ANNUAL REPORT 2016 Paramount Bed Holdings Co., Ltd.

Profile

Paramount Bed Holdings Co., Ltd. is the holding company
of a comprehensive medical group comprised of the core
entity Paramount Bed Co., Ltd.
The Paramount Bed Group was established in 1947. The
Group started out as a manufacturer of hospital beds and,against the subsequent backdrop of demographic aging,later branched out into senior care facilities and visiting
nursing care while developing a diversity of products
and services.
In recent years, the Paramount Bed Group has been
diversifying its operations in Japan and abroad
centered on healthcare offerings such as inspection
and maintenance services for institutional bedding
and wholesale rental operations for assistive products.
Going forward, in keeping with the corporate motto of“As human, for human,” the Group remains committed
to creating and increasing customer satisfaction andaugmenting enterprise value while contributing tosociety through the Group’s business activities.
The Group consists of Paramount Bed Holdings and 10
consolidated subsidiaries, eight non-consolidated subsidiaries and two affiliated companies (as of March 31, 2016).
In the fiscal year ended March 2016, it had net sales of¥74,089 million, operating income of ¥9,660 million, andnet income attributable to owners of the parent of ¥6,388
million. Paramount Bed is Japan’s leading maker of medical beds and has acquired a strong reputation, as reflected
in its estimated domestic market share of approximately
70% in medical and senior housing facilities and 60%
in home healthcare.

Disclaimer Regarding Forward-Looking Statements
The information contained in this annual report is given for the sole purpose of providing information regarding the business performance of Paramount Bed Holdings Co., Ltd.
during the fiscal year ended March 31, 2016 and is not intended to solicit investment in any securities issued by the Company. Any statements with respect to Paramount Bed’s current
plans, strategies, and forecasts are forward-looking statements based upon information available as of March 31, 2016 and involve known and unknown risks and uncertainties.
Actual events and results may differ materially from those anticipated in these statements.

Financial Highlights

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2016

2015

2016

¥ 74,089
9,660
9,735
6,388

¥ 75,270
10,038
11,5887,265$ 657,521
85,731
86,39956,691¥126,280
85,224¥125,509
85,391$1,120,694
756,336

For the year
Net sales
Operating income
Net income before income taxes
Net income attributable to owners of the parent
At year-end
Total assets
Total equity

Yen
Years ended March 31,

U.S. dollars

2016

2015

¥ 221.76
204.4870.00¥ 244.03
225.5 1
60.00

2016

Per share
Basic net income
Diluted net income
Cash dividends applicable to the year

$

1.97
1.81
0.62

Note: The U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥112.68 to U.S.$1, the approximate exchange rate at March 31, 2016.

Net sales

Operating income

Net income attributableto owners of the parent(Millions of yen)

(Millions of yen)

(Millions of yen)

100,000

15,00010,00080,00072,79475,27012,00074,08911,23911,542

66,7178,000

10,038
9,000

6,000

40,000

6,000

4,000

20,000

3,000

2,000

2013

2014

2015

0

2016

2013

2014

2015

7,385

7,265
6,388

60,000

0

7,094

9,660

0

2016

2013

2014

2015

Total assets

Total equity

Basic net income per share(Millions of yen)

(Millions of yen)

(Yen)

150,000

100,000

122,303

125,509300

126,280

120,000

82,57180,00085,391

85,224

76,626240

231.54241.01244.03221.76

103,902
90,00060,000180

60,00040,000120

30,00020,000

60

0

2013

2014

2015

2016

0

2016

2013

2014

2015

2016

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

0

2013

2014

2015

2016

1

Message from the Management

We create comfortable, healthy
environments through cutting-edge
technology with a human touch.
First of all, we thank our shareholders for their continuing support.
Let us look at the business conditions and the financial results of
Paramount Bed Holdings for the fiscal year ended March 2016.
Business Results for the Fiscal Year under Review
The Company’s consolidated net sales amounted to ¥74,089 million (down 1.6% compared to theprevious year). While the maintenance and rental business in Japan and overseas business performed
well, product sales in Japan were lower than in the previous period.
Operating income was ¥9,660 million (down 3.8%), and net income attributable to owners of theparent was ¥6,388 million (down 12.1%). The decline in sales resulted in a drop in profit.
Regarding the dividend payment for the fiscal year under review, the fiscal year-end dividend wasset at ¥35 per share. As a result, the annual dividend totaled ¥70 per share, including the distributed
interim dividend of ¥35 per share.
As for the dividend payment for the fiscal year ending March 2017, we plan to set both the interim
dividend and the year-end dividend at ¥40 per share from the standpoint of stable, ongoing returns,
for an annual dividend of ¥80 per share.

Kyosuke Kimura
Future Business Development
We have formulated a medium-term business plan, “the 2020 Plan,” covering the five-year period
from April 2016 to March 2021. To achieve sustainable and steady growth and improve corporate
value, we have set a target of ¥100 billion in consolidated net sales and ¥14 billion in consolidated
operating income for the fiscal year ending March 2021.
The 2020 Plan outlines three key policies: (1) maintain/expand existing business areas, (2) accelerate
overseas business expansion, and (3) strengthen R&D and create business models serving as buds of
new growth. Working with group companies, we will steadily boost our presence in our core market:
medical and elderly care in Japan. We will also strive to improve our market share overseas, engage
in new businesses in Japan and overseas, and thereby achieve steady growth.
We determine the distribution of profits based on a comprehensive consideration of numerous
factors, including the need to bolster the Company’s internal reserves to proactively develop futureoriented business such as R&D, capital investment, and mergers and acquisitions, respond to rapidchanges in the business environment, and further strengthen our operating foundation. In accordancewith this policy, we seek a dividend payout ratio of 30%. The 2020 Plan sets an annual dividend of¥100 for the fiscal year ending March 2021. In all our efforts,
we look forward to the continued understanding and cooperation of our shareholders.

2

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

President andChief Executive Officer

Special Topics

Medium-Term Business Plan: The 2020 Plan
We have recently formulated a medium-term business plan titled the 2020 Plan.
The details of this plan are as follows:

1 Maintain/expand

Period:April 2016 to March 2021
(the last fiscal year is the
fiscal year ending March,
2021)

Outlineof the2020 Plan

Major target:¥100 billion in consolidated
net sales and ¥14 billion
in consolidated operating
incomeKey Policiesof the2020 Plan

existing business areas
2 Accelerate overseas

business expansion
3 Strengthen R&D andcreate business models
serving as buds of
new growth

Consolidated PERFORMANCE:

Numerical
Targets in the2020 Plan(Billions of yen)

FY2015 Results

FY2020 Targets

NET SALES

74.0

100.0

OPERATING INCOME

9.7

14.0

NET INCOME attributable to owners of THE parent

6.4

10.0

Basic Net income per share (Yen)

222

342

FY2015 Results

FY2020 Targets

Note: Net income per share does not take into account dilutive shares.

Net sales by business:(Billions of yen)

Existing domestic businesses
Overseas businesses
New businesses
Total

66.9

70.0

7.1

20.0

0.0

10.0

74.0

100.0

NET SALES and operating income:
0

20

40

60

80

100

120 Billions of yen

03/2016
Net Sales (Top axis)

03/2021

Operating Income (Bottom axis)
0

5

10

15

20

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

25

30 Billions of yen

3

The Year in Review

Another exciting, productive year for our GroupStrengthening our foothold in the perinatal and pediatric care field
As part of our group’s efforts to develop new businesses, we will increase our presence in the perinatal
and pediatric care field. Recent increases in the average age of women giving birth and the rate of
low birth-weight infants have led to a need for more specialist beds, facilities, and medical devices toprotect the healthcare of expectant mothers and their unborn children and treat newborn infants.
Against this backdrop, our group aims to improve perinatal and pediatric care by helping to create
an environment that brings children and their families closer together. To this end, we have launched
products such as Bassinet Cart, Pediatric Stretcher, and Breastfeeding Chair.
The products in this lineup incorporate design elements such as a young leaf motif, resin material,
and rounded shape, which are intended to convey a gentle and easy feel. The products are also
equipped with functions that facilitate convenient and safe nursing care.
We will continue to expand our lineup of products in this field.

4

5

6

2015

2015

2015

APR MAY JUN

7

JUL
2015

APR 2015

JUN 2015

Improved lineup of electric patient lifts

Qualitas Plus Series
launched for theoverseas market

We launched three types of electric lifts: electric mobile hoists (electricallyoperated open/closing leg type), stand/recline assists, and walking
assists. In addition to bedside mobility, these products can be used fortoileting assistance, rehabilitation, and a range of other purposes.

Suyasuya Cot GCUThis low-noise Bassinet Cart isdesigned for use in neonatal intensive
care units (NICUs), growing careunits (GCUs), and similar settings.

8

AUG
2015

9

SEP
2015

SEP 2015

Paramount Bed(Thailand) opens sales
office in Chiang Mai
AUG/SEP/OCT 2015

Electric mobile patient hoist(electrically operated open/
closing leg type)
Suggested retail price:¥460,000 (excluding tax)

4Stand/recline assist
Mini Lift 125
Suggested retail price:¥500,000 (excluding tax)

Walking assist Ever 450
Suggested retail price:¥460,000 (excluding tax)
Note: Handrail soldseparately

Launch of Bassinet Cart
(Suyasuya Cot GCU and
Suyasuya Cot LARGE),
Pediatric Stretcher(Odekake Cart), andBreastfeeding Chair(HugHug).

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

OCT 2015

Breastfeeding Chair
This nursing chair featuresa cushion integrated
with the chair to ease theburden of breastfeeding. It
was developed by female
employees who haveexperienced childbirth.

Rakusho Z Series suggested
retail price: OpenOCT 2015

Rakusho Z Series, winner of the Japan Society of
Medical Health Science’s Medical Health Award 2015

Suyasuya Cot LARGE

Odekake Cart

This bed is intended forlarger infants up to around
six months.

This is a stretcher for transporting
toddlers in hospitals during
medical examinations or othermedical procedures.

10

11

12

2015

2015

2015

OCT NOV DEC

The Japan Society of Medical Health Science promotes products that
contribute to medical health, and they confer the Medical HealthAward on products and the companies that develop, produce,and market such products. In 2015, the third year of the award, theRakusho Z Series of home-care beds was one of the five products
selected for the award from among 3,000 medical health products.

1

JAN
2016

2

FEB
2016

3

MAR
2016

NOV 2015

NOV 2015

MAR 2016

Winner of the Japan Society of Physiological
Anthropology’s PA Design Award

Launch of FeeZ Series andRakusho FeeZ Series of ultra-low electric beds

We were winner of the Director-General for Commerce,
Distribution and Industrial Safety Policy’s Award at the
9th Awards for Best Contributors to Product Safety.
At the 9th Awards for Best Contributors to Product
Safety hosted by the Ministry of Economy, Trade andIndustry, Paramount Bed won the Director-General forCommerce, Distribution and Industrial Safety Policy’sAward in the large manufacturer and importer category.
Paramount Bed was commended
for its long-standing efforts tocreate safe product development
systems and prevent
product-related accidents.

We developed electric beds that are as low as 15 centimeters fromthe ground. In November, we launched the FeeZ Series of facility
care beds, and in March we launched the JIS-certified Rakusho FeeZ
Series of home-care beds. These beds are designed
to offer comfort and peace of mind to those who areused to sleeping on a futon, and if they fall out ofbed, the shock of the fall will be softened due tothe low height of the bed.

FeeZ Series

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

5

Financial Section

Management’s Discussion and Analysis

7

Consolidated Balance Sheet

8

Consolidated Statement of Income

10

Consolidated Statement of Comprehensive Income

11

Consolidated Statement of Changes in Equity

12

Consolidated Statement of Cash Flows14

Notes to Consolidated Financial Statements

16

Independent Auditor’s Report

31

6

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

Management’s Discussion and Analysis

Business Results
Net Sales and Gross Profit

Liabilities

Consolidated net sales declined 1.6% from the previous fiscal

end of the previous fiscal year to ¥20,240 million. This mainly

year to ¥74,089 million. This result primarily reflected the fact thatreflected a decrease in short-term lease obligations.

Consolidated current liabilities were down ¥129 million from thewhile the rental and wholesale business for nursing-care goods inConsolidated long-term liabilities rose ¥1,068 million to

Japan performed well—as did overseas markets—product sales¥20,816 million. This was due primarily to an increase in liability

in Japan experienced a decline. The main reasons for this decline

for retirement benefits.

included the drying up of special demand for the Rakusho Z Series

As a result, consolidated liabilities totaled ¥41,056 million at theof home-care beds launched in January 2014 (although the series

end of fiscal year under review, up ¥938 million from a year earlier.

nevertheless remained a top-seller), the impact of the revisionof the medical service and long-term care fee systems, and the fact

Total Equity

that the construction of elderly care facilities did not proceed

Consolidated total net assets decreased ¥167 million from the end

as planned.

of the previous fiscal year to ¥85,224 million. This primarily reflected

Consolidated gross profit was down 2.1% from the previous

the fact that while retained earnings from the posting of net

fiscal year to ¥31,593 million. This was primarily due to the fact that

income increased, there was a decrease in purchases of treasury

while the cost of sales declined 1.2% from the previous fiscal year

stock and the valuation difference on available-for-sale securities.

to ¥42,496 million, net sales dropped 1.6% from the previous fiscal

The shareholders’ equity ratio was 67.5%.

year to ¥74,089 million. As a result, the consolidated gross profit
margin decreased 0.2 percentage point to 42.6%.

Cash Flow
At the close of the fiscal year under review, consolidated cash andOperating Income

cash equivalents amounted to ¥22,616 million. During the fiscal

Consolidated operating income was down 3.8% from the previous

year, cash flows and the factors behind them were as follows.

fiscal year to ¥9,660 million. This result primarily reflected the factthat while selling, general and administrative expenses declined

Cash Flows from Operating Activities

1.4% to ¥21,933 million, gross profit decreased 2.1% to ¥31,593

Net cash provided by operating activities amounted to ¥9,657

million. As a result, the consolidated operating margin declined

million. This primarily reflected inflows such as ¥9,735 million in net

0.3 percentage point to 13.0%.

income before income taxes, and ¥4,960 million in depreciation
and amortization, which counterbalanced ¥3,864 million in income

Net Income Attributable to Owners of the Parent

taxes paid and a decrease of ¥1,412 million in long-term

Consolidated net income attributable to owners of the parent waslease obligations.

down 12.1% from the previous fiscal year to ¥6,388 million.
As a result, basic net income per share decreased to ¥221.76,
from ¥244.03 a year earlier. Return on equity (ROE) was 7.5%.

Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥2,038 million. This
result was mainly due to outflows such as ¥5,086 million in

Financial Condition
Assetspurchases of marketable securities and investment securities

Consolidated current assets expanded ¥1,077 million from theInflows included ¥4,182 million in sales of marketable securities

end of the previous fiscal year to ¥70,989 million. This primarily

and investment securities.

and ¥916 million in purchases of property, plant and equipment.

reflected an increase in cash and cash equivalents.
Consolidated noncurrent assets decreased ¥306 million to

Cash Flows from Financing Activities¥55,290 million. This was primarily due to a drop in investment

Net cash used in financing activities was ¥5,493 million. This mainly

securities.

reflected outflows such as ¥3,291 million in purchases of treasury

As a result, consolidated total assets reached ¥126,280 million

stock and ¥2,028 million in dividends paid.

at the close of the fiscal year ended March 2016, up ¥771 million
from a year earlier.

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

7

Consolidated Balance SheetParamount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2016

2015

2016

ASSETS
CURRENT ASSETS:¥ 22,616¥ 20,453$ 200,707

Time deposits (Note 14)

7,169

7,150

63,625Marketable securities (Notes 3 and 14)

5,829

6,237

51,729Cash and cash equivalents (Note 14)

Receivables (Note 14):
Trade notes

4,801

4,356

42,603

Trade accounts

18,071

18,721

160,371

Unconsolidated subsidiaries and associated companies

442

374

3,925

Other

1,386

1,234

12,308

(58)

(55)

(517)

Inventories (Note 4)

7,270

7,495

64,516

Lease receivables and investments in leases (Notes 13 and 14)

20,216

Allowance for doubtful accounts

2,278

2,546

Deferred tax assets (Note 11)

756

786

6,714

Prepaid expenses and other current assets

429

615

3,812

70,98969,912630,009

Land

8,717

8,693

77,356

Buildings and structures

27,45727,458

243,674

Machinery and equipment

7,577

7,741

67,247

Furniture and fixtures

8,767

8,577

77,801

Total current assets
PROPERTY, PLANT AND EQUIPMENT:

Leased assets (Note 13)

120

130

1,066

Assets for rent (Note 13)

19,244

17,914

170,783

Construction in progress

74

149

659

71,95670,662

638,586(41,897)(39,891)(371,822)

30,05930,771

266,764

Investment securities (Notes 3 and 14)

14,972

15,845

132,872

Investments in and advances to unconsolidated subsidiaries and associated companies

2,114

1,733

18,759Total
Accumulated depreciation
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:

35

58

309

Life insurance fund

1,044

1,076

9,268

Deferred tax assets (Note 11)

1,992

1,629

17,682Other assets

5,166

4,543

45,843

(91)

(58)

(812)

25,232

24,826

223,921¥126,280¥125,509$1,120,694

Goodwill

Allowance for doubtful accounts
Total investments and other assets
TOTAL
See notes to consolidated financial statements.

8

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2016

2016

2015

LIABILITIES AND EQUITYCURRENT LIABILITIES:¥

Short-term borrowings (Notes 5 and 14)

613

¥

618

$

5,445

34

38

299

10,866

10,61696,432

73

13

644

2,086

2,234

18,512

Income taxes payable

1,782

1,503

15,818

Accrued expenses

2,069

2,101

18,364Current portion of long-term lease obligations (Notes 5, 13 and 14)

1,577

1,856

13,999Other current liabilities

1,140

1,391

10,114

20,24020,370179,627

10,023

10,033

88,947

Current portion of long-term bank loans (Notes 5 and 14)
Payables (Note 14):
Trade accounts
Unconsolidated subsidiaries and associated companies
Other

Total current liabilities
LONG-TERM LIABILITIES:
Bonds with warrants (Notes 5, 6 and 14)
Long-term bank loans (Notes 5 and 14)

76

259

674

Liability for retirement benefits (Note 7)

5,321

4,536

47,222Long-term lease obligations (Notes 5, 13 and 14)

3,378

3,211

29,979

42

46

372

1,640

1,336

14,551

336

327

2,986

20,816

19,748

184,731

Common stock—authorized, 126,000,000 shares; issued,
30,877,487 shares in 2016 and 2015

4,207

4,207

37,340

Provision for environmental measures
Deferred tax liabilities (Note 11)
Other long-term liabilities
Total long-term liabilities
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 13, 15 and 16)
EQUITY (Notes 8, 9 and 19):

Capital surplus

49,87749,877

442,646

Retained earnings

37,55333,195333,269

Treasury stock—at cost, 2,403,177 shares in 2016 and 1,501,744 shares in 2015

(7,501)(4,324)(66,570)

317

1,078

2,817

Foreign currency translation adjustments

1,344

1,587

11,928

Defined retirement benefit plans

(574)

(230)

(5,099)Total

85,22385,390756,3311

1

5

Total equity

85,22485,391

756,336¥126,280¥125,509$1,120,694

Accumulated other comprehensive income:Unrealized gain on available-for-sale securities

Noncontrolling interests
TOTAL

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

9Consolidated Statement of Income
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2016

2015

2016

NET SALES¥74,089¥75,270$657,521

COST OF SALES

42,49642,991

377,139

31,59332,279280,382

21,93322,241

194,651

9,660

10,03885,731

Interest and dividend income

396

614

3,516

Interest expense

(46)

(72)

(406)

Foreign exchange (loss) gain—net

(387)

660

(3,433)

Other—net

112

348

991

75

1,550

668

9,735

11,58886,399Current

2,882

4,096

25,581

Deferred

465

227

4,126

3,347

4,323

29,707

6,388

7,265

56,69200

1¥ 6,388¥ 7,265$ 56,691

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 12)
Operating income
OTHER INCOME (EXPENSES):

Other income—net
INCOME BEFORE INCOME TAXESINCOME TAXES (Note 11):

Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

Yen

U.S. Dollars

2016

2015

2016

Basic net income¥221.76¥244.03$1.97

Diluted net income

204.48225.51

1.81

Cash dividends applicable to the year

70.00

50.00

0.62

PER SHARE OF COMMON STOCK (Notes 2 and 18):

See notes to consolidated financial statements.

10

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

Consolidated Statement of Comprehensive Income
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2016

2015

2016

¥6,388¥7,265$56,692

Unrealized (loss) gain on available-for-sale securities

(762)

457

(6,757)

Foreign currency translation adjustments

(243)

563

(2,158)

Defined retirement benefit plans

(344)

(34)

(3,055)(1,349)986(11,970)¥5,039¥8,251$44,722¥5,039¥8,251$44,72100

1

NET INCOME
OTHER COMPREHENSIVE INCOME (Note 17):

Total other comprehensive (loss) income
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
See notes to consolidated financial statements.

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

11Consolidated Statement of Changes in Equity
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

Thousands

BALANCE, MARCH 31, 2014
(APRIL 1, 2014, as previously reported)

Millions of Yen

Number of
Shares ofCommonCommonStock
Stock Issued

CapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

30,828,587¥4,166¥49,836¥18¥27,485

30,828,587

4,166

49,83618

27,431

Cumulative effect of accounting change
BALANCE, APRIL 1, 2014 (as restated)

Treasury Stock
Treasury
Total
Treasury
Stock
Treasury
Stock(the Trust)Stock¥¥(343)¥ (384)

(41)

(343)

(384)

(54)

Net income attributable to owners of the parent

7,265

Cash dividends, ¥50.00 per share(1,501)

Issuance of new shares—exercise of stock acquisition rights(41)

48,90041

41

Purchase of treasury stock(4,067)(4,067)

Disposal of treasury stock from the Trust
Net change in the year

127

127

(216)

(4,324)(18)

BALANCE, APRIL 1, 2015

30,877,487

4,207

49,87733,195(4,108)Net income attributable to owners of the parent

6,388

Cash dividends, ¥70.00 per share(2,030)Purchase of treasury stock(3,291)(3,291)

Disposal of treasury stock from the Trust

114

114

¥(102)¥(7,501)

Net change in the year
BALANCE, MARCH 31, 2016

30,877,487¥4,207¥49,877¥37,553¥(7,399)

Millions of Yen

Accumulated Other Comprehensive Income
Foreign
Unrealized Gain
DefinedCurrency
on Available-forRetirement
Translation
sale Securities
Benefit Plans
Adjustments
BALANCE, MARCH 31, 2014
(APRIL 1, 2014, as previously reported)

Total

¥621

¥1,024¥(196)¥82,570

621

1,024

(196)

82,516

Cumulative effect of accounting change
BALANCE, APRIL 1, 2014 (as restated)

Noncontrolling
Interests

Total Equity¥1¥82,5711

82,517(54)(54)

Net income attributable to owners of the parent

7,265

7,265

Cash dividends,¥50.00 per share(1,501)(1,501)

Issuance of new shares—exercise of stock acquisition rights
Purchase of treasury stock
Disposal of treasury stock from the Trust

82

82(4,067)(4,067)127

127

Net change in the year

457

563

(34)

968

(0)

968

BALANCE, APRIL 1, 2015

1,078

1,587

(230)

85,3901

85,391

Net income attributable to owners of the parent

6,388

6,388

Cash dividends, ¥70.00 per share(2,030)(2,030)Purchase of treasury stock(3,291)(3,291)

114

114

Disposal of treasury stock from the Trust
Net change in the year

(761)

(243)

(344)

(1,348)0(1,348)BALANCE, MARCH 31, 2016

¥317

¥1,344¥(574)¥85,223¥1¥85,224

12

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

Thousands of U.S. Dollars (Note 1)

BALANCE, APRIL 1, 2015

Stock
Acquisition
RightsCommonStockCapitalSurplus$37,340$442,646

Retained
Earnings

Treasury Stock
Treasury
Total
Treasury
Stock
Treasury
Stock(the Trust)Stock$294,596$(36,462)

Net income attributable to owners of the parent

56,691

Cash dividends, $0.62 per share(18,018)

Purchase of treasury stock$(1,919)(29,204)

Disposal of treasury stock from the Trust$ (38,381)(29,204)
1,015

1,015

$(904)$(66,570)

Net change in the year
BALANCE, MARCH 31, 2016

$37,340$442,646$333,269$(65,666)

Thousands of U.S. Dollars (Note 1)

Accumulated Other Comprehensive Income
Foreign
Unrealized Gain
DefinedCurrency
on Available-for- Translation
Retirement
sale Securities Adjustments Benefit Plans
BALANCE, APRIL 1, 2015

$9,574$14,086$(2,044)

Net income attributable to owners of the parent

Total

Noncontrolling
Interests

Total Equity$5$757,822$757,817
56,691

56,691

Cash dividends, $0.62 per share(18,018)(18,018)

Purchase of treasury stock(29,204)(29,204)

1,015

1,015

Disposal of treasury stock from the Trust
Net change in the year

(6,757)(2,158)(3,055)(11,970)(0)(11,970)

BALANCE, MARCH 31, 2016

$2,817$11,928$(5,099)$756,331$5$756,336

See notes to consolidated financial statements.

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

13

Consolidated Statement of Cash Flows
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2016

2015

2016

¥9,735¥11,588$86,399

Income taxes—paid(3,864)(6,205)(34,292)

Depreciation and amortization

4,960

5,128

44,016

95

454

844

OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:

Loss on sales and redemption of investment securities-net
Decrease in allowance for investment loss

(485)

Changes in assets and liabilities:(Increase) decrease in receivables

(104)

1,580

(924)

Decrease (increase) in inventories

87(1,018)

773

291

(81)

2,580

(1,883)(2,270)(16,714)

521

322

4,625

(1,412)(1,509)(12,530)

1,231

648

10,927(78)(3,436)

(695)

9,657

8,152

85,704

(19)

(521)

(171)

Purchases of marketable securities(1,100)(4,000)(9,762)

Proceeds from sales of marketable securities

2,705

3,500

24,005Purchases of property, plant and equipment(916)(1,296)(8,129)Purchases of intangible assets

(204)

(384)

(1,812)

Purchases of investment securities(3,986)(3,581)(35,372)

Proceeds from sales of investment securities

1,477

2,766

13,107

Decrease (increase) in lease receivables and investments in leases
Increase in assets for rent
Increase in payables
Decrease in long-term lease obligations
Other—net
Total adjustments
Net cash provided by operating activities

INVESTING ACTIVITIES:
Increase in time deposits

Purchases of shares of subsidiaries and associated companies
5

(44)

49

Net cash used in investing activities(2,038)(3,616)(18,085)

FORWARD¥ 7,619¥ 4,536$67,619

Other—net

14

(56)

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2016

2016

2015

FINANCING ACTIVITIES:
(8)

192

(72)

(170)

(164)

(1,512)

Purchase of treasury stock(3,291)(4,068)(29,204)

Dividends paid

(2,028)(1,501)(17,998)(Decrease) increase in short-term borrowings—net
Repayments of long-term bank loans
Proceeds from long-term bank loans

5

Other—net
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

4

161

30

(5,493)(5,375)(48,756)

37

(21)

327

2,163

(860)

19,190CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

20,453

21,313

181,517

CASH AND CASH EQUIVALENTS, END OF YEAR

¥22,616¥20,453$200,707

See notes to consolidated financial statements.

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

15

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of ParamountBed Holdings Co., Ltd. (the “Company”) and its consolidated
subsidiaries have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments and Exchange
Act and its related accounting regulations and in accordance withaccounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards (“IFRS”).
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in
the 2015 consolidated financial statements to conform to theclassifications used in 2016.
The consolidated financial statements are stated in Japanese yen,
the currency of the country in which the Company is incorporated
and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers
outside Japan and have been made at the rate of ¥112.68 to $1, theapproximate rate of exchange at March 31, 2016. Such translations
should not be construed as representations that the Japanese
yen amounts could be converted into U.S. dollars at that or any
other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidatio—The consolidated financial statements as ofMarch 31, 2016, include the accounts of the Company and its 10
significant (10 in 2015) subsidiaries (together, the “Group”).
Under the control concept, those companies in which theCompany, directly or indirectly, is able to exercise control over
operations are fully consolidated.
Investments in the remaining unconsolidated subsidiaries
and associated companies are stated at cost. If the equity
method of accounting had been applied to the investments inthese companies, the effect on the accompanying consolidated
financial statements would not be material.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Group isalso eliminated.
b. Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements—
In May 2006, the Accounting Standards Board of Japan (the“ASBJ”) issued ASBJ Practical Issues Task Force (“PITF”) No.

16

18, “Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for the Consolidated Financial
Statements” which was subsequently revised in February 2010
and March 2015 to reflect revisions of the relevant Japanese
GAAP or accounting standards in other jurisdictions. PITF No. 18
prescribes that the accounting policies and procedures applied toa parent company and its subsidiaries for similar transactions andevents under similar circumstances should in principle be unified
for the preparation of the consolidated financial statements.
However, financial statements prepared by foreign subsidiaries
in accordance with either IFRS or generally accepted accounting
principles in the United States of America (Financial AccountingStandards Board Accounting Standards Codification—“FASB ASC”)
tentatively may be used for the consolidation process, except
for the following items which should be adjusted in the
consolidation process so that net income is accounted for inaccordance with Japanese GAAP, unless they are not material:(1) amortization of goodwill; (2) scheduled amortization of
actuarial gain or loss of pensions that has been recorded inequity through other comprehensive income; (3) expensing
capitalized development costs of R&D; and (4) cancellation of thefair value model accounting for property, plant and equipment
and investment properties and incorporation of the costmodel accounting;c. Business Combinations—In September, 2013, the ASBJ
issued revised ASBJ Statement No. 21, “Accounting Standard
for Business Combinations,” revised ASBJ Guidance No. 10,“Guidance on Accounting Standards for Business Combinations
and Business Divestitures,” and revised ASBJ Statement No. 22,“Accounting Standard for Consolidated Financial Statements.”
Major accounting changes are as follows:(a) Transactions with noncontrolling interest—A parent’s
ownership interest in a subsidiary might change if the parent
purchases or sells ownership interests in its subsidiary.
The carrying amount of noncontrolling interest is adjusted
to reflect the change in the parent’s ownership interest
in its subsidiary while the parent retains its controllinginterest in its subsidiary. Under the previous accounting
standard, any difference between the fair value of theconsideration received or paid and the amount by which
the noncontrolling interest is adjusted is accounted for as an
adjustment of goodwill or as profit or loss in the consolidated
statement of income. Under the revised accounting standard,such difference is accounted for as capital surplus as long as
the parent retains control over its subsidiary.
(b) Presentation of the consolidated balance sheet—In the
consolidated balance sheet, “minority interest” under theprevious accounting standard is changed to “noncontrollinginterest” under the revised accounting standard.

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

(c) Presentation of the consolidated statement of income—In the consolidated statement of income, “net income before
minority interest” under the previous accounting standard
is changed to “net income” under the revised accounting
standard, and “net income” under the previous accounting
standard is changed to “net income attributable to owners of
the parent” under the revised accounting standard.
(d) Provisional accounting treatments for a businesscombination—If the initial accounting for a businesscombination is incomplete by the end of the reporting period
in which the business combination occurs, an acquirer shallreport in its financial statements provisional amounts forthe items for which the accounting is incomplete. Under
the previous accounting standard guidance, the impact ofadjustments to provisional amounts recorded in a businesscombination on profit or loss is recognized as profit orloss in the year in which the measurement is completed.
Under the revised accounting standard guidance, during
the measurement period, which shall not exceed one year
from the acquisition, the acquirer shall retrospectively adjust
the provisional amounts recognized at the acquisition
date to reflect new information obtained about facts andcircumstances that existed as of the acquisition date andthat would have affected the measurement of the amounts
recognized as of that date. Such adjustments shall berecognized as if the accounting for the business combination
had been completed at the acquisition date.
(e) Acquisition-related costs—Acquisition-related costs arecosts, such as advisory fees or professional fees, which anacquirer incurs to effect a business combination. Under theprevious accounting standard, the acquirer accounts foracquisition-related costs by including them in the acquisition
costs of the investment. Under the revised accounting
standard, acquisition-related costs shall be accounted for as
expenses in the periods in which the costs are incurred.
The above accounting standards and guidance for (a)transactions with noncontrolling interest, (b) presentation of theconsolidated balance sheet, (c) presentation of the consolidated
statement of income, and (e) acquisition-related costs are
effective for the beginning of annual periods beginning on
or after April 1, 2015. Earlier application is permitted from the
beginning of annual periods beginning on or after April 1, 2014,
except for (b) presentation of the consolidated balance sheet
and (c) presentation of the consolidated statement of income. Incase of earlier application, all accounting standards and guidance
above, except for (b) presentation of the consolidated balance
sheet and (c) presentation of the consolidated statement ofincome, should be applied simultaneously.

Either retrospective or prospective application of the revised
accounting standards and guidance for (a) transactions with
noncontrolling interest and (e) acquisition-related costs ispermitted. In retrospective application of the revised standards
and guidance, the accumulated effects of retrospective
adjustments for all (a) transactions with noncontrolling interestand (e) acquisition-related costs which occurred in the pastshall be reflected as adjustments to the beginning balance ofcapital surplus and retained earnings for the year of the first-time
application. In prospective application, the new standards andguidance shall be applied prospectively from the beginning of
the year of the first-time application.
The revised accounting standards and guidance for(b) presentation of the consolidated balance sheet and (c)presentation of the consolidated statement of income shallbe applied to all periods presented in financial statements
containing the first-time application of the revised standards
and guidance.
The revised standards and guidance for (d) provisional
accounting treatments for a business combination are effective
for a business combination which occurs on or after the
beginning of annual periods beginning on or after April 1, 2015.
Earlier application is permitted for a business combination which
occurs on or after the beginning of annual periods beginning on
or after April 1, 2014.
The Company applied the revised accounting standards andguidance for (a) transactions with noncontrolling interest, (b)presentation of the consolidated balance sheet, (c) presentationof the consolidated statement of income, and (e) acquisitionrelated costs above, effective April 1, 2015, and (d) provisional
accounting treatments for a business combination above fora business combination which occurred on or after April 1,
2015. The revised accounting standards and guidance for (a)transactions with noncontrolling interest and (e) acquisitionrelated costs were applied prospectively.
With respect to (b) presentation of the consolidated balance
sheet and (c) presentation of the consolidated statement ofincome, the applicable line items in the 2015 consolidated
financial statements have been accordingly reclassified andpresented in line with those in 2016.
In the consolidated statement of cash flows for the year
ended March 31, 2016, cash flows for purchases of ownershipinterests in a subsidiary without a change in consolidation scope
are presented under financing activities.
d. Cash Equivalents—Cash equivalents are short-term
investments that are readily convertible into cash and that are
exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit,

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

17

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

commercial paper and bond funds, all of which mature or
become due within three months of the date of acquisition.
e. Inventories—Inventories are stated at the lower of cost,
determined principally by the average cost method, or net selling
value, except for supplies which are stated by the most recent
purchase price method.
f. Marketable and Investment Securities—Marketable andinvestment securities are classified and accounted for, dependingon management’s intent, as follows: (1) held-to-maturity debt
securities, for which there is the positive intent and ability to holdto maturity, are reported at amortized cost and (2) available-forsale securities, which are not classified as the aforementioned
securities, are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported in a separate componentof equity.
Nonmarketable available-for-sale securities are stated atcost determined by the moving-average method. For otherthan-temporary declines in fair value, investment securities are
reduced to net realizable value by a charge to income.
Investments in Limited Partnerships (“LPS”) and similar
ventures (considered as securities under the Japanese Financial
Instruments and Exchange Act) are stated at the amounts of thecorresponding equity portion based on the most recent available
financial statements on the reporting date stipulated in thecontracts of the LPS and the ventures.
g. Property, Plant and Equipment—Property, plant andequipment are stated at cost. Depreciation of property, plantand equipment of the Company and its consolidated domestic
subsidiaries is computed by the declining-balance method basedon the estimated useful lives of the assets, while the straight-line
method is applied to buildings acquired on or after April 1, 1998
and assets for rent of the consolidated domestic subsidiaries andsubstantially all property, plant and equipment of consolidated
foreign subsidiaries. The range of useful lives is principally fromthree to 50 years for buildings and structures, from four to 11
years for machinery and equipment, from two to 20 years forfurniture and fixtures, and from three to eight years for assets forrent.
h. Long-lived Assets—The Group reviews its long-lived assets
for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may
not be recoverable. An impairment loss would be recognized
if the carrying amount of an asset or asset group exceeds thesum of the undiscounted future cash flows expected to result
from the continued use and eventual disposition of the asset
or asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash

18

flows from the continued use and eventual disposition of theasset or the net selling price at disposition.
i. Amortization of Goodwill—The differences between thecost and underlying net equity of investments in consolidated
subsidiaries at acquisition are included in investments and otherassets and are amortized on a straight-line basis over five years.
j. Other Assets—Intangible assets are carried at cost lessaccumulated amortization, which is calculated by the straightline method. Software development costs for internal use areamortized by the straight-line method based on the estimateduseful lives.
k. Allowance for Doubtful Accounts—The allowance for
doubtful accounts is estimated based on the Group’s past credit
loss experience and an evaluation of potential losses in thereceivables outstanding.
l. Bonuses to Directors—Bonuses to directors are accrued at the
year-end to which such bonuses are attributable.
m. Provision for Environmental Measures—The Groupestimates a provision for future losses resulting from thetreatment of Polychlorinated Biphenyl (“PCB”) wastes required by
the law concerning “Special Measures for Promotion of Proper
Treatment of PCB Wastes.”n. Retirement and Pension Plans—The Company and certain
consolidated subsidiaries have defined contribution and defined
benefit pension plans based on a point system. The defined
benefit pension plan provides for a lump-sum payment toterminated employees. A premium severance may be paid to
employees terminating their employment.
Liability for retirement benefits is accounted for based on the
projected benefit obligation and plan assets at the balance sheet
date. A straight-line basis was used for the method of attributing
expected benefit to periods in determining defined benefit
obligation for the year ended March 31, 2016. The Company andcertain consolidated domestic subsidiaries, however, apply thesimplified method. Past service costs are amortized on a straightline basis over 10 years, which is within the average remaining
service period. Actuarial gains and losses are amortized on astraight-line basis over 10 years, which is within the averageremaining service period.
In May 2012, the ASBJ issued ASBJ Statement No. 26,“Accounting Standard for Retirement Benefits” and ASBJ
Guidance No. 25, “Guidance on Accounting Standard for
Retirement Benefits,” which replaced the accounting standard
for retirement benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April 1,
2000, and the other related practical guidance, and were
followed by partial amendments from time to time through 2009.
(a) Under the revised accounting standard, actuarial gains and

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

losses and past service costs that are yet to be recognizedin profit or loss are recognized within equity (accumulated
other comprehensive income), after adjusting for tax effects,
and any resulting deficit or surplus is recognized as a liability(liability for retirement benefits) or asset (asset for retirement
benefits).
(b) The revised accounting standard does not change how torecognize actuarial gains and losses and past service costs in
profit or loss. Those amounts are recognized in profit or loss
over a certain period no longer than the expected averageremaining service period of the employees. However,actuarial gains and losses and past service costs that arose in
the current period and have not yet been recognized in profit
or loss are included in other comprehensive income, andactuarial gains and losses and past service costs that wererecognized in other comprehensive income in prior periods
and then recognized in profit or loss in the current period,
are treated as reclassification adjustments (see Note 17).
(c) The revised accounting standard also made certain
amendments relating to the method of attributing expected
benefit to periods, the discount rate, and expected futuresalary increases.
This accounting standard and the guidance for (a) and (b)above are effective for the end of annual periods beginningon or after April 1, 2013, and for (c) above is effective for the
beginning of annual periods beginning on or after April 1, 2014,
or for the beginning of annual periods beginning on or after
April 1, 2015, subject to certain disclosure in March 2015, allwith earlier application being permitted from the beginning ofannual periods beginning on or after April 1, 2013. However,no retrospective application of this accounting standard toconsolidated financial statements in prior periods is required.
The Group applied the revised accounting standard andguidance for retirement benefits for (a) and (b) above, effective
March 31, 2014, and for (c) above, effective April 1, 2014.
With respect to (c) above, the Group changed the method of
attributing the expected benefit to periods from a straight-line
basis to a benefit formula basis and the method of determining
the discount rate from using the period which approximates the
expected average remaining service period to using a single
weighted average discount rate reflecting the estimated timing
and amount of benefit payment, and recorded the effect of(c) above as of April 1, 2014, in retained earnings. As a result,retained earnings as of April 1, 2014 decreased by ¥54 million.
o. Stock Options—ASBJ Statement No. 8, “Accounting Standard
for Stock Options” and related guidance are applicable to stock
options newly granted on and after May 1, 2006. This standard
requires companies to recognize compensation expense for

employee stock options based on the fair value at the date of
grant and over the vesting period as consideration for receiving
goods or services. The standard also requires companies toaccount for stock options granted to non-employees based on
the fair value of either the stock options or the goods or services
received. In the consolidated balance sheet, stock options arepresented as stock acquisition rights as a separate component ofequity until exercised.
p. Research and Development Costs—Research anddevelopment costs are charged to income as incurred.
q. Leases—As a lessee, all finance lease transactions arecapitalized to recognize leased assets, assets for rent and leaseobligations in the balance sheet.
As a lessor, all finance leases that deem to transfer ownershipof the leased property to the lessee are recognized as leasereceivables, and all finance leases that deem not to transfer
ownership of the leased property to the lessee are recognized as
investments in leases.
r. Income Taxes—The provision for income taxes is computed
based on the pretax income included in the consolidated
statement of income. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted
income tax rates to the temporary differences.
s. Foreign Currency Transactions—All short-term and long-termmonetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange
rates at the consolidated balance sheet date. The foreignexchange gains and losses from translation are recognized in the
consolidated statement of income to the extent that they are nothedged by forward exchange contracts.
t. Foreign Currency Financial Statements—The balance sheet
accounts and revenue and expense accounts of the consolidated
foreign subsidiaries are translated into Japanese yen at thecurrent exchange rate as of the consolidated balance sheet
date except for equity, which is translated at the historical rate.
Differences arising from such translation are shown as “Foreign
currency translation adjustments” under accumulated othercomprehensive income in a separate component of equity.
u. Derivatives and Hedging Activities—The Group uses
derivative financial instruments, such as foreign exchange
forward contracts, to manage its exposures to fluctuations
in foreign exchange rates. The Group does not enter into
derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted
for as follows: (1) all derivatives are recognized as either assets

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

19

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

or liabilities and measured at fair value, and gains or losses
on derivative transactions are recognized in the consolidated
statements of income and (2) for derivatives used for hedging
purposes, if such derivatives qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, gains or losses onderivatives are deferred until maturity of the hedged transactions.
The foreign currency forward contracts which qualify forhedge accounting employed to hedge foreign exchange
exposures for import purchases are translated at the foreignexchange rate stipulated in the contract.
The Group evaluates hedge effectiveness semiannually bycomparing total cash flow of hedging instruments anditems hedged.
v. Per Share Information—Basic net income per share iscomputed by dividing net income attributable to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock splits.
Diluted net income per share reflects the potential dilutionthat could occur if securities were exercised or converted into
common stock. Diluted net income per share of common stock
assumes full conversion of the outstanding convertible notes andbonds at the beginning of the year (or at the time of issuance)with an applicable adjustment for related interest expense, net oftax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying
consolidated statement of income are dividends applicable to therespective years, including dividends to be paid after the end of
the year.
w. Employee Stock Ownership Plan—On September 18, 2012,
the Company’s board of directors approved the introduction of
the “Trust-type Employee Stock Ownership Incentive Plan” (the“Plan”) for the purpose of providing an incentive to enhance
corporate value on a mid- and long-term basis.
According to the Plan, the “Paramount Bed Group
Employee Stock Ownership Plan Exclusive Trust Account”(the “Trust”) acquired 204,700 shares of the Company’s stock
for a corresponding number of shares which are expected tobe acquired by the “Paramount Bed Group Employee Stock
Ownership Association” (the “Stock Ownership Association”)
during the four years subsequent to October 2012. Subsequently,
the Trust transfers the Company’s stock to the Stock Ownership
Association by the time the Trust terminates and gains on sale of
the Company’s stock accumulated in the Trust will be distributed
as residual assets to eligible employees. Additionally, as theCompany grants a guarantee to the Trust on the bank loans
for purchasing the Company’s stock, the Company is liable for20

repayment of such debt pursuant to the guarantee agreement.
The guarantee agreement stipulates that the Company
guarantees repayment of debt at the end of the term of the Trust,which, in such a case, is equivalent to an accumulated loss onsale of stock due to a decline in stock price.
Assets, liabilities, profits and losses in the accompanying
consolidated financial statements include those of the Trust,
including the Company’s stock held by the Trust.
The Company applied “Practical Solution on Transactions ofDelivering the Company’s Own Stock to Employees etc. throughTrusts” (ASBJ PITF No. 30, issued on March 26, 2015) which was
effective for the beginning of annual periods beginning on orafter April 1, 2014.
x. Accounting Changes and Error Corrections—In December
2009, the ASBJ issued ASBJ Statement No. 24, “AccountingStandard for Accounting Changes and Error Corrections” andASBJ Guidance No. 24, “Guidance on Accounting Standard for
Accounting Changes and Error Corrections.”
Accounting treatments under this standard and guidance areas follows:(1) Changes in Accounting Policies—When a new accounting
policy is applied following revision of an accounting standard,
the new policy is applied retrospectively unless the revised
accounting standard includes specific transitional provisions,in which case the entity shall comply with the specifictransitional provisions.
(2) Changes in Presentation—When the presentation of financial
statements is changed, prior-period financial statements arereclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates—A change in an
accounting estimate is accounted for in the period of
the change if the change affects that period only, and isaccounted for prospectively if the change affects both theperiod of the change and future periods.
(4) Corrections of Prior-Period Errors—When an error in priorperiod financial statements is discovered, those statements
are restated.
y. New Accounting Pronouncements
Tax Effect Accounting—On December 28, 2015, the ASBJ
issued ASBJ Guidance No. 26, “Guidance on Recoverabilityof Deferred Tax Assets,” which included certain revisions of
the previous accounting and auditing guidance issued by theJapanese Institute of Certified Public Accountants. While the
new guidance continues to follow the basic framework of theprevious guidance, it provides new guidance for the applicationof judgment in assessing the recoverability of deferred tax assets.
The previous guidance provided a basic framework which
included certain specific restrictions on recognizing deferred tax

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

assets depending on the company’s classification in respect of its
profitability, taxable profit and temporary differences, etc.
The new guidance does not change such basic framework
but, in limited cases, allows companies to recognize deferred
tax assets even for a deductible temporary difference for which
it was specifically prohibited to recognize a deferred tax asset
under the previous guidance, if the company can justify, withreasonable grounds, that it is probable that the deductible
temporary difference will be utilized against future taxable profit
in some future period.
The new guidance is effective for the beginning of annual
periods beginning on or after April 1, 2016. Earlier applicationis permitted for annual periods ending on or after March 31,
2016. The new guidance shall not be applied retrospectively andany adjustments from the application of the new guidance atthe beginning of the reporting period shall be reflected within
retained earnings or accumulated other comprehensive income
at the beginning of the reporting period.
The Company expects to apply the new guidance onrecoverability of deferred tax assets effective April 1, 2016, andis in the process of measuring the effects of applying the new
guidance in future applicable periods.

Millions of Yen
March 31, 2015

Unrealized Unrealized
Gains
Losses

Cost

Securities classified as:
Available-for-sale:
Equity securities

312

¥ 440

Debt securities

4,745

344

¥ 28

5,061

Other

14,5681,060

286

15,342

400

7

2

405

Held-to-maturity¥

752

Unrealized Unrealized
Gains
Losses

Cost

Fair Value

Securities classified as:
Available-for-sale:
Equity securities$ 4,648$ 3,204

Debt securities

39,442

2,101

858

40,685

Other

129,078

5,559

6,076

128,562

1,775

21

Held-to-maturity$

12$ 7,840

1,796

The information for available-for-sale securities which were soldduring the years ended March 31, 2016 and 2015, was as follows:
March 31, 2016

Millions of Yen
Proceeds

Realized Gains

Realized Losses

Available-for-sale:
Equity securities

¥ 102

¥ 21

912

47

¥ 64

¥ 1,014

¥ 68

¥ 64

Debt securities

¥

¥

Other

1,294

134

¥4

¥ 1,311

¥ 135

¥4

Total
March 31, 2015

Marketable and investment securities as of March 31, 2016 and2015, consisted of the following:

Available-for-sale:

Thousands of
U.S. Dollars

Millions of Yen¥

Thousands of U.S. Dollars
March 31, 2016

Other

3. MARKETABLE AND INVESTMENT SECURITIESFair Value

2016

2015

2016

¥ 1,133¥ 1,622$ 10,053

Total

Current:

17

1

Thousands of U.S. Dollars

Debt securities
Other

4,696

4,615

41,676¥ 5,829¥ 6,237$ 51,729

Equity securities¥ 1,530¥ 1,280$ 13,580

Debt securities

3,652

3,839

32,406

Other

9,790

10,72686,886¥ 14,972¥ 15,845$ 132,872

Total
Non-current:

Total

The costs and aggregate fair values of marketable andinvestment securities at March 31, 2016 and 2015, were as follows:
Millions of Yen
March 31, 2016

Cost

Unrealized Unrealized
Gains
LossesMarch 31, 2016
Proceeds

Realized Gains

Realized Losses

Available-for-sale:
Equity securities

$ 903

Other

8,099

420

$ 565

$ 9,002

$ 605

$ 565

Total

$ 185

Impairment loss was recorded for the year ended March 31, 2016
in the amount of ¥136 million ($1,208 thousand) on investment trusts
and for the year ended March 31, 2015 in the amount of ¥601 million
on unlisted equity securities.

Fair Value

Securities classified as:
Available-for-sale:
Equity securities

523

¥ 361

Debt securities

4,444

237

97

4,584

Other

14,545626

685

14,486200

2

Held-to-maturity

¥

¥

1

¥

883

202

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

21

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

4.	INVENTORIES

6. BONDS WITH WARRANTS

Inventories at March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2016
Finished products

2015

2016

¥ 3,930¥ 4,010$ 34,874

Merchandise

1,467

1,448

13,021

Raw materials

1,558

1,681

13,823Work in process

238

282

2,108

Supplies

77

74

690

¥ 7,270¥ 7,495$ 64,516

Total

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2016 and 2015, consisted ofbank overdrafts and trade receivables factoring. The weightedaverage interest rates applicable to the short-term borrowings at
March 31, 2016 and 2015, were 0.9% and 1.0%, respectively.
Long-term debt at March 31, 2016 and 2015, consisted of
the following:Thousands of
U.S. Dollars

Millions of Yen
2016
Bank loans by the Trust, sixmonth Tokyo Inter Bank Offered
Rate (TIBOR) plus 0.45% anddue 2019

¥

2015
110

¥

2016
296

$

973

Bonds with warrants

10,023

10,033

88,947Long-term lease obligations

4,955

5,066

43,978

Bonds with warrants at March 31, 2016, consisted of the following:
Issuer/description

Yen bonds withwarrants due
201815,395

133,898(1,611)(1,893)(14,298)2018¥ 13,477¥ 13,502$ 119,600

Millions of Yen

Millions of Yen

Thousands of
U.S. Dollars

2017

¥ 34

$ 299

¥ 1,577$ 13,999

2018

34

299

1,330

11,801

2019

34

299

987

8,761

2020

8

76

633

5,618

2021

338

2,997

2022 andthe reafter

90

802

¥ 4,955$ 43,978

¥ 110

$ 973

No assets were pledged as collateral for short-term borrowings
and long-term debt at March 31, 2016 and 2015.

22

July
26,
2013

¥ 10,023$ 88,947

Unsecured

July
26,
2018

¥ 10,023$ 88,947

0.00

2019

Bonds with warrants
Millions of Yen

Thousands of U.S. Dollars¥ 10,000$ 88,747¥ 10,000$ 88,747

2020
2021
Total

Lease obligations

Thousands of
U.S. Dollars

Total

Due

Year Ending March 31

15,088Long-term bank loans

Secured/unsecured

Notes:(*1) Details of the above bonds with warrants are as follows:		Type of shares: Common stock		Issue value of warrants: No consideration
		Issue price of shares: ¥4,106 ($36.44) per share		Total issue value: ¥10,000 million ($88,747 thousand)		Percentage of warrants granted: 100%
		Warrants exercise period: From August 9, 2013 to July 12, 2018		 The warrants are exercised in exchange for the bonds andthe payment amount upon exercise is equivalent to the face
amount of bonds. Issue price of shares is subject to adjustment
related to stock splits and certain other events.
(*2)	Annual maturities of bonds with warrants at March 31, 2016,
for the next five years were as follows:

Total

Year Ending
March 31

Thousands Couponof U.S.
rate (%)
Dollars

Total

Less current portion

Annual maturities of long-term debt at March 31, 2016, for the
next five years and thereafter were as follows:

Millionsof YenThe Company

2017Long-term debt, less current portion

Issueddate

7.	RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have defined
contribution and defined benefit pension plans based on a point
system. The defined benefit pension plan provides for a lump-sum
payment to terminated employees. Points are granted based on
the participating employees’ pay, years of service, position andcertain other factors. The Company and certain consolidated
subsidiaries also maintain closed pension plans for the pension
beneficiaries. A premium severance may be paid to employees
terminating their employment.
In addition to the plans above, the Company and certain
consolidated subsidiaries participate in the Tokyo Pharmaceutical
Welfare Annuity Foundation, a multiemployer pension plan for
employees in the same industry. Among those, plans underwhich it is impossible to reasonably calculate the plan assets
corresponding to their contributions are accounted for in the same
way as defined contribution pension plans.

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

Defined benefit pension plans(1) The changes in defined benefit obligation for the years ended
March 31, 2016 and 2015, were as follows:

2016

2015

¥ 4,547¥ 4,100

Cumulative effect ofaccounting change
Balance at beginning of year
(as restated)2016$ 40,354

4,174

40,354Current service cost

334

337

Interest cost

47

61

420

Actuarial losses

525

137

4,658

Benefits paid

(112)

(162)

(992)

Other

(13)
¥ 4,547$ 47,285

Balance at end of year

2,962

(117)

¥ 5,328(2) The changes in plan assets for the years ended March 31, 2016
and 2015, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2016
Balance at beginning of year

2015
¥11

2016
¥16

$102

Actuarial losses (gains)

0

(1)

1

Benefits paid

(4)

(4)

(40)

¥7

¥11

$ 63

Balance at end of year

(3) Reconciliation between the liability recorded in the consolidatedbalance sheet and the balances of defined benefit obligationand plan assets as of March 31, 2016 and 2015, was as follows:
Thousands of
U.S. Dollars

Millions of Yen
2016
Funded defined benefit
obligation

¥

2015
7

¥

2016
11

$

60

Plan assets

(7)

(11)

(63)

Total

(0)

(0)

(3)

Unfunded defined benefit
obligation

5,321

4,536

47,225Net liability arising fromdefined benefit obligation¥ 5,321¥ 4,536$ 47,222
Thousands of
U.S. Dollars

Millions of Yen
2016

2015

2016

2015

2016

Liability for retirement benefits¥ 5,321¥ 4,536$ 47,222

Net liability arising fromdefined benefit obligation¥ 5,321¥ 4,536$ 47,222

2016

Service cost

¥ 334

¥ 337

$ 2,962Interest cost

47

61

420

Recognized actuarial losses

29

18

257

Amortization of past
service cost

74
4,547

Thousands of
U.S. Dollars

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year
(as previously reported)(4) The components of net periodic benefit costs for the years
ended March 31, 2016 and 2015, were as follows:

96

OthersNet periodic benefit costs

17

17

150

¥ 427

¥ 529

$ 3,789(5) Amounts recognized in comprehensive income (before income
tax effect) in respect of defined retirement benefit plans for theyears ended March 31, 2016 and 2015
Thousands of
U.S. Dollars

Millions of Yen
2016

2015

Past service cost

2016

¥ 96

Actuarial gains¥ (492)(120)$ (4,368)

Total¥ (492)¥ (24)$ (4,368)(6) Amounts recognized in accumulated other comprehensive
income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2016 and 2015
Thousands of
U.S. Dollars

Millions of Yen
2016

2015

2016

Unrecognized actuarial losses

¥ 825

¥ 333

$ 7,319

Total

¥ 825

¥ 333

$ 7,319(7) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2016 and 2015, consisted of
the following:
2016

2015

Public and corporate debt securities

34.9%

36.5%

Foreign securities

33.7

34.7

Loans receivable

15.3

14.7

Equity securities

8.6

7.9

Others

7.5

6.2

Total

100.0%

100.0%

b. Method of determining the expected rate of return onplan assets
The expected rate of return on plan assets is determinedconsidering the long-term rates of return which are
expected currently and in the future from the various
components of the plan assets.

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

23

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016(8) Assumptions used for the years ended March 31, 2016 and2015, are set forth as follows:
Discount rate
Expected rate of return on plan assets

2016

2015

0.0% to 0.2%

0.6% to 1.0%

0.0%

0.0%

Points by
Points byservice period service period
and position and position

Expected future salary increases

Defined contribution pension plans
The required contribution of the Company and certain consolidated
subsidiaries to the defined contribution pension plans amounted to¥125 million ($1,108 thousand) and ¥120 million for the years ended
March 31, 2016 and 2015, respectively.
Multiemployer pension plan
The required contribution to the multiemployer pension
plan, which is accounted for in the same way as the defined
contribution pension plans, amounted to ¥264 million ($2,347
thousand) and ¥271 million for the years ended March 31, 2016
and 2015, respectively.
(1) Funding status of the multiemployer pension plan as of March
31, 2015 and 2014, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

Plan assets

As of March
31, 2015

As of March
31, 2014

As of March
31, 2015¥ 571,380¥ 512,489$ 5,070,824

561,736522,290

4,985,234

9,644¥ (9,801)

Total amount of actuarial liability inpension financing and minimum
actuarial reserve (*1)
Surplus (Deficit)¥$

85,590Note:(*1) The item was presented as “Pension liabilities (actuarial
liability plus balance of unamortized past service cost)” as ofMarch 31, 2015.
(2) Contributions by the Group as a percentage of total
contributions to the multiemployer pension plan
Information for the period ofContribution percentage

March 1 to 31, 2016

March 1 to 31, 2015

1.5%

1.5%

(3) Supplementary information
The surplus (deficit) presented above is mainly due to thebalance of unamortized past service cost of ¥40,107 million($355,941 thousand) and ¥45,242 million, the surplus of ¥14,311
million ($127,005 thousand) and ¥35,441 million and the generalreserve of ¥35,441 million ($314,526 thousand) and none as ofMarch 31, 2015 and 2014, respectively.
Unamortized past service cost represents the present valueof special contributions, principal and interest, which areamortized using the straight-line method. The contribution rateborne by the employer is 1.55% and the remaining amortization
period is seven years and zero months as of March 31, 2015.

24

8.	EQUITY
Japanese companies are subject to the Companies Act of Japan (the“Companies Act”). The significant provisions in the Companies Act that
affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at
any time during the annual period in addition to the year-end
dividend upon resolution at the shareholders meeting. For
companies that meet certain criteria, the board of directors may
declare dividends (except for dividends-in-kind) at any time
during the annual period if the company has prescribed so in
its articles of incorporation. However, the Company cannot do
so because it does not meet all the above criteria.
The Companies Act permits companies to distributedividends-in-kind (non-cash assets) to shareholders subject to acertain limitation and additional requirements.
Semiannual interim dividends may also be paid once a
year upon resolution by the board of directors if the articles
of incorporation of the company so stipulate. The Companies
Act provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation
is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must
be maintained at no less than ¥3 million.
b.	Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Companies Act requires that an amount equal to 10%
of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital(a component of capital surplus), depending on the equity
account charged upon the payment of such dividends until
the aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies
Act, the total amount of additional paid-in capital and legal
reserve may be reversed without limitation. The Companies
Act also provides that common stock, legal reserve, additional
paid-in capital, other capital surplus and retained earnings canbe transferred among the accounts within equity under certain
conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolutionof the board of directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution
to the shareholders which is determined by a specific formula.
Under the Companies Act, stock acquisition rights arepresented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

9. STOCK OPTIONSNo stock options were outstanding as of March 31, 2016 and 2015.
Gain from the cancellation of stock acquisition rights of nil and¥4 million was recorded for the years ended March 31, 2016 and2015, respectively.

10.	EMPLOYEE STOCK OWNERSHIP PLAN
The Trust held the following amounts of treasury stock and longterm debt which are included in the consolidated balance sheet.
Thousands of
U.S. Dollars

Millions of Yen
2016
Treasury stock¥(shares)

2015
102

¥

(40,300)

Long-term debt

2016
216

$ 905

(85,500)¥

137

11. INCOME TAXESThe Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in the aggregate,
resulted in normal effective statutory tax rates of approximately
32.3% and 35.6% for the years ended March 31, 2016 and 2015,
respectively.
The tax effects of significant temporary differences and tax loss
carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2016 and 2015, are as follows:
Thousands of
U.S. Dollars

Millions of Yen
2016

2015

2016

Deferred tax assets:
Accrued bonuses383$ 3,108

67

72

599

Liability for employees’
retirement benefits

1,627

1,448

14,438Tax loss carryforwards

1,153

1,153

10,234Gain on valuation related to an
exchange of shares transaction

210

221

1,861

Liability for directors’ and audit
and supervisory board members’
retirement benefits

¥

350

¥

Other

2,823

2,818

25,052Less valuation allowance(1,675)(1,737)(14,862)

4,555

4,358

40,430

Total

Deferred tax liabilities:
Undistributed earnings ofsubsidiaries

470

441

4,169

Gain on revaluation of land of
subsidiary

27

30

238

Unrealized gain on available-forsale securities

121

463

1,070

Loss on valuation related to an
exchange of shares transaction

1,446

1,534

12,831Other
Total
Net deferred tax assets

1,382

811

12,276

3,446

3,279

30,584¥ 1,109¥ 1,079$ 9,846

A reconciliation between the normal effective statutory tax rate
and the actual effective tax rate reflected in the accompanying
consolidated statement of income for the years ended March 31,
2016 and 2015 is omitted since the difference between the tax
rates is 5% or less of the normal effective statutory tax rate.
On March 29, 2016, tax reform laws were enacted in Japan
which changed the normal effective statutory tax rate fromapproximately 32.3% to 30.9%, effective for years beginning on
April 1, 2016 and 2017, and to 30.6%, effective for years beginningon or after April 1, 2018.
The effect of this change is immaterial.

12. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,386
million ($12,300 thousand) and ¥1,247 million for the years ended
March 31, 2016 and 2015, respectively.

13. LEASESThe Group, as a lessee, leases certain servers and personal
computers for internal use (machinery and equipment), as well as
certain welfare equipment for rental business (assets for rent). As alessor, the Group leases certain beds and other welfare equipment
to its customers.
Total rental expenses, including lease payments under financeleases, for the years ended March 31, 2016 and 2015, were ¥3,010
million ($26,708 thousand) and ¥3,091 million, respectively. Total
rental revenues, including lease income under finance leases, forthe years ended March 31, 2016 and 2015, were ¥15,230 million($135,163 thousand) and ¥13,620 million, respectively.
(1) The Group as Lessee
The minimum rental commitments under noncancelable
operating leases at March 31, 2016, were as follows:
Millions of Yen

Thousands of U.S. Dollars

Due within one year

¥ 10

Due after one year

10

87

¥ 20

$ 177

Total

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

$ 90

25

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

(2) The Group as Lessor
The net lease receivables are summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen
2016
Gross receivables

2016

¥ 544

(19)

(0)

(163)

¥ 496

¥ 544

$ 4,404

Unearned interest income
Lease receivables

2015

¥ 515

$ 4,567

The net investments in leases are summarized as follows:
Thousands of
U.S. Dollars

Millions of Yen
2016
Gross receivables
Unearned interest income
Investments in leases

2015

2016

¥ 2,194¥ 2,691

(412)

(689)

$ 19,472(3,660)¥ 1,782¥ 2,002$ 15,812

Maturities of lease receivables for finance leases that deemto transfer ownership of the leased property to the lessee areas follows:Year Ending March 31

Millions of Yen

Thousands of U.S. Dollars

2017

¥ 186

$ 1,652

2018

128

1,140

2019

88

779

2020

59

526

2021

36

316

2022 and thereafter

18

154

¥ 515

$ 4,567

Total

Maturities of investments in leases for finance leases thatdeem not to transfer ownership of the leased property to thelessee are as follows:Year Ending March 31

Millions of Yen

Thousands of U.S. Dollars

2017

¥ 670

$ 5,943

2018

510

4,523

2019

405

3,597

2020

287

2,546

2021

191

1,694

2022 and thereafter

131

1,169

¥ 2,194$ 19,472

Total

14. FINANCIAL INSTRUMENTS AND RELATEDDISCLOSURES(1) Group Policy for Financial Instruments
The Group uses its own funds and procures funds by issuanceof bonds for operating capital and capital investments
necessary to conduct its business activities. Cash surpluses,
if any, are mainly invested in financial instruments such as
deposits and marketable securities. It is the Group’s policy not
to use derivatives for speculative purposes.
(2) Nature and Extent of Risks Arising from Financial
Instruments
Receivables such as trade notes and accounts receivable, lease26

receivables and investments in leases are exposed to customer
credit risk. Trade receivables in foreign currencies from businessin foreign countries are exposed to the market risk of fluctuation
in foreign currency exchange rates.
Marketable and investment securities are exposed to the riskof market price fluctuations and business risk of the investees.
Trade accounts payable are due within one year. Certain
trade accounts payable from importing raw materials andothers are denominated in foreign currencies and exposed tothe market risk of fluctuation in foreign currency exchange rates.
Lease obligations are mainly intended to finance purchasesof assets for rent and capital investments and are due within six
years from the balance sheet date.
Borrowings are intended to procure operating capital due
within four years from the balance sheet date.
Derivatives are forward foreign currency contracts to hedge
the market risk of fluctuation in foreign currency exchange ratesof trade receivables and payables in foreign currencies. Please
see Note 15 for more details about derivatives.
Bonds with warrants are used as funds for the purchaseof welfare equipment for rental business of the Group andinvestments in domestic and overseas manufacturing facilities.
The redemption date of the bonds is within three years after
March 31, 2016.
(3) Risk Management for Financial Instruments
Credit risk management (counterparty default risk)
The Group manages its credit risk from trade receivables on thebasis of internal credit limit guidelines, which include controls on
payment terms and balances of each customer and monitoring ofmajor customers’ credit condition on a regular basis so that it can
reduce its risk by early identification of a possible default caused byfinancial difficulties of customers.
With respect to derivatives, because the counterparties arelimited to highly rated financial institutions, the Group does not
anticipate any losses arising from credit risk.
Market risk management (foreign exchange risk andinterest rate risk)
Marketable and investment securities are managed bymonitoring market values and financial position of issuers on aregular basis.
The execution and control of derivatives are made inaccordance with internal guidelines which regulate theauthorization of derivative transactions. Each transaction is
executed by the relevant function under the approval of the personwith defined authority.
Liquidity risk management (the risk that the Group cannot
meet its contractual obligations in full on their maturity
dates)

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

The Company and its major subsidiaries manage their liquidity
risk by holding adequate volumes of liquid assets, along withpreparing and updating adequate cash management plan on amonthly basis.
(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on the market
price or the reasonably calculated values with certain
assumptions in case no market prices exist. The reasonably
calculated values may fluctuate if different assumptions areapplied. The contract amounts regarding derivative transactions
described in Note 15 do not indicate market risk related toderivative transactions.
(a) Fair value of financial instruments
Millions of Yen
March 31, 2016
Cash and cash equivalents

Carrying
AmountFair Value

Unrealized
Gain (Loss)¥ 22,616¥ 22,616

Time deposits

7,169

7,169

Receivables

24,70024,700

Lease receivables and investments inleases

2,278

2,610

¥ 332

200

202

2

19,954

19,954Marketable and investment securities
Held-to-maturity debt securities
Available-for-sale securities
Total¥ 76,917¥ 77,251

Payables¥ 10,939¥ 10,939

Short-term borrowings

613

613

Long-term bank loans(including current portion)

110

111

¥ 334

¥

1

Lease obligations(including current portion)

4,955

5,133

Bonds with warrants

10,023

11,200

1,177

Total

¥ 26,640¥ 27,996¥ 1,356

Derivative transactions (*1)

¥

¥

(94)

¥ 178

(94)

Millions of Yen
March 31, 2015

Carrying
AmountFair Value

Cash and cash equivalents¥ 20,453¥ 20,453

Unrealized
Gain (Loss)

Time deposits

7,150

7,150

Receivables

24,685

24,685

Lease receivables and investments inleases

2,546

3,110

¥ 564

5

Marketable and investment securities
Held-to-maturity debt securities

400

405

21,155

21,155

Total¥ 76,389¥ 76,958

Payables¥ 10,629¥ 10,629

Available-for-sale securities

Short-term borrowings

618

618

Long-term bank loans(including current portion)

296

293

¥ 569

¥ (3)

Lease obligations(including current portion)

5,066

5,159

93

Bonds with warrants

10,033

10,275242

Total¥ 26,642¥ 26,974¥ 332

Derivative transactions (*1)

¥

¥   

6

6

Thousands of U.S. Dollars
March 31, 2016

Carrying
AmountFair Value

Cash and cash equivalents$ 200,707$ 200,707

Unrealized
Gain/(Loss)

Time deposits

63,62563,625

Receivables

219,207219,207

Lease receivables and investments inleases

20,21623,159$ 2,943

21

Marketable and investment securities
Held-to-maturity debt securities

1,775

1,796

177,087

177,087

Total$ 682,617$ 685,581

Payables$ 97,076$ 97,076

Available-for-sale securities$ 2,964

Short-term borrowings

5,445

5,445

Long-term bank loans(including current portion)

973

979

6

Lease obligations(including current portion)

43,97845,556$ 1,578

Bonds with warrants

88,947

99,397

10,450Total$ 236,419$ 248,453$ 12,034

Derivative transactions (*1)$(834) $

(834)

Note:
(*1) Receivables and payables from derivative transactions
are presented on a net basis and numbers in parentheses
denote net payables.
Cash and Cash Equivalents, Time Deposits, and Receivables
The carrying values approximate fair value because of theirshort maturities.
Lease Receivables and Investments in Leases
The fair values are measured at the amount calculated bydiscounting the sum of principal and interest after reflecting
their collectability by the rate which would be applied if asimilar new lease transaction was entered into.
Marketable and Investment Securities
The fair values are measured at the quoted market priceof the stock exchange and at the quoted price obtained
from the counterparty financial institutions. For certain
debt securities, fair values are measured at the amountcalculated by discounting the expected redemption value
by the yield rate which would be expected if similar new
debt securities were acquired. Fair value information onmarketable and investment securities by classification is
included in Note 3.
Payables and Short-Term Borrowings
The carrying values approximate fair value because of theirshort maturities.
Long-Term Bank Loans (including current portion) andLease Obligations (including current portion)
The fair values are measured at the amount calculated bydiscounting the sum of principal and interest by the rate
which would be applied if a similar new borrowing or leasetransaction was entered into.

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

27

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2016

Bonds with Warrants
The fair values of the bonds issued by the Company aremeasured at the market price.
Derivatives
Fair value information for derivatives is included in Note 15.
(b) Carrying amount of financial instruments whose fair value
cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen
2016

2015

2016

Unlisted equity securities that
do not have a quoted market
price in an active market¥ 1,017¥ 827$ 9,022

Investments in investment
partnership

170

170

1,509

Other investments

406

406

3,604

(5)	Maturity Analysis for Financial Assets and Securities with
Contractual Maturitie
Millions of Yen
March 31, 2016

Cash and cash equivalents

Due after Due after
Due inYear Five Years Due after
One Year One
throughthrough
10 Yearsor Less Five
Years 10 Years
7,169

Receivables

24,700

Lease receivables andinvestments in leases

740

Held-to-maturity debt
securities

¥ 118

Total

Contract
AmountBuying U.S.$¥ 485

Buying CNY

4,839

March 31, 2015
431

814

738

¥ 672

9,683

3,410

1,544

186

¥ 50,343¥ 5,644¥ 2,600¥ 858

Contract
AmountCash and cash equivalents
Time deposits
Receivables
Lease receivables andinvestments in leases$ 67,629

Buying U.S.$¥ 559$ 4,302219,207

42,943$ 1,046

1,775

Available-for-sale securities
with contractual maturities
Debt securities

3,826

7,227

6,553

Other

85,92730,257

13,701

1,652$ 446,781$ 50,087$ 23,075$ 7,613

Please see Note 5 for annual maturities of long-term debt
including obligations under finance leases.

(80)

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One Year
¥ 441

¥6

¥6

$ 5,961

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One Year

Foreign currency forward contracts:
Buying CNY

Held-to-maturity debt
securities

28

Contract
AmountBuying U.S.$

Marketable and investment
securities

Total

March 31, 2016

63,625$ 12,603¥ (14)(80)

Thousands of U.S. Dollars

Due after Due after
Due inYear Five Years Due after
One Year One
throughthrough
10 Yearsor Less Five
Years 10 Years

6,567¥ (14)

Foreign currency forward contracts:

Thousands of U.S. Dollars
March 31, 2016

¥ 364

Millions of Yen

200

Available-for-sale securities
with contractual maturities
Other

Millions of Yen
Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One Year

Foreign currency forward contracts:¥ 1,420

Marketable and investment
securities

Debt securities

The Group enters into foreign currency forward contracts to hedge
foreign exchange risk associated with certain assets and liabilities
denominated in foreign currencies.
All derivative transactions are entered into to hedge foreign
currency exposures incorporated within the Group’s business.
Accordingly, market risk in these derivatives is offset by opposite
movements in the value of hedged assets or liabilities.
Because the counterparties to these derivatives are limited tohighly rated financial institutions, the Group does not anticipate
any losses arising from credit risk.
The execution and control of derivatives are made inaccordance with internal guidelines which regulate theauthorization of derivative transactions. Each transaction is
executed by the relevant function under the approval of theperson with defined authority.
Derivative Transactions to Which Hedge Accounting Is
Not Applied

March 31, 2016

¥ 7,620

Time deposits

15.	DERIVATIVES$ 3,231$ (121)$ (121)

(712)

(712)

The fair value of derivative transactions is measured at the quoted
price obtained from the counterparty financial institutions.
The contract amounts of derivatives which are shown in theabove table do not represent the amounts exchanged by theparties and do not measure the Group’s exposure to credit ormarket risk.
At March 31, 2016, cash and cash equivalents and investment
securities were pledged as collateral for derivative transactionsin the amount of ¥211 million ($1,874 thousand) and ¥235 million($2,084 thousand), respectively.

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

16. CONTINGENT LIABILITIES

18. NET INCOME PER SHAREAt March 31, 2016, the Group had the following
contingent liabilities:
Millions of Yen

Thousands of
U.S. Dollars¥$

Guarantees for employees’ housing loans
Recourse obligation for the transfer of payables
on factoring transactions

64
1,184

567
10,51017. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2016

2015

Reconciliation of the differences between basic and diluted net
income per share (“EPS”) for the years ended March 31, 2016 and2015, is as follows:

2016

Year Ended March 31, 2016

¥ (1,395)¥ 932$ (12,380)

Reclassification adjustments toprofit or loss

291

(310)

2,579

Amount before income tax effect(1,104)622(9,801)

Income tax effect
Total

342

(165)

3,044

¥ (762)¥ 457$ (6,757)¥ (243)¥ 563

Diluted EPS—Net income
for computation

Year Ended March 31, 2015

$ (4,625)

114

257

Amount before income tax effect

(492)

(24)

(4,368)

148

(10)

1,313

¥ (344)¥ (34)$ (3,055)¥ (1,349)¥ 986$ (11,970)¥ 221.76$ 1.97$ 1.81¥ 6,388

31,240,466¥ 204.48

Millions ofYen

Thousandsof Shares

Yen

Net Income
Attributableto Ownersof Parent

WeightedAverage
Shares (*1)

¥ 7,265

29,769,237

Basic EPS—Net income
available to common shares¥ 7,265

U.S. Dollars
EPS

10,006¥ (138)

U.S. Dollars

2,435,460

Diluted EPS—Net income
for computation

29

Total other comprehensive (loss) income

28,805,006

Effect of dilutive securities—
Stock acquisition rights¥ (521)

Total¥ 6,388

Effect of dilutive securities—
Bonds with warrants

Yen

EPS

2,435,460

Reclassification adjustments toprofit or loss
Income tax effectWeightedAverage
Shares (*1)

$ (2,158)

Defined retirement benefit plans:
Adjustments arising during the year

Net Income
Attributableto Ownersof the Parent

Effect of dilutive securities—
Bonds with warrants

Foreign currency translation adjustments:
Adjustments arising during the year

Thousandsof Shares

Basic EPS—Net income
available to common shares

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

Millions ofYen

32,214,703¥ 244.03¥ 225.51

Note:(*1)	As the Company’s stock held by the Trust is stated as treasury
stock in the accompanying consolidated financial statements,
the number of shares of such stock is not included in thenumber of shares of common stock and the weighted-average
number of shares used for computation of the basic anddiluted EPS.

19. SUBSEQUENT EVENTSAppropriation of Retained Earnings
The following appropriation of retained earnings at March 31,
2016, was approved at the Company’s shareholders meeting heldon June 29, 2016:
Millions of
Yen
Year-end cash dividends, ¥35 ($0.31) per share (*1)¥997

Thousands of
U.S. Dollars$8,845Note:(*1)	As the Company’s stock held by the Trust is stated as treasury
stock in the accompanying consolidated financial statements,
the dividends to the Trust of ¥1 million ($13 thousand) are notincluded in the total amount of the year-end cash dividends
above.

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

29

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 201620. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment
Information Disclosures” and ASBJ Guidance No. 20, “Guidanceon Accounting Standard for Segment Information Disclosures,” anentity is required to report financial and descriptive information
about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity
about which separate financial information is available and suchinformation is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing
performance. Generally, segment information is required to bereported on the same basis as is used internally for evaluating
operating segment performance and deciding how to allocate
resources to operating segments.
(1) Description of Reportable Segment
The Group has only one reportable segment, which is related tothe bed business, for the years ended March 31, 2016 and 2015.
(2) Information about Products and Services
Millions of Yen
2016
Products and Services

Sales toexternalcustomers

Beds

Ward
MedicalMattresses Equipment
Equipment¥ 29,291¥ 4,534¥ 3,885

Other

RentalTotal¥ 3,260 ¥ 18,886 ¥ 14,233 ¥ 74,089

Millions of Yen
2015
Products and Services

Sales toexternalcustomers

Beds

Ward
MedicalMattresses Equipment
Equipment¥ 33,438¥ 5,260¥ 4,132

Other

Rental

Total

Asia

¥ 66,908¥ 4,996

Middle East

Ward
MedicalMattresses Equipment
Equipment

RentalOther¥ 1,345

Total

¥ 350

¥ 74,089

Millions of Yen
2015
Japan

Asia

¥ 69,342¥ 3,802

Middle East

Europe

¥ 345

Other

¥ 1,436

Total

¥ 345

¥ 75,270

Thousands of U.S. Dollars
2016
Japan

Asia

$ 593,784$ 44,338

Middle East
$ 4,351

Europe

Other

Total

$ 11,941$ 3,107$ 657,521

Note: Sales are classified by country or region based on thelocation of customers.
b. Property, plant and equipment
The Group operates mainly in Japan and total tangible
fixed assets in foreign countries were less than 10% ofconsolidated tangible fixed assets as of March 31, 2016 and2015.
(4) Information about Major Customers
In the years ended March 31, 2016 and 2015, there were
no individual customers for whom sales exceeded 10% ofconsolidated net sales.
(5) Information about Impairment Loss on Fixed Assets
In the years ended March 31, 2016 and 2015, there was no
impairment loss on fixed assets.
(6)	Information about Amortization of Goodwill and
Balance of Goodwill
Thousands of
U.S. Dollars

Millions of Yen

Balance of goodwill
Other

Europe

¥ 490

2016

Products and Services

30

2016
Japan

Amortization of goodwill

2016

Sales toexternalcustomers

Millions of Yen¥ 3,550 ¥ 16,208 ¥ 12,682 ¥ 75,270

Thousands of U.S. Dollars

Beds(3) Information about Geographical Areasa. SalesTotal$259,945 $40,235 $34,484 $28,936 $167,609 $126,312 $657,521

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

2015

2016

¥ 23

¥ 53

$ 206

35

58

309

Independent Auditor’s Report

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

31

Global Network

8

14

7

11

1 2 3 4
12

10

9
5
6
13

1 Paramount Bed Holdings Co., Ltd.

9 Paramount Bed Vietnam Co., Ltd.

Domestic
Manufacture and sales of medical and nursing-care equipment
2 Paramount Bed Co., Ltd.

2-14-5, Higashisuna, Koto-ku, Tokyo 136-8670, Japan
Inspection, maintenance, and leasing of beds and other products
3 Paratechno Co., Ltd.

5-28-3, Hongo, Bunkyo-ku, Tokyo 113-8415, Japan
Rental wholesale business for nursing-care goods
4 Paramount Care Service Co., Ltd.

2-14-5, Higashisuna, Koto-ku, Tokyo 136-0074, Japan

Lot H-1, Long Duc Industrial Park, Long Duc Ward,Long Thanh Dist., Dong Nai Province, Vietnam
Sales companies
10 Paramount Bed (Thailand) Co., Ltd.

924 Talomsin Building 5th Fl., Rama 3 Rd., Bangpongpang
Yannawa, Bangkok 10120, Thailand
11 Paramount Bed India Pvt. Ltd.

1002A&B, 10th Floor, Welldone Tech Park, Sector-48,
Sohna Road, Gurgaon-122002, India
12 Paramount Bed Mexico S.A. de C.V.

Overseas
Regional oversight company

Paramount Bed Asia Pacific Pte. Ltd.
1 Raffles Place #19-01
One Raffles Place, Office Tower One, Singapore 048616
Manufacturing companies
6 PT. Paramount Bed Indonesia

MM2100 Industrial Town, Block M-1-1 Export Processing Zone
Cikarang Barat Bekasi 17520, Jawa Barat, Indonesia
7 Paramount Bed (China) Co., Ltd.

Florencia No. 57 Piso 3 Col. Juarez Del. Cuauhtemoc CP 06600,
Mexico D.F. Mexico

Paramount Bed do Brasil Ltda.
Rua Maestro Cardim 407, Salas 1009 E 1010, Liberdade
Cep: 01323-000 Sao Paulo-Sp-Brazil
Representative office

PARAMOUNT BED Middle East OfficeDubai Airport Free Zone 4WA, G10,
P.O. Box 293552, Dubai, U.A.E.

A-105 (Xin Mei Road) Wuxi National Hi and New Tech Industrial
Development Zone, Wuxi, Jiangsu, 214028, China
8 Corona Medical S.A.S. France

Z.A. la Fosse Neuve, Route de Meslay 37210 Parcay-Meslay,
France32

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 016

Consolidated subsidiaryNon-consolidated subsidiaryCorporate/Share Information
As of March 31, 2016

Corporate Name:

Paramount Bed Holdings Co., Ltd.

Head Office:2-14-5, Higashisuna, Koto-ku, Tokyo 136-8671, JapanTel:+81-3-3648-1100

Established:

October 1982

Capital:¥4,207 million

Representatives:

Chairman: Kenji Kimura

Website Information
SearchPARAMOUNT BED HOLDINGS IR

Please see thematerials on
the Company’s
website formore detailed
information.

President and Chief Executive Officer: Kyosuke Kimura
Business Lines:

http://www.paramountbed-hd.co.jp/en/

Paramount Bed Holdings Co., Ltd. is the holding company of a comprehensive medicalgroup comprised of the core entity Paramount Bed Co., Ltd. which engages in theDistribution by Type of Shareholder:manufacture and sales of beds, mattresses, and equipment for medical and nursing

0.3% 7.7%

care environments, and subsidiaries engaged in services such as the inspection andmaintenance of Paramount Bed products and the leasing and wholesaling of assistive
products. Paramount Bed Holdings Co., Ltd. is responsible for the planning, drafting,and implementation of Group management strategies, auditing of group management,

18.9%

25.4%

22.0%

25.7%

and other tasks related to Group management control.

Number of Employees:

22 (non-consolidated)
2,638 (consolidated)%

Number of Shares Authorized: 126,000,000

Japanese individuals and others

25.4

Number of Shares Issued:

30,877,487

Other Japanese companies

25.7

Number of Shareholders:

9,583

Foreign investors

22.0

Japanese financial institutions

18.9

Japanese securities companies

0.3

Treasury stock

7.7

Principal Shareholders:Distribution by Number of Shares Held:

Number of shares held
(thousand)%

CTOK Co., LTD.

3,121

10.9

LLAGE WOOD Co.

2,373

8.3

NIU VALLEY CAPITAL LLC

1,679

5.9

The Master Trust Bank of Japan, Ltd. (Trust Account)

968

3.4

Japan Trustee Services Bank, Ltd. (Trust Accounts)

966

3.4

Kenji Kimura

912

3.2

Kyosuke Kimura

911

3.2

500,000 or more

54.9

Michihide Kimura

911

3.2

100,000 to 499,999

24.4

Tomohiko Kimura

820

2.9

50,000 to 99,999

3.8

10,000 to 49,999

6.6

Mizuho Bank, Ltd.

700

2.5

5,000 to 9,999

1.5

Name

Notes 1. The Company holds 2,362,877 shares of treasury stock, but these are excluded from the above list ofprincipal shareholders.
2. The voting rights ratio is calculated excluding treasury stock.

3.7%
1.5%
3.8%

5.1%

6.6%
54.9%
24.4%
%

1,000 to 4,999

3.7

Less than 1,000

5.1

Pa ra mo unt Bed Holding s Co. , Ltd. A NNUA L RE PORT 2 016

33