 31, 2018

For the years ended March 31, 2018 and 2017, there were no material intangible assets with indefinite useful lives.
The Group expenditures on R&D recognized as expenses for the years ended March 31, 2018 and 2017, are ¥17,749 million(US $167,065 thousand) and ¥17,971 million, respectively. R&D expenses are included in cost of sales and selling, general and administrative
expenses in the consolidated statement of income.
The Group performs impairment testing for goodwill acquired through business combinations by comparing the carrying amount and therecoverable amount per CGU or group of CGUs.
Significant goodwill recognized in the consolidated statement of financial position is primarily goodwill related to the Functional Components
and Equipment segment arising from the acquisition of Waupaca Foundry, Inc. in 2014 (¥65,372 million (US $615,324 thousand) and¥69,399 million as of March 31, 2018 and 2017, respectively) and that related to the Magnetic Materials and Applications business inconnection with the acquisition of additional shares in NEOMAX Co., Ltd. through a tender offer in 2006 (¥35,781 million(US $336,794 thousand) and ¥35,781 million as of March 31, 2018 and 2017, respectively).
The Group measures the recoverable amount for each CGU or group of CGUs by the value in use. In assessing the value in use, estimated future
cash flows based on management-approved business plans are discounted to their present values using the discount rate based on the weightedaverage cost of capital. The business plan to be used is based on external information and reflects historical trends, generally with a maximum
period of five years. Since the Group is engaged in a wide range of business activities from development, production, and sale of diverse
products to providing various services, appropriate external information for each business activity is used for evaluating the value in use. In
addition, the estimated future cash flows subsequent to the business plan are calculated using the estimated growth rate not exceeding the longterm average growth rate of the market to which the CGU belongs.
The discount rate used for impairment testing of the significant goodwill is estimated based on prior years’ weighted-average cost of capital(approximately 5.0% to 10.0%). For future cash flows, a permanent growth rate (maximum 2.0%) is applied. Such rate is determined not toexceed the growth rate of countries and regions making estimates, including budgets, and engaged in business activities. Furthermore, evenwhen primary assumptions used for the impairment test change within a reasonable and foreseeable range, Group management considers any
significant impairment losses unlikely to occur.

39

Deferred Taxes and Income Taxes
The following table shows major components of income taxes:

2018

2017

Thousands of
U.S. dollars
2018¥ 14,377¥ 15,382$ 135,326(6,490)(2,977)¥ 4,910

1,803(1,861)¥ 15,324(61,088)(28,021)$ 46,216

Millions of yen
Income taxes
Current tax expense
Deferred tax expense
Accruals and reversals of temporary differences
Changes in realizability of deferred tax assets
Total

The Company is subject to a national corporate tax, inhabitant tax, and deductible business tax, and those taxes resulted in combined statutory
income tax rates of 30.7% for each of the years ended March 31, 2018 and 2017.
The Company has elected to file a consolidated income tax return.
On December 22, 2017, major tax reform was approved by the U.S. Congress in the Tax Cuts and Jobs Act, and the federal corporate income tax
rate has been reduced from 35% to 21% effective from January 1, 2018. As a result, income taxes for the year ended March 31, 2018, decreasedby ¥3,670 million (US $34,544 thousand).
The reconciliation between the combined statutory income tax rate and the effective income tax rate as a percentage of income before income
taxes is as follows:
Combined statutory income tax rate
Share of profits of investments accounted for using the equity method
Expenses not deductible for tax purposes
Special tax credit for corporate taxes
Adjustments to deferred tax assets and liabilities due to enacted tax laws and rates
Change in realizability of deferred tax assets
Other, net
Effective income tax rate

2018
30.7%
(1.8)
0.3
(4.0)
(7.5)
(6.3)
(0.9)
10.5%

2017
30.7%
(0.5)
0.2
(2.9)
0.1
(2.8)
(1.6)
23.2%

Changes in significant portion of the deferred tax assets and liabilities are as follows:

Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reserve regulated by
Japanese tax laws
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Changes in thescope ofconsolidation

March 31, 2018

¥ (2,242)
‒
‒
‒
(191)
¥ (2,433)

¥‒
‒
‒
‒
74
¥ 74

¥ 18,113
2,455
5,499
2
18,242¥ 44,311

225
19
2,268

‒
(26)
‒

‒
‒
‒

(1,563)(2,205)(6,936)4,886(51)¥ 7,347¥ 9,467‒‒¥ (26)¥ (2,459)

‒
‒
‒
¥ 74

(6,353)(17,279)¥ (34,336)¥ 9,975

April 1, 2017

Recognized in
profit or loss

¥ 20,100
2,275
5,581
197
16,397¥ 44,550

¥ 255
180
(82)
(195)
1,962
¥ 2,120(1,788)(2,198)(9,204)(11,239)(17,228)¥ (41,657)¥ 2,893

40

Millions of yen
Recognized inothercomprehensive
incomeDeferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reserve regulated by
Japanese tax laws
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reserve regulated by
Japanese tax laws
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Changes in thescope ofconsolidation

March 31, 2017

¥ (1,166)
‒
‒
‒
(489)
¥ (1,655)¥ (308)
(47)
227
‒
242
¥ 114

¥ 20,100
2,275
5,581
197
16,397¥ 44,550

31
(35)
(831)

‒
13
‒

‒
‒
‒

(1,788)(2,198)(9,204)746
2,262¥ 2,173
¥ 58

‒
‒
¥ 13
¥ (1,642)‒(256)¥ (256)¥ (142)(11,239)(17,228)¥ (41,657)¥ 2,893

April 1, 2016

Recognized in
profit or loss

¥ 21,881
3,930
5,769
904
15,722¥ 48,206¥ (307)(1,608)
(415)
(707)
922
¥ (2,115)(1,819)(2,176)(8,373)(11,985)(19,234)¥ (43,587)¥ 4,619

April 1, 2017

Millions of yen
Recognized inothercomprehensive
incomeThousands of U.S. dollars
Recognized in
Changes in the
Recognized inotherscope ofprofit or loss
comprehensive
consolidation
incomeMarch 31, 2018

$ 189,194
21,41452,532
1,854
154,339$ 419,334$ 2,400
1,694(772)(1,835)
18,468$ 19,955$ (21,103)‒‒‒(1,798)$ (22,901)

$ ‒
‒
‒
‒
697
$ 697

$ 170,491
23,10851,76019
171,706$ 417,084(16,830)(20,689)(86,634)

2,118
179
21,348

‒
(245)
‒

‒
‒
‒

(14,712)(20,755)(65,286)(105,789)(162,161)$ (392,103)$ 27,231

45,990(480)$ 69,155$ 89,110‒‒$ (245)$ (23,146)

‒
‒
$ ‒
$ 697

(59,799)(162,641)$ (323,193)$ 93,891

Deferred tax liabilities have not been recognized for excess amounts over the tax bases of investments in foreign subsidiaries and associates thatare considered to be reinvested indefinitely, because such differences will not reverse in the foreseeable future.
Total temporary differences related to undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognized as ofMarch 31, 2018 and 2017, were ¥143,391 million (US $1,349,689 thousand) and ¥143,620 million, respectively.
In assessing the realizability of deferred tax assets, the Group considers whether it is probable that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in specific tax
jurisdictions during periods in which these deductible temporary differences become deductible or unused tax credits can be used. Althoughrealization is not assured, the Group considers the scheduled reversals of deferred tax liabilities and projected future taxable income in making
the assessment. Based on these factors, the Group believes that it is probable that it will realize the recognized deferred tax assets as of March 31,
2018.

41

Deductible temporary differences, net operating loss carry-forwards, and unused tax credits carry-forwards for which no deferred tax asset isrecognized are as follows:
Millions of yen
Deductible temporary difference
Net operating loss carry-forwards
Unused tax credits carry-forwards
Total

March 31, 2018
¥ 32,637
6,870
554¥ 40,061

March 31, 2017
¥ 49,145
6,931
646¥ 56,722

Thousands of
U.S. dollars
March 31, 2018
$ 307,201
64,6655,215$ 377,080

Carry-forwards related to net operating losses and unused tax credits on which no deferred tax asset is recognized will expire as follows:
Millions of yen
March 31, 2018
Net operating loss carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total net operating loss carry-forwards
Unused tax credits carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total unused tax credits carry-forwards

March 31, 2017

Thousands of
U.S. dollars
March 31, 2018

¥ 6,870‒¥ 6,870¥ 6,809122¥6,931$ 64,665‒$ 64,665

¥ 554
‒
¥ 554

¥ 646
‒
¥ 646

$ 5,215‒$ 5,215

March 31, 2018
¥ 151,511

March 31, 2017

Thousands of
U.S. dollars
March 31, 2018

¥ 133,366$ 1,426,120

21,483

17,419202,212¥ 172,994¥ 150,785$ 1,628,332

Trade Payables
Trade payables as of March 31, 2018 and 2017, are summarized as follows:
Millions of yen

Accounts payable
Notes payable and electronically recorded obligations
Total

Provisions
Details and the reconciliation of provisions included in other current liabilities and other non-current liabilities as of and for the year ended
March 31, 2018, are as follows:

Balance at April 1, 2017
AdditionsUtilized
Reversals

Millions of yen
Asset retirement
Provision for
obligations
environmental measures¥ 774¥ 1,492
33
22
(16)
(574)

Effects of exchange rate changes
Balance at March 31, 2018
Current
Non-current

42

(45)
(29)

(79)
‒

¥ 717

¥ 861

‒

14

¥ 717

¥ 847

Thousands of U.S. dollars
Asset retirement
Provision for
obligations
environmental measures
Balance at April 1, 2017

$ 7,285$ 14,044

AdditionsUtilized

311
(151)

207
(5,403)

Reversals
Effects of exchange rate changes

(424)
(273)

(744)
‒

$ 6,749$ 8,104‒132$ 6,749$ 7,973

Balance at March 31, 2018
Current
Non-current

Asset retirement obligations:
The Group recognizes asset retirement obligations principally based on estimated future expenditures using historical trends when the Group
has a legal obligation associated with the retirement of property, plant and equipment used in normal operation, such as obligations to restore
the site in relation to lease agreements for plant facilities and premises.
Provision for environmental measures:
A provision for environmental measures is provided for disposal costs anticipated to be incurred with respect to the Law Concerning Special
Measures against PCB Waste.

Employee Benefits(1)

Post-Employment Benefits
The Company, its subsidiaries located in Japan, and certain overseas subsidiaries have contributory defined benefit pension plans andfunded and unfunded lump-sum payment plans to provide retirement and severance benefits to employees. An employee retirement benefit
trust is established for the pension plans and the lump-sum payment plans.
The Company and some of its subsidiaries have contract-type pension plans based on the pension rules. They also have established a postemployment benefits committee as an advisory body for significant matters related to the pension plans. The committee holds meetings toreport various matters, such as asset management performance, plan status, and accounting treatments, and to discuss agendas, such as plan
revisions and investment policy changes, as necessary.
Under the unfunded lump-sum payment plans, employees are entitled to receive lump-sum payments based on their earnings and thelength of service at retirement.
In addition, the Company and its certain subsidiaries have defined contribution pension plans.
Reconciliations of the beginning and ending balances of the benefit obligation and the fair value of the plan assets of the defined benefit
pension plans are as follows:
Millions of yen
2018¥ 190,008
6,948
1,915
1,204
(181)
(10,493)‒196¥ 189,597

Defined benefit obligations at the beginning of the year
Service costs
Interest costs
Actuarial gains and losses
Past service cost
Benefits paid
Wind-up of some plans
Effects of exchange rate changes and others
Defined benefit obligation at the end of the year

43

2017
¥ 202,730
6,806
1,962
(111)
250
(12,882)(5,257)(3,490)¥ 190,008

Thousands of
U.S. dollars
2018$ 1,788,479
65,39918,025
11,333(1,704)(98,767)‒
1,845$ 1,784,610

Thousands ofMillions of yen
U.S. dollars
2018
2018
2017
¥ 130,934$ 1,232,436¥ 137,383
Fair value of plan assets at the beginning of the year
1,822
17,1501,047Interest income
5,540
52,146
3,683
Return on plan assets (excluding interest income)
3,938
37,067
3,477
Contributions to defined benefit pension plans (Note)(7,997)(75,273)(7,978)Benefits paid‒‒
(5,257)Wind-up of some plans(270)(2,541)(1,421)
Effects of exchange rate changes and others
Fair value of plan assets at the end of the year
¥ 133,967¥ 130,934$ 1,260,985
Note: As of March 31, 2018, the estimated contributions to the defined benefit pension plans for the year ending March 31, 2019, were
¥3,791 million (US $35,683 thousand).
The amounts recognized in relation to defined benefit plans in the consolidated statement of financial position are as follows:

March 31, 2018
¥ (181,333)
133,967(47,366)(8,264)

March 31, 2017
¥ (183,270)
130,934(52,336)(6,738)

Thousands of
U.S. dollars
March 31, 2018
$ (1,706,824)
1,260,985(445,840)(77,786)¥ (55,630)¥ (59,074)$ (523,626)

2017¥ (1,528)
559
858

Thousands of
U.S. dollars
2018$ 10,617(6,721)
7,436

Millions of yen
Present value of defined benefit obligations (funded)
Fair value of plan assets
Funded status
Present value of defined benefit obligations (unfunded)
Net asset (liability) recognized in the consolidated
statement of financial position
Components of actuarial gains and losses are as follows:
Millions of yen
2018¥ 1,128(714)
790

Arising from changes in financial assumptions
Arising from changes in demographic assumptions
Other

The Company and all of its subsidiaries use their year-end as a measurement date. The primary assumptions used for actuarial valuation
are as follows:
March 31, 2018
1.1%

Discount rate

March 31, 2017
1.1%

If, as of March 31, 2018, the discount rate rose by 0.5%, the defined benefit obligations would decrease by ¥9,029 million(US $84,987 thousand), and if the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥9,595 million(US $90,314 thousand). If, as of March 31, 2017, the discount rate rose by 0.5%, the defined benefit obligations would decrease by¥9,100 million, and if the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥9,920 million.
Although sensitivity analysis is based on the assumption that all other variables are constant, in reality, changes in other assumptions may
affect the sensitivity analysis.
The weighted-average duration (weighted-average maturity) of defined benefit obligations is as follows:
March 31, 201810.4 years

Duration

March 31, 201710.8 years

The objective of the investment policy of the plan is to ensure stable returns from investments over the long term, which allows thepension funds to meet their future benefit payments, and to maintain the pension funds in a sound condition.
In order to achieve the above objective, the plan establishes a target rate of return, taking into consideration the participants’ demographics,
funded status, the Company’s and certain subsidiaries’ capacities to absorb risks, and the current economic environment. To meet the target
rate of return, the plan also employs strategic target asset allocation based on the expected rate of return by asset class, the standard
deviation of the rate of return, and the correlation coefficient among assets.
When markets fluctuate in excess of certain levels, the asset allocation of the plan assets is rebalanced to the strategic target asset
allocation. The Company and certain subsidiaries periodically review actual returns on the plan assets, economic trends, and theircapacities to absorb risks and realign the strategic target asset allocation, if necessary.

44

The following tables show the fair value of the plan assets as of March 31, 2018 and 2017:

StocksGovernment and municipal debt securities
Corporate and other debt securities
Hedge funds
Securitized products
Cash and cash equivalents
Life insurance company general accounts
Commingled funds
Other
Total

StocksGovernment and municipal debt securities
Corporate and other debt securities
Securitized products
Cash and cash equivalents
Life insurance company general accounts
Commingled funds
Other
Total

With a quoted market
price in an active market¥ 9,663850‒‒
25
10,843‒‒72¥ 21,453

Millions of yen
March 31, 2018
Without a quoted market
price in an active market
¥ 330
192
1,232
200
3,653
‒
18,90387,174830¥ 112,514

With a quoted market
price in an active market¥ 10,046
637
‒
27
6,202
‒
‒
107
¥ 17,019

Millions of yen
March 31, 2017
Without a quoted market
price in an active market
¥ 318
193
1,197
2,668
0
18,35490,364821¥ 113,915

Total¥ 9,993
1,042
1,232
200
3,678
10,84318,90387,174902¥ 133,967

Total¥ 10,364
830
1,197
2,695
6,202
18,35490,364928¥ 130,934

Thousands of U.S. dollars
March 31, 2018
With a quoted market
Without a quoted market
Total
price in an active market
price in an active market
Stocks$ 90,954$ 3,106$ 94,061
Government and municipal debt securities
8,001
1,807
9,808
Corporate and other debt securities‒
11,596
11,596
Hedge funds
‒
1,883
1,883
Securitized products
235
34,384
34,620Cash and cash equivalents
102,061‒
102,061Life insurance company general accounts‒
177,927
177,927
Commingled funds‒
820,538
820,538
Other
678
7,813
8,490
$ 201,930$ 1,059,055$ 1,260,985
Total
Commingled funds represent pooled institutional investments. Approximately 32% and 34% of commingled funds were invested in listed
stocks as of March 31, 2018 and 2017, respectively. Approximately 44% and 46% were invested in government and municipal debt
securities as of March 31, 2018 and 2017, respectively. Approximately 12% and 10% were invested in corporate and other debt securities
as of March 31, 2018 and 2017, respectively. Approximately 12% and 10% were invested in other assets as of March 31, 2018 and 2017,
respectively.
Expenses recognized in relation to the Company’s and certain subsidiaries’ contributions to the defined contribution plans amounted to¥3,324 million (US $31,288 thousand) and ¥3,295 million for the years ended March 31, 2018 and 2017, respectively.
(2)

Employee Benefit Expense
The aggregated amounts of employee benefit expenses recognized in the consolidated statement of income for the years ended
March 31, 2018 and 2017, were ¥136,553 million (US $1,285,326 thousand) and ¥135,666 million, respectively.

45

Equity(1)

Common Stock
March 31, 2018
Authorized issuance (Number of shares)

500,000,000

March 31, 2017
500,000,000

Issued shares(Number of shares)
Balance as of April 1, 2016
Changes during the year
Balance as of March 31, 2017
Changes during the year
Balance as of March 31, 2018428,904,352‒
428,904,352‒
428,904,352

Shares issued by the Company are non-par value common stock. The issued shares above include treasury stock. Changes in treasury stock
for the years ended March 31, 2018 and 2017, are as follows:
Treasury shares(Number of shares)
Balance as of April 1, 2016
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2017
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2018

1,324,420
3,750
(270)
1,327,900
4,476
(241)
1,332,135

Treasury stock held by the Company’s associates as of March 31, 2018 and 2017, was 71,885 shares and 71,885 shares, respectively.
(2)

Surplus(a) Capital surplus
The Companies Act of Japan mandates that at least half of paid-in capital be appropriated as common stock and the rest be
appropriated as legal reserves as part of capital surplus.
(b) Retained earnings
The Companies Act of Japan provides that an amount equal to 10% of appropriated retained earnings to be paid as dividends bereserved as legal reserve or retained earnings reserve to the extent that the total legal reserve and retained earnings reserve equals 25%of the nominal value of common stock. Retained earnings reserve may be made available for dividend payments upon a shareholders’meeting resolution.

46

Accumulated Other Comprehensive Income and Other Comprehensive Income
Accumulated other comprehensive income, net of related tax effects, as presented in the consolidated statement of changes in equity is asfollows:
Millions of yen

Thousands of
U.S. dollars
2018

2018

2017

Balance at the beginning of the year
Net other comprehensive income¥ 7,725(6,314)¥ 9,754(2,029)$ 72,713(59,431)

Balance at the end of the year

¥ 1,411¥ 7,725$ 13,281¥ 5,521‒¥ 2,960(86)$ 51,967‒

Foreign currency translation adjustments on foreign operations:Remeasurements of defined benefit pension plans:
Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income

2,094

2,647

19,710

Balance at the end of the year

¥ 7,615¥ 5,521$ 71,677¥ 6,724(18)¥ 7,603(367)$ 63,291(169)

Net change in fair value of financial assets measured at FVTOCI:
Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income

1,130

(512)

10,636

Balance at the end of the year

¥ 7,836¥ 6,724$ 73,758¥ (415)449¥ (1,537)
1,122$ (3,906)
4,226

¥ 34

¥ (415)$ 320¥ 19,555(18)(2,641)¥ 18,780
(453)
1,228

$ 184,064¥ 16,896¥ 19,555

Net change in fair value of cash flow hedges:
Balance at the beginning of the year
Net other comprehensive income
Balance at the end of the year
Total accumulated other comprehensive income:Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income
Balance at the end of the year

47

(169)
(24,859)$ 159,036

The following is a summary of reclassification adjustments, by line item, made to other comprehensive income, including non-controllinginterests and related tax effects arising during the years ended March 31, 2018 and 2017:
Millions of yen
2018
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

48

¥ (5,902)
4,336¥‒(2,242)¥ (5,902)
2,094

697
27

(34)
(9)

663
18

758
¥ (84)(239)¥ (2,524)519¥ (2,608)¥ (230)
597

¥‒
(182)

¥ (230)
415

1
¥ 368

‒
¥ (182)

1¥ 186¥ (6,132)
4,336¥‒(2,242)¥ (6,132)
2,094

697
624

(34)
(191)

663
433

759
¥ 284

(239)
¥ (2,706)520¥ (2,422)

¥ 228
‒
7
(16)
¥ 219

¥ (6,360)
2,094
656
449
520
¥ (2,641)

Millions of yen
2017
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

49

¥ (620)3,794¥ ‒(1,166)¥ (620)
2,628

100
(608)

(138)
185

(38)
(423)

(375)
¥ 2,291(223)¥ (1,342)

(598)
¥ 949

¥ (970)
2,211

¥ ‒
(674)

¥ (970)
1,537

(243)
¥ 998

‒
¥ (674)

(243)
¥ 324

¥ (1,590)
3,794

¥ ‒
(1,166)¥ (1,590)
2,628

100
1,603

(138)
(489)

(38)
1,114

(618)
¥ 3,289(223)¥ (2,016)(841)¥ 1,273

¥ 75
(19)
(3)
(8)
¥ 45

¥ (1,665)
2,647
(35)
1,122
(841)
¥ 1,228

Thousands of U.S. dollars
2018
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit obligations
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

50

$ (55,553)
40,813$ ‒(21,103)$ (55,553)
19,710

6,561
254

(320)
(85)

6,241
169

7,135
$ (791)(2,250)$ (23,758)

4,885$ (24,548)$ (2,165)
5,619

$ ‒
(1,713)$ (2,165)
3,906

9$ 3,464‒$ (1,713)

9$ 1,751$ (57,718)
40,813$‒(21,103)$ (57,718)
19,710

6,561
5,873

(320)
(1,798)

6,241
4,076

7,144
$ 2,673(2,250)$ (25,471)

4,895$ (22,797)$ 2,146‒
66(151)$ 2,061$ (59,864)
19,710
6,175
4,226
4,895
$ (24,859)

Dividends
Dividends paid for the years ended March 31, 2018 and 2017, are as follows:

Resolution adopted
Board of Directors’
meeting on
May 30, 2016
Board of Directors’
meeting on
October 27, 2016
Board of Directors’
meeting on
May 30, 2017
Board of Directors’
meeting on
October 24, 2017

Resolution adopted
Board of Directors’
meeting on
May 30, 2017
Board of Directors’
meeting on
October 24, 2017

Type of shares

Millions ofyen
Aggregate
amountAppropriation from

Common stock¥ 5,559Retained earnings

Common stock¥ 5,559

Common stock

Yen
Record date

Effective date

¥ 13.0March 31, 2016

May 31, 2016

Retained earnings¥ 13.0

September 30,
2016

November 29,
2016¥ 5,559Retained earnings¥ 13.0March 31, 2017

May 31, 2017

Common stock¥ 5,558

Retained earnings¥ 13.0

September 30,
2017

November 29,
2017Type of shares

Thousands of
U.S. dollars
Aggregate
amountAppropriation from

Record date

Effective dateCommon stock$ 52,325

Retained earnings$ 0.12

March 31, 2017

May 31, 2017

Common stock$ 52,316

Retained earnings$ 0.12September 30,
2017

November 29,
2017

Amountper share

U.S. dollars
Amount per
share

Dividends whose record date is during the year ended March 31, 2018, but whose effective date is in the following fiscal year are as follows:
Millions of yen
Resolution adopted

Type of shares

Board of Directors’
meeting on
May 29, 2018

Yen

Aggregate
amountAppropriation fromAmount per
share

Record date

Effective dateCommon stock¥ 5,558

Retained earnings¥ 13.00

March 31, 2018

May 31, 2018

Resolution adopted

Type of shares

Thousands of
U.S. dollars
Aggregate
amountAppropriation from

Record date

Effective date

Board of Directors’
meeting on
May 29, 2018

Common stock$ 52,316

Retained earnings

March 31, 2018

May 31, 2018

U.S. dollars

51

Amount pershare$ 0.12Other Income and Other Expenses
Other income and other expenses consist of the following items for the years ended March 31, 2018 and 2017:
Millions of yen
Thousands of U.S. dollars
2018
2017
2018
Other income:Gain on reorganization (*)¥ 406¥ 8,475$ 3,822
Other
4,995
5,595
47,016
Total other income¥ 5,401¥ 14,070$ 50,838
Other expenses:
Structural reform expenses¥799¥ 1,495$ 7,521
Loss on disposal of property, plant and equipment
3,950
2,955
37,180
Impairment loss on property, plant and equipment
10,611
1,063
99,878Compensation expenses
4,382‒
41,246
Other
4,463
6,273
42,009Total other expenses¥ 24,205¥ 11,786$ 227,833(*) Gain on reorganization for the years ended March 31, 2018 and 2017, includes ¥400 million (US $3,765 thousand) and ¥4,311 million(before tax effects), respectively, as a result of the Group losing control of certain subsidiaries. There was no gain or loss resulting from theremeasurement at fair value of the investment retained in the former subsidiary for the years ended March 31, 2018 and 2017.

Other Financial Income and Expenses
Other financial income and expenses for the years ended March 31, 2018 and 2017, are summarized as follows:
Millions of yen
2018
Other financial income:
Dividend income (*)
¥ 144
Other
844
Total
¥ 988
Other financial expenses:
Exchange loss
1,148
Other
2
Total
¥ 1,150(*) Dividend income is from financial assets measured at FVTOCI.

Thousands of U.S. dollars
2017

2018

¥ 220
28
¥ 248

$ 1,355
7,944$ 9,300

1,150
39¥ 1,189

10,80619$ 10,825

Earnings per Share
The calculation of basic earnings per share (EPS) attributable to shareholders of the parent company is summarized as follows:
Thousands of shares
Weighted-average number of common stock on which basic
EPS is calculated

2018

2017

427,573427,578

Millions of yen
Net income attributable to shareholders of the parent company

2018¥ 42,210

Basic EPS attributable to shareholders of the parent company

2018¥ 98.722017¥ 50,593
Yen

Thousands of
U.S. dollars
2018$ 397,308

U.S. dollars
2017¥ 118.32

2018$ 0.93Note that diluted EPS attributable to shareholders of the parent company is not presented because no potentially dilutive shares of common
stock were issued or outstanding for the years ended March 31, 2018 and 2017.

52

Supplementary Explanation on the Consolidated Statement of Cash Flows
Changes in liabilities arising from financing activities during the fiscal year ended March 31, 2018, are as follows:
Millions of yen
Short-term debt
Balance as of April 1, 2017
Increase (decrease) involving cash flows

Corporate bonds
payableLong-term debt

Total

¥ 26,301¥ 29,984¥ 137,782¥ 194,067

2,335(20,000)(11,690)(29,355)(1,433)13(2,646)(4,066)¥ 27,203¥ 9,997¥ 123,446¥ 160,646

Increase (decrease) not involving cash flows
Effects of exchange rate changes and others
Balance as of March 31, 2018

Thousands of U.S. dollars
Corporate bonds
payableLong-term debt

Total

$ 247,562$ 282,229$ 1,296,894$ 1,826,685

21,979(188,253)(110,034)(276,308)(13,488)122(24,906)(38,272)$ 256,052$ 94,098$ 1,161,954$ 1,512,105

Short-term debt
Balance as of April 1, 2017
Increase (decrease) involving cash flows
Increase (decrease) not involving cash flows
Effects of exchange rate changes and others
Balance as of March 31, 2018

Financial Instruments and Other Related Information(1)

Financial Risk
The Group is engaged in business activities worldwide, and therefore exposed to various risks, including interest rate risk, currency
exchange rate risk, and credit risk.
(a) Market risk
The Group’s major manufacturing bases are located in Japan and Asia, but its customers are geographically diversified. As a result, theGroup is exposed to market risks from fluctuations in foreign currency exchange rates.
(i) Interest rate risk
The Group is exposed to interest rate risks related principally to long-term liabilities. In order to minimize interest rate risks, theGroup enters into interest rate swap agreements to hedge future cash flow exposures to fluctuations in interest rates. Those interest
rate swaps are receive-floating, pay-fixed interest rate swaps. For interest rate swaps, the Group receives floating interest rate
payments on long-term liabilities, including borrowings, and pays fixed interest rate payments, thereby creating fixed interest rate
long-term liabilities.
Sensitivity analysis:
Sensitivity analysis for the interest rates shown below indicates the impact of assumed changes in interest rates on income before
income taxes in the Company’s consolidated statement of income. If interest rates increased by 1% on financial instruments(floating-interest financial assets and liabilities measured at amortized cost, financial assets and liabilities measured at FVTPL, andderivatives), and all other variables were constant, the impact on the income before income taxes for the years ended March 31,2018 and 2017, would have been as follows:
Millions of yen
2018
¥ 225

Impact on income before income taxes

2017
¥ 986

Thousands of
U.S. dollars
2018$ 2,118(ii) Currency exchange risk
The Group holds assets and liabilities exposed to currency exchange risks. In order to hedge currency exchange risks, the Grouputilizes forward exchange contracts.
In order to stabilize future net cash flows from transactions denominated in foreign currencies for trade receivables and payables aswell as forecast transactions, each month the Group measures the net amount of future cash flows on the settlement date for eachcurrency and hedges fluctuation risk, mainly using forward exchange contracts for a portion of these transactions. As per theGroup’s policy, these contracts generally expire in one year.
Hedge relationships between forward exchange contracts and hedged items are highly effective in offsetting effects on hedged
items (assets and liabilities denominated in foreign currencies) arising from changes in foreign currency exchange rates.

53

Sensitivity analysis:
Sensitivity analysis for the currency exchange rates shown below indicates the impact of increases or decreases in currency
exchange rates on income before income taxes in the Company’s consolidated statement of income. If the Japanese yen had
depreciated by 1% against foreign-currency denominated financial instruments held by the Group, and all other variables wereconstant, the impact on the income before income taxes for the years ended March 31, 2018 and 2017, would have been as follows:
Millions of yen

Currency

Impact on income before income taxes

2018
¥ 142
62
2

US Dollar
Euro
Other

2017
¥ 138
50
3

Thousands of
U.S. dollars
2018$ 1,337584
19(b) Credit risk
Credit risk refers to the risk that the Group will incur a financial loss because customers or counterparties fail to discharge theircontractual obligations related to a financial instrument or contract. The Group is exposed to credit risks because of its operating
activities (primarily trade receivables) and financing activities, including deposits at financial institutions, currency transactions, andother financial instruments. No significant concentration of credit risk is present, as the Group has a diverse group of trading parties
situated in many different regions.
The Group sets credit limits according to the credit risks of certain instruments or customers by periodically reviewing relevant factors,
such as financial conditions and ratings.
The Group’s maximum exposure to credit risk, without considering collateral held, is represented as the carrying amount of financial
assets (excluding contingent liabilities) net of impairment losses, if any, in the consolidated statement of financial positions. The
maximum exposure to credit risk from contingent liabilities is represented as the balance of contingent liabilities disclosed in Note 25.
“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions).” Balances by contractual maturity of tradereceivables and other assets that are past due at the end of the reporting period but not impaired are omitted from disclosures becausesuch balances are not material.
Reconciliation of allowance for doubtful receivables is as follows:
Millions of yen
Balance at the beginning of the year
Additions (provision)
Utilized (write off)
Unused amount reversed (recovery)
Other
Balance at the end of the year

March 31, 2018
¥ 293
604
(2)
(657)
(15)
¥ 223

March 31, 2017
¥ 432
495
(46)
(624)
36
¥ 293

Thousands of
U.S. dollars
March 31, 2018
$ 2,758
5,685(19)(6,184)(141)$ 2,099(c) Liquidity risk
The Group’s fundamental financial policy is to maintain an appropriate level of liquidity and secure adequate funds for current andfuture business operations. The Group works to optimize capital utilization for its business operations through the efficientmanagement of working capital. Further, the Group endeavors to improve group-wide capital management by centralizing thismanagement function to the Company.
The Group also raises funds from both capital markets and commercial banks. The Group finances its capital expenditures primarily bydrawing down internally generated funds and also through the issuance of debts and equity securities when necessary.
The Group also maintains commitment line agreements with a number of financial institutions to secure efficient funding as necessary.
The total unused commitment lines as of March 31, 2018, are disclosed in Note 25. “Commitments and Contingencies (Other Than
Liabilities Recognized as Provisions).”
The following tables present balances by maturity of non-derivative financial liabilities held by the Group as of the reporting dates:
Note that the carrying amounts of trade payables and contractual cash flows match, and their due dates are all within one year. Hence,
they are not included in the following tables.

54

Millions of yen
March 31, 2018

Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Long-term debt
Long-term borrowings
Lease obligations

Carrying
amount¥ 27,203

Contractual
cash flows¥ 27,363

Withinone year¥ 27,363

After one but
not more than
five years¥‒

Over five years¥‒

17,253

17,412

17,412

‒

‒

9,997
118

10,030118

10,030
118

‒
‒

‒
‒

106,19380

108,633
80

6,018
‒

102,31580300‒

Millions of yen
March 31, 2017

Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Long-term debt
Long-term borrowings
Corporate bonds payable
Lease obligations

Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Long-term debt
Long-term borrowings
Lease obligations

Carrying
amount¥ 26,301

Contractual
cash flows¥ 26,458

Withinone year¥ 26,458

After one but
not more than
five years¥‒

Over five years¥‒

15,227

15,334

15,334‒‒19,994241

20,224242

20,224
241

‒
‒

‒
‒

122,555
9,990
149

125,814
10,102
149

1,245
72
‒

123,671
10,030
149

898
‒
‒

Thousands of U.S. dollars
March 31, 2018
After one but
ContractualWithinnot more thancash flows
one yearfive years$ 257,558$ 257,558$ ‒Over five years$ ‒Carrying
amount$ 256,052

162,396

163,893

163,893‒‒

94,0981,111

94,4091,111

94,409
1,111

‒
‒

‒
‒

999,558753

1,022,524
753

56,645‒

963,055
753

2,824
‒

55

The weighted-average interest rates of short-term debt, the current portion of long-term debt, and long-term debt are 2.00%, 1.83%, and
0.87%, respectively. The maturities range from 2018 to 2026. The details of corporate bonds by issue are as follows:
Millions of yen
IssuerIssue

Issue date
March 31,2018

March 31,2017

Thousands of
U.S. dollars

Secured/UnsecuredInterest
rate(%)

Maturity

March 31,
2018

The
Company

The 29th unsecured
corporate bondOctober 29,
2007

¥ ‒

¥ 19,994$ ‒Unsecured

1.97

October 27,
2017

The
Company

The 30th unsecured
corporate bondSeptember 13,
2011¥ 9,997¥ 9,990$ 94,098

Unsecured

0.79

September 13,
2018

Total

‒

‒

¥ 9,997¥ 29,984$ 94,098‒‒‒

Contingent liabilities disclosed in Note 25. “Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” arenot included in the above table.
The following tables show the maturities of derivatives. Net settlement derivatives are also disclosed in gross amounts.

Forward exchange contracts
Copper futures contracts
Interest rate swaps
Put options

Forward exchange contracts
Interest rate swaps
Put options

Forward exchange contracts
Copper futures contracts
Interest rate swaps
Put options

In
Out
In
Out
In
Out
In
Out

In
Out
In
Out
In
Out

In
Out
In
Out
In
Out
In
Out

Within one year
¥ 17
52
6
‒
‒
‒
‒
‒

Millions of yen
March 31, 2018
After one but not
more than five
years
Over five years
¥ ‒
¥ ‒
2
‒
‒
‒
‒
‒
561
‒
461
‒
6,061
‒
‒
‒

Total
¥ 17
54
6
‒
561
461
6,061
‒

Within one year
¥ 148
202
‒
‒
‒
‒

Millions of yen
March 31, 2017
After one but not
more than five
years
Over five years
¥‒
¥‒
‒
‒
167
‒
620
‒
6,061
‒
‒
‒

Total
¥ 148
202
167
620
6,061
‒

Within one year
$ 160
489
56
‒
‒
‒
‒
‒

Thousands of U.S. dollars
March 31, 2018
After one but not
more than five
years
Over five years
$ ‒
$ ‒
19
‒
‒
‒
‒
‒
5,280
‒
4,339
‒
57,050
‒
‒
‒

Total
$ 160
508
56
‒
5,280
4,339
57,050‒56

(d) Capital management
The Group’s fundamental capital management policy is to maintain an appropriate level of assets, liabilities, and capital for current andfuture business operations and to optimize capital efficiency for its business operations.
The ratio of equity attributable to shareholders of the parent company is viewed as a significant indicator for the Group’s capitalmanagement. A specific ratio is targeted under the Group’s medium-term management plan and continuously monitored.
The Group is not subject to significant capital requirements except for general rules, such as the Companies Act of Japan.
Equity attributable to shareholders of the parent company as of March 31, 2018, was ¥562,720 million (US $5,296,687 thousand),
which increased by ¥26,157 million (US $246,207 thousand) from the year ended March 31, 2017. As a result, the ratio of equity
attributable to shareholders of the parent company as of March 31, 2018, was 53.1%, an increase from 51.6% in the previous year.
(e) Risk of stock price fluctuations
The Group pursues profit in its business and enhances corporate value through reinforcing relationships, particularly with customers
and suppliers, or by delivering proposals to its investees. As part of maintaining the relationship with customers, suppliers, or otherparties, the Group occasionally invests in marketable securities and therefore is exposed to the risk of stock price fluctuations. To
manage this risk, the Group regularly monitors the fair values of these instruments, financial conditions, and other factors of investees.
Further, holdings of stocks are reviewed by the relevant department as appropriate, considering relationships with business partners.
(2)

Fair Value of Investments in Securities and Other Financial Assets and Liabilities(a) Methods and assumptions of fair value measurements
The following methods and assumptions are used to measure fair values of financial assets and liabilities:
Cash and cash equivalents, trade receivables, short-term debt, and trade payables:
Carrying amount of these assets and liabilities approximates their estimated fair value because of their short-term maturity.
Long-term debt:
Fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using market
interest rates under similar contractual terms.
Investments in securities and other financial assets and liabilities (excluding long-term loans receivable):
Refer to fair value hierarchy at (e) “Fair value hierarchy” below.
Long-term loans receivable:
Fair value of long-term loans receivable is estimated based on the present value of future cash flows using interest rates applicableto obtain an additional loan under similar contractual terms.
(b) Fair value of investments in securities and other financial assets
Carrying amounts and estimated fair values of financial assets for the years ended March 31, 2018 and 2017, are as follows:

57

Millions of yen
March 31, 2018
Carrying
Estimatedamounts
fair values
Financial assets measured at FVTPL
Current
Securities
Derivatives
Forward exchange contracts
Copper futures contracts
Non-current
Securities
Derivatives
Interest rate swaps
Put options
Financial assets measured at FVTOCI
Non-current
Securities
Financial assets measured at amortized cost
Current
Short-term loans receivable
Non-current
Other debt securities
Long-term loans receivable

March 31, 2017
Carrying
Estimatedamounts
fair values

Thousands of
U.S. dollars
March 31, 2018
Carrying
Estimatedamounts
fair values

¥ 790

¥ 790

¥ 643

¥ 643

$ 7,436$ 7,436

‒
6

‒
6

148
‒

148
‒

‒
56

‒
56

1,791

1,791

1,843

1,843

16,85816,858

100
6,061

100
6,061

‒
6,061

‒
6,061

941
57,050941
57,05010,876

10,876

10,231

10,231

102,372

102,372

1

1

116

116

9

9

1,911
612

1,911
612

2,082
711

2,082
711

17,988
5,761

17,9885,761

Equity instruments are securities measured at FVTOCI.
(c) Fair value of financial assets measured at FVTOCIThe following is a list of major equity instruments designated as FVTOCI and their fair values as of the reporting dates:
Millions of yen
March 31, 2018
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
OSG Corporation
Konwa Kaikan
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
Santoku Corporation
WEARE Pacific Co., Ltd.
Mikuni Shoji Co., Ltd.

Fair value¥ 2,133
1,360
1,265
894
802
479
329
276
249
224

Millions of yen
March 31, 2017
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
OSG Corporation
Konwa Kaikan
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
Santoku Corporation
Yamaichi Special Steel Co., Ltd
Mikuni Shoji Co., Ltd.

Fair value¥ 1,750
1,274
1,154
833
827
434
324
266
246
207

58

Thousands of U.S. dollars
March 31, 2018
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
OSG Corporation
Konwa Kaikan
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
Santoku Corporation
WEARE Pacific Co., Ltd.
Mikuni Shoji Co., Ltd.

Fair value$ 20,077
12,801
11,907
8,415
7,549
4,509
3,097
2,598
2,344
2,108

(d) Fair value of financial liabilities
Carrying amounts and estimated fair values of financial liabilities as of the reporting dates are as follows:
The Group holds no financial liabilities designated at initial recognition as financial liabilities measured at FVTPL.
Millions of yen
March 31, 2018
Carrying
Estimatedamounts
fair values

March 31, 2017
Carrying
Estimatedamounts
fair values

Thousands of
U.S. dollars
March 31, 2018
Carrying
Estimatedamounts
fair values

Financial liabilities measured at FVTPL
Current
Derivatives
Forward exchange contracts

¥ 35

¥ 35

¥ 202

¥ 202

$ 329

$ 329

Interest rate swaps

‒

‒

453

453

‒

‒

Forward exchange contracts

2

2

‒

‒

19

19

27,203

27,203

26,301

26,301

256,052

256,052

17,253

17,39015,227

15,330162,396

163,686

9,997

10,032

19,994

20,22494,09894,428

118

118

241

241

1,111

1,111

Non-current
Derivatives

Financial liabilities measured at amortized
cost
Current
Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease obligations
Non-current
Long-term debt
Long-term borrowings

106,193

107,886

122,555

125,311

999,558

1,015,493

Corporate bonds payable

‒

‒

9,990

10,110‒‒

Lease obligations

80

80

149

149

753

753

Since the fair value of finance lease obligations is not material to the consolidated statement of financial position, it is measured as thepresent value of the minimum lease payments discounted by the interest rates used at the initial recognition of lease obligations.
Accordingly, the fair value is based on the relevant carrying amount.
(e) Fair value hierarchy
Financial instruments measured at fair value on a recurring basis after initial recognition are classified into three levels of a fair value
hierarchy based on observability and materiality of inputs used for fair value measurement. The three levels of the hierarchy are as
follows:
Level 1:
Fair value measured using quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2:59

Fair value measured using direct or indirect observable inputs other than the quoted prices included in Level 1.
Level 3:
Fair value measured using unobservable inputs.
When several inputs are used for a fair value measurement, the measurement is categorized in its entirety in the same level of the fairvalue hierarchy as the lowest level input that is significant to the entire measurement. Transfers between levels are deemed to haveoccurred at the beginning of each quarter period.
Securities:
Securities that can be measured at fair value through quoted market prices are included in Level 1. Those securities include listed
stocks, government bonds or other debt securities, and exchange traded funds.
In the absence of an active market for securities, the following are used as inputs for fair value measurement: quoted prices for
similar securities; quoted prices for transactions that are not distressed for identical or similar securities; or other relevant
information, including observable interest rates and yield curves, credit spreads, and default rates. These inputs are included in
Level 2. Included in Level 2 are short-term investments and listed stocks traded over-the-counter.
Shares of non-listed companies and other instruments, whose significant inputs for fair value measurement are unobservable, areincluded in Level 3. The Group uses price information provided by financial institutions to evaluate these investments. The Group
corroborates the information using an income approach based on its own valuation model or a market approach, such as comparison
with prices of similar securities.
Derivatives:
Derivatives measured in a model using the following are included in Level 2: quoted prices under transactions that are not distressed,
quoted prices in markets that are not active, and observable interest rates and yield curves or forward and spot prices for currencies
and commodities. Level 2 derivatives mainly include interest rate swaps, forward foreign exchange contracts, and commodity
futures contracts.
Financial assets and liabilities measured at amortized cost:
Financial assets and liabilities measured at amortized cost are included primarily in Level 2 or Level 3.
The following tables present financial instruments that are measured at fair value on a recurring basis and the fair value hierarchyclassification as of March 31, 2018 and 2017:

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
Derivatives
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Total

¥ 790
‒

¥‒
6

¥‒
‒

¥ 790
6

‒
‒
3,811

1,002
100
‒

789
6,061
7,065

1,791
6,161
10,876

‒
‒

35
2

‒
‒

35
2

Millions of yen
March 31, 2017
Level 2
Level 3

Total

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
Derivatives
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Millions of yen
March 31, 2018
Level 2
Level 3

¥ 643
‒

¥‒
148

¥‒
‒

¥ 643
148

‒
‒
3,341

1,007
‒
‒

836
6,061
6,890

1,843
6,061
10,231

‒
‒

202
453

‒
‒

202
453

60

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
Derivatives
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Thousands of U.S. dollars
March 31, 2018
Level 2
Level 3

Total

$ 7,436
‒

$ ‒
56

$ ‒
‒

$ 7,43656‒‒
35,872

9,431
941
‒

7,427
57,05066,50016,85857,991
102,372

‒
‒

329
19

‒
‒

329
19

Financial liabilities (current and non-current) measured at FVTPL represent derivatives.
The following tables present the changes in Level 3 instruments whose fair values were measured on a recurring basis for the years
ended March 31, 2018 and 2017:
Millions of yen

At April 1, 2016
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2017
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2018

FVTPL

FVTOCI

Total¥ 7,189
‒
‒
(346)
49
5
¥ 6,897
‒
‒
(84)
36
1
¥ 6,850¥ 8,267
‒
(476)
(906)
‒
5
¥ 6,890
‒
188
(4)
‒
(9)
¥ 7,065¥ 15,456‒(476)(1,252)49
10¥ 13,787
‒
188
(88)
36
(8)
¥ 13,915

Thousands of U.S. dollars

At March 31, 2017
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2018

FVTPL

FVTOCI

Total$ 64,919
‒
‒
(791)
339
9
$ 64,477$ 64,853
‒
1,770
(38)
‒
(85)
$ 66,500$ 129,772
‒
1,770
(828)
339
(75)
$ 130,977

There were no changes in unrealized gains (losses) recognized in profit or loss relating to assets held as of March 31, 2018 and 2017.
Such gains (losses) in profit or loss are included in other financial income and other financial expenses in the consolidated statement ofincome.

61

(3)Derivative Instruments and Hedging Activities
Cash flow hedge:
Foreign currency exposure:
Changes in the fair value of forward exchange contracts designated as cash flow hedges for forecasted foreign currency transactions
are reported in other comprehensive income. These amounts are reclassified into profit or loss in the same period as foreignexchange gains or losses on hedged items are recognized in profit or loss.
Interest rate exposure:
Changes in fair values of interest rate swaps designated as hedging instruments for fluctuation in cash flows associated with longterm debt obligations are reported in other comprehensive income. The amount in accumulated other comprehensive income issubsequently reclassified to other financial income and expenses over the period in which interest expenses are recognized in profit
or loss.
As of March 31, 2018, the expected period for cash flows arising from hedged items and affecting profit or loss is to be from
April 2017 to June 2021.
The fair values of derivatives designated as hedging instruments as of March 31, 2018 and 2017, are as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2018
March 31, 2017
March 31, 2018
Asset
Liability
Asset
Liability
Asset
Liability
Cash flow hedges$ 160
Forward exchange contracts
¥ 17
¥ 54
¥1
¥ 202
$ 508
5,280
Interest rate swaps
561
461
167
620
4,339
Total

¥ 578

¥ 515

¥ 168

¥ 822

$ 5,441$ 4,848

The fair values of derivative assets and liabilities to which hedge accounting is not applied were ¥6,067 million (US $57,107 thousand)and ¥‒ million (US $‒ thousand), respectively, as of March 31, 2018, and ¥6,208 million and ¥‒ million, respectively, as ofMarch 31, 2017.
The contract or notional amounts of derivatives as of March 31, 2018 and 2017, are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2018
March 31, 2017
March 31, 2018
Forward exchange contracts:
To sell foreign currencies¥ 913¥ 7,622$ 8,594
To buy foreign currencies
1,427
3,089
13,432
Interest rate swaps
92,684
105,986
872,402
Copper futures contracts
132
‒
1,242

The following tables present the amounts in relation to cash flow hedges recognized in the consolidated statement of income for theyear ended March 31, 2018:
Gain or loss recognized in OCI
Effective portion of derivatives designated as hedging instruments

Forward exchange contracts
Interest rate swaps
Copper futures contracts¥ (79)
100
6

Thousands of
U.S. dollars$ (744)
941
56

Total

¥ 27

$ 254

Derivatives

Millions of yen

Gain or loss reclassified from OCI into profit or loss
Effective portion of derivatives designated as hedging instruments
Derivatives
Forward exchange contracts
Interest rate swaps

Recognized inconsolidated statement of income
Other financial income and expenses
Other financial income and expenses

Total

62

¥ 144
453

Thousands of
U.S. dollars$ 1,355
4,264

¥ 597

$ 5,619

Millions of yen

The following tables present the amounts in relation to cash flow hedges recognized in the consolidated statement of income for theyear ended March 31, 2017:
Gain or loss recognized in OCI
Effective portion of derivatives designated as hedging instruments
Derivatives

Millions of yen

Forward exchange contracts
Interest rate swaps¥ (155)
(453)

Total

¥ (608)Gain or loss reclassified from OCI into profit or loss
Effective portion of derivatives designated as hedging instruments
Derivatives
Forward exchange contracts
Interest rate swaps
Copper futures contracts

Recognized inconsolidated statement of income
Other financial income and expenses
Other financial income and expenses
Other financial income and expenses

Millions of yen

Total¥ (50)
2,262(1)¥ 2,211

Pledged Assets
The following assets were pledged as collateral by certain subsidiaries for their accounts payables as of March 31, 2018 and 2017:
Millions of yen
Securities and other financial assets
Total

March 31, 2018
¥ 122
¥ 122

March 31, 2017
¥ 114
¥ 114

63

Thousands of
U.S. dollars
March 31, 2018
$ 1,148$ 1,148

Major Subsidiaries and Associates
The Company’s parent company is Hitachi, Ltd., which is located in Japan. The Company’s consolidated financial statements include thefollowing subsidiaries:

Name

Location

Hitachi Metals Tool Steel, Ltd.

Minato-ku, Tokyo

Specialty Steel Products

100.0

Hitachi Metals Neomaterial, Ltd.

Suita, Osaka

Specialty Steel Products

100.0

Hitachi Metals Wakamatsu, Ltd.

Wakamatsu-ku,
Kita-kyushu, Fukuoka

Specialty Steel Products

100.0

Hitachi Metals Precision, Ltd.

Minato-ku, Tokyo

Specialty Steel Products

100.0

HMY, Ltd.

Yasugi, Shimane

Specialty Steel Products

100.0

Hitachi Metals MMC Superalloy, Ltd.

Okegawa, Saitama

Specialty Steel Products

100.0

NEOMAX KINKI Co., Ltd.

Yabu, Hyogo

Magnetic Materials and Applications

100.0

NEOMAX ENGINEERING Co., Ltd.

Takasaki, Gunma

Magnetic Materials and Applications

100.0

Hitachi Ferrite Electronics, Ltd.

Tottori, Tottori

Manufacturing and sales of products

100.0

NEOMAX KYUSHU Co., Ltd.

Takeo, Saga

Magnetic Materials and Applications

100.0

Hitachi Metals FineTech, Ltd.

Kuwana, Mie

Functional Components and Equipment

100.0

Alcast, Ltd.

Kumagaya, Saitama

Functional Components and Equipment

100.0

Kyushu Technometal Co., Ltd.

Miyako, Fukuoka

Functional Components and Equipment

100.0

Hitachi Metals Trading, Ltd.

Minato-ku, Tokyo

Sales of products

100.0

Tonichi Kyosan Cable, Ltd.

Ishioka, Ibaraki

Wires, Cables, and Related Products

100.0

Ibaraki Technos, Ltd.

Hitachi, Ibaraki

Manufacturing and sales of products

100.0

SH Copper Products Co., Ltd.

Tsuchiura, Ibaraki

Specialty Steel Products

100.0

Hitachi Metals Solutions, Ltd.

Minato-ku, Tokyo

Real estate business and others

100.0

Metglas, Inc.

South Carolina, U.S.A.

Specialty Steel Products

100.0

Hitachi Metals Korea Co., Ltd.

Gyeonggi-do, South
Korea

Manufacturing and sales of products

100.0

Baosteel Hitachi Rolls (Nantong) Co., Ltd.

Jiangsu, China

Specialty Steel Products

70.0

San Technology, Inc.

Cavite, Philippines

Magnetic Materials and Applications

100.0

Pacific Metals Co., Ltd.

North Gyeongsang,South Korea

Magnetic Materials and Applications

100.0

PT. HITACHI METALS INDONESIA

Banten, Indonesia

Magnetic Materials and Applications

100.0

Hitachi Metals San Huan Magnetic Materials (Nantong)
Jiangsu, China
Co., Ltd.

Magnetic Materials and Applications

51.0

Waupaca Foundry, Inc.

Wisconsin, U.S.A.

Functional Components and Equipment

100.0

AAP St. Marys Corp.

Ohio, U.S.A.

Functional Components and Equipment

100.0

Namyang Metals Co., Ltd.

Daegu, South Korea

Functional Components and Equipment

90.8

Ward Manufacturing, LLC

Pennsylvania, U.S.A.

Functional Components and Equipment

100.0

64

Principal business

As of March 31, 2018
Ownership%Name

Location

Hitachi Metals America, Ltd.

New York, U.S.A.

Sales of products

100.0

Hitachi Metals Hong Kong Ltd.

Hong Kong, China

Sales of products

100.0

Hitachi Metals Europe GmbH

Dusseldorf, Germany

Sales of products

100.0

Hitachi Metals Singapore Pte. Ltd.

Singapore

Sales of products

100.0

Hitachi Metals Taiwan, Ltd.

New Taipei, Taiwan

Manufacturing and sales of products

100.0

Hitachi Metals (Thailand) Ltd.

Ayutthaya, Thailand

Manufacturing and sales of products

100.0

Hitachi Metals (Suzhou) Technology, Ltd.

Jiangsu, China

Manufacturing and sales of products

100.0

Hitachi Metals (China), Ltd.

Shanghai, China

Sales of products

100.0

Hitachi Cable America Inc.

New York, U.S.A.

Manufacturing and sales of products

100.0

Hitachi Cable (Suzhou) Co., Ltd.

Jiangsu, China

Wires, Cables, and Related Products

100.0

Hitachi Cable (Johor) Sdn. Bhd.

Johor, Malaysia

Wires, Cables, and Related Products

100.0

Hitachi Cable Vietnam Co., Ltd.

Hai Duong, Vietnam

Manufacturing and sales of products

100.0

Thai Hitachi Enamel Wire Co., Ltd.

Bangpakong
Wires, Cables, and Related Products
Chachoengsao, Thailand

49.4

HC Queretaro, S.A. de C.V.

Queretaro, Mexico

100.0

Others26 companies‒

65

Principal business

As of March 31, 2018
Ownership%

Wires, Cables, and Related Products‒‒

Transactions with Related Parties(1) Transactions with Related Parties
Transactions with the related parties are as follows:
For the year ended March 31, 2018:
Millions of yen
Transaction
Balance atamountyear-endThousands of U.S. dollars
Transaction
Balance atamountyear-end

Withdrawal

Deposit

Hitachi, Ltd.

Deposits with HitachiGroup cash poolingsystem(*1) (*3)

Company
with thesame parent
company

Borrowings

Hitachi America Capital, Ltd.

Borrowings from acash pooling system(*2) (*3)

Associate

SUMIDEN HITACHICABLE Ltd.

Attribution

Parentcompany

Name

Nature of transaction¥ 76,125(*4)¥ 8,059$ 716,538(*4)$ 75,857

0

Sales of products(*5)¥ 5,660(*4)¥ 24,016

Borrowings¥ 19,1230¥ 14,233$ 53,276(*4)$ 179,998$ 226,054$ 133,970

For the year ended March 31, 2017:
Attribution

Parentcompany
Company
with thesame parent
company

Name

Nature of transaction

Millions of yen
Transaction
Balance atamountyear-end
Deposit

Hitachi, Ltd.

Deposits with HitachiGroup cash poolingsystem(*1) (*3)

Borrowings

Hitachi America Capital, Ltd.

Borrowings from acash pooling system(*2) (*3)¥ 18,315(*4)¥ 84,1840¥ 10,955¥ 13,463(*4)*1 The Company participates in the Hitachi Group’s cash pooling system, an initiative intended to provide integrated management offunds. Balance at the end of the fiscal year indicates deposit balance as of the year-end.
*2 The Company participates in the Hitachi Group’s cash pooling system, where Hitachi America Capital Ltd. is a key participant, an
initiative intended to provide integrated management of funds. Balance at the end of the fiscal year indicates borrowings balance as of
the year-end.
*3 Interest rates on funding are reasonably determined based on market interest rates.
*4 As deposits and withdrawals are made on a daily basis, transaction amounts represent differences between the beginning and endingbalances for the year.
*5 Transaction terms for sales of products are determined in the same manner as regular transaction terms based on their market prices(2) Compensation for Key Management Personnel
Compensation for key management personnel of the Group is as follows:

Short-term employee benefits

Millions of yen
For the year ended
For the year ended
March 31, 2018
March 31, 2017
¥ 642
¥ 608

66

Thousands of U.S. dollars
For the year ended
March 31, 2018
$ 6,043

Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)(1)

Loan Commitments
The Group has lines of credit arrangements with banks in order to secure financing sources for business operations. The total unused linesof credit as of March 31, 2018 and 2017, were ¥40,000 million (US $376,506 thousand) and ¥40,000 million, respectively. The Group also
has overdraft facilities with banks. The unused facilities under these agreements as of March 31, 2018 and 2017, were ¥71,318 million(US $671,291 thousand) and ¥79,818 million, respectively.

(2)

Commitments for Acquisition of Assets
Outstanding commitments for the purchase of property, plant and equipment as of March 31, 2018 and 2017, were ¥53,326 million(US $501,939 thousand) and ¥41,751 million, respectively.

(3)

Guarantee Obligations
The Group was contingently liable for loan guarantees and other guarantees to its associates and third parties in the amounts of¥3,644 million (US $34,300 thousand) and ¥4,126 million as of March 31, 2018 and 2017, respectively.

Subsequent Events
There are no applicable items.

6768