ｆAnnual Report 2018Year ended March 31, 2018

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
9
11
12
13
14
15
45
46
47

Operational Results2

1. Operational Results(1) Analysis of Operational Results<Summary of Operational Results for the Consolidated Fiscal Year ended March 31, 2018>
In the fiscal year under review, the Japanese economy experienced amodest recovery marked by a pick-up in the capital investment,
employment/income environments, and consumer spending backed
by improvements in corporate earnings. This was despite facing aprotectionist policy in the United States and a rise in political risks
in neighboring countries such as China and North Korea.
Under these circumstances, our Group actively implemented several
measures as the second year of the medium-term management plan 2016-18“Value up to the Next” (April 1, 2016 - March 31, 2019), to improve ourcorporate quality and enhance our earnings base.

Representative Director,
President, CEO
Kazuya Takahashi

As a result, in the current consolidated fiscal year, net sales increased by 5,945 million yen (5.6%)
compared with the preceding consolidated fiscal year to 112,691 million yen. On the other hand, operating
income decreased by 900 million yen (8.1%) to 10,246 million yen, and the current net income attributableto owners of the parent decreased by 940 million yen (11.6%) to 7,190 million yen.
We would like to present the summary of business on a consolidated basis by segment in comparison withthe preceding fiscal year.
i) Specialty Truck Segment
In Japan, demand for logistics-related vehicles grew steadily. The Group made capital investments aimed
at streamlining production and improving efficiency at each plant, including the new Power Gate Center
constructed at the Nagoya Plant in January 2018.
The Group launched new products by leveraging its technology, including “PY165-39,” a new piston
concrete pump truck with 39-meter boom, the longest in Japan, and the highest output volume in Japan,
launched in October 2017. In November, the Group fully remodeled and released a press type refuse truck,
and a rotary type refuse truck.
As for the overseas market, the Group engaged in new activities such as producing export vehicles for theRepublic of Uganda, for which the Group won a contract in the preceding fiscal year, and expanding
product lines in Indonesia.
As a result, net sales in the Specialty Truck Segment increased by 5,866 million yen (6.4%) to 97,788
million yen. On the other hand, segment profit decreased by 851 million yen (9.3%) to 8,296 million yen
due to cost increase, etc.

Operational Results3

New press type refuse truck

New piston concrete pump truck“PY165-39”

Tailgate lifter(Indonesia model)ii) Environmental Equipment and Systems Segment
As for plant construction, in addition to construction work for facilities that the Group has already won projects
for, the Group continued to focus on the stock-type business such as maintenance and operation.
In the biogas plant business, the Group engaged in sales activities such as collecting information and making
proposals to win new contracts.
As a result, net sales decreased by 569 million yen (6.3%) to 8,458 million yen due to the momentary decreaseof the sales by the percentage of completion method in the plant construction department. On the other hand,
Segment profit increased by 75 million yen (5.2%) to 1,523 million yen.

Biogas plant

Recycle center in NahaOperational Results

4iii) Real Estate Rental Segment
For multistory parking systems, the Group focused on securing new contracts for their renewal andmaintenance, which is a stock-type business. For coin-operated parking, the Group strove to securesales for the multistory parking facility Sasashima Live Parking that opened in Nagoya in April
2017 and other locations.
As for the overseas market, the Group won a contract for the second multi-story parking
equipment in Indonesia in March 2018. The Group will facilitate construction with a target
completion date of December 2018.
As a result, net sales increased by 606 million yen (9.4%) to 7,087 million yen. On the other hand,segment profit decreased by 89 million yen (7.2%) to 1,155 million yen.

Sasashima Live Parking(The toll parking (Coin-operated) in Nagoya)

The first Multi-story parking equipment
in Indonesia<Forecast of Operations for the Next Consolidated Fiscal Year ending March 31, 2018>
The Japanese economy is expected to remain on a steady growth path due to continued
improvements in the capital investment and employment/income environments backed by strong
corporate earnings, despite facing global political risks.
Our Group makes determined efforts to expand sales and profits and improve our corporate value,
under the medium term management plan 2016-18 “Value up to the Next”.
Regarding the forecast of consolidated business performance for March 2019, the Company
estimates net sales to grow to 115, 000 million yen, operating income to decrease to 9,500 million
yen, the current net income attributable to owners of the parent is estimated to decrease to 6,700
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 10,317million yen (8.0%) from the end of
the preceding fiscal year to 138,860 million yen.
Current assets increased by 7,602 million yen (10.6%) to 79,231 million yen, due to increases in cash anddeposits, etc.
Non-current assets (property, plant and equipment, intangible assets and investments and other assets)
increased by 2,714 million yen (4.8%) to 59,629 million yen, due to the rise in market prices ofinvestment securities, etc.
Regarding liabilities, current liabilities increased by 4,412 million yen (12.1%) to 40,921 million yen due
to increases in electronically recorded monetary obligations, etc. Non-current liabilities decreased by
1,129 million yen (10.1%) to 10,032 million yen due to repayment of long-term loans, etc.
Total net assets increased by 7,034 million yen (8.7%) to 87,907 million yen due to the posting of net
profit, etc. attributable to owners of parent.
As a result, the capital adequacy ratio stood at 62.7% as of the end of the current fiscal year (62.3% at theend of the preceding fiscal year).
ii) Cash Flow Situation
Consolidated cash and cash equivalents at the end of period increased by 3,772 million yen (21.5%)
compared with the end of the preceding fiscal year to 21,357 million yen. Cash flow by activity type issummarized as follows:
Cash Flow from Operating Activities
Net cash provided by operating activities amounted to 10,857 million yen (a decrease of 1,116 million
yen compared with the preceding fiscal year). This was because of the posting of net profit before tax,
increases in trade notes and accounts payable, etc.
Cash Flow from Investing Activities
Net cash used in investing activities was 4,083 million yen (a decrease of 808 million yen compared withthe preceding fiscal year). This was because of purchases of non-current assets, etc.
Cash Flow from Financing Activities
Net cash used by financing activities amounted to 2,973 million yen (an increase of 799 million yen
compared with the preceding fiscal year). This was because of repayment of loans, dividends paid, etc.

Operational Results

6(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.
The Meeting of Shareholders on June 27th, 2018 resolved and passed to pay a dividend of 18 yen per share at
the end of March 2018 as originally proposed by management, making its annual dividend 36 yen per shareincluding an interim dividend, increased by 2 yen compared with the preceding fiscal year.
For the year ending March 2019, management plans to pay an annual dividend of 38 yen per share (including
an interim dividend of 19 yen), increased by 2 yen compared with the preceding fiscal year.

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) Mid-to-Long Term Management Strategy
Under the medium term management plan 2016-18 “Value up to the Next” (3 year plan; April 1, 2016 - March
31, 2019) , we are promoting priority strategies for the growth of the group based on the following basic policy.
Basic policies
Our group is fostering consistent developmental growth and striving to become a corporate group widely
chosen by customers and society at large by taking measures to establish a firm earning foundation andsecure new sources of earnings, and is aggressively channeling management resources into these measures.
(1) Enhancing a domestic earning foundation
In Japan, promoting selection and concentration from the long-term and company-wide perspectives, andenhancing the earning foundation and improving the profit ratio through efforts such as expanding theshares of logistics- and environment-related products and expanding stock business(2) Establishing overseas sales
Putting overseas businesses on the growth track as key sources of future earnings through efforts across the
Kyokuto Kaihatsu group(3) Promoting M&A and new businesses
Promoting strategic M&A and new businesses aggressively and seeking new growth drivers(4) Improving corporate quality
Based on the provision of merchandise (products and services) of higher standards of quality, the safety, andthe compliance, focusing on the establishment of a healthy corporate culture to create sustainable growth
Key Strategies(1) Special purpose vehicles business[1] Expanding shares of key products (e.g., tailgate lifters, refuse trucks, detachable body trucks, andfreezing vans)[2] Reconstructing a strategic and flexible production system from a far-sighted, long-term perspective[3] Improving customer satisfaction and enhancing the foundation of the stock business by expanding
regular visit service and locations on 24-hour duty
[4] Building industry-leading product groups with world-class performance and quality

Management Policy

8(2) Environmental business[1] Securing orders by strengthening sales and proposal capabilities and participating in joint ventures withother companies for recycling facilities[2] Increasing earnings from after-sales service and operation acceptance through measures such as energy
saving proposals and enhanced group collaboration[3] Promoting the establishment of businesses in new fields and products such as biogas plants(3) Parking business[1] Focusing on renewal and after-sales service for mechanical multistory parking equipment[2] Securing earnings through measures such as developing new business locations, including large facilities
for pay-by-the-hour parking lots
[3] Securing new earnings sources through measures such as developing overseas markets based on groupcollaboration(4) Overseas business[1] Securing and expanding the production volume and shares of plants in India and Indonesia, andestablishing the production and sales system of the plant in Thailand at an early stage[2] Promoting collaboration with local partners and expanding exports through measures such as
developing untapped markets[3] Promoting the development of human resources overseas and enhancing collaboration across the group
to develop products for overseas markets(5) Improving corporate quality[1] Striving to improve quality awareness and address quality control from the customer perspective, andestablishing the quality to be chosen continuously[2] Building the foundation of a healthy corporate culture (e.g., by creating a secure and safe work
environment, ensuring compliance, and building a scheme of technology and skill tradition)[3] Establishing human resources and an organization that create sustainable growth (e.g., by developing
next-generation leaders and building a scheme to support the enhancement of overseas businesses)[4] Improving stockholder satisfaction by implementing effective stockholder return measures(approximately 20 to 30% of the expected consolidated dividend payout ratio)(3) Targeted management index
We set management targets of sales of 100 billion yen or more and operating profit of 9 billion yen or more on aconsolidated base for the term ending March 2019, the last fiscal year of the medium term management plan
2016-18 “Value up to the Next” (3 year plan; April 1, 2016 - March 31, 2019).
In addition, our group’s goal for the period during and after this plan is summed up by the slogan ”KYOKUTO
with sustainable and developmental growth and widely chosen.” We endeavor to achieve (1) a domestic
operating profit ratio of 10% or more, (2) overseas sales of 10 billion yen or more, and (3) a sales increase
through M&A and new businesses, reaching consolidated net sales of 120 billion yen or more.

9Consolidated Balance Sheets

CONSOLIDATED BALANCE SHEETSAt March 31, 2018 and 2017

Thousands of
U.S. dollars(Note 1)Millions of yen
ASSETS
Current assets:
Cash and deposits (Notes 8 & 9)
Short-term securities (Notes 8 & 9)
Trade notes and accounts receivable (Note 9 & 17)
Merchandise & finished goods
Work in process
Raw materials & supplies
Other current assets
Deferred tax assets (Note 15)
Allowance for doubtful accounts
Total current assets

2018¥

Property, plant and equipment (Note 10):Land (Note 5)
Buildings and structures (Note 5)
Machinery, equipment and vehicles
Construction in progress
Other
Total
Accumulated depreciation
Net property, plant and equipment

Intangible assets

Investments and other assets:
Investment securities (Notes 3 & 9)
Deferred tax assets (Note 15)
Other assets
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total
The accompanying notes are an integral part of these statements.

¥

2017

2018

10,657 ¥11,20040,741
890
4,763
7,964
1,716
1,360
(60)
79,231

6,684
10,90038,759
884
4,305
7,364
1,406
1,383
(57)
71,62820,592
33,17817,817276
5,029
76,892(36,997)
39,895

20,64332,402
17,166176
4,810
75,197(36,223)
38,974

193,805
312,260
167,6852,594
47,337
723,681(348,204)
375,477

639

648

6,018

15,518
53
2,450
(729)
17,292
56,914
128,542

159,137
1,047
26,214(6,681)
179,717561,2121,306,914

16,908
111
2,786
(710)
19,09559,629138,860 ¥$$

100,303
105,412383,440
8,379
44,82374,952
16,154
12,803(564)
745,702

Consolidated Balance Sheets

Thousands of
U.S. dollars(Note 1)Millions of yen
LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans (Notes 4 & 9)
Current portion of long-term bank loans (Notes 4 & 9)
Trade notes and accounts payable (Note 9 & 17)
Electronically recorded obligations - operating (Note 9 & 17)
Accrued expenses
Income taxes payable
Other current liabilities (Note 4)
Total current liabilities

2018¥

Non-current liabilities:
Long-term bank loans (Notes 4 & 9)
Net defined benefit liabilities (Note 6)
Liabilities for directors' retirement benefits
Deferred tax liabilities (Note 15)
Other non-current liabilities (Notes 4, 5 & 9)
Total non-current liabilities
Total liabilities

Net assets:
Shareholders' equity:
Common stock (Note 12):
Authorized-170,950,672 shares
Issued-42,737,668 shares in 2018 and 2017
Capital surplus (Note 12)
Retained earnings
Treasury stock, at cost:
3,009,431 shares in 2017
3,009,885 shares in 2018
Total shareholders' equity
Accumulated other comprehensive income (Note 16):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total
The accompanying notes are an integral part of these statements.

¥

10

2017

2018

2,971 ¥
1,345
16,846
11,003
4,095
1,741
2,920
40,921

2,639
1,530
16,017
7,462
3,916
1,907
3,037
36,508

$

1,204
688
160
4,841
3,139
10,03250,953

2,611
732
205
4,317
3,296
11,16147,66911,3276,478
1,508
45,56329,53894,414
479,552

11,90011,71959,464

11,90011,71953,723111,999
110,294559,667(2,151)80,932(2,150)75,192(20,246)
761,714

6,416
22
(339)
6,099
876
87,907
138,860 ¥

5,167
(12)
(239)
4,916
765
80,873
128,542

60,383207(3,190)57,4008,248
827,362
1,306,914$

27,964
12,656
158,547
103,562
38,545
16,38827,476385,138

Consolidated Statements of Income

11

CONSOLIDATED STATEMENTS OF INCOME
Years ended March 31, 2018 and 2017

Thousands of
U.S. dollars(Note 1)Millions of yen
Net sales
Cost of sales (Note 18)
Gross profit
Selling, general and administrative expenses (Note 13)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sales of investment securities
Loss on sales or disposition of property and equipment, net
Loss on impairment of long-lived assets (Note 14)
Equity in losses of affiliates
Loss on valuation of investment securities (Note 3 and 9)
Foreign exchange loss
Other-net
Other expenses -net
Income before income taxes and non-controlling interests
Income taxes (Note 15):
Current
Deferred
Total income taxes
Net income
Net loss attributable to non-controlling interests
Net income attributable to owners of the parent

¥

¥

2018
112,691 ¥
89,45023,241
12,995
10,246

2017
106,745
83,25323,492
12,345
11,147

$

358
(104)
104
(323)
(216)
(92)
(124)
41
(356)
9,890

293
(99)
1
(65)
(263)
(125)
(103)
(33)
(394)
10,753

3,365
(975)
976
(3,036)(2,033)(868)(1,163)382(3,352)
93,080

3,007
33
3,040
6,850
(340)
7,190 ¥

2,529
275
2,804
7,949
(182)
8,131

28,300313
28,61364,467(3,206)
67,673$

U.S. dollars(Note 1)

Yen
2018
Amounts per shares:
Basic net income
Diluted net income
Cash dividends applicable to earnings of the year
The accompanying notes are an integral part of these statements.

¥

2018
1,060,618
841,879
218,739
122,307
96,432180.99 ¥
36.00

2017
204.66
34.00

2018
$

1.70
0.34

Consolidated Statements of Comprehensive Income

12

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2018 and 2017

Thousands of
U.S. dollars(Note 1)Millions of yen
Net income¥

Other comprehensive income (Note 16):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates accounted forby the equity method
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
The accompanying notes are an integral part of these statements.

¥

2018
6,850 ¥

2017
7,949

$

2018
64,467

1,249
15
(100)
35

1,484
57
134
(41)

11,755
140
(933)
326

1,199

1,634

11,2888,049 ¥

9,583

8,373
(324)

9,799
(216)

$

75,75578,809(3,054)

110,294

111,999

110,294

surplusstock

111,999

Capital11,71911,719Common11,90011,90011,719surplus11,900stock

The accompanying notes are an integral part of these statements.

Balance, March 31, 2018

Other net changes in the year

Cash dividends paid

Appropriation

Change in scope of consolidation

Net income attributable to owners of the parent$$

Balance, March 31, 2017

Purchases of treasury stock

¥

¥

¥

Balance, March 31, 2018

Other net changes in the year

Cash dividends paid

Appropriation

Change in scope of consolidation

Net income attributable to owners of the parent

Purchases of treasury stock

Balance, March 31, 2017

Other net changes in the year

Cash dividends paid

Appropriation

Change in scope of consolidation

Net income attributable to owners of the parent

Purchases of treasury stock

Balance, March 31, 2016

CapitalCommonCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2018 and 2017

Total

559,667(13,461)(20,246)

761,714(13,461)

(180)

(180)

(8)
67,673

707,690(8)equityshareholders'

Total

80,932(20,238)

stock

Treasury(2,151)(1,430)67,673505,635

earnings

Retained

Shareholders' equity

59,464(1,430)

(19)

(19)

(1)

(1)
7,190

75,192(2,150)(1,272)

7,190

53,723(1,272)

(82)

(82)

(0)

(0)
8,131

68,415equityshareholders'(2,150)stock

Treasury

8,131

46,946earnings

Retained

Shareholders' equity

60,383

11,755

48,628sale securities

available-for-gain onUnrealized

6,416

1,249

5,167

1,484

3,683

sale securities

available-for-gain onUnrealized

plans

(339)

(100)

(239)

134

(373)

of defined benefit

Remeasurements

207

314

(107)

adjustments

translation

currency

Foreign(3,190)(933)(2,257)plans

of defined benefit

Remeasurements

Accumulated other comprehensive income

22

34

(12)

48

(60)

adjustments

translation

currency

Foreign

Accumulated other comprehensive income
Total

interests

income57,400

11,136

8,248

1,044

7,204

Noncontrollingother

46,264

Total

87,907

1,294(1,430)

(19)

7,190

(1)

80,873

2,367(1,272)

(82)

8,131

(0)

71,729net assets

827,362

12,180(13,461)(180)

67,673(8)761,158

assetsTotal netThousands of U.S. dollars

876

111

765

701

comprehensive

accumulated

Total

6,099

1,183

4,916

1,666

64

interests

income3,250

Noncontrollingothercomprehensive

accumulated

Millions of yen

Consolidated Statements of Changes 13
in Shareholders’ Equity

Consolidated Statements of Cash Flows

14

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2018 and 2017

Thousands of
U.S. dollars(Note 1)Millions of yen
2018
Operating activities:
Income before income taxes and non-controlling interests
Depreciation and amortization
Loss on valuation of investment securities
Gain on sales of investment securities
Loss on impairment of long-lived assets
Equity in losses of affiliates
Loss on sales or disposition of property and equipment, net
Interest and dividend income
Interest expenses
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Increase (decrease) in net defined benefit liabilities
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in allowance for others
Increase (decrease) in consumption taxes payable
Other, net
Sub totalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

2018

9,890 ¥
2,529
(104)
216
92
282
(358)
104
(1,803)
(816)
4,478
(195)
(17)
(94)
(185)
(380)
13,639357(81)(3,058)10,857

10,753
2,213
125
(1)
263
58
(293)
99
3,040
177
346
(230)
(1,850)
(215)
259
(82)
14,662293(17)(2,965)
11,973

Investing activities:
Purchases of shares of subsidiaries
Purchases of securities and investments
Proceeds from sales of securities and investments
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Net decrease (increase) in short-term loans receivable
Disbursement of loans receivableCollection of loans receivable
Net cash used in investing activities

(526)
215
(3,469)
235
45
(588)
5
(4,083)

(354)
(222)
4
(2,533)
321
(35)
(465)
9
(3,275)(4,954)
2,023(32,649)
2,213
424(5,540)50(38,433)

Financing activities:
Net increase (decrease) in short-term bank loans
Proceeds from long-term bank loans
Repayment of long-term bank loans
Payment of finance lease obligations
Purchases of treasury stock
Dividends paid
Net cash used in financing activities

16
70(1,593)(35)(1)(1,430)(2,973)(634)(1,791)(77)(0)(1,272)(3,774)147
658(14,992)(334)(8)(13,458)(27,987)

Foreign currency translation adjustments on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents from a newly consolidated subsidiary
Cash and cash equivalents at end of year (Note 8)

(32)
3,769
17,584
4
21,357 ¥

(32)
4,892
12,61478
17,584(298)
35,467
165,50141
201,009

The accompanying notes are an integral part of these statements.

¥

2017

¥

$

$

93,08023,802
(976)
2,033
868
2,649
(3,365)975(16,971)(7,682)
42,143(1,834)(160)(886)(1,738)(3,578)
128,360
3,364(762)(28,777)
102,185

Basis of Presenting Consolidated
Financial Statements

15

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 ¥106.25=US$1, the approximate exchange rate on March 31, 2018.
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 11 significant subsidiaries. Investments in 6 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.

Basis of Presenting Consolidated
Financial Statements

16

In March 31, 2018, 6 subsidiaries are excluded from scope of consolidation. As tothese, investments in 6 nonconsolidated subsidiaries are accounted for by theequity 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 financial statements.
During the fiscal year ended March 31, 2018, PT. Kyokuto Indomobil
Manufacturing Indonesia has been included into the scope of consolidation frombeing accounted for by the equity method and Mori Plant Co., Ltd. has newly
been accounted for equity method, since their materiality has been increased.
Among the consolidated subsidiaries, the balance sheet date for Kyokuto
Kaihatsu (Kunshan) Machinery Co., Ltd., Trex Thairung Co., Ltd. and PT.
Kyokuto Indomobil Manufacturing Indonesia is December 31. They are
consolidated using the financial statements as of their balance sheet date.
Significant inter-company transactions between their balance sheet date andconsolidated balance sheet date are adjusted for consolidation.
Furthermore, the balance sheet date for Kyokuto Special Automobile Trading(Shanghai) Co., Ltd. under the equity method is different from the consolidatedbalance sheet date, but no adjustments were made.
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 is being amortized on a straight-line
basis over estimated useful lives or 5 years in situations in which the useful lives
cannot be estimated. However, insignificant goodwill is charged to expenses
when incurred.

(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.

Basis of Presenting Consolidated
Financial Statements

17(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.
Non-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.

(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 statedBasis of Presenting Consolidated
Financial Statements

18

years that do not exceed the average remaining service period of the employees(10 years) beginning with the year following the year which incurred.

(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
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.

Basis of Presenting Consolidated
Financial Statements

19(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
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 39,727 and 39,728 thousand shares for 2018 and 2017.
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 Revenue Recognition” (Accounting Standards Boardof Japan (ASBJ) Statement No.29, March 30, 2018)-“Implementation Guidance on Accounting Standard for Revenue Recognition”(ASBJ Guidance No.30, March 30, 2018)

Basis of Presenting Consolidated
Financial Statements

20(1) Overview
The International Accounting Standards Board (IASB) and the Financial
Accounting Standards Board (FASB) in the United States jointly developed acomprehensive accounting standard for revenue recognition and publishedthe “Revenue from Contracts with Customers” (as IFRS 15 in the IASB and
Topic 606 in the FASB) in May 2014, respectively. To respond to both IFRS
15,which will be applied from a fiscal year beginning on or after January 1,
2018 and Topic 606, which will be applied from a fiscal year beginning after
December 15, 2017, the ASBJ has developed a comprehensive accounting
standard for revenue recognition and issued it in conjunction with the
Implementation Guidance.
In developing the accounting standards for revenue recognition, the ASBJ
basically integrated the core principles of IFRS 15 from a comparability point
if view of the financial statements, which is one of the benefits of ensuringconsistency with IFRS 15, the ASBJ, on the other hand, considered additional
alternative treatments where current practices under Japanese GAAP should
be reflected as far as such treatments would not significantly impair
international comparability.
(2) Scheduled date of application
To be applied from the beginning of the fiscal year ending March 2022.
(3) Effects of application of these standards
The effects of the application of the aforementioned standard and guidance on
the Company’s consolidated financial statements are currently under theassessment.

Basis of Presenting Consolidated
Financial Statements

21

3. Securities
The following is a summary of held-to-maturity securities and available-for-salesecurities at March 31, 2018 and 2017:
Millions of yen

Held-to-maturity securities

March 31, 2018

Gross

Gross

Carrying

unrealized

unrealized

amountgains

losses¥¥¥Fair value

Debt securities,
whose fair value exceeds
carrying amount

30

0

－

¥

30

whose fair value does notexceed carrying amount
Total

－
¥

30

－
¥

0

－
¥

－

－
¥

30

Millions of yen

Held-to-maturity securities

March 31, 2017

Gross

Gross

Carrying

unrealized

unrealized

amountgains

losses¥¥¥Fair value

Debt securities,
whose fair value exceeds
carrying amount

45

0

－

¥

45

whose fair value does notexceed carrying amount
Total

－
¥

45

－
¥

0

－
¥

－

－
¥

45

Basis of Presenting Consolidated
Financial Statements

22

Thousands of U.S. dollars

Held-to-maturity securities

March 31, 2018

Gross

Gross

Carrying

unrealized

unrealized

amountgains

lossesFair value

$

$

0

$ －

$

－

－

0

$ －

Debt securities,
whose fair value exceeds
carrying amount

282

282

whose fair value does notexceed carrying amount
Total

－
$

282

$

－
$

282

Millions of yen

Available-for-sale securities

March 31, 2018

Gross

Gross

Book Value

unrealized

unrealized(Estimated fair

gains

lossesvalue)

Cost

Market value available:
Equity securities¥ 5,888

Other securities

333

Subtotal¥ 6,221

¥

9,260

¥

9,260

¥

(18)

－
¥

(2)

¥

(20)

315
¥

15,461
1,417

Market value not available:
Total

15,146¥

16,878

Basis of Presenting Consolidated
Financial Statements

23

Millions of yen

Available-for-sale securities

March 31, 2017

Gross

Gross

Book Value

unrealized

unrealized(Estimated fair

gains

lossesvalue)

Cost

Market value available:
Equity securities¥ 5,994

Other securities

333

Subtotal¥ 6,327

¥

7,465

¥

0
¥

7,465

(7)

¥

(14)
¥

(21)

13,452319¥

13,771
1,702

Market value not available:
¥

Total

15,473Thousands of U.S. dollars

Available-for-sale securities

March 31, 2018

Gross

Gross

Book Value

unrealized

unrealized(Estimated fair

gains

lossesvalue)

87,151$ (19)$ 142,554

－

(169)

2,961

87,151$ (188)$ 145,515

Cost

Market value available:
Equity securities$ 55,422

Other securities

3,130

Subtotal$ 58,552$$

Market value not available:

13,340Total$ 158,855

Impairment losses of available-for-sale securities which have market value wererecognized in the amount of ¥ 16 million during the fiscal year ended March 31, 2017.
No impairment loss was recorded during the fiscal year ended March 31, 2018.
Impairment losses for security whose market value is not available, please refer toNote 9 “Financial Instruments and Related Disclosures”.
Impairment losses of all securities whose fair value declined 50 percent or more wererecognized. In addition, the Company considers the fair values of securities are
deemed unrecoverable and impairment losses are recognized when their fair values
have declined more than 30%, but less than 50% from acquisition cost, and the fairvalues have continued to decline for two years.

Basis of Presenting Consolidated
Financial Statements

24

4. Short-term Bank Loans and Long-term Debts
The annual average interest rates applicable to short-term bank loans at March
31, 2018 and 2017 were 1.62% and 0.64%, respectively.
Long-term debts at March 31, 2018 and 2017 consisted of the following:Thousands ofMillions of yen

U.S. dollars

2018

2017

2018

¥ 2,549¥ 4,141$ 23,983

Lease obligations

345

312

3,247

Other

891

1,115

8,390

Total

¥ 3,785¥ 5,568$ 35,620

Long-term bank loans

Aggregate annual maturities of long-term debts subsequent to March 31, 2018
were as follows:
Thousands ofYear ending March 31

Millions of yen

U.S. dollars

2019¥ 1,663$ 15,654

2020

920

8,663

2021

918

8,636

2022

257

2,414

2023 and thereafter

27

253

¥ 3,785$35,620

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 31,2018 and 2017.
The unexecuted balance of lending commitments of the Company at March 31,2018 and 2017 were as follows:
Thousands ofTotal lending commitments
Less amounts currently executed
Unexecuted balance

Millions of yen

U.S. dollars

2018

2017

2018

¥ 5,000¥ 5,000$ 47,059－－－¥ 5,000¥ 5,000$ 47,059

Basis of Presenting Consolidated
Financial Statements

25

5. Pledged Assets
The following assets were pledged as collateral for the following borrowings at March 31,2018 and 2017:
Thousands ofMillions of yen

U.S. dollars

2017

2018

2018
Land
Buildings
Total

¥

750

¥

750

$

7,055

1,728

1,832

16,267¥ 2,478¥ 2,582$ 23,322
Thousands ofMillions of yen

U.S. dollars

2018

2017

2018

Other non-current liabilities¥ 1,786¥ 2,019$ 16,814

Total¥ 1,786¥ 2,019$ 16,814

Basis of Presenting Consolidated
Financial Statements

26

6. Retirement Benefits
The Company, a domestic subsidiary and a foreign 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 a kind of defined
contribution plans.
The changes in defined benefit obligations for the year ended March 31, 2018 and 2017
were as follows:
Thousands ofMillions of yen

U.S. dollars

2017

2018

2018
Benefit obligations at beginning ofyear¥ 6,794¥

6,700$ 63,947

Service cost

439

430

4,125

Interest cost

20

11

189

Actuarial gains or losses

376

44

3,542

Retirement benefits paid

(416)

(391)

(3,917)

6

－

58

6,794

$ 67,944

Increase of benefit obligation due
to a newly
consolidated subsidiary

¥

7,219

¥

The changes in plan assets for the year ended March 31, 2018 and 2017 were as follows:
Thousands ofPlan assets at beginning of year

Millions of yen

U.S. dollars

2018

2017

2018

¥

¥

5,545

$ 57,056

6,062

Expected return on plan assets

121

95

1,141

Actuarial gains or losses

161

126

1,516

Contributions from employers

538

652

5,057

Retirement benefits paid

(351)

(356)

(3,304)

6,062$ 61,466

Plan assets at end of year

¥

6,531

¥

The reconciliation of the defined benefit obligations and plan assets to the net defined
benefit liabilities recognized in the consolidated balance sheet as of March 31, 2018 and2017 were as follows:Basis of Presenting Consolidated
Financial Statements

27

Thousands ofBenefit obligations

Millions of yen

U.S. dollars

2018

2017

2018

¥

¥

6,794

$ 67,944

6,062

61,466

7,219

Plan assets at end of year
Net amount of liabilities and assets
recognized in consolidated balance sheet
Net defined benefit liabilities

6,531
¥

688

¥

732

$

6,478

¥

688

¥

732

$

6,478

Net defined benefit assets
Net amount of liabilities and assets
recognized in consolidated balance sheet

－
¥

688

－
¥

732

－
$

6,478

The retirement benefit expenses for the year ended March 31, 2018 and 2017 were as
follows:
Thousands ofService cost

Millions of yen

U.S. dollars

2018

2017

2018

¥

¥

$

Interest cost
Expected return on plan assets
Recognition of actuarial gains or losses
Severance and pension costs

¥

439

430

4,125

20

11

189

(121)

(95)

(1,141)

70

111

664

408

¥

457

$

3,837

Remeasurements of defined benefit plans recognized in other comprehensive income(amount before income tax effect) were as follows:
Thousands of

2018

Millions of yen

U.S. dollars

2017

2018

Recognized actuarial gains or losses

¥

(144)

¥

193

$ (1,355)

Total

¥

(144)

¥

193

$ (1,355)

Basis of Presenting Consolidated
Financial Statements

28

Remeasurements of defined benefit plans recognized in accumulated other comprehensive
income (amount before income tax effect) were as follows:
Thousands ofMillions of yen

U.S. dollars

2018

2017

2018

Unrecognized actuarial gains or losses

¥

486

¥

342

$

4,578

Total

¥

486

¥

342

$

4,578

The components of plan assets as of March 31, 2018 and 2017 were as follows:
Ratio

2018

2017

Bonds

42%

41%

Securities

31%

32%

General account asset

20%

20%

Other

7%

7%

Total

100%

100%

The major actuarial assumptions for the year ended March 31, 2018 and 2017 were as
follows:
2018

2017

0.0 to 0.6%

0.0 to 0.6%

7.2%

-%

The Company and a domestic subsidiary

2.0%

1.3 to 2.0%

A foreign subsidiary-%-%

4.3 to 6.5%

4.3 to 6.3%

7.0%

-%

Discount rate
The Company and a domestic subsidiary
A foreign subsidiary
Long-term rate of return on plan assets

Future salary increase
The Company and a domestic subsidiary
A foreign subsidiary

Long-term rate of return on plan assets was determined by considering the current andfuture portfolio of plan assets and the current and future long-term performance of various
assets comprise the plan assets.
The required amount of the defined contribution pension plan were ¥ 107 million ($ 1,011
thousand) and ¥ 103 million for the year ended March 31, 2018 and 2017 in the Company
and other domestic subsidiaries.

Basis of Presenting Consolidated
Financial Statements

29

7. Contingencies
At March 31, 2018 and 2017, the Group was contingently liable as follows:
Thousands ofMillions of yen

U.S. dollars

2018

2017

2018

¥

¥

$

As a guarantor of indebtedness of :Affiliated companies

114

12

Other
Total

38

¥

14

50

¥

128

358
115

$

473

8. Cash and cash equivalents
Cash and cash equivalents at March 31, 2018 and 2017 were as follows:
Thousands ofMillions of yen

2018
Cash and deposits
Short-term securities
Securities with redemption term of over 3
monthsCash and cash equivalents¥ 10,657

2017¥

U.S. dollars

2018

6,684

$ 100,303

11,20010,900105,412(500)－(4,706)¥ 21,357¥ 17,584$ 201,009

Basis of Presenting Consolidated
Financial Statements

30

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, notfor speculative nor trading purpose, but to hedge the exposure to foreign exchange raterisks with the debts and credits denominated in foreign currencies and 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 to customers.
In order to monitor credit risk, the Group manages, according to the credit management
guideline of the Group, the due date and the balance of operating receivables from
customers.
Investment securities consist of mainly held-to-maturity securities and equity 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 isreported to the board meeting.
Trade notes and accounts payable have payment due dates mainly within one year. Tradenotes 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 business activities andlong-term bank loan and bonds payable, which are due mainly within five years, areraised 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 to manage 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 onlywith financially stable financial institutions to reduce institutions’ credit risk.
Based on a report from the Company and consolidated subsidiaries, the Group preparesand 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, the contract
prices themselves do not present the market risk on the derivative transactions.

Basis of Presenting Consolidated
Financial Statements

31

Summarized in the table below are the carrying amounts and the estimated fair value offinancial instruments outstanding at March 31, 2018 and 2017. Financial instruments forwhich it is extremely difficult to determine the fair value are not included in the table below.
Millions of yen

Unrecognized

Carrying
March 31, 2018

amountFair value

gain/loss

Cash and deposits¥ 10,657¥ 10,657¥

Trade notes and accounts receivable

40,74140,741

─

Short-term securities

11,200

11,200─Investment securities

15,491

15,4910

Trade notes and accounts payable(16,846)(16,846)

─

(11,003)(11,003)―

Short-term bank loans(2,971)(2,971)─Long-term bank loans(2,549)(2,550)(1)

Long-term deposits

(891)

(939)

(48)

─

─

─

Electronically recorded obligations- operating

Derivatives

─Millions of yen

Carrying
March 31, 2017
Cash and deposits¥

UnrecognizedamountFair value

6,684

¥

6,684

gain/loss¥─

Trade notes and accounts receivable

38,75938,759─

Short-term securities

10,90010,900─Investment securities

13,816

13,8160Trade notes and accounts payable(16,017)(16,017)

─

(7,462)(7,462)―

Short-term bank loans(2,639)(2,639)─Long-term bank loans(4,141)(4,149)(8)Long-term deposits(1,115)(1,188)

(73)

─

─

─

Electronically recorded obligations- operating

Derivatives

Basis of Presenting Consolidated
Financial Statements

32

Thousands of U.S. dollars

Unrecognized

Carrying
March 31, 2018account

Fair value

gain/loss

Cash and deposits$ 100,303$ 100,303$

Trade notes and accounts receivable

383,440

383,440

─

Short-term securities

105,412

105,412─Investment securities

145,797

145,7970

Trade notes and accounts payable(158,547)(158,547)―(103,562)(103,562)―

Short-term bank loans(27,964)(27,964)─Long-term bank loans(23,983)(23,996)(13)

Long-term deposits(8,391)(8,842)

(451)

─

─

─

Electronically recorded obligations- operating

Derivatives

Methods to determine the estimated fair value of financial instruments and other mattersrelated 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 thefinancial institutions.
The carrying amounts of the other securities than the above debt securities approximate fairvalue because of their short maturity.
(c) “Investment securities”
The fair values of marketable securities are based on quoted market prices. The fair valuesof debt securities are based on quotes provided by the financial institutions. For information
on securities classified by holding purpose, please refer to Note 3 “Securities”.
(d) “Trade notes and accounts payable”, “Electronically recorded obligations - operating”
and “Short-term bank loans”
Their carrying amounts approximate fair value because of their short maturity.

─Basis of Presenting Consolidated
Financial Statements

33(e) “Long-term bank loans”
The fair value of long-term bank loans is estimated based on present value of the total ofprincipal and interest discounted by an assumed current interest rate for loans with similarterms and remaining maturities.
(f) “Long-term deposit”
The fair value of long-term deposit is estimated based on present value of the total ofprincipal and interest discounted by an assumed interest rate, if possible, based on debt’s
maturity and credit risk.
(g) “Derivatives”
Please refer to Note 11 “Derivatives”.
Financial instruments for which it is extremely difficult to determine the fair value at March
31, 2018 and 2017 consist of the following:Thousands ofMillions of yen

Non-listed equity securities

U.S. dollars

2018

2017

2018

¥

¥

1,702

$13,340

1,408

13,357

1,417
1,419

Long-term deposit

Impairment losses of non-listed securities were recognized in the amount of ¥ 109 million during
the fiscal year ended March 31, 2017. No impairment loss was recorded during the fiscal year
ended March 31, 2018.
The annual maturities of financial assets and investment securities with contractual maturities
subsequent to March 31, 2018 and 2017 were as follows:
Millions of yen
Due in one year

March 31, 2018
Cash and deposits

or less¥ 10,657

Due after one

Due after five

year throughyears throughfive years

ten years

¥

－

¥

－

Trade notes and accounts receivable

40,741－－

Short-term securities

11,200－－Investment securities

30

－

－

Total

¥ 62,628

¥

－

¥

－

Basis of Presenting Consolidated
Financial Statements

34

Millions of yen
Due in one year
or less

March 31, 2017
Cash and deposits

¥

6,684

Due after one

Due after five

year throughyears throughfive years

ten years

¥

¥

－

－

Trade notes and accounts receivable

38,759－－

Short-term securities

10,900－－Investment securities

15

30

－

Total

¥ 56,358

¥

¥

30

－

Thousands of U.S. dollars

Due in one year

March 31, 2018or less

Cash and cash equivalents$ 100,303

Due after one

Due after five

year throughyears throughfive years

ten years

$

－

$

－

Trade notes and accounts receivable

383,440－－

Short-term securities

105,412－－Investment securities

282

－

－

Total

$ 589,437

$

－

$

－

10. Investment Property
The company and certain subsidiaries hold some rental properties including land in Tokyoand other areas (“investment properties”). The amounts of net income related to investment
properties (rental income is recognized in operating revenue and rental expense isprincipally charged to operating expenses) were ¥ 966 million ($ 9,090 thousand) and ¥ 745
million for the year ended March 31, 2018 and 2017, respectively. There was no loss on
impairment of investment properties for the year ended March 31, 2018 and 2017.
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, 2017

¥ 7,746(decrease)¥ (645)

March 31, 2018

March 31, 2018

¥ 7,101¥ 9,985

Basis of Presenting Consolidated
Financial Statements

35

Millions of yen

Carrying amount

Fair value

Increase/
April 1, 2016

¥ 7,903(decrease)¥ (157)

March 31, 2017

March 31, 2017

¥ 7,746¥ 10,393

Thousands of U.S. dollars

Carrying amount

Fair value

Increase/
April 1, 2017

$ 72,903(decrease)$ (6,073)

March 31, 2018

March 31, 2018

$ 66,830$ 93,976(1) Carrying amount is net of accumulated depreciation and accumulated impairment
losses, if any.
(2) Increase during the year ended march 31, 2018 was mainly due to the expenditure forrepairing the elevator of ‘the Mall MIZUHO’ in amount of ¥ 4 million ($ 39 thousand).
Decrease during the year ended March 31, 2018 was mainly due to an unused land in
an amount of ¥ 502 million ($ 4,725 thousand).
Increase during the year ended march 31, 2017 was mainly due to the expenditure forrepairing the sidewalk of ‘the Mall MIZUHO’ in amount of ¥ 17 million. Decreaseduring the year ended March 31, 2017 was mainly due to depreciation in an amount of¥ 193 million.
(3) Fair value at March 31, 2018 and 2017 were principally measured based on the real estateappraisal 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 assessment and for theapproval, reporting and monitoring of transactions involving derivative financial
instruments. The Company does not hold or issue derivative financial instruments for
trading purposes.

Basis of Presenting Consolidated
Financial Statements

At March 31, 2018 and 2017,36

the notional amounts and the estimated fair value ofderivative financial instruments, for which deferred hedge accounting has been applied or
has not been applied were none, respectively.

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

Balance at March 31, 2016

Numb er ofCommonCapitalSharesStock

Surp lus

42,737,668¥ 11,900¥ 11,719－－－

42,737,668

11,90011,719－－－42,737,668¥ 11,900¥ 11,719

Movement of stock during 2017
Balance at March 31, 2017
Movement of stock during 2018
Balance at March 31, 2018

Thousands of U.S. dollars

Balance at March 31, 2017
Movement of stock during 2018
Balance at March 31, 2018

CommonCapitalStocksurplus$ 111,999$ 110,294－$ 111,999－$ 110,294

The Company adopted 100 shares of common stock as “unit amount of shares”. A holder ofshares representing less than one unit cannot exercise any voting rights with respect to suchshares. 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 theprevailing market price.

13. Research and Development
Research and development expenditure which is included in “Selling, general andadministrative expenses” were ¥ 1,577 million ($ 14,843 thousand) and ¥ 1,516 million forthe years ended March 31, 2018 and 2017, respectively.

Basis of Presenting Consolidated
Financial Statements

37

14. Loss on impairment of long-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 to constitute a group.
Headquarters and welfare facilities were classified as corporate assets. The consolidated
subsidiaries classified their fixed assets into groups by the individual subsidiaries which are
regarded as the smallest units independently generating cash flows.
In fiscal year ending March 31, 2018, the Group recognized loss on impairment oflong-lived assets as follows:

Thousands of
U.S. dollars

Location

Use

Type of assets

Millions of yen

Pluakdang,Business

Buildings and structures¥ 185$ 1,738

Rayong,properties

Machinery, equipment and vehicles

17

157

Other long-lived assets

14

138

Total

216

2,033

ThailandThe company found it difficult to return the investments due to decrease of profitability as
the result of reviewing the business plan, the book values of assets were written down to the
expected future cash flow in certain business properties.
The recoverable values of the above business properties were determined using net sales
values based on the real estate appraisal of the building and the salvage values of thestructures, machinery, equipment, tools, furniture, fixtures and leased assets.

15. Income 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 30.81% for the years
ended March 31, 2018 and 2017. Foreign subsidiaries are subject to income taxes of thecountries in which they operate.
The tax effects of significant temporary differences which resulted in deferred tax assets andliabilities at March 31, 2018 and 2017 were as follows:Basis of Presenting Consolidated
Financial Statements

38

Thousands ofMillions of yen

U.S. dollars

2017

2018

2018
Deferred tax assets - current:
Accrued Bonuses

¥

604

¥

598

$

5,689

Provision for product warranties

204

199

1,924

Allowance for repairs

47

72

444

Allowance for doubtful accounts

19

18

177

Accrued corporation enterprise tax

137

152

1,288

Loss on valuation of inventories

124

115

1,168

Forecast of construction cost

107

121

1,003

Other

195

175

1,836

1,437

1,450

13,529

(77)

(67)

(726)

¥ 1,360¥ 1,383$ 12,803¥¥$

Sub-total
Less valuation allowance
Total deferred tax assets - current

Deferred tax assets – non-current:
Net defined benefit liabilities
Fixed assets – elimination of intercompany

245

221

2,304

256

256

2,414

－

33

－

Allowance for doubtful accounts

218

327

2,050

Loss on impairment of long-lived assets

309

399

2,908

33

33

312

Excess depreciation

242

179

2,276

Other

291

344

2,735

Sub-total

1,594

1,792

14,999Less valuation allowance(940)(1,174)(8,843)654¥

profits
Accrued payable for transfer to the defined
contribution pension plan

Loss on valuation of investment for
subsidiaries and affiliates

Total deferred tax assets - non-current

¥

618

$

6,156

Basis of Presenting Consolidated
Financial Statements

39

Thousands ofMillions of yen

U.S. dollars

2018

2017

2018

¥ (2,822)¥ (2,273)$ (26,555)(1,407)(1,429)(13,242)

(59)

(84)

(556)

(1,096)(1,096)(10,319)(5,384)(4,882)(50,672)¥ (4,730)¥ (4,264)$ (44,516)

Deferred tax liabilities:
Unrealized gain on investment securities
Reduction reserve for fixed assets
Special depreciation reserve
Unrealized gain on subsidiaries’ fixed assets
by revaluation at the beginning of
consolidation
Total deferred tax liabilities - non-current
Net deferred tax assets (liabilities) –non-current

The reconciliation between the statutory tax rate and the effective income tax rate for theyear ended March 31, 2018 and 2017 were as follows:
2018

2017

－

30.81%

Non-deductible expenses for income tax purpose

－

0.71

Non-taxable dividend income－(0.16)

Inhabitant per capita tax

－

0.77

Tax credit－(3.08)

Change in valuation allowance－(4.15)

Equity in earnings of affiliated companies

－

0.69

Other

－

0.49

－

26.08%

Statutory tax rate

Effective tax rate

The reconciliation between the statutory tax rate and the effective income tax rate for the year
ended March 31, 2018 was omitted because the difference is 5% or below the statutory income tax
rate.

Basis of Presenting Consolidated
Financial Statements

40

16. Comprehensive Income
The components of other comprehensive income for the year ended March 31, 2018 and 2017
were as follows:
Thousands ofMillions of yen

U.S. dollars

2018

2017

2018

¥ 1,892¥ 2,141$ 17,805

Reclassification adjustments for gain (loss)

(104)

(16)

(976)

Amount before income tax effect

1,788

2,125

16,829

Income tax effect

(539)

(641)

(5,074)¥ 1,249¥1,484$ 11,755

Adjustments arising during the year

¥

15

¥

57

$

140

Total

¥

15

¥

57

$

140

¥ (214)¥82$ (2,019)

70

111

664

(144)

193

(1,355)

44

(59)

422

Unrealized gain on available-for-sale securities:
Gains (Losses) arising during the year

Total
Foreign currency translation adjustments:

Remeasurements of defined benefit plans:
Gains (Losses) arising during the year
Reclassification adjustments for gain (loss)
Amount before income tax effect
Income tax effect
Total

¥

(100)

¥

134

$

(933)

Share of other comprehensive income in affiliates
accounted for by equity method:
Gains (Losses) arising during the year

¥

35

¥

(41)

$

326

Total

¥

35

¥

(41)

$

326

Total other comprehensive income¥ 1,199¥ 1,634$ 11,288

Basis of Presenting Consolidated
Financial Statements

41

17. Trade Note Maturities
The following trade notes and electronically recorded monetary claims and obligations
which matured but were not settled on March 31, 2018 because that day fell on a bankholiday, were included in the balance sheet as of March 31, 2018:
Thousands ofMillions of yen

2018

2017

U.S. dollars

2018

1,019

¥ －

Electronically recorded monetary claims - operating

239

－

2,246

Trade notes payable

378

－

3,557

2,027

－

19,077

Trade notes receivable¥

Electronically recorded obligation - operating

$

9,591

18. Provision of reserve for Losses on Construction Contracts
Provision of reserve for losses on construction contracts included in Cost of Sales were ¥ 33
million ($ 313 thousand) and ¥ 47 million for the years ended March 31, 2018 and 2017,
respectively.

19. Segment Information
a. Description of reportable segments
The Group’s reportable segments are those for which separately financial information isavailable and regular evaluation by the Board of Directors is being performed in order todecide how resources are allocated among the Group. The Group conducts several types ofbusinesses including specialty truck business, environmental equipment and systems andreal estate rental business. The Company and its consolidated subsidiaries are engaged ineach business as an independent management unit. The Group consists of three reportablesegments, 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, tanktrucks, refuse trucks, trailers, etc. Industry B manufactures and distributes recycle facilities,
including maintenance and consignment business. Industry C manufactures multistory
parking equipment and offers operating services for toll parking and real estate rental
services.

Basis of Presenting Consolidated
Financial Statements

42

b. Methods of measurement for the amounts of sales, profit, assets, liabilities and otheritems 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 basedon the market prices.
c. Information about sales, profit, assets and other items for the years ended March 31,2018 and 2017 are as follows:
Millions of yen
Reportable segments
Consolidated(Note 1)

(Note 2)

Industry

IndustryA

BC¥ 97,761¥ 8,456¥ 6,474¥ 112,691

－

27

2

613

642

(642)

－

97,788

8,458

7,087

113,333(642)

112,691

Segment profit

8,296

1,523

1,155

10,974(728)

10,246

Segment assets

81,041

5,507

12,45999,00739,853

138,860

1,991

46

442

2,479

1

2,480

2,982

48

172

3,202

－

3,202

2018

Total

Reconciliations

Industry

Net sales:
External customers
Intersegment sales or transfers
Total

¥

112,691

Other items:
Depreciation
Increase in tangible andintangible fixed assets

Basis of Presenting Consolidated
Financial Statements

43

Millions of yen
Reportable segments
Consolidated(Note 1)

(Note 2)

Industry

IndustryA

BC¥ 91,903¥ 9,025¥ 5,817¥ 106,745

－

18

2

664

684

(684)

－

91,921

9,027

6,481

107,429(684)

106,745

Segment profit

9,148

1,447

1,245

11,840(693)

11,147

Segment assets

75,7795,211

12,157

93,14735,395

128,542

1,701

44

421

2,166

1

2,167

2,477

47

202

2,726

－

2,726

2017

Total

Reconciliations

Industry

Net sales:
External customers
Intersegment sales or transfers
Total

¥

106,745

Other items:
Depreciation
Increase in tangible andintangible fixed assets

Thousands of U.S. dollars
Reportable segments
Consolidated(Note 1)

(Note 2)

Industry

IndustryA

B

C$ 920,097$ 79,586$ 60,935$ 1,060,618－$ 1,060,618

249

18

5,772

6,039

(6,039)－920,346

79,60466,707

1,066,657(6,039)1,060,618

Segment profit

78,07814,334

10,873103,285(6,853)96,432

Segment assets

762,734

51,832

117,265

931,831375,083

1,306,914

18,738437

4,159

23,334

7

23,341

28,067456

1,618

30,141－30,141

2018

Total

Reconciliations

Industry

Net sales:
External customers
Intersegment sales or transfers
Total

Other items:
Depreciation
Increase in tangible andintangible fixed assets

Basis of Presenting Consolidated
Financial Statements

1.

44

Reconciliations of segment profit in an amount of ¥ (728) million ($ (6,853)
thousand) which consists of elimination of intersegment transactions in an
amount of ¥ 5 million ($ 50 thousand) and corporate expenses which are notallocated to each reportable segment in an amount of ¥ (733) million($ (6,903) 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.

20. Subsequent Event
T The following appropriations of the Company’s retained earnings in respect of the year
ended March 31, 2018 were as proposed by the Board of Directors and approved by theshareholders at the annual general meeting held on June 27, 2018.
Thousands ofAppropriations
Cash dividends of ¥ 18 ($ 0.17) per share

Millions of yen¥

715

U.S. dollars

$

6,730

Independent Auditor’s Report45

Board of Directors andStatutory
Auditors
Corporate
Information
CORPORATE INFORMATION
Kyokuto Kaihatsu Kogyo Co., Ltd.
Established: June 1, 1955
Paid-in Capital: 11,899,867,400 yen (March 31, 2018)
Number of Employees: consolidated 2,781; non-consolidated 999 (March 31, 2018)
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 96,657 ㎡
Located in Yamato, Kanagawa (Japan)
Nagoya Plant
Occupies 109,611 ㎡
Located in Komaki, Aichi (Japan)
Miki Plant
Occupies 100,728 ㎡
Located in Miki, Hyogo (Japan)
Fukuoka Plant
Occupies 43,503 ㎡
Located in Iizuka, Fukuoka (Japan)
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)
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 20,028 ㎡
Located in Purwakarta, Jawa Barat (Indonesia)
Plant of TREX THAIRUNG CO., LTD.
Occupies 85,158 ㎡
Located in Pluakdang, Rayong (Thailand)46

Board of Directors and Statutory Auditors

BOARD OF DIRECTORS AND STATUTORY AUDITORS
Kazuya Takahashi,

Representative Director, President, CEO

Haruhiro Kondo,

Representative Director, Senior Managing Director,
Senior Executive Officer

Takashi Yoneda,

Director, Associate Senior Executive Officer

Ikuya Sakai,

Director, Associate Senior Executive Officer

Takeo Norimitsu,

Director, Executive Officer

Tatsuya Nunohara,

Director,Executive Officer

Yoji Kido,

Outside Director

Akira Michigami,

Outside Director

Harumi Sugimoto,Standing Auditor

Yoshinori Takashima,

AuditorMorio Kusunoki,

Outside Corporate Auditor

Yoshihiko Norikura,

Outside Corporate Auditor

Mitsuhiko Nakajima,

Associate Senior Executive Officer

Noboru Horimoto,Executive Officer

Sadanobu Kato,

Executive Officer

Akira Sakurai,

Executive Officer

Hiroaki Kuriyama,

Executive Officer

Yukihiro Hosozawa,

Executive Officer

Kazuhiko Harada,

Executive Officer

Teruyuki Kizu,

Executive Officer

Shinichi Takahama,Executive Officer

47