Annual Report 2014
Year ended March 31, 2014

CONTENTS
Operational Results
Management Policy
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Shareholders’ Equity
Consolidated Statements of Cash Flows
Basis of Presenting Consolidated Financial Statements
Independent Auditor’s Report
Corporate information
Board of Directors and Statutory Auditors

2
7
10
12
13
14
15
16
43
44
45

Operational Results2

1. Operational Results(1) Analysis of Operational Results<Summary of Operational Results for the Consolidated Fiscal Year ended March 31, 2014>
In the current consolidated fiscal year, the Japanese economy basically rebounded
due to the bullish U.S. economy; the low yen rate and the high stock prices partly
resulting from the Bank of Japan’s easy-money policy; and the effect of economic
measures implemented by the national government, even though there were such
alarming factors as the slower growth of emerging markets and disturbances ininternational politics.
The year being the first year in our new mid-term management plan
“Next Step 2015” - To make the next step forward- (April 1, 2013 - March 31,2016), our Group strove to reinforce our managerial basis and improve ourcorporate value, and promoted various measures both in Japan and abroad to makegreater business achievements.
Representative Director,
President, COO
As a result, in the current consolidated fiscal year, net sales increased by
Kazuya Takahashi
14,187 million yen (18.5%) compared with the preceding consolidated fiscal year
to 90,911 million yen. As for profit and loss status, operating income reached 8,038 million yen, an
improvement of 2,903 million yen (56.6%) due to the big sales improvement at the Specialty Truck Segment,
our mainstay category. Thus, the current net income reached 3,646 million yen, an improvement of 474 million
yen (15.0%).

We would like to present the summary of business on a consolidated basis by segment in comparison
with the preceding fiscal year.

i) Specialty Truck Segment
In Japan, the year saw a higher demand for specialty trucks than last year. Our Group made positive efforts tosecure orders, and tried to shorten delivery time e.g. by implementing measures to improve production
efficiency at each plant. As a result, sales proved satisfactory mainly regarding large dump trucks and concrete
pumps in the field of construction; refuse trucks and detachable body trucks in the field of the environment; andpneumatic bulk carrier trucks and trailers in the field of logistics.
Further, in cooperation with other companies, we developed such new products as Press type electric refuse
truck (Hybrid type), a electrically-powered refuse trucks with the world’s first system which drives refuse
collection equipment powered by hybrid batteries; and LOG BUSTER LB-515TK, a truck-mounted woodcrushing machine. We also developed various other products.
As for our overseas business, our plant in Indonesia (PT. Kyokuto Indomobil Manufacturing Indonesia,
Purwakarta City) was formally inaugurated February 2014, to help expand sales in the country.
As a result, net sales in the Specialty Truck Segment increased by 13,101 million yen (21.4%) to
74,374 million yen. Segment profit increased by 1,146 million yen (34.0%) to 4,515 million yen due tothe big improvement of the sales, despite the record of the allowance for doubtful accounts of the
production subsidiary in China.

Operational Results

Press type electric refuse truck(Hybrid type)

Plant in Indonesia

3“LOG BUSTER LB-515TK”

Dump truck and Mixer truck(Indonesian model)ii) Environmental Equipment and Systems Segment
In the field of plant construction, the market continued to be in a difficult situation. Nevertheless, we reaped
results from our positive marketing activities, contracting the construction of a facility to treat bulky rubbish andbottles in May 2013 with the Shiki District Sanitary Association organized by the Cities of Shiki, Niiza andFujimi in Saitama Prefecture; and the construction of a recycling center in June 2013 with the municipal officeof Tsu in Mie Prefecture. In the field of maintenance and operation outsourcing, we promoted such efforts as
the streamlining of business through the integration of Group companies and marketing activities throughcooperation among Group companies.
As a result, net sales decreased by 1,158 million yen (11.6%) to 8,795 million yen due to themomentary decrease of the sales by the percentage of completion method. Segment profit increased by
131 million yen (10.6%) to 1,374 million yen due to steady performance of the entrusted operations
and maintenance work.

Recycle center in NahaOperational Results

4iii) Real Estate Rental Segment
We continued to face a stiff competition in the multi-story parking equipment market. In this field, we engagedin active marketing efforts regarding new construction projects by profiting from an increased demand for
condominiums in anticipation of the hike of consumption tax rate. Also, we put our efforts in renewal projectsof such equipment as stock business. In the field of coin parking, we strove to secure revenues by securing andselecting parking lots, and improving the rate of operation.
Also, we newly entered the field of mega solar power generation. Two power generation plants - Fukuoka Plant(Iizuka City) inaugurated in March 2013 and former Tohoku Plant (Hachinohe City) inaugurated in September
2013 - helped improve our revenues.
As a result, net sales increased by 2,325 million yen (38.0%) to 8,450 million yen due to the increase of sales ofparking business, the launch of mega solar powers and the sale of a real estate for sale, and segment profit
increased by 1,609 million yen (163.8%) to 2,592 million yen.

Toll parking (Coin-operated)

Multi-story parking equipment<Forecast of Operations for the Next Consolidated Fiscal Year ending March 31, 2015>
The recovery of the Japanese economy is expected to continue due to such factors as the recovery of theEuropean and U.S. economies, the continued implementation of economic measures by the national
government, the increase of export and capital investment, and the rise of wage level due to improved corporate
revenues; even though there are such alarming factors as the hike of consumption tax rate and changes inemerging economies.
Our Group continues to make determined efforts to expand sales and profits and improve our corporate value,by steadily implementing our mid-term management plan “Next Step 2015” - To make the next step forwardto be mentioned later.
In April 2014, our Company, Nippon Trex Co., Ltd. (our consolidated subsidiary) and two local companies
agreed to jointly establish a new company (TREX THAIRUNG CO., LTD., Pluakdaeng) in the Kingdom ofThailand, which will serve as a base for production and marketing of van bodies and specialty trucks. We aremaking preparations with a view to starting the operation of the company in January 2015.
Regarding the forecast of consolidated business performance for March 2015, the Company estimates net sales
to increase by 1,089 million yen (1.2%) over March 2014 to 92,000 million yen Management expects theoverall operating income to decrease by 437 million yen (5.4%) to 7,600 million yen, while net income isestimated to grow by 855 million yen (23.4%) to 4,500 million yen.

Operational Results

5(2) Analysis on Financial Conditionsi) Situations of Assets, Liabilities and Net WorthIn the current consolidated fiscal year, total assets increased by 12,848 million yen (13.1%) from the end of thepreceding fiscal year to 110,743 million yen.
Current assets increased by 10,591 million yen (20.7%) to 61,712 million yen, due to increases in securities,
etc.
Non-current assets (property, plant and equipment, intangible assets and investments and other assets)
increased by 2,256 million yen (4.8%) to 49,031 million yen, due to recovery of market prices of investment
securities, etc.
Regarding liabilities, current liabilities increased by 6,857 million yen (24.2%) to 35,173 million yen, due toincreases in trade notes and accounts payable, etc. Non-current liabilities increased by 2,014 million yen(18.8%) to 12,743 million yen due to increase of long-term loans, etc.
Total net assets increased by 3,975 million yen (6.8%) to 62,827 million yen, due to posting of net profit, etc.
As a result, the capital adequacy ratio stood at 56.7% as of the end of the current fiscal year (60.1% at the end of
the preceding fiscal year).

ii) Cash Flow Situation
Consolidated cash and cash equivalents at the end of period increased by 7,912 million yen (122.4%) comparedwith the end of the preceding fiscal year to 14,379 million yen. Cash flow by activity type is summarized asfollows:
Cash Flow from Operating Activities
Net cash provided by operating activities amounted to 9,387 million yen (an increase of 7,507 million yen
compared with the preceding fiscal year). This was because of a posting of net profit, etc.
Cash Flow from Investing Activities
Net cash used in investing activities was 2,038 million yen (an increase of 1,328 million yen compared withthe preceding fiscal year). This was because of purchases of non-current assets, etc.
Cash Flow from Financing Activities
Net cash provided by financing activities amounted to 477 million yen (an increase of 2,721 million yen
compared with the preceding fiscal year). This was because of increase of long-term loans.

(3) Principal policy for return of profits to shareholders and payment of dividends for the current
year and next year
The Kyokuto Kaihatsu Kogyo Group regards the return of profits to shareholders as one of the most importantmanagement’s policies. Taking the development of business in the future and business environments into
account, management has been striving to meet investors’ expectations through the improvement of businessperformance and the strengthening of its financial position.

Operational Results

The Meeting of Shareholders on June 26th, 2014 resolved and passed to pay a dividend of 11 yen per share at
the end of March 2014 as originally proposed by management, making its annual dividend 21 yen per shareincluding an interim dividend, increased by 5 yen compared with the preceding fiscal year.
For the year ending March 2015, management plans to pay an annual dividend of 22 yen per share (including
an interim dividend of 11 yen).

6

Management Policy

7

2. Management Policy(1) Basic Management Policy of the Company
The management philosophy of the Kyokuto Kaihatsu Group is "Value technology and trust, make concerted
efforts to develop the company, and widely contribute to the society."
Our ultimate goal in the management policy is to implement corporate policy recognizing a social role andresponsibility as a public company in a strong relationship with various stakeholders such as customers,
business partners, shareholders, employees, and local societies. In addition, by providing safe, effective andhigh quality products and services through our fair and sound business activities, the Kyokuto Kaihatsu Groupseeks to bring about greater contribution to our society and maximize corporate value.
With this management policy, we devote ourselves to three major business domains including Specialty Truck,
Environmental Equipment and Systems, and Real Estate Rental.
(2) Targeted management index
The Kyokuto Kaihatsu Group has been working as one for the improvement of corporate value under the
medium-term management plan “Next Step 2015” - To make the next step forward - (3-year plan) since April 1,
2013.
In this plan, we set management targets of sales of 89,000 million yen and operating profit of 7,000 million yen
on a consolidated base for the term ending March 2016, the last fiscal year of the plan. However, while demandin our core special purpose vehicles business has trended at levels higher than we assumed, we achieved thesetargets in the first year of the plan as a result of the Group making a concerted effort to secure orders and handle
production.
We have thus revised the management targets for the final fiscal year of the plan as follows towards the further
expansion of the Kyokuto Kaihatsu Group.
(million yen)
Term ending March 2016 Increase inRate ofamountincrease
Before revi sion After revision

Consolidated net sales
Consolidated operat ing p rofit

89,0007,000

95,000
8,200

6,000
1,200

107%
117%

(thousand US dollars)Term ending March 2016 Increase inRate ofamountincrease
Before revision After revision
Consolidated net sales
865,086
923,406
58,320107%
Consolidated operating profit
68,04079,705
11,664117%*Rate: ¥102.88=1US$(3) Mid-to-Long Term Management Strategy and Major Challenges
On our group’s medium-term management plan "Next Step 2015", we are driving the key strategies forward
for our group’s progress under the basic policies as follows:
Basic policies
Kyokuto Kaihatsu Kogyo Group will celebrate its 60th anniversary in the final year of this medium-term
management planning.
Positioning this three-year range as an important term to make our structural reforms to make the next step
forward, we will try to restructure our management foundation and improve our corporate values as well

Management Policy

8

as promote the formation of attractive corporate culture as a trusted and loved group based on thefollowing basic policies.

"Step" to survive in the domestic market
For the core businesses (specialty truck, environmental equipment and systems and parking businesses),
we will construct a firm earning system to survive in the matured domestic market.
"Step" to the global development
Positioning the overseas business as a key for the future profits, we will strengthen the foundation for
global development.
We will energetically promote the early profit contribution of the overseas sites and new market
development.
"Step" to the strengthening of total monozukuri (manufacturing) power
We will establish core technologies, develop human resources and ensure high quality in order tostrengthen the total monozukuri power as a company and develop our domestic/overseas business basedon the power.
"Step" to improve the brand value
We will provide high quality to various needs in the product development, production, sales and service
fields to improve customer satisfaction as well as develop effective PR strategies proactively in order toimprove our brand value in both Japan and abroad.
"Step" to get new sources of earnings
We will energetically promote business collaboration, M&A and entry in new fields in order to expand ourbushiness chances and create future core business so that we will be able to become a company that earns
100 billion yen.
Key Strategies(1) Establishing a firm earning system for the existing businesses
Specialty truck business[1] Securing orders by securely receiving domestic demands for earthquake disaster reconstruction
and recovery and land toughening.
[2] Expanding the shares of key products for sales expansion (dump trucks, refuse trucks, tailgate
lifters, trailers).
[3] Improving the production efficiency by measures such as reviewing the production process
drastically, promoting the automation and standardizing product specifications.
[4] Establishing the procurement system aiming at the best price and best quality.
[5] Establishing a firm earning foundation as a stock business by improving the after-sales service.
Environmental equipment and systems business[1] Participating in joint venture with other companies for recycle facilities and securing orders taking
advantage of competitive prices.
[2] Securing long-term stable earnings by after-sales service and accepting operation.
Parking business[1] Securing our competitiveness by promoting the product development in the fields whose markets
are expected to expand, overseas production and improving quality for mechanical multistory
parking equipment.

Management Policy

9[2] Promoting the selection of business locations focusing on the profitability in the pay-by-the-hourparking lot.
(2) Strengthening the foundation for global development[1] Realizing the early stable operation of the plants in India and Indonesia and their contribution to
the group performance.
[2] Early establishment of the production of the plant in Thai in cooperation with NIPPON TREX
Co., Ltd.
[3] For the Kunshan plant in China, enhancing the sales in the South-East Asia and the parts supply
function to the group companies.
[4] Strengthening the business development in the specialty truck, environmental equipment andsystems and parking businesses in the China and the ASEAN region.
[5] Strengthening the development of human resources who support global development.
[6] Strengthening the collaboration of domestic and overseas development sites of the group anddeveloping products that are competitive in the overseas markets.
(3) Enhancing the total power as a monozukuri company[1] Ensuring quality that is the top in the specialty truck business by measures such as promotion ofinternal manufacturing, skill tradition for monozukuri and improvement of technical skills andproduction technology.
[2] Establishing the lineup of only one and number one products that are accepted in the world andkeep leading the industry.
[3] Promoting the product development in new fields powerfully by using existing technologies.
(4) Improving the brand value[1] Improving the reliability by company-wide collaboration in the development, production, sales
and service for quality improvement.
[2] Sharing the awareness in the group that the brand is an important management resource andinputting management resources aggressively.
[3] Establishing systems for continuous brand value improvement activities and a system to evaluate
such activities.
(5) Creating future core businesses
Exploiting new needs in the existing businesses, inputting new products and creating "the fourthpillar" as a new core business in order to keep developing in the future. (E.g. entering in promisingmarkets that are not influenced by the existing businesses)(6) Company-wide activities for corporate value improvement[1] Strengthening the law observance and impropriety prevention system and social contribution by
powerful promotion of CSR activities.
[2] Strengthening the environmental management by taking measures such as energy-saving
promotion and reduction of substances of concern.
[3] Improving the satisfaction level of stockholders by implementing effective stockholder returnmeasures.

Consolidated Balance Sheets10

Consolidated Balance Sheets11

Consolidated Statements of Income

12Consolidated Statements of Comprehensive Income

13Consolidated Statements of Changes 14
in Shareholders’ Equity

Consolidated Statements of Cash Flows15

Basis of Presenting
Financial Statements

Consolidated 16

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Kyokuto Kaihatsu Kogyo
Co., Ltd. (the “Company”) and its consolidated subsidiaries (collectively the“Group”) have been prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its related accounting
regulations, and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
In preparing the accompanying consolidated financial statements, certain
reclassifications have been made to the consolidated financial statements issued
domestically, in order to present them in a form which is more familiar to readers
outside Japan.
In addition, the notes to consolidated financial statements include additional
information which is not required under generally accepted accounting principles
and practices in Japan.
The financial statements presented herein are expressed in Japanese yen and,solely for the convenience of the readers, have been translated into U.S. dollars
at the rate of ¥102.88=US$1, the approximate exchange rate on March 31, 2014.
These translations should not be construed as representations that the Japanese
yen amounts actually are, have been or could be converted into U.S. dollar
amounts.

2. Summary of Significant Accounting Policies(a) Consolidation
The consolidated financial statements include the accounts of the Company andits 9 significant subsidiaries. Investments in 3 nonconsolidated subsidiaries and
1 affiliate are accounted for by the equity method.
Under the concept of control or significant influence, those companies in which
the Company, directly or indirectly, is able to exercise control over operations are
fully consolidated, and those companies which the Group has the ability to
exercise significant influence (affiliated companies) are accounted for by theequity method.
In March 31, 2014, 4 subsidiaries are excluded from scope of consolidation. As tothese, investments in 3 non-consolidated subsidiaries are accounted for by theequity method, and other is not accounted for. In the same way, 1 investment inaffiliate is not accounted for by the equity method.
These companies are not material in terms of total assets, net sales, net income
and retained earnings and do not have any significant impact on the consolidated

Basis of Presenting
Financial Statements

Consolidated 17

financial statements.
All significant inter-company balances and transactions have been eliminated in
the consolidated financial statements. All material unrealized gains resulting frominter-company transactions have been eliminated.
Assets and liabilities of the consolidated subsidiaries at the time of investment
are all valued at fair value. The goodwill or negative goodwill is being amortizedon a straight-line basis over estimated useful lives not exceeding 20 years, or 5
years in situations in which the useful lives cannot be estimated. However,insignificant goodwill or negative goodwill is charged to expenses (income) whenincurred.

(b) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into
cash and exposed to insignificant risk of changes in value. All of cash equivalentsmature or become due within three months from the date of acquisition.

(c) Short-term Securities and Investment Securities
The Group classifies their securities which have readily determinable fair values
as held-to-maturity debt securities, available-for-sale securities, depending on
management’s intent.
(Held-to-maturity debt securities)
Held-to-maturity debt securities are stated at amortized cost.
(Available-for-sale securities)
Marketable available-for-sale securities are stated at fair value, with unrealized
gains or losses, net of applicable taxes, and reported in accumulated othercomprehensive income. The cost of available-for-sale securities sold is determinedbased on the moving average method.
None-marketable securities are stated at cost determined by the moving averagemethod.
(d) Inventories
Merchandises are stated at cost determined by the specific identification method,or if lower, the net realizable value.
Raw materials, finished goods and work in process are stated at cost determinedby the periodic average method, or if lower, the net realizable value.
Supplies are stated at cost determined by the last purchase cost method, or if
lower, the net realizable value.

Basis of Presenting
Financial Statements

Consolidated 18(e) Depreciation
Depreciation is principally computed under the straight-line method, using rates
based on the estimated useful lives of the assets. The useful lives are principally
ranging from 7 to 60 years for buildings and structures, and 4 to 17 years formachinery, equipment and vehicles.
Amortization of intangible assets is computed by the straight-line method.

(f) Retirement Benefits
Net defined benefit liabilities are recorded for employees’ pension and severance
payments based on the projected benefit obligations and the fair value of plan
assets at the balance sheet date.
In calculating the projected retirement obligations, the straight-line attribution
is applied for allocation of projected benefits to the periods until the end of thecurrent fiscal year.
Actuarial gains or losses are amortized by declining-balance method over statedyears that do not exceed the average remaining service period of the employees(10 years) beginning with the year following the year which incurred.
(Accounting change)
From March 31, 2014, the Company adopted the “Accounting Standard for
Retirement Benefits (ASBJ Statement No.26, May 17, 2012; hereinafter referred to as
the “Retirement Benefits Accounting Standards”) and “Guidance on AccountingStandard for Retirement Benefits (ASBJ Guidance No.25, May 17, 2012; hereinafterreferred to as the “Guidance on Retirement Benefits”) (excluding the provisions set
forth in Clause 35 of the Retirement Benefits Accounting Standards and Clause 67 of
the Guidance on Retirement Benefits).
Consequently, retirement benefit obligations net pension assets were recorded as net
defined benefit liabilities, and the unrecognized actuarial gains or losses wererecorded as net defined benefit liabilities.
In accordance with the transitional accounting treatments set forth in Clause 37 of
the Retirement Benefits Accounting Standards, the Company has made adjustments
to the remeasurements of defined benefit plans recorded as “Accumulated othercomprehensive income” by factoring in the effects arising from the changes in thecurrent consolidated fiscal year.
As a result, Net defined benefit liabilities of ¥1,693 million ($16,452 thousand)was recognized and accumulated other comprehensive income decreased by ¥71
million ($691 thousand).

(g) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided against potential losses oncollections at an amount determined using a historical bad debt loss ratio and an
amount individually estimated on the collectability of receivables that are

Basis of Presenting
Financial Statements

Consolidated 19

expected to be uncollectible due to bad financial condition or insolvency of the
debtor.

(h) Asset Retirement Obligations
Asset retirement obligations are defined as a statutory or similar obligation withregard to the removal of tangible fixed assets and are incurred when tangible
fixed assets are acquired, constructed, developed or used in an ordinary way. The
asset retirement obligation is recognized as the sum of the discounted cash flow
required for the future asset retirement and is recorded in the period in which
the obligation is incurred if a reasonable estimate can be made.

(i) Revenue from Construction Contracts
Revenues from construction contracts and the related costs are recorded under thepercentage-of-completion method, if the outcome of the construction contract can be
estimated reliably. Otherwise, the completed-contract method is applied if theoutcome cannot be reliably estimated.

(j) Allowance for Losses on Construction Contracts
Estimated losses on construction contracts are charged to income in the period inwhich they are identified.

(k) Leases
Finance lease transactions, except for immaterial or short-term finance leases
transactions which are accounted for as operating leases, are capitalized torecognize lease assets and lease obligations in the balance sheet. Suchcapitalized lease assets are depreciated by the straight-line method over thelease terms assuming no residual value.

(l) Income Taxes
The asset and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differences
between the carrying amount and tax bases of assets and liabilities, andoperating loss carry-forwards.

(m) Derivatives
All derivatives, except for certain foreign exchange forward contracts andinterest rate swap contracts described below, are stated at fair value. If
derivative financial instruments are used as hedges and meet certain hedging
criteria, the Group defers recognition of gains or losses resulting from a change

Basis of Presenting
Financial Statements

Consolidated 20

in the market value of the derivative financial instruments until the related
gains or losses on the hedged items are recognized. Accounts payable hedged byforeign exchange contracts which meet certain hedging criteria are translated attheir contracted rates. Interest rate swaps which meet certain hedging criteria
are accounted for as if the interest rate applied to the swaps had originallyapplied to the underlying debt.

(n) Per Share Information
Basic net income per share is computed based on net income available to common
stockholders and the weighted average number of shares of common stock
outstanding during each period. The average numbers of shares used in thecomputations are 39,730 thousand shares for 2014 and 39,731 thousand sharesfor 2013.
Diluted net income per share is not disclosed because the Company had nopotentially dilutive shares outstanding at these balance sheet dates.
Cash dividends per share shown in the statements of income are the amounts
applicable to the respective years.

(o) Accounting Standards issued but not yet applied“Accounting Standard for Retirement Benefits (ASBJ Statement No.26, May 17,2012) and “Guidance on Accounting Standard for Retirement Benefits (ASBJ
Guidance No.25, May 17, 2012)(1) Summary
The accounting standard was revised, from the viewpoint of improvements tofinancial reporting and international trends, mainly focusing on how unrecognizedactuarial gain and loss and unrecognized prior service cost should be accounted for,how benefit obligation and service cost should be determined, and enhancement of
disclosures.

(2) Scheduled date of adoption
The amendment of the calculation method for present value of defined benefit
obligation and service cost will be adopted from the beginning of the fiscal year ending
March 31, 2015.
(3) The effect of adoption of this revised accounting standard
The effect of adoption of this revised accounting standard would be not material.

Basis of Presenting
Financial Statements

Consolidated 21

3. Securities
The following is a summary of held-to-maturity securities and available-for-salesecurities at March 31, 2014 and 2013:
Millions of yen

Held-to-maturity securities

March 31, 2014
Debt securities,
whose fair value exceeds
carrying amountwhose fair value does
not exceed carrying
amountTotal

Carrying
amountGrossunrealized
gains

Gross
unrealized
lossesFair value

¥

15

¥ 0

¥

－

¥

15

¥

30
45

－
¥ 0

¥

(0)
(0)

¥

30
45

Millions of yen

Held-to-maturity securities

March 31, 2013
Debt securities,
whose fair value exceeds
carrying amountwhose fair value does
not exceed carrying
amountTotal

Carrying
amountGrossunrealized
gains

¥

632

¥ 0

¥

－
632

－
¥ 0

Gross
unrealized
losses

¥

－

¥

－
－

Fair value

¥

632

¥

－
632

Thousands of U.S. dollars

Held-to-maturity securities

March 31, 2014
2014
Debt securities,
whose fair value exceeds
carrying amountwhose fair value does notexceed carrying amount
Total

Carrying
amountGrossunrealized
gains

Gross
unrealized
lossesFair value

$ 152

$

146

$ 6

$ －

$

292
438

－
$ 6

(3)
$ (3)

$

289
441

Basis of Presenting
Financial Statements

Consolidated 22

Millions of yen

Available-for-sale securities

March 31, 20142014Market value available:
Equity securities
Other securities
SubtotalMarket value not available:
Total

Cost

Gross
unrealized
gains¥ 5,542132¥ 5,674¥ 4,5310¥ 4,531Grossunrealize
d losses¥¥

Book Value(Estimated fairvalue)

(33)
(9)
(42)

¥ 10,040
123¥ 10,163
892¥ 11,055
Millions of yen

Available-for-sale securities

March 31, 2013Market value available:
Equity securities
Other securities
SubtotalMarket value not available:
Total

Cost

Gross
unrealized
gains¥ 4,409732¥ 5,141¥ 2,73112¥ 2,743

Gross
unrealize
d losses¥¥

Book Value(Estimated fairvalue)

(96)
(3)
(99)

¥ 7,044741¥ 7,785
1,195¥ 8,980

Thousands of U.S. dollars

Available-for-sale securities

March 31, 2014
Market value available:
Equity securities
Other securities
SubtotalMarket value not available:
Total

Cost

Gross
unrealized
gains

Gross
unrealized
lossesBook Value(Estimatedfair value)$ 53,865
1,287$ 55,152$ 44,0470$ 44,047$ (320)(88)$ (408)$ 97,592
1,199$ 98,791
8,668$ 107,459

Basis of Presenting
Financial Statements

Consolidated 23

4. ShortShort-term Bank Loans and LongLong-term Debts
The annual average interest rates applicable to short-term bank loans at March
31 2014 and 2013 were 0.63% and 0.66%, respectively.
Long-term debts at March 31, 2014 and 2013 consisted of the following:
Millions of yen

Thousands of
U.S. dollars

Bonds

2014
¥ 147

2013
¥ 641

2014
$ 1,429

Long-term bank loans

5,561

3,829

54,056

184

261

1,785

Other

1,779

1,998

17,297

Total¥ 7,671¥ 6,729$ 74,567

Lease obligations

Aggregate annual maturities of long-term debts subsequent to March 31, 2014
were as follows:
Thousands ofYear ending March 31

Millions of yen

U.S. dollars

2015

¥

2,624

$ 25,509

2016

1,727

16,783

2017

1,031

10,024

2018

815

7,926

1,474

14,325

7,671$ 74,567

2019 and thereafter
Total

¥

To set up a commitment line by multiple finance institutions, the Company
renewed an agreement with a syndicate of 7 banks for the years ended March 31,
2014 and 2013, respectively.
The unexecuted balance of lending commitments of the Company at March 31,
2014 and 2013 were as follows:
Millions of yen

Total lending commitments
Less amounts currently executed
Unexecuted balance

Thousands of
U.S. dollars

2014¥ 3,000

2013¥ 3,0002014$ 29,160－¥ 3,000－¥ 3,000－$ 29,160

Basis of Presenting
Financial Statements

Consolidated 24

5. Pledged Assets
The following assets were pledged as collateral for the following borrowings at
March 31, 2014 and 2013:
Millions of yen

Thousands of
U.S. dollars

2014¥ 5,755

2013¥ 5,755

2014$ 55,936

3,399

3,410

33,045－449－¥ 9,154¥ 9,614$ 88,981

Millions of yen

Thousands of
U.S. dollars

2014
¥ 100

2013
¥ 100

2014
$ 972

Current portion of long-term bank loans

635

482

6,176

Long-term bank loans

518

693

5,034

Other

2,719

2,952

26,424

Total¥ 3,972¥ 4,227$ 38,606

Land
Buildings
Investment securities
Total

Short-term bank loans

6. Retirement Benefits
The Company and a domestic subsidiary have defined benefit corporate pension
plans and lump-sum retirement benefit plans. Other domestic subsidiaries join
the Smaller Enterprise Retirement Allowance Mutual Aid Scheme which is akind of defined contribution plans. For the year ended March 31, 2014, The
Company transferred its part of defined benefit corporate pension plan to adefined contribution pension plan. As a result of applying “Guidance on
Accounting Standard for Transfers Between Retirement Benefit Plans” (ASBJ
Guidance No.1, January 31, 2002), Loss on revision of retirement benefit plans of¥234 million ($2,272 thousand) was recognized.

Basis of Presenting
Financial Statements

Consolidated 25

The changes in defined benefit obligations for the year ended March 31, 2014
were as follows:
Millions of yen

Thousands of
U.S. dollars

2014¥ 6,533

2014$ 63,505

Service cost

385

3,739

Interest cost

112

1,085

Actuarial gains or losses

38

365

Retirement benefits paid

(424)

(4,117)

Transition to a defined contribution pension plan(384)

(3,728)¥ 6,260$ 60,849

Benefit obligations at beginning of year

Benefit obligations at end of year

The changes in plan assets for the year ended March 31, 2014 were as follows:
Millions of yen

Thousands of
U.S. dollars

Plan assets at beginning of year2014
¥ 4,135

2014$ 40,193

Expected return on plan assets

71

696

Actuarial gains or losses

341

3,311

Contributions from employers

663

6,442

Retirement benefits paid

(381)

(3,698)Transition to a defined contribution pension plan(262)

(2,547)¥ 4,567$ 44,397

Plan assets at end of year

The reconciliation of the defined benefit obligations and plan assets to the net
defined benefit liabilities recognized in the consolidated balance sheet as ofMarch 31, 2014 was as follows:

Benefit obligations
Plan assets at end of year
Net amount of liabilities and assets recognizedin consolidated balance sheet

Net defined benefit liabilities
Net defined benefit assets
Net amount of liabilities and assets recognizedin consolidated balance sheet

Millions of yen

Thousands of
U.S. dollars

2014¥ 6,260

2014$ 60,849

4,567

44,397¥ 1,693$ 16,452¥ 1,693$ 16,452－－¥ 1,693$ 16,452

Basis of Presenting
Financial Statements

Consolidated 26

The retirement benefit expenses for the year ended March 31, 2014 was asfollows:
Millions of yen

Thousands of
U.S. dollars

Service cost

2014
¥ 385

2014
$ 3,739

Interest cost

112

1,085

Expected return on plan assets

(71)

(696)

Recognition of actuarial gains or losses

108

1,053

¥ 534

$ 5,181¥ 234$ 2,272

Severance and pension costs
Loss on revision of retirement benefit plans(Other expenses)

The unrecognized actuarial gains or losses recognized in accumulated othercomprehensive income (amount before income tax effect) was ¥110 million($1,067 thousand) for the year ended March 31, 2014.
The components of plan assets as of March 31, 2014 were as follows:
Ratio

Bonds

2014
35%

Securities

39%

General account asset

20%

Other

6%

Total

100%

The major actuarial assumptions for the year ended March 31, 2014 were as
follows:
2014
Discount rate
1.3%
Long-term rate of return on plan assets
1.3 to 2.0 %Long-term rate of return on plan assets was determined by considering thecurrent and future portfolio of plan assets and the current and future long-term
performance of various assets comprise the plan assets.
As a result of transferring the part of defined benefit corporate pension plan to adefined contribution pension plan on March 31, 2014, the benefit obligations
decreased by ¥384 million ($3,728 thousand) and unrecognized actuarial gains orlosses (before tax) decreased by ¥5 million ($45 thousand) for the year ended
March 31, 2014. The pension assets of ¥613 million ($5,955 thousand) will betransferred to the defined contribution pension plan for 4 years. Outstandingbalance for transferring of 351 million as of March 31, 2014, was accounted as“Other current liabilities” and “Other non-current liabilities” on the consolidated

Basis of Presenting
Financial Statements

Consolidated 27

balance sheets.
The required amount of the defined contribution pension plan was ¥26 million($ 252 thousand) for the year ended March 31, 2014 in other domestic
subsidiaries.
The following table sets forth the changes in benefit obligations, plan assets andfunded status of the Group at March 31, 2013:
Millions of yen

Benefit obligations at end of year
Fair value of plan assets at end of year2013
¥ 6,533
4,135

Funded status:
Benefit obligation in excess of plan assets

2,398

Unrecognized actuarial losses(526)

Liabilities for Retirement Benefits¥ 1,872

Severance and pension costs of the Group included the following components forthe years ended March 31, 2013:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization:
Prior service cost
Actuarial losses
Other
Net periodic benefit cost

2013
¥ 376
112
(62)
(20)
203
25
¥ 634

Assumptions used in the accounting for the defined benefit plans for the years
ended March 31, 2013 were as follows:
2013
Method of attributing benefit to periods of service
straight–line basis
Discount rate
1.3 to 2.0 %Long-term rate of return on plan assets
1.3 to 2.0 %Amortization period for prior service cost
10 years
Amortization period for actuarial losses
10 yearsBasis of Presenting
Financial Statements

Consolidated 28

7. Contingencies
At March 31, 2014 and 2013, the Group was contingently liable as follows:
Millions of yen

Thousands of
U.S. dollars

2014

2013

2014

¥ 3,668¥ 3,786$ 35,650

172

32

1,671

¥ 3,840¥ 3,818$ 37,321

As a guarantor of indebtedness of :Affiliated companies
Other
Total
8. Cash and cash equivalents
Cash and cash equivalents at March 31, 2014 and 2013 were as follows:

Cash and deposits

Millions of yen

Thousands of
U.S. dollars

2014

2013

2014

¥ 5,643¥ 3,861$ 54,848

8,736

3,222

84,913

－

(617)

－

¥ 14,379¥ 6,466$ 139,761

Short-term securities
Government bonds with original
maturities more than three months
Cash and cash equivalents

9. Financial Instruments and Related Disclosures(1) Policy for financial instruments
The Group manages funds by utilizing short-term deposits, etc. The Group
raises money by borrowing from financial institutions and by issuing bonds.
Derivatives are used, not for speculative nor trading purpose, but to hedge
the exposure to interest rate risks associated with certain interest payments
on borrowings.
(2) Types of financial instruments and related risk, and risk management for
financial instruments
Trade notes and accounts receivable are exposed to credit risk in relation tocustomers. In order to monitor credit risk, the Group manages, according to
the credit management guideline of the Group, the due date and the balanceof operating receivables from customers.
Investment securities consist of mainly held-to-maturity securities andequity securities issued by the Group’s business partners and these securities
are exposed to market risk.
The Group periodically monitors the fair value of such equity securities,
which is reported to the board meeting.

Basis of Presenting
Financial Statements

Consolidated 29

Trade notes and accounts payable have payment due dates mainly within one
year. Trade notes and accounts payable denominated in foreign currencies are
exposed to the market risk of fluctuation in foreign currency exchange rate.
Such risk is hedged principally by forward foreign currency contract.
Short-term bank loans are raised mainly in connection with businessactivities and long-term bank loan and bonds payable, which are due mainly
within five years, are raised principally for the purpose of making capital
investments.
Long-term debts with variable interest rates are exposed to interest rate
fluctuation risk, so the Group enters into interest rate swap transactions tomanage such interest rate exposure.
Derivatives are managed in accordance with policies and procedures for risk
assessment (see Note 11 “Derivatives”) and also the Group enters into
derivative transactions only with financially stable financial institutions to
reduce institutions’ credit risk.
Based on a report from the Company and consolidated subsidiaries, theGroup prepares and updates its cash flow plans on a monthly basis to manage
the Group’s liquidity.
(3) Supplementary explanation of the estimated fair value of financial
instruments
With regard to the below mentioned contract prices etc. of derivatives, thecontract prices themselves do not present the market risk on the derivativetransactions.
Summarized in the table below are the carrying amounts and the estimated fairvalue of financial instruments outstanding at March 31, 2014 and 2013.
Financial instruments for which it is extremely difficult to determine the fairvalue are not included in the table below.
Millions of yen

Carrying
March 31, 2014
Cash and deposits

amount¥5,643

Unrecognized

Fair value
¥

5,643

gain/loss¥─

Trade notes and accounts receivable

34,65434,654─

Short-term securities

8,736

8,736

─

Investment securities

10,208

10,2080Trade notes and accounts payable(20,540)(20,540)

─

Short-term bank loans(2,720)(2,720)─Long-term bank loans(5,561)(5,559)

2

(147)

(148)

(1)

(1,779)(1,908)

(129)

─

─

─

Bonds payable
Long-term deposits
Derivatives

Basis of Presenting
Financial Statements

Consolidated 30

Millions of yen

Carrying
March 31, 2013
Cash and deposits

amount¥3,861

Unrecognized

Fair value
¥

3,861

gain/loss─¥

Trade notes and accounts receivable

33,62933,629─

Short-term securities

3,222

3,222

0

Investment securities

7,800

7,800

0

Trade notes and accounts payable(17,680)(17,680)─

Short-term bank loans(2,620)(2,620)─Long-term bank loans(3,829)(3,829)

0

(641)

(645)

(4)

(1,998)(2,156)

(158)

─

─

─

Bonds payable
Long-term deposits
Derivatives

Thousands of U.S. dollars

Carrying
March 31, 2014
Cash and deposits$

Unrecognizedaccount

Fair value

54,848$gain/loss

54,848$─Trade notes and accounts receivable

336,839

336,839

─

Short-term securities

84,91384,913─Investment securities

99,22999,232

3

Trade notes and accounts payable(199,654)(199,654)―

Short-term bank loans(26,439)(26,439)─Long-term bank loans(54,056)(54,032)

24

Bonds payable(1,429)(1,434)(5)Long-term deposits(17,297)(18,546)(1,249)───Derivatives

Methods to determine the estimated fair value of financial instruments and othermatters related to securities and derivative transactions:(a) “Cash and deposits” and “Trade notes and accounts receivable”
Their carrying amounts approximate fair value because of their short maturity.
(b) “Short-term securities”
The fair values of held-to-maturity debt securities are based on quotes provided
by the financial institutions.
The carrying amounts of the other securities than the above debt securities
approximate fair value because of their short maturity.

Basis of Presenting
Financial Statements

Consolidated 31(c) “Investment securities”
The fair values of marketable securities are based on quoted market prices. The
fair values of debt securities are based on quotes provided by the financial
institutions. For information on securities classified by holding purpose, pleaserefer to Note 3 “Securities”.
(d) “Trade notes and accounts payable” and “Short-term bank loans”
Their carrying amounts approximate fair value because of their short maturity.
(e) “Long-term bank loans”
The fair value of long-term bank loans is estimated based on present value of thetotal of principal and interest discounted by an assumed current interest rate forloans with similar terms and remaining maturities.
(f) “Bonds payable”
The fair value of bonds payable is estimated based on present value of the total ofprincipal and interest discounted by an assumed interest rate based on debt’s
maturity and credit risk.
(g) “Long-term deposit”
The fair value of long-term deposit is estimated based on present value of thetotal of principal and interest discounted by an assumed interest rate, if possible,
based on debt’s maturity and credit risk.
(h) “Derivatives”
Please refer to Note 11 “Derivatives”.
Financial instruments for which it is extremely difficult to determine the fairvalue at March 31, 2014 and 2013 consist of the following:
Millions of yen

2014
Non-listed equity securities
Long-term deposit¥

Thousands of
U.S. dollars

2013
892

¥ 1,195

1,053

1,054

2014
$

8,668
10,237

Basis of Presenting
Financial Statements

Consolidated 32

The annual maturities of financial assets and investment securities with
contractual maturities subsequent to March 31, 2014 and 2013 were as follows:
Millions of yen
Due in one year
or less

March 31, 2014
Cash and deposits¥

Trade notes and accounts receivable

5,643

Due after five

year throughyears throughfive years

ten years

¥

─

¥

─

34,654

─

─

─

45

─

Investment securities
Total

Due after one¥ 40,297

¥

45

¥

─

Millions of yen
Due in one year
or less

March 31, 2013
Cash and deposits¥

Trade notes and accounts receivable

3,861

Due after one

Due after five

year throughyears throughfive years

ten years

¥

─

¥

─

33,629──

Short-term securities

618

─

─

Investment securities

─

15

─

Total

¥ 38,108

¥

15

¥

─

Thousands of U.S. dollars
Due after one

Due after fiveDue in one year

year throughyears throughor less

five years

ten years

March 31, 2014
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities
Total

$

54,848―$$―336,839

─

─

─

438

─

$ 391,687

$

438

$

―

10. Investment Property
The company and certain subsidiaries hold some rental properties including landin Tokyo and other areas (“investment properties”). The amounts of net income
related to investment properties (rental income is recognized in operating
revenue and rental expense is principally charged to operating expenses) were
¥ 724 million ($ 7,040 thousand) and ¥ 833 million for the year ended March 31,
2014 and 2013, respectively. There was no loss on impairment of investment
properties for the year ended March 31, 2014. The amounts of loss on impairmentof investment properties was ¥ 234 million for the year ended March 31, 2013
(Note 14).

Basis of Presenting
Financial Statements

Consolidated 33

The carrying amount, changes in such balances and market prices of investment
properties were as follows:
Millions of yen

Carrying amount

Fair value

Increase/
April 1, 2013
¥ 9,301(decrease)¥ (937)

March 31, 2014

March 31, 2014

¥ 8,364¥ 10,707

Millions of yen

Carrying amount

Fair value

Increase/
April 1, 2012
¥ 9,170(decrease)¥ 131

March 31, 2013

March 31, 2013

¥ 9,301¥ 11,294

Thousands of U.S. dollars

Carrying amount

Fair value

Increase/
April 1, 2013
$ 90,409(decrease)$ (9,107)

March 31, 2014

March 31, 2014

$ 81,302$ 104,068(1) Carrying amount is net of accumulated depreciation and accumulated
impairment losses, if any.
(2) Increase during the year ended March 31, 2013 was mainly due to thechange in holding purpose of Haneda office in an amount of ¥ 621 million.
Decrease during the year ended March 31, 2014 was mainly due todepreciation in an amount of ¥ 212 million ($ 2,056 thousand) and thechange in category of Hachinohe Plant due to starting up the electric power
selling in an amount of ¥ 717 million ($ 6,966 thousand).
Decrease during the year ended March 31, 2013 was mainly due todepreciation in an amount of ¥ 213 million and impairment loss in an
amount of ¥ 234 million.
(3) Fair value at March 31, 2014 and 2013 were principally measured based on thereal estate appraisal assessed by the external real estate appraiser.
11. Derivatives
Derivative financial instruments are utilized by the Company principally to
reduce interest rate risk and foreign exchange rate risk. The Company has
established a control environment which includes policies and procedures for risk

Basis of Presenting
Financial Statements

Consolidated 34

assessment and for the approval, reporting and monitoring of transactions
involving derivative financial instruments. The Company does not hold or issue
derivative financial instruments for trading purposes.
The notional amounts and the estimated fair value of derivative financial
instruments, for which deferred hedge accounting has been applied were as
follows:
Millions of yen

March 31, 2014

Hedged item

Contract
amountContract
amount due
after one year

Fair
value

Interest rate swap:(Fixed rate payment/floating rate receipt)

Long-term¥bank loans

793

¥

275

Note

Millions of yen

March 31, 2013

Hedged item

Contract
amountContract
amount due
after one year

Fair
value

Interest rate swap:(Fixed rate payment/floating rate receipt)

Long-termbank loans

¥

1,329

¥

811

Note

Thousands of U.S. dollars

March 31, 2014

Hedged item

Contract
amountContract
amount due
after one year

Fair
value

Interest rate swap:(Fixed rate payment/floating rate receipt)

Long-termbank loans

$

7,708

$

2,673

Note

Fair value of swap contracts assigned for Long-term bank loans is included in thefair value of Long-term bank loans disclosed at Note 9 “Financial Instruments
and Related Disclosures”.

Basis of Presenting
Financial Statements

Consolidated 35

12. Shareholders’ Equity
Changes in common stock and additional paid-in capital have resulted from thefollowing:
Millions of yen

Balance at March 31, 2012Retirement of stock during 2013
Balance at March 31, 2013
Retirement of stock during 2014
Balance at March 31, 2014

N u m be r o f
Sh are s
42 , 73 7, 6 68－
42 , 73 7, 6 68－
42 , 73 7, 6 68

Co mmo n
S to c k
11, 9 00－
11, 9 00－
11, 9 00

Cap i ta l
Su r p lu s
11, 7 19－
11, 7 19
0
11, 7 19

Thousands of U.S. dollars

Balance at March 31, 2013
Retirement of stock during 2014
Balance at March 31, 2014

Co mmo n

Cap i ta l

S to c ksu r p lu s

115 , 66 7－
115 , 66 7

113 , 90 70
11 3, 9 07

The Company adopted 100 shares of common stock as “unit amount of shares”. A
holder of shares representing less than one unit cannot exercise any voting rights
with respect to such shares. However, the holder is entitled to receive dividends
and other distributions. A holder of a fraction of a unit may at any time request
the Company to purchase such shares at the prevailing market price. Shares sopurchased must be sold or otherwise transferred to a third party within areasonable time.
13. Research and Development
Research and development expenditure which is included in “Selling, generaland administrative expenses” were ¥ 1,347 million ($ 13,096 thousand) and¥ 1,163 million for the years ended March 31, 2014 and 2013, respectively.
14. Loss on impairment of longlong-lived assets
With regard to the property, plant and equipment of the Group, business assets wereclassified into groups based on the management accounting categories. For rental
properties, idle properties and properties for sale, each property is considered toconstitute a group. Headquarters and welfare facilities were classified as corporate
assets.

Basis of Presenting
Financial Statements

Consolidated 36

In the fiscal year ending March 31, 2014, the Group recognized loss on impairment oflong-lived assets as follows:
Use
Business property

Property for saleType of assets
Buildings, structures, machineryand equipment, vehicles, tools,
furniture and fixtures
Land

Location
China, Kunshan
Sapporo-shi, Hokkaido

Since return of investments in certain business properties was judged to be difficult
due to decrease of expected future cash flow from them, the book values of such assets
were written down to the expected future cash flow, and the property for sale waswritten down to net sales values, and the resulting decrease was recognized as loss on
impairment of long-lived assets of ¥654 million ($6,355 thousand), comprising ¥389
million ($3,783 thousand) for buildings, ¥163 million ($1,585 thousand) for machineryand equipment, ¥57 million ($556 thousand) for structures, ¥8 million ($76 thousand)for land and ¥37 million ($355 thousand) for other assets.
In the fiscal year ending March 31, 2013, the Group recognized loss on impairment oflong-lived assets as follows:
Use
Idle property
Idle property
Property for saleType of assets
Land
Land
Buildings, structures, machineryand equipment, tools, furnitureand fixtures

Location
Chino-shi, Nagano
Ota-ku, Tokyo
Atsugi-shi, Kanagawa

Since return of investments in certain idle properties was judged to be difficult due tofalling land prices, the book values of such assets were written down to recoverable
values or net sales values, and the resulting decrease was recognized as loss on
impairment of long-lived assets of ¥234 million, comprising ¥190 million for land,¥42 million for buildings and ¥2 million for other assets.
The recoverable values of the above idle properties were determined using net sales
values based on appraisal values for road rating or fixed asset tax.

15. Income Taxes
Taxes
The Company and its domestic subsidiaries are subject to several taxes based on
income, which in the aggregate resulted in a statutory tax rate of approximately
37.96% for the years ended March 31, 2014 and 2013. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.

Basis of Presenting
Financial Statements

Consolidated 37

Following the publication on March 31, 2014 of the “Act for Partial Revision of the
Income Tax Act (Act No.10 of 2004)”, Japanese corporation tax rates will be changed
for the fiscal years beginning on or after April 1, 2014. In line with these revisions, thestatutory tax rate will be changed to calculate deferred tax assets and liabilities from37.96% to 35.59% for temporary differences which are expected to reverse in the
period from the fiscal year beginning on April 1, 2014.
As a result of this change, net deferred tax assets (after netting deferred tax
liabilities) decreased by ¥109 million ($1,064 thousand), and income taxes-deferredincreased by ¥109 million ($1,064 thousand).
The tax effects of significant temporary differences which resulted in deferred
tax assets and liabilities at March 31, 2014 and 2013 were as follows:
Millions of yen

2014
Deferred tax assets:
Accrued expenses
Loss on valuation of inventories
Liabilities for retirement benefits
Net defined benefit liabilities
Depreciation
Fixed assets – elimination ofintercompany profits
Allowance for doubtful accounts
Provision for product warranties
Corporation enterprise tax
Net operating loss carry-forwards
Other
Sub-total
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred gain on sales of fixed assets forincome tax purposes
Unrealized gain on investment securities
Special depreciation reserve
Unrealized gain on subsidiaries’ fixed
assets by revaluation at the
beginning of consolidation
Total
Net deferred tax assets (liabilities)

Thousands of
U.S. dollars

2013

2014

524
92
662
－
488

$ 6,415
824
－
5,808
6,031

272

663

2,645

1,144
242
245
78
833
4,777
(2,120)
2,657

612
280
75
140
463
3,999
(1,317)
2,682

11,124
2,348
2,377
756
8,102
46,430(20,601)
25,829(1,723)(1,741)(16,747)(1,598)
(144)

(942)
(174)

(15,535)(1,408)(1,283)(1,283)(12,467)(4,748)¥ (2,091)(4,140)¥ (1,458)(46,157)$ (20,328)

¥

660
85
－
597
621

¥

Basis of Presenting
Financial Statements

Consolidated 38

The reconciliation between the statutory tax rate and the effective income tax
rate for the year ended March 31, 2014 and 2013 were as follows:
2014
2013
Statutory tax rate
37.96%
37.96%
Non-deductible expenses for income tax purpose
0.76
0.87
Non-taxable dividend income(0.38)(0.41)
Inhabitant per capita tax
1.13
1.52
Effect of tax rate change
1.52－
Change in valuation allowance
9.96
3.26
Amortization of negative goodwill－(2.68)
Equity in earnings of affiliated companies
0.78
0.14
Other
(2.38)(0.21)
Effective tax rate
49.35%
40.45%

16. Comprehensive Income
The components of other comprehensive income for the year ended March 31, 2014
and 2013 were as follows:
Millions of yen
Unrealized gain on available-for-sale securities:
Gains arising during the year
Reclassification adjustments for loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Total
Share of other comprehensive income in affiliate:
Gains arising during the year
Total
Total other comprehensive income

Thousands of
U.S. dollars

2014

2013

2014

¥ 1,875
(11)
1,864
(675)
¥ 1,189¥ 1,535
1,535
(549)
¥ 986

$ 18,226(106)
18,120(6,562)$ 11,558

¥ 83
¥ 83

¥ 77
¥ 77

$ 809
$ 809

¥ 36
¥ 36

¥ 14
¥ 14

$ 350
$ 350

¥ 1,308¥ 1,077$ 12,717

17. Trade Note Maturities
The following trade notes, which matured but were not settled on March 31, 2013
because that day fell on a bank holiday, were included in the balance sheet as ofMarch 31, 2013.
There were not applicable in 2014, because March 31, 2014 was weekday.
Millions of yen

2013
Trade notes receivable
Trade notes payable

¥ 840
932

Basis of Presenting
Financial Statements

Consolidated 39

18. Provision of reserve for Losses on Construction Contracts
Provision of reserve for losses on construction contracts included in Cost of Sales
were ¥ 71 million ($ 689 thousand) and ¥ 4 million for the years ended March 31,
2014 and 2013, respectively.

19.
19. Segment
Segment Information
a. Description of reportable segments
The Group’s reportable segments are those for which separately financial
information is available and regular evaluation by the Board of Directors is being
performed in order to decide how resources are allocated among the Group. The
Group conducts several types of businesses including specialty truck business,environmental equipment and systems and real estate rental business. The
Company and its consolidated subsidiaries are engaged in each business as anindependent management unit. The Group consists of three reportable segments,
which are “Specialty truck business” (Industry A), “Environmental equipment
and systems business” (Industry B) and “Real estate rental business” (Industry
C). Industry A manufactures and distributes specialty trucks such as dump
trucks, tailgate lifters, tank trucks, refuse trucks, trailers, etc. Industry B
manufactures and distributes recycle facilities, including maintenance andconsignment business. Industry C manufactures multistory parking equipment
and offers operating services for toll parking and real estate rental services.
b. Methods of measurement for the amounts of sales, profit, assets, liabilities
and other items for each reportable segment
The accounting policies of each reportable segment are consistent to those
disclosed in Note 2, “Summary of Significant Accounting Policies”. Intersegment
sales or transfers are based on the market prices.

Basis of Presenting
Financial Statements

Consolidated 40

c. Information about sales, profit, assets and other items for the years ended
March 31, 2014 and 2013 are as follows:
Millions of yen
Reportable segments
Reconciliations

Consolidated(Note 2)

IndustryA

IndustryB

IndustryC

Total¥ 74,358¥ 8,793¥ 7,760¥ 90,911

－

16

2

690

708

(708)

－

74,374

8,795

8,450

91,619(708)

90,911

Segment profit

4,515

1,374

2,592

8,481

(443)

8,038

Segment assets

67,8795,459

12,777

86,115

24,628110,743

Depreciation

1,191

67

379

1,637

1

1,638

Increase in tangible andintangible fixed assets

1,510

33

705

2,248

－

2,248

2014

(Note 1)

Net sales:
External customers
Intersegment sales or transfers
Total

¥

90,911Other items:

Millions of yen
Reportable segments
Reconciliations

Total

Consolidated(Note 2)

IndustryA

IndustryB

IndustryC¥ 61,246¥ 9,953¥ 5,525

27

－

600

627

(627)

－

61,273

9,953

6,125

77,351(627)

76,724

Segment profit

3,368

1,242

983

5,593

(459)

5,134

Segment assets

64,150

5,735

12,696

82,581

15,314

97,895

Depreciation

1,061

59

260

1,380

－

1,380

Increase in tangible andintangible fixed assets

1,261

23

702

1,986

－

1,986

2013

(Note 1)

Net sales:
External customers
Intersegment sales or transfers
Total¥ 76,72－

4¥

76,724

Other items:

Basis of Presenting
Financial Statements

Consolidated 41
Thousands of U.S. dollars

Reportable segments
Reconciliations

Consolidated(Note 2)

IndustryA

IndustryB

IndustryC

Total$ 722,761$ 85,471$ 75,433$ 883,665－$ 883,665

158

18

6,707

6,883

(6,883)－722,919

85,48982,140890,548(6,883)

883,665

Segment profit

43,87913,35925,19682,434(4,305)78,129Segment assets

659,790

53,063

124,197

837,050

239,381

1,076,431

Depreciation

11,579649

3,685

15,913

7

15,920

Increase in tangible andintangible fixed assets

14,678322

6,846

21,846－

21,8462014(Note 1)

Net sales:
External customers
Intersegment sales or transfers
Total

Other items:

1.

Reconciliations of segment profit in an amount of ¥(443) million ($(4,305)
thousand) which consists of elimination of intersegment transactions in an
amount of ¥2 million ($23 thousand) and corporate expenses which are notallocated to each reportable segment in an amount of ¥(445) million ($(4,328)
thousand). Corporate expenses are mainly general administrative expenses
not attributable to any other reportable segments.
Reconciliations of segment assets are surplus fund (cash and deposits andsecurities) and long-term investment fund (investment securities) of theCompany.

2.

Segment profit is reconciled with operating income in the consolidated
statements of income.

Information about impairment loss on fixed assets by reportable segment
Millions of yen
Reportable segments

2014
Loss on impairment ofIndustryA¥

654

IndustryB

Industry
C

¥ －

¥ －

Total

¥

654

Reconciliations¥ －Consolidated¥

654

long-lived assets

Millions of yen
Reportable segments

2013
Loss on impairment oflong-lived assets

IndustryA

Industry
B

¥ －

¥ －

Industry
C

Total

¥

¥

234

234

Reconciliations¥ －Consolidated¥

234

Basis of Presenting
Financial Statements

Consolidated 42

Thousands of U.S. dollars
Reportable segments

2014
Loss on impairment ofIndustryA

IndustryB

IndustryC

Total

Reconciliations

Consolidated$ 6,355$ －$ －$ 6,355$ －$ 6,355

long-lived assets

Information about amortization of goodwill and unamortized balance
There was no amortization of goodwill and unamortized balance for the years
ended March 31, 2014.
Millions of yen
Reportable segments
IndustryA

IndustryB

IndustryC

Total

Reconciliations

Consolidated

Amortization for the year

377

－

－

377

－

377

Unamortized balance

－

－

－

－

－

－

2013
Negative goodwill:

20. Subsequent Event
The following appropriations of the Company’s retained earnings in respect of
the year ended March 31, 2014 were as proposed by the Board of Directors andapproved by the shareholders at the annual general meeting held on June 26,
2014.

Appropriations
Cash dividends of ¥ 11 ($ 0.11) per share

Millions of yen¥

437

Thousands of
U.S. dollars
$

4,248

Independent Auditor’s Report

43Corporate Information

44

CORPORATE INFORMATION
Kyokuto Kaihatsu Kogyo Co., Ltd.
Established: June 1, 1955
Paid-in Capital: 11,899,867,400 yen (as of March 31, 2014)
Number of Shares Issued: 42,737,668 shares (as of March 31, 2014)
Number of Employees: consolidated 2,390; non-consolidated 897(as of March 31, 2014)
Headquarters:
6-1-45, Koshienguchi, Nishinomiya-shi, Hyogo, 663-8545 Japan
Tel.+81-798-66-1000, Fax.+81-798-66-8146
Tokyo Office (Overseas Business Department):
3-15-10, Higashi-shinagawa, Shinagawa-ku, Tokyo, 140-0002, Japan
Tel.+81-3-5781-9828, Fax+81-3-5781-3431
Plants:Yokohama Plant
Occupies 62,423 ㎡
Located in Yamato, Kanagawa (Japan)
Nagoya Plant
Occupies 109,611 ㎡
Located in Komaki, Aichi (Japan)
Miki Plant
Occupies 98,274 ㎡
Located in Miki, Hyogo (Japan)
Fukuoka Plant
Occupies 66,832 ㎡
Located in Iizuka, Fukuoka (Japan)
Plant of KYOKUTO KAIHATSU (KUNSHAN) MACHINERY CO., LTD.
Occupies 83,140 ㎡
Located in Kunshan, Jiangsu (China)
Plant of MITHRA KYOKUTO SPECIAL PURPOSE VEHICLE CO., PVT. LTD.
Occupies 60,405 ㎡
Located in Veerapanenigudem, Andhra Pradesh (India)
Plant of PT KYOKUTO INDOMOBIL MANUFACTURING INDONESIA
Occupies Aprox.20,000 ㎡
Located in Purwakarta, Jawa Barat (Indonesia)
Head Plant of NIPPON TREX Co., Ltd.
Occupies 125,285 ㎡
Located in Toyokawa, Aichi (Japan)
Otowa Plant of NIPPON TREX Co., Ltd.
Occupies 20,889 ㎡
Located in Toyokawa, Aichi (Japan)

Board of Directors and Statutory Auditors

BOARD OF DIRECTORSDIRECTORS AND STATUTORY AUDITORS
Takaaki Fudetani,
Representative Director, Chairman, CEO
Kazuya Takahashi,
Representative Director, President, COO
Harumi Sugimoto,Director, Associate Senior Executive Officer
Takashi Yoneda,
Director, Associate Senior Executive Officer
Haruhiro Kondo,
Director, Associate Senior Executive Officer
Ikuya Sakai,
Director, Associate Senior Executive Officer
Ryuichiro Nishikawa,Director, Associate Senior Executive Officer
Toshihisa Nakanishi,

Executive Officer

Takeo Norimitsu,

Executive Officer

Noboru Horimoto,Executive Officer

Sadanobu Kato,

Executive Officer

Akira Sakurai,

Executive Officer

Souichiro Ochi,

Executive Officer

Tatsuya Nunohara,

Executive Officer

Hiroaki Kuriyama,

Executive Officer

Yukihiro Hosozawa,

Executive Officer

Yoshinori Takashima, Standing Auditor
Tomoki Ueyama,

AuditorAkira Michigami,

Outside Corporate Auditor

Morio Kusunoki,

Outside Corporate Auditor

45