ANNUAL REPORT 2015 Paramount Bed Holdings Co., Ltd.

Profile

Financial Highlights

Paramount Bed Holdings Co., Ltd. is the holding company

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries

of a comprehensive medical group comprised of the core
entity Paramount Bed Co., Ltd.

Years ended March 31,

The Paramount Bed Group was established in 1947. The

For the year

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.

Net sales
Operating income
Income before income taxes and minority interests
Net income

2015

2014

¥ 75,270
10,038
11,5887,265¥ 72,794
11,542
12,772
7,385

$

2015

¥125,509
85,391¥122,303
82,571$1,044,425
710,588626,367
83,53496,43160,453

At year-end
Total assets
Total equity

In recent years, the Paramount Bed Group has been
diversifying its operations in Japan and abroad

Thousands of
U.S. dollars

Millions of yen

Yen
Years ended March 31,

U.S. dollars

2015

2014

2015

¥ 244.03
225.51
60.00¥ 241.01
227.1350.00

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 to society
through the Group’s business activities.
The Group consists of Paramount Bed Holdings and 10
consolidated subsidiaries, eight non-consolidated subsid-

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

$

2.03
1.88
0.50

Note: The U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥120.17 to U.S.$1, the approximate exchange rate at March 31, 2015.

Net sales

Operating income

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

100,000

15,00010,00080,00072,79475,27012,000

11,23911,542

8,000

10,03866,71760,000

9,000

6,000

40,000

6,000

4,000

20,000

3,000

2,000

7,094

7,385

7,265

2014

2015

iaries and two affiliated companies (as of March 31, 2015).
In the fiscal year ended March 2015, it had net sales of¥75,270 million, operating income of ¥10,038 million, andnet income of ¥7,265 million. Paramount Bed is Japan’s
leading maker of medical beds and has acquired a strong0

reputation, as reflected in its estimated domestic market

2013

2014

2015

0

2013

2014

0

2015

2013

share of approximately 70% in medical and senior housing

Total assets

Total equity

Basic net income per sharefacilities and 60% in home healthcare.

(Millions of yen)

(Millions of yen)

(Yen)

150,000

100,000

122,303300

125,509

120,000

82,57180,00085,391

76,626240

231.54241.01244.03

2014

2015

103,902

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, 2015 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, 2015 and involve known and unknown risks and uncertainties.
Actual events and results may differ materially from those anticipated in these statements.

90,00060,000180

60,00040,000120

30,00020,000

60

0

2013

2014

2015

0

2013

2014

2015

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0

2013

1

Message from the Management

Special Topics

We create comfortable, healthy
environments through cutting-edge
technology with a human touch.

Sixty-Five Years at
the Paramount Bed GroupThe Group originated from Paramount Bed Co., Ltd., which
manufactures and sells beds for medical and nursing-care use.
Thanks to its stakeholders, Paramount Bed Co., Ltd. celebrated its
65th anniversary on May 25, 2015. In this Special Topics section,
we introduce the epoch-making events in the Paramount Bed
Group’s history, together with the trend in sales.

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 2015.
Business Results for the Fiscal Year under Review

The Rakusho Z Series is launched

1966

2007

2008

2011

The Chiba Plant is constructed,
and an integrated mass production
system is established

The Company
enters the rental andwholesale business fornursing-care goods

Hospital beds areequipped with risefrom-bed sensors

The Company
converts to a holding
company system

80

Rakusho

Kyosuke Kimura
President andChief Executive Officer

1993

1996

2002

Rakusho featuring the Kyma-Linemattress base are launched

The Company’s shares arelisted on the First Section of
the Tokyo Stock Exchange

The maintenancebusiness is launched

60

1995
The first overseas
subsidiary is establishedin Indonesia

40

1987

Aura Electric Bed

Shares are
publicly offered

1962

1983

The first domestic electric
bed is developed

The first electric home-care bed
Aura Electric Bed are launched

1950

1972

Kimura Bed Manufacturing
Company Limited (nowParamount Bed Co., Ltd.)is establishedKA-500, the leading modelof hospital beds featuring
pressed steel mattress base,are launched

2015

2010

2000

1980

20

1990

The first domestic
electric bed: KA-45

1970

With regard to the Group’s business development, we will seek to further strengthen our business of
product sales to medical and elderly care facilities—our core business—and will focus on expanding
our business domains in Japan and other countries.
In our overseas business, in June 2014 we launched operations at Paramount Bed Vietnam, ourfourth overseas production facility, with the aim of strengthening group collaboration and establishingan optimal worldwide production system, having already launched operations in Indonesia, China
and France. We will coordinate with our sales facilities in Singapore, Thailand, India, the United ArabEmirates, Mexico and Brazil to promote more community-based business activities.
In Japan, we established four new offices to expand the rental and wholesale business fornursing-care goods conducted by Paramount Care Service. This brought the total of directly managed
facilities in Japan to 58.
Taking a long-term view, the Paramount Bed Group will devise a business strategy and promotebusiness diversification to boost its corporate value. In all our efforts, we look forward to the continued
understanding and cooperation of our shareholders.

A new back-raising mechanismthat tilts the entire bed is adopted

1960

Future Business Development

2014

Panoramic view of the Chiba Plant

1950

The Company’s consolidated net sales grew 3.4% year on year to ¥75,270 million, due to favorable
performance of the overseas business and the rental and wholesale business for nursing-care goods
in Japan.
Operating income was down 13.0% to ¥10,038 million, and net income dropped 1.6% to ¥7,265
million. This was the first decline in operating income since the Company was listed as ParamountBed Holdings Co., Ltd. in 2011, and was mainly due to a drop in the gross margin associated with adecrease in sales of the Company’s products and an increase in the price of materials purchased dueto the rise in consumption tax and depreciation of the yen.
Regarding the dividend payment for the fiscal year under review, the fiscal year-end dividend wasset at ¥35 per share, including ¥10 to commemorate the 65th anniversary of the Company’s foundation.
In combination with the interim disbursement of ¥25 per share, this brought the annual dividend to ¥60
per share.
As for the dividend payment for the fiscal year ending March 2016, we plan to set both the interim
disbursement and the year-end dividend at ¥35 per share from the standpoint of stable, ongoing
returns for an annual dividend of ¥70 per share, ensuring that a good return to shareholders willremain our high priority.
During the fiscal year under review, we purchased a total of around 1.4 million shares of treasury stock,amounting to roughly ¥4,067 million, through a tender offer in June 2014. In May 2015, we announced
that during the next fiscal year we would be purchasing a total of one million shares of treasury stock
amounting to a maximum of ¥3,300 million to improve per share value and capital efficiency.
Taking a long-term view, the Paramount Bed Group will continue to seek improvement ofcorporate value.

The Rakusho Z Series
Rakusho

Net sales(Unit: billions of yen)

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30The Year in Review

Another exciting, productive year for our GroupJUL 2014

Efforts in Central and South American Markets

PBR Coverage Area

In the global business of the Paramount Bed Group, we focus on promisingmarkets in Asia as well as the Central and South American regions, where rapid
growth is expected. In Central and South America, Paramount Bed Mexico S.A.
de C.V. (PMX) in Mexico City and Paramount Bed Do
Brasil Ltda. (PBR) in São Paulo are launched in January
We participated in
HOSPITALAR 2014, Southand July 2014, respectively. PBR handles sales in Brazil,
America’s largest medical
and PMX handles sales in Central and South American
equipment exhibition,
countries other than Brazil. We are forming distribution
held in São Paulo overa period of four days
networks in each area to achieve brand penetration instarting on May 20, 2014.
Central and South America.
We welcomed a total of

MexicoMexico City
Brazil

5

6

2014

2014

2014

APR MAY JUN
APR 2014

The Company participatesin general welfare
exhibitions Barrier Free2014 and Post-Acute
Medicine Fair (Osaka)
JUN 2014

The concept model“Smart Bed System”
is announced
JUN 2014

The operations of
Paramount Bed Vietnam
Co., Ltd. plant is started

PMX Coverage Area

7

JUL
2014

INTIME TRUST electric beds
for general use are launched

Cococia Yuki bedsore prevention
air mattresses are launched

These beds are lower-priced models featuring both thefunction and design that distinguish the INTIME brand, which
is based on the concept of productive time and quality sleepin the bedroom. Handrails can be attached as necessary, sothey can also be
used as medical
treatment beds.

We launched sales of the Cococia Yuki bedsore prevention air
mattresses, which automatically link to the back-raising functions ofbeds when paired with medical and nursing care beds and properly
control pressure. In addition to high body pressure dispersion functionality, these mattresses
support the user’s backand posture maintenance,
so they reduce the risk of
bedsores not only when
the user is sleeping but
also when sitting up.

INTIME TRUST
suggested retail price:¥185,000 (excluding
tax, mattress soldseparately)

8

AUG
2014

9

SEP
2014

JUL 2014

JUL 2014

The KK-8000 Series emergency
stretcher are launched
In addition to emergency transport, these stretchers support awide range of emergency medical functions, including medical
examinations, treatment and X-rays. They offer improved transportation and traveling performance and incorporate functions
to reduce theburden on
nursing staff.

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Cococia Yuki suggested retailprice: ¥187,000 to ¥210,000(excluding tax)

10

11

12

2014

2014

2014

OCT NOV DEC

1

JAN
2015

2

FEB
2015

3

MAR
2015

OCT 2014

The operations of Paramount Bed
Do Brasil Ltda. is started

The KK-8000 Series
suggested retailprice: Open

4

OCT 2014

São Paulo

500 visitors to our booth.

4

SEP 2014

The Aldecora Series of beds for medical
and elderly care facilities are launched
SLEEP SCAN
suggested retail price: OpenSEP 2014

SLEEP SCAN non-wearable
sleep meter are relaunched
Real-time display of breathing
rate and rising detection functions were added to the SLEEPSCAN non-wearable sleep
meter, which monitors sleep
when it is simply placed underthe mattress. It helps to ensure
the safety of residents andreduce the burden on caregivers in elderly care andother facilities.

Rakusho Z Series suggested
retail price: OpenWe launched sales of the Aldecora Series, which incorporates a metallic design, giving it a high-quality feelthat makes it go with any space based on the concept
of coordination with hospital rooms and living spaces.
The aluminum board features a clear panel that can holdsheets of various colors and designs, giving it a wider
range of design variation.
OCT 2014

The Rakusho Z Series wins
the Good Design Award

Aldecora Series suggested
retail price: ¥638,000 (excluding tax)

The Rakusho Z Series of home-care beds received the 2014 Good
Design Award (G Mark). This bed features a new lifting mechanismthat tilts the entire bed. The judges’ comments included the remarkthat “using this function, the idea of reducing the burden on caregivers and promoting independence can be achieved.”

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Financial Section

Management’s Discussion and Analysis

Management’s Discussion and Analysis

7

Business Results
Net Sales and Gross Profit

Liabilities

Consolidated Balance Sheet

8

Consolidated net sales increased 3.4% from the previous fiscal year

end of the previous fiscal year to ¥20,370 million. This mainly

to ¥75,270 million. This was primarily due to continued favorable

reflected a decrease in income taxes payable.

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

Consolidated current liabilities were down ¥469 million from theperformance of Paramount Care Service Co., Ltd.’s rental andConsolidated long-term liabilities rose ¥855 million to ¥19,748

wholesale business for nursing-care goods and increased sales

million. This was mainly due to a rise in deferred tax liabilities.

in the overseas business, especially in Asian regions where

As a result, consolidated liabilities totaled ¥40,118 million at thesales facilities are located.

end of fiscal year under review, up ¥386 million from a year earlier.

Consolidated gross profit was down 1.9% from the previous
fiscal year to ¥32,279 million. This was primarily because the cost

Total Equityof sales rose 7.8% from the previous fiscal year to ¥42,991 million.

Consolidated total equity grew ¥2,820 million from the end of the

As a result, the consolidated gross profit margin declined 2.3

previous fiscal year to ¥85,391 million. This was due to an increase

percentage points to 42.9%.

in retained earnings from the posting of net income.
The shareholders’ equity ratio was 68.0%.

Operating Income
Consolidated operating income was down 13.0% from theCash Flowprevious fiscal year to ¥10,038 million. This mainly reflected theAt the close of the fiscal year under review, consolidated cash anddecrease in the gross margin and an increase in selling, generalcash equivalents amounted to ¥20,453 million. During the fiscal

and administrative expenses of 4.1% to ¥22,241 million. As a result,year, cash flows and the factors behind them were as follows.

the consolidated operating margin declined 2.6 percentage points

Cash Flows from Operating Activities

to 13.3%.

Net cash provided by operating activities amounted to ¥8,152

Net Income

million. This reflected an increase in income before income

Consolidated net income was down 1.6% from the previous fiscal

taxes and minority interests of ¥11,588 million, an increase inyear to ¥7,265 million. Net income per share rose to ¥244.03, fromdepreciation and amortization of ¥5,128 million and a decrease in¥241.01 a year earlier. Return on equity (ROE) was 8.7%.

receivables of ¥1,580 million, which counterbalanced income taxes
paid of ¥6,205 million and a decrease in long-term obligations ofFinancial Condition
Assets1,509 million.

Consolidated current assets expanded ¥1,442 million from theCash Flows from Investing Activities

end of the previous fiscal year to ¥69,912 million. This was mainly

Net cash used in investing activities totaled ¥3,616 million. This wasdue to an increase in inventories, marketable securities and time

mainly due to purchases of marketable securities and investment

deposits.

securities of ¥7,580, million, an increase in time deposits of ¥521

Consolidated noncurrent assets grew ¥1,764 million to ¥55,597

million, purchases of property, plant and equipment of ¥1,296

million. This was mainly due to an increase in assets for rent,

million, which counterbalanced proceeds from sales of marketable

investments and advances to unconsolidated subsidiaries andsecurities and investment securities of ¥6,266 million.

associated companies, and deferred tax assets, reflecting an
expansion in the rental and wholesale business for nursing-care

Cash Flows from Financing Activities

goods, which is the main business of subsidiary Paramount CareNet cash used in financing activities was ¥5,375 million. This mainly

Service Co., Ltd. As a result, consolidated total assets reachedreflected purchase of treasury stock of ¥4,068 million through a¥125,509 million at the close of the fiscal year ended March 2015,

tender offer and a decrease in dividends paid of ¥1,501 million.

up ¥3,206 million from a year earlier.

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7

Consolidated Balance SheetParamount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

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

2015

2014

2015

2015

ASSETSLIABILITIES AND EQUITYCURRENT ASSETS:

CURRENT LIABILITIES:¥ 20,453¥ 21,313$ 170,203

Time deposits (Note 14)

7,150

6,629

59,498Current portion of long-term bank loans (Notes 5 and 14)

Marketable securities (Notes 3 and 14)

6,237

3,509

51,902

Payables (Note 14):

Trade notes

4,356

5,196

36,252

Trade accounts

18,721

19,422

155,790

374

580

1,234
(55)

Inventories (Note 4)
Lease receivables and investments in leases (Notes 13 and 14)

Cash and cash equivalents (Note 14)

Other
Allowance for doubtful accounts¥

Short-term borrowings (Notes 5 and 14)

2015

2014

618

¥

435

$

5,142

38

28

312

Trade accounts

10,62910,14988,452

Other

2,234

2,443

18,589

Income taxes payable

1,503

2,376

12,5083,109

Accrued expenses

2,101

2,131

17,482

1,804

10,265Current portion of long-term lease obligations (Notes 5, 13 and 14)

1,856

2,148

15,441

(56)

(458)

Other current liabilities

1,391

1,129

11,581

7,495

6,267

62,374

20,37020,839169,507

Receivables (Note 14):

Unconsolidated subsidiaries and associated companies

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

Total current liabilities

2,546

2,437

21,184

Deferred tax assets (Note 11)

786

959

6,544

Bonds with warrants (Notes 5, 6 and 14)

10,033

10,04383,486

Prepaid expenses and other current assets

615

410

5,114

Long-term bank loans (Notes 5 and 14)

259

444

2,152

69,912

68,470581,777

Liability for retirement benefits (Note 7)

4,536

4,084

37,743Long-term lease obligations (Notes 5, 13 and 14)

3,211

3,598

26,719

46

46

382

1,336

366

11,121

327

312

2,727

19,74818,893

164,330

4,207

4,166

35,012

49,877

49,836

415,057

Total current assets
PROPERTY, PLANT AND EQUIPMENT:LONG-TERM LIABILITIES:

Land

8,693

8,692

72,340

Provision for environmental measures

Buildings and structures

27,45827,014228,483

Deferred tax liabilities (Note 11)

Machinery and equipment

7,741

7,512

64,420

Other long-term liabilities

Furniture and fixtures

8,577

8,813

71,373

Total long-term liabilities

Leased assets (Note 13)

130

251

1,084

Assets for rent (Note 13)

17,914

16,355

149,071

Construction in progress

149

101

1,244

70,662

68,738588,015

Common stock—authorized, 126,000,000 shares; issued,
30,877,487 shares in 2015 and 30,828,587 shares in 2014

(39,891)(37,617)(331,951)

Capital surplus

30,771

31,121

256,064

Stock acquisition rights

Total
Accumulated depreciation
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:COMMITMENTS AND CONTINGENT LIABILITIES (Notes 13, 15 and 16)
EQUITY (Notes 8, 9 and 19):

18

Retained earnings

33,19527,485276,234(4,324)(384)(35,989)

Investment securities (Notes 3 and 14)

15,845

16,223

131,859

Treasury stock—at cost, 1,501,744 shares in 2015 and 149,396 shares in 2014

Investments in and advances to unconsolidated subsidiaries and associated companies

1,733

607

14,421

Accumulated other comprehensive income:

58

111

483

Unrealized gain on available-for-sale securities

1,078

621

8,978

Life insurance fund

1,076

1,117

8,951

Foreign currency translation adjustments

1,587

1,024

13,208Deferred tax assets (Note 11)

1,629

863

13,553

Defined retirement benefit plans

(230)

(196)

(1,917)

Total

85,39082,570710,583

1

1

5

Total equity

85,391

82,571

710,588¥125,509¥122,303$1,044,425

Goodwill

Other assets
Allowance for doubtful accounts

4,543

4,336

37,803

(58)

(60)

(486)

Allowance for investment loss (Note 14)
Total investments and other assets
TOTAL

Minority interests(485)
24,82622,712

206,584¥125,509¥122,303$1,044,425

TOTAL

See notes to consolidated financial statements.

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9Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

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

2015

2014

2015

NET SALES¥75,270¥72,794$626,367

NET INCOME BEFORE MINORITY INTERESTSCOST OF SALES

42,991

39,885

357,754

OTHER COMPREHENSIVE INCOME (Note 17):

32,27932,909268,613

22,241

21,367

185,079

10,038

11,542

83,534Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 12)
Operating income
OTHER INCOME (EXPENSES):

2015

2014

2015

¥7,265¥7,398$60,454

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

457

(145)

3,809

Foreign currency translation adjustments

563

632

4,688

Defined retirement benefit plans(34)

Total other comprehensive income

Interest and dividend income

614

482

5,106

COMPREHENSIVE INCOME

Interest expense

(72)

(90)

(600)

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

Foreign exchange gain—net

660

238

5,494

Owners of the Company

Other—net

348

600

2,897

Minority interests

1,550

1,230

12,897

11,588

12,77296,431

Current

4,096

5,532

34,090

Deferred

227

(158)

1,887

4,323

5,374

35,977

7,265

7,398

60,4540

13

1¥ 7,265¥ 7,385$ 60,453

Other income—net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

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

(288)

986

487

8,209

¥8,251¥7,885$68,663¥8,251¥7,830$68,662

055

1

See notes to consolidated financial statements.

INCOME TAXES (Note 11):

Total income taxes
NET INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME
NET INCOME

Yen

U.S. Dollars

2015

2014

2015

Basic net income¥244.03¥241.01$2.03

Diluted net income

225.51

227.13

1.88

Cash dividends applicable to the year

60.00

50.00

0.50

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

See notes to consolidated financial statements.

10

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11

Consolidated Statement of Changes in Equity
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

Thousands

BALANCE, APRIL 1, 2013

Millions of Yen

Number of
Shares ofCommonCommonStock
Stock Issued

CapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

30,792,587¥49,806¥29¥21,656¥4,136

Net income

Thousands of U.S. Dollars (Note 1)

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

(17)

¥(460)¥ (477)

7,385

Cash dividends, ¥50.00 per share(1,531)

Issuance of new shares–exercise of stock acquisition rights

36,00030

BALANCE, APRIL 1, 2014 (as restated)

Purchase of treasury stock

(24)

(24)

Disposal of treasury stock from the Trust

117

Change in scope of consolidation

117

(25)

4,166

49,83618

27,48530,828,587

4,166

49,83618

27,431

(41)

(343)

(384)

(41)

(343)

(384)

(54)

Net income

7,265

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

Issuance of new shares–exercise of stock acquisition rights

48,900

41

127

127

¥(216)¥(4,324)(18)¥49,877¥33,195¥(4,108)

BALANCE, APRIL 1, 2013

¥ 766

¥ 434

Minority
Interests

Total¥76,350BALANCE, MARCH 31, 2015

345

$35,012154

228,270

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

Total Equity$415,057$276,234

1,054$(1,800)$(35,989)¥ 276¥76,626

Purchase of treasury stock

(24)

(24)

Disposal of treasury stock from the Trust

117

117

(25)

(25)

(145)

590

¥(196)

238

(275)

(37)

621

1,024

(196)

82,5701

82,571

621

1,024

(196)

82,516

1

82,517(54)$ 8,520$(1,629)$687,116

5,169

8,520

(1,629)686,669

7,265

7,265

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

82

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

127

Net change in the year

457

563

(34)

968

¥1,078¥1,587¥(230)¥85,390

Minority
Interests

Total Equity$5$687,1215

686,674

(447)

(447)

(12,489)(12,489)690

690(33,849)(33,849)

1,054

1,054

Net change in the year

3,809

4,688

(288)

8,055

(0)

8,055

BALANCE, MARCH 31, 2015

$8,978$13,208$(1,917)$710,583$5$710,588

See notes to consolidated financial statements.

(54)

Net income

BALANCE, MARCH 31, 2015

Total

Cash dividends, $0.42 per share

Disposal of treasury stock from the Trust

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015$(34,189)$5,169Issuance of new shares–exercise of stock acquisition rights

60

Disposal of treasury stock from the Trust(33,849)
1,054

60,45360

Purchase of treasury stock(3,194)60,453Purchase of treasury stock

Issuance of new shares–exercise of stock acquisition rights(2,854)

Net income

7,385

Cumulative effect of accounting change

(340)

345

Accumulated Other Comprehensive Income
Foreign
Unrealized Gain
DefinedCurrency
on Available-for- Translation
Retirement
sale Securities Adjustments Benefit Plans(1,531)

12414,712

(154)

7,385

BALANCE, APRIL 1, 2014 (as restated)$ (3,194)(33,849)(1,531)

Change in scope of consolidation$(2,854)

Disposal of treasury stock from the TrustBALANCE, APRIL 1, 2014 (as restated)

Issuance of new shares–exercise of stock acquisition rights

(340)

(447)

60,453

Cash dividends, ¥50.00 per share

BALANCE, MARCH 31, 2014
(APRIL 1, 2014, as previously reported)$(12,489)

Net income

Net change in the year

$228,717

Cumulative effect of accounting change

Millions of Yen

Accumulated Other Comprehensive Income
Unrealized
ForeignDefinedGain (Loss) on
Currency
Retirement
Available-forTranslation
Benefit Plans
sale Securities
Adjustments$154

Cash dividends, $0.49 per share(4,067)

Disposal of treasury stock from the Trust¥4,207$414,712

Thousands of U.S. Dollars (Note 1)(4,067)30,877,487$34,667

Net change in the year

Purchase of treasury stock

BALANCE, MARCH 31, 2015

Treasury Stock
Treasury
Total
Treasury
Stock (theTreasury
Stock
Trust)Stock

Net income

41

Net change in the year

Retained
Earnings

Purchase of treasury stock

30,828,587

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

Stock
Acquisition
Rights34,667Issuance of new shares–exercise of stock acquisition rights(11)

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

CapitalSurplus

Cumulative effect of accounting change

30

Net change in the year

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

Common
Stock

¥

(0)

968

1

¥85,391

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 15

13

Consolidated Statement of Cash Flows
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

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

2015

2014

2015

¥11,588¥12,772$ 96,431

OPERATING ACTIVITIES:

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

2015

2014

2015

FINANCING ACTIVITIES:

Income before income taxes and minority interests
Adjustments for:

Increase in short-term borrowings—net

192

220

1,599

Repayments of long-term bank loans

(164)

(157)

(1,368)

5

171

44

(4,068)(24)(33,849)

Income taxes—paid(6,205)(7,569)(51,640)

Proceeds from long-term bank loans

Depreciation and amortization

5,128

4,805

42,673Purchase of treasury stock

Loss (gain) on sales and redemption of investment securities-net

454

(900)

3,779

Proceeds from issuance of bonds with warrants(Decrease) increase in allowance for investment loss

(485)

485

(4,037)

Dividends paid

Changes in assets and liabilities:(1,501)(1,532)(12,488)

161

82

1,333

(5,375)8,810(44,729)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

(21)

115

(178)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(860)

8,243

(7,157)

Other—net

Decrease (increase) in receivables

1,580(2,953)

13,150

Increase in inventories(1,018)(389)(8,475)

(81)

(121)

(674)

(2,270)(2,309)(18,891)

322

1,953

2,683

(1,509)(1,542)(12,558)

648

2,142

5,395

Total adjustments(3,436)(6,398)(28,595)

Net cash provided by operating activities

8,152

6,374

67,836(521)(3,020)(4,337)(4,000)(5,697)(33,286)

Increase in lease receivables and investments in leases
Increase in assets for rent
Increase in payables
Decrease in long-term lease obligations
Other—net

10,050Net cash (used in) provided by financing activities

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARY, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR

1021,31313,060177,360¥20,453¥21,313$170,203

See notes to consolidated financial statements.

INVESTING ACTIVITIES:
Increase in time deposits
Purchases of marketable securities
Proceeds from sales of marketable securities

3,500

7,503

29,125Purchases of property, plant and equipment(1,296)(1,733)(10,789)

Purchases of intangible assets

(384)

(235)

(3,199)Purchases of investment securities(3,581)(6,344)(29,797)

Proceeds from sales of investment securities

2,766

3,455

23,015

(56)

(595)

(463)

Purchases of shares of subsidiaries and associated companies
Other—net
Net cash used in investing activities
FORWARD

14

(44)

(390)

(355)

(3,616)(7,056)(30,086)¥ 4,536¥ (682)$ 37,750

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1515Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

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 2014 consolidated financial statements to conform to theclassifications used in 2015.
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 ¥120.17 to $1, theapproximate rate of exchange at March 31, 2015. Such translations
should not be construed as representations that the Japanese yenamounts could be converted into U.S. dollars at that or any otherrate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements as ofMarch 31, 2015, include the accounts of the Company and its 10
significant (10 in 2014) 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.
18, “Practical Solution on Unification of Accounting Policies

16

Applied to Foreign Subsidiaries for the Consolidated Financial
Statements.” PITF No. 18 prescribes that the accounting policies
and procedures applied to a parent company and its subsidiaries
for similar transactions and events under similar circumstances
should in principle be unified for the preparation of theconsolidated financial statements. However, financial statements
prepared by foreign subsidiaries in accordance with either IFRS
or the generally accepted accounting principles in the UnitedStates of America 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 in accordance with Japanese GAAP, unless they are notmaterial: (1) amortization of goodwill; (2) scheduled amortizationof actuarial gain or loss of pensions that has been recorded inequity through other comprehensive income; (3) expensing
capitalized development costs of R&D; (4) cancellation of thefair value model accounting for property, plant and equipment
and investment properties and incorporation of the cost modelaccounting; and (5) exclusion of minority interests from net
income, if contained in net income (see Note 2.x).
c. 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,
commercial paper and bond funds, all of which mature or
become due within three months of the date of acquisition.
d. 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.
e. 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.

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

f. 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 three
to 50 years for buildings and structures, four to 11 years formachinery and equipment, two to 20 years for furniture andfixtures, and three to eight years for assets for rent.
g. 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
flows from the continued use and eventual disposition of theasset or the net selling price at disposition.
h. 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.
i. 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.
j. 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.
k. Allowance for Investment Loss—The allowance forinvestment loss is estimated for possible future loss fromnonmarketable investment securities considering their financial
conditions.
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, 2014. 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 andlosses 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.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1517Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

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, liability
for retirement benefits as of April 1, 2014, increased by ¥74
million ($615 thousand), and retained earnings as of April 1, 2014,
decreased by ¥54 million ($447 thousand). The effects on net
income, however, were immaterial.
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 option 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

18

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 theconsolidated foreign subsidiaries are translated into Japanese
yen at the current exchange rate as of the consolidated balance
sheet date except for equity, which is translated at the historicalrate. Differences arising from such translation are shown as“Foreign currency translation adjustments” under accumulated
other comprehensive 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
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 and items
hedged.
v. Per Share Information—Basic net income per share iscomputed by dividing net income available to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted for stock
splits.
Diluted net income per share reflects the potential dilutionthat could occur if securities were exercised or converted into

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

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 forrepayment 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 iseffective for the beginning of annual periods beginning on orafter April 1, 2014. However, as the relevant trust agreement
was concluded before April 1, 2014. The PITF has no effect on
the consolidated financial statements for the year ended March
31, 2015.
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
Accounting Standards for Business Combinations andConsolidated Financial Statements—In September 2013,
the ASBJ issued revised ASBJ Statement No. 21, “AccountingStandard for Business Combinations,” revised ASBJ GuidanceNo. 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 minority interest is adjusted toreflect the change in the parent’s ownership interest in its
subsidiary while the parent retains its controlling interest
in its subsidiary. Under the current accounting standard,
any difference between the fair value of the consideration
received or paid and the amount by which the minority
interest is adjusted is accounted for as an adjustment of
goodwill or as profit or loss in the consolidated statementof income. Under the revised accounting standard, suchdifference shall be 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
the current accounting standard will be changed to“noncontrolling interest” under the revised accounting
standard.
(c) Presentation of the consolidated statement ofincome—In the consolidated statement of income, “income
before minority interest” under the current accounting

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 15

19Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

standard will be changed to “net income” under the revised
accounting standard, and “net income” under the current
accounting standard will be 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 current 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
the current 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 orafter April 1, 2015.
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 and20

guidance 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 andguidance.
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.
The Company applies to apply the revised accounting
standards and guidance for (a), (b), (c) and (e) above from April
1, 2015, and for (d) above for a business combination which will
occur on or after April 1, 2015, and is in the process of measuring
the effects of applying the revised accounting standards andguidance in future applicable periods.

2015

2014

Equity securities

312

¥ 328

¥ 2

Debt securities

5,638

119

43

5,714

Other

11,338665

148

11,855

400

0

2

398

Held-to-maturity

Total

2015

¥ 1,709$ 13,496

4,615

1,800

38,406¥ 6,237¥ 3,509$ 51,902¥ 1,280¥ 1,763$ 10,652$ 3,664

Debt securities

39,491

2,859

$ 236

42,114Other

121,230

8,822

2,387

127,665

3,329

56

15

3,370

Held-to-maturity

1,294

134

¥4

¥ 1,311

¥ 135

¥4

1,448

1,316

12,053

Raw materials

1,681

1,658

13,986Work in process

282

307

2,352

Supplies

74

77

617

¥ 7,495¥ 6,267$ 62,374

Total

Short-term borrowings at March 31, 2015 and 2014, consisted ofbank overdrafts and trade receivables factoring. The weightedaverage interest rates applicable to the short-term borrowings at
March 31, 2015 and 2014, were 1.0% and 1.1%, respectively.
Long-term debt at March 31, 2015 and 2014, consisted of thefollowing:

390

¥2

¥ 3,267¥ 847¥2

The costs and aggregate fair values of marketable andinvestment securities at March 31, 2015 and 2014, were as follows:

Equity securities

Millions of Yen
Fair Value

Securities classified as:
Available-for-sale:
752

Debt securities

4,745

344

¥ 28

5,061

Other

14,5681,060

286

15,342

400

7

2

405

March 31, 2015

Other
Total

$

Realized Gains
141$

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

¥

2014
296

¥

2015
472

$ 2,464
83,486

Bondswithwarrants

10,033

10,043Long-termleaseobligations

5,066

5,746

42,16015,395

16,261

128,110

LesscurrentportionLong-term debt, less current portion(1,893)(2,176)(15,753)¥ 13,502¥ 14,085$ 112,357

Annual maturities of long-term debt at March 31, 2015, for the
next five years and thereafter were as follows:

Thousands of U.S. Dollars
Proceeds

Thousands of
U.S. Dollars

Millions of Yen

Total

¥ 457

Available-for-sale:

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

1

2,060

$ 131,859

Held-to-maturity¥¥ 1,207¥ 16,223

¥

17

Other

¥ 15,845¥ 440$ 33,366

Merchandise

Realized Losses

Debt securities

31,947

312

Realized Gains

Available-for-sale:

89,2602015¥ 2,909

2015
¥

Total

Total

2014

¥ 4,010

Millions of Yen
Proceeds

Other

4,405

¥

$ 6,259

The information for available-for-sale securities which were soldduring the years ended March 31, 2015 and 2014, was as follows:

10,055Equity securities

2015
Finished products

5. SHORT-TERM BORROWINGS AND LONG TERM DEBT
$ 2,595

3,839

Unrealized Unrealized
Gains
LossesFair Value

Equity securities

10,726

Cost

Unrealized Unrealized
Gains
Losses

Cost

Available-for-sale:

Other

March 31, 2015

638

Securities classified as:

Debt securities
Total

¥

March 31, 2014

Non-current:
Equity securities¥

Thousands of U.S. Dollars
March 31, 2015

Thousands of
U.S. Dollars

Millions of Yen

Equity securities¥ 1,622

Other

Inventories at March 31, 2015 and 2014, consisted of the following:

Available-for-sale:

Current:
Debt securities

Fair Value

Available-for-sale:

March 31, 2015

Thousands of
U.S. Dollars

Millions of Yen

Unrealized Unrealized
Gains
Losses

Cost

Securities classified as:

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2015 and2014, consisted of the following:

4. INVENTORIESMillions of Yen
March 31, 2014

Realized Losses

7

10,772

1,116

$ 31

$ 10,913$ 1,123$ 31

Impairment loss on unlisted equity securities for the year ended
March 31, 2015 was ¥601 million ($5,002 thousand). No impairment
loss was recognized for the year ended March 31, 2014.

Year Ending
March 31

Long-term bank loans
Millions of Yen

Lease obligations

Thousands of
U.S. Dollars$

Millions of Yen

Thousands of
U.S. Dollars

2016

¥ 38

312

¥ 1,856$ 15,441

2017

173

1,450

1,213

10,092

2018

38

312

934

7,776

2019

38

312

604

5,026

2020

9

78

318

2,651

141

1,174

¥ 296

$ 2,464¥ 5,066$ 42,160

2021 and thereafterTotal

No assets were pledged as collateral at March 31, 2015 and 2014.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 15

21Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

6. BONDS WITH WARRANTS
Bonds with warrants at March 31, 2015, consisted of the following:
Issuer/description

IssueddateMillionsof YenThousands Couponof U.S.
rate (%)
Dollars

Secured/unsecured

Defined benefit pension plans(1) The changes in defined benefit obligation for the years ended
March 31, 2015 and 2014, were as follows:Due

Yen bonds withwarrants due
2018

July
26,
2013

Total

¥10,033$83,486¥ 10,033$ 83,486

0.00

Unsecured

July
26,
2018

Bonds with warrants
Millions of Yen

Balance at beginning of year
(as previously reported)

Thousands of U.S. Dollars

2016
2017
¥ 10,000$ 83,215¥ 10,000$ 83,215

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.

22$ 34,118
615

4,174

3,793

34,733Current service cost

337

309

Interest cost

61

49

509

Actuarial losses

137

17

1,141

Benefits paid
Balance at end of year

2,801

(162)

(68)

(1,345)¥ 4,547¥ 4,100$ 37,839(2) The changes in plan assets for the years ended March 31, 2015
and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2015

2014

2015

Balance at beginning of year

¥16

¥22

$136

Actuarial (gains) losses

(1)

0

(8)

Benefits paid

(4)

(6)

(32)

¥11

¥16

$96

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, 2015 and 2014, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Total

¥ 3,7932015
Funded defined benefit
obligation

¥

2014
11

¥

2015
16

$

92

Plan assets

(11)

(16)

(96)

Total

(0)

(0)

(4)

Unfunded defined benefit
obligation

4,536

4,084

37,747Net liability arising fromdefined benefit obligation¥ 4,536¥ 4,084$ 37,743

2015

2014

2015

¥ 309

$ 2,801

Interest cost

61

49

509

Recognized actuarial losses

18

36

147

Amortization of past service
cost

96

128

801

OthersNet periodic benefit costs

17

42

141

¥ 529

¥ 564

$ 4,399(5) Amounts recognized in comprehensive income (before income
tax effect) in respect of defined retirement benefit plans for theyears ended March 31, 2015 and 2014
Thousands of
U.S. Dollars

Millions of Yen
2015

2014

2015

Past service cost

¥ 96

Actuarial gains(120)(1,002)¥ (24)$ (201)

Total

$

801

(6) Amounts recognized in accumulated other comprehensive
income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2015 and 2014

2015

2014

Unrecognized past service cost

2015

¥ 96

Unrecognized actuarial losses

¥ 333

208

$ 2,767

Total

¥ 333

¥ 304

$ 2,767(7) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2015 and 2014, consisted of thefollowing:
2015

2014

522,290

497,125

4,346,259

Deficit¥ (9,801)¥ (31,895)$(81,561)Note:(*1) The item was presented as “Pension liabilities (actuarial
liability plus balance of unamortized past service cost).” as ofMarch 31, 2014.
(2) Contributions by the Group as a percentage of total
contributions to the multiemployer pension plan
Information for the period ofContribution percentage

Equity securities

7.9

7.7

2015

Others

6.2

5.3

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.

As of March
31, 2014$ 4,264,698

15.3$ 37,743

As of March
31, 2013¥ 465,230

14.7¥ 4,084

As of March
31, 2014¥ 512,489

Loans receivable¥ 4,536

Thousands of
U.S. Dollars

Plan assets

39.4%$ 37,743

0.0%

Total amount of actuarial liability inpension financing and minimum
actuarial reserve (*1)

32.3

¥ 4,084

0.0%

Defined contribution pension plans
The required contribution of the Company and certain consolidated
subsidiaries to the defined contribution pension plans amounted to¥120 million ($1,002 thousand) and ¥117 million for the years ended
March 31, 2015 and 2014, 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 ¥271 million ($2,257
thousand) and ¥258 million for the years ended March 31, 2015
and 2014, respectively.
(1) Funding status of the multiemployer pension plan as of March
31, 2014 and 2013 was as follows:

36.5%¥ 4,5362014
0.6% to 1.5%

Points by
Points byservice period service period
and position and position

Expected future salary increases

34.7

Net liability arising fromdefined benefit obligation

2015
0.6% to 1.0%

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

Expected rate of return on plan assets

Foreign securities

Liability for retirement benefits

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

2014

¥ 337

Discount rate

Public and corporate debt securities

Thousands of
U.S. Dollars

Millions of Yen

2015
Service cost

2015

74

Balance at beginning of year
(as restated)

2018
2019

2014

¥ 4,100

Cumulative effect ofaccounting change

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 ($34.17) per share		Total issue value: ¥10,000 million ($83,215 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, 2015,
for the next five years were as follows:Year Ending March 31

2015

Thousands of
U.S. Dollars

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

The Company(8) Assumptions used for the years ended March 31, 2015 and2014, are set forth as follows:(4) The components of net periodic benefit costs for the years
ended March 31, 2015 and 2014, were as follows:

March 1 to 31, 2015

March 1 to 31, 2014

1.5%

1.4%

(3) Supplementary information
The deficit presented above is mainly due to the balance of
unamortized past service cost of ¥45,242 million ($376,483
thousand) and ¥49,513 million, and the surplus of ¥35,441
million ($294,922 thousand) and ¥17,618 million for the years
ended March 31, 2015 and 2014, respectively.
Unamortized past service cost represents the present
value of 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 eight years and zero months as of March 31, 2014.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1523Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

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
stock acquisition rights and treasury stock. Such treasury stock24

acquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

10. EMPLOYEE STOCK OWNERSHIP PLAN

9. STOCK OPTIONS

2015
Stock
Option2011
Stock
Options

Persons Granted
One director, four
executive officers,
and 15 employees
605 directors andemployees ofsubsidiaries

Date of Exercise
Grant (*1)
Price

Exercise Period

Treasury stock¥(shares)

259,000
shares

October
1, 2011¥1,396($11.62)

The stock option activity is as follows:Year Ended March 31, 2014
VestedMarch 31, 2013—Outstanding

98,000

VestedExercised(36,000)

Canceled
March 31, 2014—Outstanding

137

343
301

1.2

2015

Undistributed earnings on subsidiaries

0.2$ 1,800

Unrecognized deferred tax on unrealized intercompany profits

0.2$ 1,137

The 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
35.6% and 38.0% for the years ended March 31, 2015 and 2014,
respectively.
The tax effects of significant temporary differences and tax loss
carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2015 and 2014, are as follows:
Thousands of
U.S. Dollars

Millions of Yen
2015

2014

VestedExercised(48,900)

Canceled(13,100) (*1)

March 31, 2015—Outstanding

Accrued bonuses$ 3,187

72

79

597

Liability for employees’
retirement benefits

1,448

1,444

12,051

1,153

1,099

9,599

Exercise price¥ 1,396($ 11.62)

Tax loss carryforwards

Average stock price at exercise¥ 3,182($ 26.48)

Gain on valuation related to an
exchange of shares transaction

Fair value price at grant date

¥
($

Other

298
2.48)

Note:
(*1) Gain from the cancellation of stock acquisition rights of ¥4
million ($32 thousand) was recorded for the year ended March
31, 2015.
The Assumptions Used to Measure the Fair Value of the 2011
Stock Option
Estimate method: Black-Scholes option pricing model
Volatility of stock price: 34%
Estimated remaining outstanding period: Three and a half years
Estimated dividend: ¥30.00 per share
Risk free interest rate: 0.46%¥

383

Allowance for investment loss

¥

173
221

244

1,843

2,818

2,417

23,439(1,737)(1,656)(14,452)

4,358

4,210

36,264

Undistributed earnings ofsubsidiaries

441

361

3,672

Gain on revaluation of land of
subsidiary

30

30

248

Unrealized gain on available-forsale securities

463

299

3,857

Loss on valuation related to an
exchange of shares transaction

1,534

1,703

12,768Less valuation allowance
Total
Deferred tax liabilities:

Other
Total
Net deferred tax assets

1.7

Other—net

0.9

Actual effective tax rate

42.1%

On March 31, 2015, a tax reform law was enacted in Japan
which changed the normal effective statutory tax rate fromapproximately 35.6% to 33.1%, effective for years beginning on orafter April 1, 2015, and to 32.3%, effective for years beginning on orafter April 1, 2016.
The effect of this change is immaterial.

12. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,247
million ($10,375 thousand) and ¥1,257 million for the years ended
March 31, 2015 and 2014, respectively.

13. LEASES
410

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

Change in valuation allowance for deferred tax assets

2015

Deferred tax assets:
62,000(0.4)
0.3(135,600)¥

38.0%

Lower income tax rates applicable to income in certain foreign countries
Inhabitants taxes

11. INCOME TAXESYear Ended March 31, 2015

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015¥

62,000

VestedMarch 31, 2014—Outstanding¥(85,500)

Long-term debt
From
October 1, 2011
toJuly 16, 2014

2014
216

Normal effective statutory tax rate
Expenses not deductible for income tax purposes

Thousands of
U.S. Dollars

Millions of Yen

The stock options outstanding as of March 31, 2015, are as follows:
Numberof Options
Granted2014

The Trust held the following amounts of treasury stock and longterm debt which are included in the consolidated balance sheet.

811

361

6,743

3,279

2,754

27,288¥ 1,079¥ 1,456$ 8,976

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 year ended March 31,
2015 is omitted since the difference between the tax rates is 5% orless of the normal effective statutory tax rate. The reconciliation forthe year ended March 31, 2014 is as follows:

The 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, 2015 and 2014, were ¥3,091
million ($25,724 thousand) and ¥3,079 million, respectively. Total
rental revenues, including lease income under finance leases, forthe years ended March 31, 2015 and 2014, were ¥13,620 million($113,343 thousand) and ¥11,696 million, respectively.
(1) The Group as Lessee
The minimum rental commitments under noncancelable
operating leases at March 31, 2015, were as follows:
Millions of Yen

Thousands of U.S. Dollars

Due within one year

¥ 7

Due after one year

11

91

¥ 18

$ 147

Total

$ 56

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

Millions of Yen
2015
Gross receivables
Unearned interest income
Lease receivables

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 15

2014

2015

¥ 544

¥ 597

(0)

(34)

$ 4,527
(3)

¥ 544

¥ 563

$ 4,524

25

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

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

Millions of Yen
2015
Gross receivables
Unearned interest income
Investments in leases

2014¥ 2,6912015¥ 2,268$ 22,390

(689)

(394)

(5,730)¥ 2,002¥ 1,874$ 16,660

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

2016

¥174

$1,447

2017

156

1,298

2018

99

822

2019

61

507

2020

32

264

2021 and thereafter

22

189

¥544

$4,527

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

2016

¥ 665

$ 5,531

2017

597

4,967

2018

575

4,786

2019

372

3,095

2020

240

1,994

2021 and thereafter

242

2,017

¥ 2,691$ 22,390

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, leasereceivables 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 and26

others are denominated in foreign currencies and exposedto the 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 mainly associated with the introduction of
the “Trust-type Employee Stock Ownership Incentive Plan”
and are due within five years from the balance sheet date.
Borrowings with variable interest rates are exposed to market
risk fluctuation of interest rates.
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 four years after
March 31, 2015.
(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)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.

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015(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 in case different assumptions
are applied. The contract amounts regarding derivativetransactions described in Note 15 do not indicate market risk
related to derivative transactions.
(a) Fair value of financial instruments

Thousands of U.S. Dollars

Carrying
AmountFair Value

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

Time deposits

7,150

7,150

Receivables

24,685

24,685

Lease receivables and investments inleases

2,546

3,110

400
21,155

21,155

Total

Available-for-sale securities¥ 76,389¥ 76,958

Payables

¥ 564

5
¥ 569

¥ 10,629¥ 10,629

Short-term borrowings

618

618

Long-term bank loans(including current portion)

296

293

¥ (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

Millions of Yen
March 31, 2014

Carrying
AmountFair Value

Cash and cash equivalents¥ 21,313¥ 21,313

Time deposits

6,629

6,629

Receivables

27,00227,002

Lease receivables and investments inleases

2,437

2,753

Unrealized
Gain (Loss)¥

316

Marketable and investment securities
Held-to-maturity debt securities

400

398

18,366

18,366

Total¥ 76,147¥ 76,461

Payables¥ 10,149¥ 10,149

Available-for-sale securities

(2)
¥

314

Short-term borrowings

435

435

Long-term bank loans (including current
portion)

472

460

¥12

Lease obligations (including current
portion)

5,746

5,981

(235)

Bonds with warrants

10,043

10,825

(782)

Total

¥ 26,845¥ 27,850¥ (1,005)

Derivative transactions (*1)

¥

¥

13

13

Cash and cash equivalents$ 170,203$ 170,203

Unrealized
Gain/(Loss)

Time deposits

59,49859,498

Receivables

205,417

205,417

Lease receivables and investments inleases

21,18425,883$ 4,699

3,329

3,370

41

176,039

176,039

Available-for-sale securities

Unrealized
Gain (Loss)

405

Fair Value

Held-to-maturity debt securities

Marketable and investment securities
Held-to-maturity debt securities

Carrying
AmountMarketable and investment securities

Millions of Yen
March 31, 2015

March 31, 2015

Total

$ 635,670$ 640,410

Payables$ 88,452$ 88,452

Short-term borrowings

5,142

5,142

Long-term bank loans(including current portion)

2,464

2,436

Lease obligations(including current portion)

42,15942,930Bonds with warrants$ 4,740

$

(28)
771

83,48685,504

2,018

Total

$ 221,703$ 224,464$ 2,761

Derivative transactions (*1)

$

$

51

51

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 were 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 were entered into.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1527

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2015

Bonds with Warrants
The fair values of the bonds issued by the Company aremeasured by 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
2015
Unlisted equity securities that
do not have a quoted market
price in an active market

2014

¥ 827

2015

¥ 1,431$ 6,883

Investments in investment
partnership

170

170

1,415

Other investments

406

7

3,380

Allowance for investment loss was recorded for the unlisted
equity securities in the amount of ¥485 million for the year
ended March 31, 2014. There was no allowance for investment
loss for the year ended March 31, 2015.
(5)	Maturity Analysis for Financial Assets and Securities with
Contractual Maturities
Millions of Yen
March 31, 2015

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
7,150

Receivables

24,685685

200

Foreign currency forward contracts:
Buying U.S.$
1,622

1,859

1,061

8,784

3,416

986

¥ 50,101¥ 6,942¥ 2,441

Cash and cash equivalents¥ 805

Due after Due after
Due inYear Five Years Due after
One Year One
throughthrough
10 Yearsor Less Five
Years 10 Years$ 59,705

Time deposits

59,498

Receivables

205,417

Lease receivables andinvestments in leases

5,701$ 13,869$ 1,614

Marketable and investment
securities
Held-to-maturity debt
securities

1,664$ 1,664

Available-for-sale securities
with contractual maturities
Debt securities

13,496

15,468

8,831

Other

73,09928,4358,201$ 416,916$ 57,772$ 20,310

Total

28

¥ 253

605

Thousands of U.S. Dollars
March 31, 2015

Contract
Amount¥ 200

Available-for-sale securities
with contractual maturities
Other

¥ 559

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

¥6

¥6

Millions of Yen
March 31, 2014

Held-to-maturity debt
securities

Total

Contract
Amount¥ 194

Marketable and investment
securities

Debt securities

Millions of Yen

Foreign currency forward contracts:
Buying U.S.$¥ 1,667

5,039

March 31, 2015

Contract
AmountForeign currency forward contracts:
Buying U.S.$$ 4,650

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One Year
¥ 146

¥ 13

¥ 13

Contract
Amount Fair Value Unrealized
Due after
Gain (Loss)One Year$ 3,672

$ 51

$ 51

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.

16. CONTINGENT LIABILITIESAt March 31, 2015, the Group had the following contingent
liabilities:

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

¥

$

73
1,390

610
11,564

17. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2015

2014

2015

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

¥ 932

¥ 730

$ 7,754

Reclassification adjustments toprofit or loss

(310)

(955)

(2,577)

Amount before income tax effect

622

(225)

5,177

Income tax effect

(165)

80

(1,368)¥ 457¥ (145)$ 3,809

¥ 563

¥ 632

$ 4,688

Total
Foreign currency translation adjustments:
Adjustments arising during the year
Defined retirement benefit plans:
Adjustments arising during the year

¥ (138)$ (1,151)

Reclassification adjustments toprofit or loss

114

948

Amount before income tax effect

(24)

(203)

Income tax effect

(10)

(85)

¥ (34)$ (288)

Total
Total other comprehensive income

¥ 986

¥ 487

$ 8,209

18. NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net
income per share (“EPS”) for the years ended March 31, 2015 and2014, is as follows:
Millions ofYen

Thousandsof Shares

Net Income

WeightedAverage
Shares (*1)

Year Ended March 31, 2015

Thousands of U.S. Dollars$ 6,703

Thousands of
U.S. Dollars

Recourse obligation for the transfer of payables
on factoring transactions

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
AppliedMarch 31, 2015

Millions of Yen
Guarantees for employees’ housing loans

15. DERIVATIVES¥ 7,175

Time deposits
Lease receivables andinvestments in leases

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

Basic EPS—Net income
available to commonshareholders¥ 7,265

29,769,237

Effect of dilutive securities—
Bonds with warrants

2,435,460

Effect of dilutive securities—
Stock acquisition rights

10,006

Diluted EPS—Net income
for computation

EPS¥ 244.03

32,214,703¥ 225.51

Millions ofYen

Thousandsof Shares

Yen

Net Income

WeightedAverage
Shares (*1)

¥ 7,385

30,641,779

Effect of dilutive securities—
Bonds with warrants

1,826,595

Effect of dilutive securities—
Stock acquisition rights

46,028

Diluted EPS—Net income
for computation

U.S. Dollars¥ 7,265

Year Ended March 31, 2014

Basic EPS—Net income
available to commonshareholders

Yen¥ 7,385

32,514,402$ 2.03$ 1.88
U.S. Dollars

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,
2015, was approved at the Company’s shareholders meeting heldon June 26, 2015:
Millions of
Yen
Year-end cash dividends, ¥35 ($0.29) per share (*1)

Thousands of
U.S. Dollars¥1,028$8,556Note:(*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 ¥3 million ($25 thousand) are notincluded in the total amount of the year-end cash dividends
above.
Acquisition of treasury stocks
The board of directors of the Company made a resolution on May
12, 2015 concerning acquisition of treasury stocks in accordancewith Article 156 of the Companies Act with replacement of terms
pursuant to paragraph 3 of Article 165 of the Companies Act.
Details of the resolution by the board of directors’ meeting
related to acquisition of treasury stocks are as follows:
1. Purpose:

To raise shareholders’ interests byimproving capital efficiency andensuring flexible capital strategy

2. Type of shares to be acquired:

Common stock of the Company

3. Total number of shares to be acquired:

1,000,000 shares (maximum)

4. Total acquisition price:¥3,300 million ($27,461 thousand)(maximum)5. Acquisition period:

From May 13, 2015 to December 30,
2015

6. Acquisition method:

Market purchase on the Tokyo Stock
Exchange (Discretionary dealing by
securities company)

7. Interim status of acquisition as of
May 31, 2015
(1) Type of shares acquired:(2) Total number of shares acquired:(3) Total acquisition price of shares:

Common stock of the Company
128,200 shares¥418 million ($3,481 thousand)EPS¥ 241.01¥ 227.13

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 15

29Notes to Consolidated Financial Statements

Independent Auditor’s ReportParamount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 201520. 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
to the bed business, for the years ended March 31, 2015 and 2014.
(2) Information about Products and Services
Millions of Yen
2015
Products and Services

Sales toexternalcustomers

Beds

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

Other

RentalTotal¥ 3,550 ¥ 16,208 ¥ 12,682 ¥ 75,270

Millions of Yen
2014
Products and Services
Beds
Sales toexternalcustomers¥ 34,808

Ward
MedicalMattresses Equipment
Equipment¥ 5,021¥ 4,464

Other

RentalTotal(3) Information about Geographical Areasa. SalesMillions of Yen
2015
Japan

Asia

¥ 69,342¥ 3,802

Middle EastAsia

¥ 67,336¥ 3,662

Middle East

Sales toexternalcustomers

30$278,253

Ward
MedicalMattresses Equipment
Equipment

Other¥ 1,372

Total

¥ 202

¥ 72,794

2015
Japan

Asia

$ 577,035$ 31,642

Middle East
$ 2,867

Europe

Other

Total

$ 11,953$ 2,870$ 626,367

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, 2015 and2014.
(4) Information about Major Customers
In the years ended March 31, 2015 and 2014, 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, 2015 and 2014, 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
2015

Rental¥ 75,270

Thousands of U.S. Dollars

Balance of goodwill
Other

Europe¥ 222

Amortization of goodwill

Products and Services

Total

¥ 345

2014
Japan

¥ 3,607 ¥ 14,136 ¥ 10,758 ¥ 72,794

2015

Other

¥ 1,436

Millions of Yen

Thousands of U.S. Dollars

Beds

Europe

¥ 345

2014

2015

¥ 53

¥ 73

$ 441

58

111

483

Total

$43,774 $34,389 $29,539 $134,878 $105,534 $626,367

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 15

31

Global Network

Corporate/Share Information
As of March 31, 2015

8

14

7

11

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

1 2 3 4

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:

1210

Corporate Name:

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

Paramount Bed Holdings Co., Ltd. is the holding company of a comprehensive medical

9group comprised of the core entity Paramount Bed Co. Ltd., which engages in the5Distribution by Type of Shareholder:manufacture and sale of beds, mattresses, and equipment for medical and nursing

6

0.6% 4.6%

care environments, and subsidiaries engaged in services such as the inspection and13

maintenance of Paramount Bed products and the leasing and wholesaling of assistive
products. Paramount Bed Holdings Co., Ltd. is responsible for the planning, drafting,

20.5%

and implementation of Group management strategies, auditing of group management,

28.4%

and other tasks related to Group management control.

20.1%

1 Paramount Bed Holdings Co., Ltd.

Number of Employees:

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 and 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

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.

Japanese individuals and others

Number of Shares Issued:

30,877,487

Other Japanese companies

25.8

Number of Shareholders:

12,006

Foreign investors

20.1

Japanese financial institutions

20.5

Japanese security companies

0.6

Treasury stock

4.6

Principal Shareholders:

28.4

Distribution by Number of Shares Held:

Number of shares held
(thousand)%

CTOK Co., LTD.

3,121

10.6

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

LLAGE WOOD Co.

2,373

8.1

NIU VALLEY CAPITAL LLC

1,679

5.7

Paramount Bed Do Brasil Ltda.

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

1,081

3.7

Rua Maestro Cardim 407, Salas 1009 E 1010, Liberdade
Cep: 01323-000 Sao Paulo-Sp-Brazil

Japan Trustee Services Bank, Ltd. (Trust Accounts)

939

3.2

Kenji Kimura

912

3.1

Kyosuke Kimura

911

3.1

500,000 or more

51.7

Michihide Kimura

911

3.1

100,000 to 499,999

23.5

Tomohiko Kimura

820

2.8

50,000 to 99,999

5.1

10,000 to 49,999

6.9Mizuho Bank, Ltd.

700

2.4

5,000 to 9,999

1.5

1,000 to 4,999

4.7

less than 1,000

6.6

1002A&B, 10th Floor, Welldone Tech Park, Sector-48,
Sohna Road, Gurgaon-122002, India

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%

Number of Shares Authorized: 126,000,000

11 Paramount Bed India Pvt. Ltd.

12 Paramount Bed Mexico S.A. de C.V.

Overseas25.8%

2,496 (consolidated)

9 Paramount Bed Vietnam Co., Ltd.

Domestic

22 (non-consolidated)

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 015

Consolidated subsidiaryNon-consolidated subsidiary

Name

Notes 1. The Company holds 1,416,244 shares of treasury stock, but these are excluded from the above list ofmajor shareholders.
2. The voting rights ratio is calculated excluding treasury stock.

4.7%
1.5%

6.6%

6.9%
5.1%

51.7%
23.5%
%

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1533