Fiscal Year ended October 31, 2003

Accounting Bulletin (Consolidated)
December 11, 2003
Listed Company Name

Kanamoto Company, Ltd.

Company Code Number

9678

Listing Exchanges

Tokyo Stock Exchange, Sapporo Stock Exchange

Head Office Address

1-19, Odori Higashi 3-chome, Chuo-ku, Sapporo, Hokkaido Japan 060-0041（URL http://www.kanamoto.co.jp）
Representative

Kanchu Kanamoto President

Inquiries

Nobuhito Utatsu
Director & Corporate Officer, Division Manager, Accounting Division
TEL 81-11-209-1600
Please send inquiries in English to takayama@kanamoto.co.jp.

Date of Report to the Board of Directors

SEC Accounting Standards

December 11, 2003

The Company has not adopted SEC accounting standards

1. Consolidated Operating Results for the Fiscal Year ended October 31, 2003
(November 1, 2002 – October 31, 2003)(1) Consolidated Operating Results(Numbers less than one million yen have been rounded down)

Revenues

Operating Income

Millions of yen
Fiscal year ended
October 31, 2003
Fiscal year ended
October 31, 2002％

Millions of yen

63,686（−2.4）

2,307（

65,251（−3.1）

2,287

Net Income

Ordinary Income％

Millions of yen

％

0.9）

2,279

（ −4.3）（−20.4）2,381（−26.9）Net Income
per Share ofCommonStock

Net income
per share ona fully diluted
basis

Return on
Returnshareholders’ on total
equityassetsOrdinary
incomemarginMillions of yen

％

Yen

Yen

Fiscal year ended
October 31, 2003

913(−24.4)

29.96

27.11

2.9

2.4

3.6

Fiscal year ended
October 31, 2002

1,209

( 155.8)

39.99

30.76

3.9

2.3

3.6

％

％

％

(Note) 1. Investment profit or loss accounted for by the equity method
Fiscal Year ended October 31, 2003−
Fiscal Year ended October 31, 2002−
2. Average number of shares (consolidated) outstanding during the fiscal year
Fiscal Year ended October 31, 2003
30,030,383 sharesFiscal Year ended October 31, 2002
30,235,808 shares
3. Are there any changes in accounting method?
No
4. The percentages shown for revenues, operating income, ordinary income and net income are the percent
increase or decrease compared to the prior consolidated fiscal year

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 1

(2) Consolidated Financial Position
Total Assets

Shareholders’Shareholders’Shareholders’EquityEquity Ratio

Equity per Share

Millions of yen

Millions of yen

Fiscal year ended
October 31, 2003

Yen

89,01031,90735.8

1,068.25

Fiscal year ended
October 31, 2002

99,31331,24031.5

1,033.30％(Note) Number of shares (consolidated) issued and outstanding at the end of the fiscal year:
Fiscal Year ended October 31, 2003 29,868,824 sharesFiscal Year ended October 31, 2002 30,233,756 shares(3) Consolidated Cash Flows

Fiscal year ended
October 31, 2003
Fiscal year ended
October 31, 2002

Cash Flow from

Cash Flow from

Cash Flow from

Balance of CashOperating

Investing

Financingand Equivalents at

Activities

Activities

Activities

End of Period

Millions of yen

Millions of yen

Millions of yen

Millions of yen

10,359−107−13,764

11,92010,645−442−10,761

15,433(4) Companies to which consolidation accounting and equity method accounting apply
Number of consolidated subsidiaries: 4
Number of non-consolidated subsidiaries accounted for by the equity method: 0
Number of affiliated companies accounted for by the equity method: 0(5) Changes in scope of consolidation and application of equity method accounting
Consolidation (new companies)

0(Excluded) 2

Equity method accounting (new companies)

0(Excluded) 0

2. Projected Consolidated Operating Results for the Fiscal Year Ending October 31, 2004
(November 1, 2003 - October 31, 2004)
Revenues

Ordinary Income

Net Income

Millions of yen

Millions of yen

Millions of yen

Interim period

29,970920

420

Full year

59,5901,450

580

Reference: Projected net income per share of common stock (Full year)¥19.42*The above projections were prepared based upon information available to the Company at the time the projections wereannounced as well as various assumptions concerning the future economic and business environment. Actual operating
results may differ from the projected figures depending upon various factors in the future

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 2

I

Current Conditions of the Company’s Group

The Kanamoto Company group is comprised of the parent company, six subsidiaries and two affiliatedcompanies. The business activities of the group are centered on the rental of construction equipment, andthe development of businesses involved in the rental and sale of a full line of construction-related materials.
An explanation of each company’s position with regard to its relevant business is provided below.

Businesses related to the Construction Equipment Rental Division
The Company’s rental division, together with Daiichi Machine Industries Co., Ltd. (a consolidated
subsidiary company) and Kanamoto Shikoku Co., Ltd. (a non-consolidated subsidiary company), is
engaged in the rental and sale of construction equipment and machines used for construction. These two
subsidiary companies operate in designated marketing areas and borrow rental equipment assets from theCompany as needed in order to meet customer demand. Taniguchi Co., Ltd., a subsidiary company that also
engaged in this business, was merged into Kanamoto in August 2003.
SRG Kanamoto Co., Ltd. (a consolidated subsidiary company) operates a rental business that provides
temporary materials for construction use. Assist Co., Ltd. (a consolidated subsidiary company) is engaged
in the rental and sale of furniture and fixtures and safety products for the construction industry. The
Company borrows rental assets from SRG Kanamoto Co., Ltd. and Assist Co., Ltd. as needed to rent to its
own customers.
In addition to the above companies, Kanatech Co., Ltd. (a consolidated subsidiary company) develops,
manufactures and sells modular housing units for temporary use. Polyshield Services Co., Ltd. (anon-consolidated subsidiary company), which was engaged in the sale and construction of specialized
rust-proof, water-proof shields, has halted all business operations at the present time.

Businesses related to the Steel Sales Division
The Company’s Steel Sales Division sells steel products and construction-related manufactured goods. The
Company has no subsidiaries or affiliated companies related to this division.

Businesses related to the Information Products Division and Other Businesses
As the Company’s information and telecommunications-related division, Kanamoto’s Information Products
Division is engaged in the rental and sale of computers, computer peripheral equipment and equipment forthe development of computer products. Active Technology Corporation (an affiliated company), which isprincipally engaged in the sale of telecommunications-related equipment such as wireless LAN devices, isaffiliated with this division.
As a supplemental business, Active Power Corporation (an affiliated company) is engaged in the sale ofmicroturbine generators manufactured by Capstone Corporation, a U.S. company, and supplies theseproducts to the Company, among others.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 3

Relationship of the Operating Businesses(Note) An asterisk indicates an affiliated company to which equity method is not applied

Customers

Construction-related businesses
Construction

Daiichi Machine Industries Co., Ltd.

equipment rental

Kanamoto Co., Ltd. Construction
Information Products
Division-related
businesses
・
Other Businesses
Active Technology
Corporation*
Active Power
Corporation*equipment rental

Sale of telecom
devices
Sale ofConstruction
Equipment Rental
Division・
Steel Sales
Division・
Information
Products Division

Kanamoto Shikoku Co., Ltd.

Rental of temporary
scaffolding

SRG Kanamoto Co., Ltd.

Rental of safety
products
Manufacture and sale ofmodular housing units

microturbine

Supply ofmodularhousing units

Assist Co., Ltd.

Kanatech Co., Ltd.

generators

Polyshield Services
Co., Ltd.

Lines indicate:

Consolidated
subsidiaries

Non-consolidated
subsidiaries

Affiliatedcompanies

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 4

II

Management Policies

1. Basic policies concerning business management
Kanamoto Company believes that adapting to changes in its business environment, developing the firm ona sustainable basis and maximizing earnings contributes to the best results for all of its stakeholders. Thisis the reason the Company has always made the centerpiece of its action agenda the concept “constantly
seek innovation and strive to energize the business.”
By offering each customer optimal solutions and services fine-tuned to its exact needs, based on rational
rental proposals that take maximum advantage of Kanamoto’s years of accumulated equipment rental
knowledge and experience, Kanamoto seeks to grow in a manner that will contribute fully to society.

2. Basic policies concerning distribution of earnings
To ensure the long-term, integrated expansion of shareholders’profits, Kanamoto Company continues tofocus comprehensively on both capital investments and profitability based on its medium-term profit plan,
general dividend trends and a sound financial position. In particular, the Company remains committed to its
policy of stable dividend growth.
At the same time, the Company utilizes its internal reserves by allocating funds for the introduction of rental
equipment assets that will serve as the source of future earnings.
During the consolidated fiscal year under review, the Company purchased 351,000 shares of treasury stock.
Kanamoto has established a policy and system for the amortization of treasury stock, based on theassumption the Company will execute its policy at the appropriate time according to circumstances.

2-2. Policy concerning reduction of the Company’s investment unit
Given the Company’s present circumstances and markets, management believes it has adopted an
appropriate position with regard to Kanamoto’s investment unit and stock allocation, and has no plans to
reduce these positions at this time. The Company currently also has no plans to execute a stock split.
The Company will continue to flexibly examine its activities, however, in accordance with the future situation
concerning the distribution of investment units.

2-3. Management indicators established as objectives
Because of the need for the Company to maintain a large quantity of assets, Kanamoto has always
emphasized ROI (return on investment) and cash flow, and seeks growth in EBITDA (earnings before
interest, taxes, depreciation and amortization) to meet its primary objective of establishing a solidmanagement foundation.
For the new long-range management plan Kanamoto will launch in the fiscal year ending in October 2004,
the Company will seek to attain the following numerical objectives after three years (fiscal year ending
October 2006) and five years (fiscal year ending October 2008).
(Millions of yen, except net income per share)
Fiscal Year ending

Consolidated operating results

Non-consolidated operating
results (Kanamoto Company)

Fiscal Year ending

October 2006

October 2008

(After three years)(After five years)

Revenues

60,40063,340Ordinary income

3,350

5,370

Net income per share

57 yen93 yen

Revenues

58,00060,600Ordinary income

3,160

5,070

EBITDA

18,02919,553

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 5

3. Medium to long-term corporate management strategy
Kanamoto has now completed the first two years of its “Kanamoto Survival Plan,” the three-year
medium-term management plan the Company has been executing since the fiscal year ended October 2002
(38th Business Period), and is currently in the final year of the plan. During these two years, Kanamoto has
reduced and improved the total cost of revenues and its selling, general and administrative expenses, andheightened every employee’s sense of the challenges facing the Company. As a result, the Company wasable to achieve operating results that exceeded its initial targets.
Because of its primary focus on cost reduction strategies and reform of internal systems, however, thesurvival plan possesses inherent limits as a profit expansion program.
Kanamoto has therefore positioned the fiscal year ending in October 2004 (40th Business Period), the final
year of the “Kanamoto Survival Plan,” as the first year in the Company’s new management plan.
“Metamorphosis”is a long-range, five-year plan, through which Kanamoto will launch efforts to reinvigorate
the Company and create a stronger Kanamoto that is well-equipped to survive in the face of a changed
business environment, by the end of the fiscal year ending in October 2008.
In the new long-range management plan, Kanamoto will focus on enhancing the operating systems in theConstruction Equipment Rental Division, which is the core business of Kanamoto and the Kanamoto group.
To accomplish this plan we have established the following objectives.
a) Earnings-focused management
Kanamoto will shift its focus from the revenues-first approach utilized in the past and emphasize gross profit.
Moreover, because the Company has already completed the replacement of its rental assets with the latest
emissions-controlled models designed to reduce pollution, during the plan period the Company will limit the
introduction of new rental assets and work to reduce the amount of depreciation and amortization expense,
which reduces operating income. The Company will continue to aggressively introduce small-scaleconstruction equipment and inexpensive rental assets, however, which boast high profit margins.

b) Execute a bold scrap and build program
Currently, Hokkaido accounts for 41% of Kanamoto’s total revenues by region, with Honshu accounting forthe remaining 59%. Kanamoto will further pursue the shift in sales towards Honshu, and implement a
flexible branch office location strategy that will increase the percentage of revenues accounted for by
Honshu to 65%. In addition to taking bolder measures to close and scale back the number of unprofitablebranches in particular, the Company will concentrate on establishing lightly-equipped branches centeredparticularly in the Tokyo metropolitan area.
c) Build a powerful marketing organization where customers are always Number One
By taking maximum advantage of its information systems, Kanamoto will implement marketing programs tothoroughly fulfill user needs, including new models and new construction methods, and capture regional
construction projects. The Company will continue to reconfigure its asset composition to best suit theregional characteristics of each branch office, independently and autonomously of the others, to create aposition in which Kanamoto’s presence is indispensable for its customers’operations.
d) Pursue Kanamoto’s alliance strategy
Kanamoto is presently developing its approach of building a Kanamoto alliance group, which the Company
has developed in western Japan and used to produce tangible results in market share growth in thecorresponding region. The Company will introduce the technique in other marketing areas as well. By using
this approach Kanamoto has strengthened corporate cooperation as the Kanamoto group, regardless ofwhether its partners are consolidated or non-consolidated companies, and improved synergistic effects.
Although the Kanamoto group reaches from Hokkaido to Okinawa when all of the alliance firms are included,
each business base is united organically to form a unified entity capable of providing the same quality of
products and services throughout Japan.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 6

Even though business conditions will be extremely difficult during the initial two-year period of the newlong-range management plan, by pursuing the objectives mentioned above Kanamoto will earn industry
recognition as the leading company in the construction equipment rental business. By continuing efforts toimprove and strengthen its financial position, Kanamoto will seek to create a firm that is evaluated positively
by the market, through measures such as its debt rating and dividend policy.

4. Issues to be addressed by the Company
Under the financial restoration policy proclaimed by the Koizumi Cabinet, controls on public works
expenditures are being slowly implemented. This policy is projected to remain unchanged as long as there
are no large changes in the economy. At the same time, however, there are also limits on the low volume ofprivate sector construction projects, which are concentrated in major metropolitan areas. Overall, there islittle expectation for an immediate increase in construction demand.
Moreover, the construction equipment rental industry also faces headwinds that grow more intense witheach passing day, as the volume of public works decreases. In addition to sharp unit price declines that arelarger than anticipated, operating margins at both large and small construction equipment rental companies
continue to shrink each year as building contractors demand large discounts. The severity of competition
among firms makes new investment difficult for independent operators and small and medium-sized firms,
and the industry faces an extremely tough business environment.
On the other hand, despite being confronted with this severe business environment, there are some positive
signs for the construction equipment rental industry as well.
One such bright spot is the shift to construction equipment rentals, which is continuing steadily as
construction firms strive to reduce their asset balances. Indicators of this trend include the use of rentals byconstruction firms to meet their equipment needs, which recently rose to 55.6%. This reliance on rentals is
growing particularly at subcontractors working with large general construction firms, where the percentage
of all equipment used at construction sites that is rented increased 2.0% points to 44.0%. Even for
construction investment, where the general trend is downwards, there are some models and sectors forwhich unit price declines are comparatively small.
Kanamoto has already completed its transition to equipment designed in particular to be moreenvironmentally friendly. By taking steps to reduce equipment exhaust emissions with an asset
enhancement program based on aggressive introduction of new automobiles, the Company has created afull equipment lineup.
As a result, Kanamoto does not face a need for large-scale capital investment during the next few years. Byutilizing its state-of-the-art rental construction equipment to the maximum extent, and cooperating closelywith the companies and alliance partners in the Kanamoto group that are developing businesses in various
regions, Kanamoto can direct its full attention to expanding the volume of orders received and focus on
increasing earnings.
The Kanamoto group is a combination of firms that boast strong relationships with sectors such as
temporary housing materials, furniture, fixtures and security equipment and specialized housing units,
which supplement the Company’s principal business of construction equipment rentals. Because the prompt,
flexible utilization of these relationships will be the key to differentiation from other companies, Kanamoto
will concentrate on further strengthening cooperation among Kanamoto group firms, steadily increasing
synergistic effects and zealously working to create a knowledge management system and equipment
maintenance standardization system that effectively utilizes the online network linking all of the Company’sbranches.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 7

5. Basic approach concerning corporate governance and status of corporate governancemeasures
Kanamoto introduced a corporate officer system in January 2001 to clarify responsibility for execution of theCompany’s businesses. Kanamoto has also consolidated its organizational framework, which will improvethe communication function for top-down notification of instructions such as management policies, andprovide a system for keeping every employee well informed about the Company’s policies.
In conjunction with this change the Company partially revamped its organizational structure. By establishinga separate Management Planning Division and restructuring the Business Coordination Headquarters,
Kanamoto is making every effort to prepare exact business strategies that conform to the market
environment and, in line with this effort, execute comprehensive management controls at each businessdivision and each affiliated company.
In addition, by preparing ethics guidelines and establishing a Compliance Committee that includes outsidecommittee members, the Company has taken steps to strengthen observance of laws and ethics regulations.
Kanamoto has also established a Rewards and Penalties Committee to propose separate rewards anddemerits, a New Branch Committee to examine large-scale capital investment proposals related to opening
new branch proposals and offices, a Proposal Study Committee to investigate employee proposals,
determine if they are feasible to execute and propose commendations for such ideas, a Personnel
Examination Committee to investigate changes in the promotions and work group system, an Operating
Results Committee to propose performance-based compensation and draft commendations for branches
demonstrating excellent achievement, and a Public Relations Planning Committee to closely review thecontents of corporate announcements. By establishing these various committees, Kanamoto continues topromote in-house awareness concerning corporate governance.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 8

III

Operating Results and Financial Position(1) Operating resultsa) Summary of consolidated fiscal year operating results
During the consolidated fiscal year under review, business sentiment in some sectors of Japan’s economy
showed a positive outlook. In particular, operating results recovered substantially in major manufacturingindustries that had previously completed excess capacity adjustments. On the other hand, in industries suchas construction and services where industry reorganization has not progressed very far, the deflationary
economy continued to play itself out. At the small and medium-sized enterprises that comprise the vast
majority of the economy in particular, a situation colored by a sense of economic stagnation continued.
Personal consumption as well remains sluggish, affected by the delay in recovery of the businessenvironment and worries about the future that are manifest in questions about employment and pension
issues.
In the construction industry, which is Kanamoto’s main customer, there was no early order boost fromgovernment orders for public works. With healthy private sector demand also concentrated in only the major
metropolitan areas, a tough environment prevailed throughout Japan. A synopsis for each of Kanamoto’sbusiness sectors is provided below.

Construction-related businessWith the decline in public works, construction equipment rental prices remained at rock bottom levels. The
business environment surrounding the industry remained severe. Customers made more forceful requests
for discounts, encouraged by excessive competition among firms.
Given the decline in government orders for public works during fiscal 2003, plus other influences such as
nationwide local elections and a House of Representatives election, construction equipment rental demandthroughout the fiscal year suffered from a lack of upward momentum. Particularly in regions where thevolume of public works orders was small, the circumstances that swept over and engulfed the construction
equipment rental industry, which was already gasping from a wave of price competition as firms sought tomaintain sales, showed no positive signs of easing.
In its Construction Equipment Rental Division, Kanamoto continued its efforts from the prior fiscal year as itsought to thoroughly implement low-cost operations. During the consolidated fiscal year under review the
Company undertook efforts to reduce transportation charges and review maintenance costs, areas thatreceived less attention in the past. Management also worked to maintain profits through measures such as
shifting rental assets to models less susceptible to unit price reductions.
During the consolidated fiscal year under review, Kanamoto opened two branches and closed two branches
in the Hokkaido territory, closed one branch in the Tohoku territory, added three new branches in the
Kanto-Shinetsu territory and opened two new branches in the Kinki-Chubu territory. Altogether the branch
network grew by a net addition of four branches (seven opened, three closed). This included two newly
established branches in the Hokkaido district in Otaru and Yoichi, which were added when the Company
merged with Taniguchi Co., Ltd. in August 2003.
By region, the downward trend in public works construction in both Hokkaido and the Tohoku territory was
undeniable. Nevertheless, the Company made a strong effort and kept the decline in construction equipment
rental revenues by region to 2.4% and 0.5%, respectively, by focusing on even small-scale construction
works with the intent of not losing any orders. Rental revenues in the Kanto-Shinetsu territory rose by 4.1%
compared to the prior fiscal year, reflecting the results of new branches opened in Tokyo and the surrounding
areas, while rental revenues in the Kinki-Chubu territory jumped 15.3% as the result of Kanamoto’s allianceefforts. During the consolidated fiscal year under review, the percentage of total rental revenues accounted
for by Hokkaido and Honshu were 41.3% and 58.7%, respectively, and the results from Kanamoto’s effort toshift business to the Tokyo metropolitan area are becoming steadily apparent. As a result of these changes,
revenues from construction equipment rentals increased by 1.3% year-on-year.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 9

With regard to the division’s sales revenues, on the other hand, revenues from overseas sales of used
construction equipment grew by 9.2%. Domestic sales rose by 2.4%, reflecting the results of a campaign
the Company initiated to sell used temporary unit housing. As a result, total sales revenues increased by
5.8% compared to the prior consolidated fiscal year.
Operating income recovered and grew by 4.2%. This reflected efforts to shrink both total cost of revenues
from operations and selling, general and administrative expenses by managing a low-cost operation, and thesuccess of the Company’s effort to achieve a more balanced depreciation expense burden by emphasizing
leases as the means for introducing construction rental assets.
The conditions for consolidated subsidiaries in the Company’s construction-related businesses were as
follows.
In August 2003, Kanamoto merged with Taniguchi Co., Ltd., with Kanamoto being the surviving entity. Assist
Co., Ltd., which handles products that are less affected by falling prices, increased revenue by only 1.7% but
substantially expanded fiscal year net income, which rose by 203.3%. SRG Kanamoto Co., Ltd. began toreap the benefits of opening a branch in Sapporo, as sales grew by 19.7% compared to the priorconsolidated fiscal year, and although the company still had a deficit for the fiscal year, it reduced the size ofthe net loss by 37.3%. Kanatech Co., Ltd. faced a difficult challenge, as fiscal year sales fell 44.7% becauseof a sharp drop in demand both inside and outside of the Kanamoto group, especially in the number of orders
from Kanamoto, which resulted in a full-year net loss. Daiichi Machine Industries Co., Ltd. saw its revenues
shrink 8.9% compared to the prior consolidated fiscal year, under the influence of declining public works
construction. By amortizing past years’costs during the prior fiscal year, however, the Company was able toincrease fiscal year net income by 392.4%.
As a result of the above activities, consolidated revenues from construction-related businesses decreased
0.3% year-on-year to ¥56,395 million, and operating income rose 4.6% compared to the prior consolidated
fiscal year to ¥2,205 million.
Steel sales-related business
The Steel Sales Division focused its efforts on increasing sales centered on the Sapporo metropolitan area,
where demand was expected to be strong, with the retail business also taking pains to increase sales. Efforts
to stimulate demand were less successful than expected, however. Added to this was the Company’s effort
to strengthen internal credit controls. As a result, sales fell by 14.3% compared to the prior consolidated
fiscal year to ¥6,373 million, and the operating loss decreased by 110.8% to ¥5 million yen.
Information Products Business and Other Businesses
Because demand shifted away from expensive engineering workstations to low-priced PC workstations,
Kanamoto’s Information Products Business Division saw its rental revenue shrink by 17.4% compared to theprior consolidated fiscal year. Equipment sales also fell, declining 32.4% as sales of wireless LAN modules forfactory use came to an end and development and mass production of new model modules was delayed. For
the division as a whole, revenues decreased 26.5%.
As a result of the above activities, revenues for the Company’s Information Products Business and Other
Businesses shrank 27.1% from the prior consolidated fiscal year level to ¥916 million, and operating income
declined 467.1% year-on-year to ¥24 million yen.
In other businesses, as previously reported in March 2003 the Company liquidated Providence Brewery Co.,Ltd.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 10

Fiscal Year ended October 31, 2003 Consolidated Operating Results(Million yen; % change from prior year)
Revenues

Operating Income

Ordinary Income

Net Income

Consolidated Fiscal
Year under review

63,686

–2.4%

2,307

0.9%

2,279

–4.3%

913

–24.4%

Prior consolidated
Fiscal Year

65,251

–3.1%

2,287

–20.4%

2,381–26.9%

1,209

155.8%b) Outlook for the next consolidated fiscal year (Business Period ending October 2004)
Expenditures for public works during fiscal 2003 have already been executed, and the organization of a
supplementary budget to be used as an employment measure is being debated. Nevertheless, the central
government has a full plate of various domestic and international issues that need to be resolved. Givenpresent circumstances, it is difficult to anticipate any substantial changes in the government’s current
economic policy, whose overall tone is one of fiscal spending restraint, for the next fiscal year and after. The
severity of the business environment surrounding the construction equipment rental industry is expected tocontinue under the influence of factors such as the trend towards reducing public works expenditures andthe lack of a strong recovery trend in private sector construction and capital investment. Under thesecircumstances, Kanamoto will execute bold, active measures based on “Metamorphosis,” the Company’s
new long-range management plan, to create a corporate business structure and financial position that will
enable Kanamoto to respond fully to this tough business environment.
In a capital-intensive business such as construction equipment rentals, a company will incur a depreciation
expense burden each year corresponding to the volume of rental assets owned. On the other hand, therental business also has characteristics that enable a rental company to earn gains on the sale of its used
assets after generating a steady stream of earning through rental of the assets over a sufficient period oftime.
Over the past few years, Kanamoto made an effort to differentiate itself from other companies by
aggressively carrying out a program to update and reinforce its rental assets on an accelerated schedule.
This included an antipollution program targeting areas such as emissions control. During this period a trend
to restrict new asset introductions was generally very strong throughout the construction equipment rental
industry.
As a result, the majority of Kanamoto’s asset lineup consists of construction equipment models withstate-of-the-art pollution control equipment. Because it will not be necessary for the Company to replace its
new equipment for the next several years, Kanamoto will not face any large capital investment burden forequipment rental assets.
In its new long-range management plan, Kanamoto has not planned any large asset introductions for theimmediate future. Because used construction equipment disposals will also be limited, the Company will beable to utilize its rental assets to provide a basis for rental operations over a greater number of years than
traditionally was possible.
As a result, the sale and disposal of used construction equipment that has contributed to earnings to-datewill be limited in the early stages of the Company’s new long-range management plan. Moreover, to formsound industry business practices, a temporary decline in revenue is projected based on the policy of
responding to non-payment of user service fees with a firm business stance and optimization of rental fees.
Based on these transitional factors resulting from the severe business environment and implementation of
the Company’s new long-range management plan, Kanamoto has established a strict business plan forrevenues and income for the fiscal year ending October 2004.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 11

By steadily following the individual measures and strategies outlined in “Metamorphosis,”its new long-range
management plan, however, the Company projects substantial improvement in its earnings level by the final
fiscal year of the plan.

Fiscal Year ending October 31, 2004 Projected Consolidated Operating Results(Million yen; % change from prior year)
Revenues

Operating Income

Ordinary Income

Net Income

Interim period

29,970

–8.0%

1,020

–46.5%

920–48.8%

420–46.2%

Full year

59,590

–6.4%

1,630

–29.3%

1,450–36.4%

580–36.5%(2) Financial position
For the consolidated fiscal year under review, cash flow from operating activities was down 2.7% fromthe prior consolidated fiscal year, to ¥10,359 million. The amount paid for corporate and other taxes
decreased sharply, but cash flow declined because of the drop in income before taxes and adjustments andlower depreciation and amortization expense.
Cash flow from investing activities was ¥107 million. This was ¥335 million (75.8%) less than in theprior consolidated fiscal year, and mainly reflected a large decrease in funds used for the purchase ofinvestment securities.
Cash flow used for financing activities increased by 27.9% to ¥13,764 million. The increase was mainly
because of increases in funds used for redemption of straight bonds and funds used for redemption of
convertible bonds.
As a result of the above, the balance of cash and the cash equivalents at the end of the consolidated fiscal
year under review was ¥11,921 million yen, ¥3,512 million (22.8%) less than at the end of the priorconsolidated fiscal year.
Cash flow indicator trends for the Kanamoto group
The cash flow indicator trends for the Kanamoto group are provided below.
Fiscal Year Ended
October 2001

Fiscal Year Ended
October 2002

Fiscal Year Ended
October 2003

Shareholders’equity ratio (%)

28.9

31.5

35.8

Shareholders’equity ratio on a market
capitalization basis (%)

15.0

14.4

17.7

Years to repay debt

4.5

4.7

4.0

Interest coverage ratio (times)

14.8

14.2

17.2

(Note)
Shareholders’equity ratio: Shareholders’equity / Total assets
Shareholders’equity ratio on a market capitalization basis: Shareholders’equity on a market capitalization basis / Total
assetsYears to repay debt: Interest-bearing liabilities / Operating cash flow
Interest coverage ratio: Operating cash flow / Interest payments*All indicators are calculated using financial values on a consolidated basis.
*Total market capitalization is calculated by multiplying the closing share price at the end of the term by the number ofshares outstanding (after deducting treasury stock) at the end of the term.
*Cash flow from operating activities shown on the Consolidated Statements of Cash Flows is used as operating cash flow.
Interest-bearing liabilities include all liabilities on which the Company pays interest that are accounted for on theConsolidated Balance Sheets.
The amounts shown as interest expense on the Consolidated Statements of Cash Flows are used as interest payments.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 12

Fiscal Year ending October 31, 2004 Projected Cash Flows
Cash flow from operating activities is projected to decrease compared to the consolidated fiscal year
under review because of lower revenues and earnings and a decrease in the amount of depreciation andamortization expense.
Cash flow from investing activities is projected to remain nearly unchanged from the level of theconsolidated fiscal year under review because the Company does not project any large changes in
expenditures.
Cash flow used for financing activities is projected to decrease compared with the consolidated fiscal
year under review because the Company will not redeem straight bonds or convertible bonds.
As a result, the balance of cash and cash equivalents at the term of the next consolidated fiscal year is
projected to remain at nearly the same level as the balance at the end of the consolidated fiscal year underreview.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 13

III

Consolidated Financial Statements

1. Consolidated Balance Sheets
PeriodCategory(Unit: Thousands of yen)
Prior consolidated
accounting fiscal year
（As of October 31, 2002）
Amount¥ thousands(Assets)

Percent%

Current consolidated
accounting fiscal year
(As of October 31, 2003)
AmountChange fromprior year

Percent¥ thousands%¥ thousands

Current Assets
Cash and deposits

15,437,482

11,928,637−3,508,845

Notes and accounts receivable,
trade

23,120,417

21,411,919−1,708,497

Negotiable securities

75,07539,192−35,883

Inventory

809,466

854,296

44,8292,466,271

1,958,064−508,207

Corporate and other taxes
receivable

56,109−−56,109

Deferred tax assets

167,379

261,196

93,817

Other current assets

437,337

436,585−751

Construction equipment

Allowance for doubtful accounts−494,633
42,074,906

Total Current Assets

5,790−488,842
42.4

36,401,049

40.9−5,673,856

Fixed Assets
Tangible Fixed Assets
Rental equipment

16,896,190

13,301,236−3,594,954

Buildings and structures

7,685,672

7,187,496−498,175

Machinery, equipment, vehicles
and delivery equipment

1,087,738

989,031−98,706

24,600,974

24,637,537

36,562−106,900

Land
Construction in progress

108,792

1,892

Other assets

189,559

437,874

50,568,929

Total Tangible Fixed Assets

50.9

46,555,069

248,31452.3−4,013,860

Intangible Fixed Assets

100,727

Other assets
Total Intangible Fixed Assets

100,727

102,7480.1

102,748

2,021
0.1

2,021

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 14

(Unit: Thousands of yen)
PeriodPrior consolidated
accounting fiscal year
（As of October 31, 2002）

Category

AmountInvestment and Other Assets¥ thousands

Percent%

Current consolidated
accounting fiscal year
(As of October 31, 2003)
AmountChange fromprior year

Percent¥ thousands%¥ thousands

Investment securities

3,682,356

3,572,156−110,200

Deferred tax assets

1,748,980

1,383,397−365,582

Other

1,717,732

1,559,460−158,272

Allowance for doubtful accounts−580,183−563,757

16,425

Total Investments
AssetsandOther

6,568,886

6.6

5,951,255

6.7−617,630

Total Fixed Assets

57,238,543

57.6

52,609,073

59.1−4,629,469

Total Assets

99,313,449

100.0

89,010,122

100.0−10,303,326(Liabilities)
Current Liabilities
Notes and accounts payable, trade11,965,279

11,048,285−916,993

905,454

713,358−192,095

Long-term bank loans due within
one year

8,484,358

9,672,816

1,188,457

Corporate bonds to be redeemedwithin one year

5,277,692−−5,277,692

Convertible bonds to be redeemedwithin one year

4,164,000−−4,164,000

Corporate taxes payable

19,309648,231628,921

Accrued bonuses to employees

541,179

442,868−98,310

Accounts payable, other

7,909,341

5,819,386−2,089,955

Other current liabilities

753,119568,574

Short-term bank loans

40,019,734

Total Current Liabilities

40.3

28,913,520−184,545
32.5−11,106,213

Long-term Liabilities

17,301,830

20,734,299

3,432,468

retirement

1,675,725

1,777,314

101,589

Retirement allowances to directors
and auditors

196,643

197,093449

8,636,876

5,333,619−3,303,256

Consolidation adjustment account25,493

14,630−10,862

Other

118,996

61,076Long-term bank loans
Accruedbenefits

employees

Long-term accrued expenses−57,920

Total Long-term Liabilities

27,955,564

28.1

28,118,033

31.6

162,468

Total Liabilities

67,975,299

68.4

57,031,554

64.1−10,943,745

97,5740.1

71,3030.1−26,271(Minority Interests)
Minority Interests

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 15

(Unit: Thousands of yen)
PeriodCategory

Prior consolidated accounting
fiscal year
（As of October 31, 2002）
Amount(Shareholders’Equity)
Common stock

Percent

Current consolidated
accounting fiscal year
(As of October 31, 2003)
AmountChange fromprior year

Percent¥ thousands%¥ thousands%¥ thousands

8,596,737

8.7

−

−

−8,596,737

Additional paid-in capital

9,720,343

9.8

−

−

−9,720,343

Consolidated retained earnings

13,044,002

13.1

−

−

−13,044,002

Valuation difference
investment securities

other−108,448

−0.1

−

−

108,448

Treasury stock
Parent company stock held bysubsidiaries−2,086

−0.0

−

−

2,086

−9,973

−0.0

−

−

9,973

31,240,575

31.5

−

−

−31,240,575−−

8,596,737

9.7

8,596,737

Additional paid-in capital−−

9,720,343

10.9

9,720,343

Earned surplus−−

13,400,060

15.0

13,400,060

Valuation difference on othernegotiable securities−−

367,4420.4

367,442−−−177,318−0.2−177,318−−

31,907,265

35.8

31,907,265

99,313,449

100.0

89,010,122

100.0−10,303,326

on

Total Shareholders’Equity
Common stock

Treasury stock
Total Shareholders’Equity
Total Liabilities, Minority Interest andShareholders’Equity

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 16

2. Consolidated Statements of Income
Period(Unit: Thousands of yen)

Prior consolidated accounting
fiscal year
(From November 1, 2001 to
October 31, 2002)

Category

AmountRevenues from operations¥ thousands

Percent%

Current consolidated
accounting fiscal year
(From November 1, 2002 to
October 31, 2003)
AmountChange fromprior year

Percent¥ thousands%¥ thousands

Rental revenues

40,560,882

40,724,552

163,670

Sales

24,690,988

22,961,732−1,729,256

Total revenues from operations

65,251,870

100.0

63,686,284

100.0−1,565,586

Cost of revenues from operations
Cost of rental revenues

30,630,540

30,928,308

297,767

Cost of goods sold

19,376,376

17,970,191−1,406,185

Total cost of revenues

50,006,917

76.6

48,898,499

76.8−1,108,417

Gross profit

15,244,953

23.4

14,787,785

23.2−457,168

Selling, general and administrative
expenses

12,957,410

19.9

12,480,119

19.6−477,290

Operating income

2,287,543

3.5

2,307,665

3.6

20,122Non-operating revenues
Interest revenue

2,552

10,089−7,537

Dividend income

45,62779,711

34,084Gain on sale of investment securities

157,293

134,900−22,392

Insurance benefits

38,354

23,148−15,205

Rents received

95,17786,490−8,687

Cash bonus received

168,536

18,733−149,802

6,237−−6,237

Other

233,103

182,479−50,623

Total non-operating revenues

754,419

Amortization of consolidation
adjustment account

1.1

528,0160.8−226,403

Non-operating expenses
Interest expense

475,129

Other

185,605

Total non-operating expenses

660,735

1.0

556,378

0.8−104,356

2,381,227

3.6

2,279,303

3.6−101,924

Ordinary income

398,080−77,048

158,298−27,307

Extraordinary profits
Gain on sale or retirement of fixed
assets

14,266365−13,900

Reimbursement of accrued
employees retirement benefit

395,091−−395,091

Other

11,101

Total extraordinary profits

420,459

36,5700.6

36,93625,4690.1−383,522

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 17

PeriodCategory
Extraordinary losses

Prior consolidated
accounting fiscal year
(From November 1, 2001 to
October 31, 2002)
AmountPercent¥ thousands%

Loss on sale or retirement of
fixed assets
Valuation loss
securitieson

investment

Loss on salesecuritiesofinvestment

Lossonredemption
convertible bonds

of

Other

(Unit: Thousands of yen)
Current consolidated
accounting fiscal year
Change from
(From November 1, 2002 toprior year
October 31, 2003)
AmountPercent¥ thousands%¥ thousands

88,863−110,493

240,765259,639

18,87470,085−−70,085

96,085−−96,085

67,58592,42024,834

673,8781.0

440,9220.7−232,955

2,127,807

3.2

1,875,316

3.0−252,491

864,430

1.3

1,036,152

1.6

171,721

Adjustment for corporate and othertaxes

59,3970.1−55,071−0.0−114,468

Minority interest loss

5,252

0.0

19,6400.0

14,387

1,209,231

1.8

913,875

1.4−295,356

Total extraordinary losses
Incomebeforetaxes
andadjustments
Corporate, local and business taxes

Net income

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 18

3. Statements of Consolidated Retained Earnings
PeriodCategory

Prior consolidated accounting
fiscal year
(From November 1, 2001 to
October 31, 2002)
Amount(Unit: Thousands of yen)
Current consolidated
accounting fiscal year
Change from
(From November 1, 2002 toprior year
October 31, 2003)
Amount¥ thousands¥ thousands

Balance of consolidated retained
earnings at the beginning of theperiod%12,395,900%¥ thousands− −12,395,900

Reduction in consolidated
retained earnings
Dividends

544,529

Directors and auditors’bonuses

16,600−561,129−−−561,129−1,209,231

Net income for the period

1,209,231−

Balance of consolidated retained
earnings at the end of the period

13,044,002− −13,044,002(Capital Surplus)
Balance of capital surplus at the
beginning of the period−

9,720,343

9,720,343

Balance of capital surplus at theend of the interim period−

9,720,343

9,720,343−

13,044,002

13,044,002

913,875

913,875

557,817557,817

13,400,060

13,400,060(Earned Surplus)
Balance of earned surplus at the
beginning of the period
Increase in earned surplus
Net income for the period−−

913,875

Decrease in earned surplus
Dividends−

Directors and auditors’bonuses−

Balance of earned surplus at theend of the period

541,217−−

16,600

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 19

4. Consolidated Statements of Cash Flows
PeriodCategory(Unit: Thousands of yen)

Prior consolidated
accounting fiscal year
(From November 1, 2001 to
October 31, 2002)

Current consolidated
accounting fiscal year
(From November 1, 2002 to
October 31, 2003)

AmountAmountChange fromprior year

Cash flow from operating activities¥ thousands¥ thousands¥ thousands

Income before taxes andadjustments

2,127,807

1,875,316−252,491

Depreciation and amortization
expense8,119,889

6,650,660−1,469,228

Amortization of consolidation
adjustment account−6,23761,057

67,295Gain on sale or retirement of fixed
assets−14,266−365

13,900Loss on sale or retirement of fixed
assets

199,356

88,863−110,493

Installment purchases of assets forsmall-value rentals

265,647

113,174−152,473

Reclassification of cost of sales
associated with disposal of
construction equipment

35,35918,306−17,053

1,504,216

1,779,039

274,822−1,251,943−906,554

345,388

240,765259,639

18,874Gain on sale of investment securities−157,293−134,900

22,392

Loss on sale of investment securities

Reclassification of cost of sales
associated with disposal of rental
assetsExpenditures for acquisition ofrental assets
Valuation loss on investment
securities

70,085−−70,085

Gain on redemption of corporate
bonds by purchase−46,450−890

45,560Loss on redemption of convertible
bonds

96,085−−96,085

Increase (decrease) in allowance for
doubtful accounts

300,631−22,216−322,847

Decrease in accrued bonuses to
employees−53,509−98,310−44,801

Increase (decrease) in accrued
employees retirement benefits−333,035

101,589434,625

Increase (decrease) in retirement
allowances to directors and auditors−85,782449

86,232

Interest revenue and dividend
income−55,717−82,263−26,546

Interest expense on installment
purchases of rental assets

271,236

181,612−89,623

Interest expense

475,129

398,080−77,048

Decrease in accounts receivable,
trade2,985,326

1,708,497−1,276,828(Increase) decrease in inventory
assets336,554−44,829−381,384

Increase (decrease) in accounts
payable, trade−1,104,285−916,993

187,291

Increase in accounts payable, other

107,073

206,893

99,820

Directors and auditors’bonuses paid

−16,600−16,600−

Other, net−563,520

74,043

637,564

Subtotal

13,446,523

11,293,299−2,153,224

Interest and dividends received

55,717−747,992

82,263−600,912

26,546
147,080

Payment of corporate and othertaxes−2,108,470−415,364

1,693,106

Cash flow from operating activities

10,645,777

10,359,286−286,491

Interest expense

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 20

PeriodCategory

Prior consolidated
accounting fiscal year
(From November 1, 2001 to
October 31, 2002)(Unit: Thousands of yen)
Current consolidated
Change fromaccounting fiscal year
prior year
(From November 1,2002 to
October 31, 2003)

Amount¥ thousands

Amount¥ thousands¥ thousands−207,190−5,000202,189

Revenue from redemption ofterm deposits

645,1311,218−643,913

Funds used for the purchase of
tangible fixed assets−398,195−638,435−240,240

Funds provided from the sale oftangible fixed assets

112,805

11,331−101,474

Funds used for the purchase ofintangible fixed assets−26,294−23,145

3,149

Funds used for the purchase ofinvestment securities−2,645,631−1,361,608

1,284,023

Funds provided from sale ofinvestment securities

2,243,014

1,988,385−254,628

Funds used for purchase ofinvestments−16,129−14,220

1,909

Funds used for purchase of
subsidiary company stock
following change in scope of
consolidation−114,274−

114,274

Funds used for purchase of
subsidiary company stock−−108,551−108,551

Cash flow from investing activities
Disbursements for investments interm deposits

Other−35,51242,99878,510−442,276−107,027

335,249

Decrease in short-term bank loans

160,001−192,095−352,097

Funds provided by long-term bankloans

13,670,000

15,000,000

1,330,000

Funds used to repay long-termbank loans−10,538,637−10,379,073

159,563

Funds used for redemption ofstraight bonds by purchase−1,576,550−65,110

1,511,440

Funds used for redemption ofstraight bonds−−5,277,692−5,277,692

Funds used for redemption of
convertible bonds−3,590,085−4,098,000−507,915

Funds used for repayment of
installment obligations−8,348,209−8,076,438

271,771

Funds used for the purchase oftreasury stock−1,548−165,258−163,709

Payment of dividends to parent
company−544,529−541,217

3,312

8,000

30,00022,000−10,761,559−13,764,886−3,003,327

Increase (decrease) in cash andequivalents−558,058−3,512,627−2,954,569

Balance of cash and equivalents at
beginning of period

15,991,306

15,433,247−558,058

Balance of cash and equivalents at
end of the period

15,433,247

11,920,620−3,512,627

Cash flow from investing activities
Cash flow from financing activities

Funds provided from the issue ofstock to minority shareholders
Cash flow used for financing
activities

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 21

5. Significant Accounting Policies for the Consolidated Financial Statements
Prior Consolidated Fiscal Year
(From November 1, 2001
to October 31, 2002)
1. Companies included in
the consolidation

Current Consolidated Fiscal Year
(From November 1, 2002
to October 31, 2003)(1) Number of consolidated companies: 6
Consolidated company name:
Taniguchi Co., Ltd.
Assist Co., Ltd.
SRG Kanamoto Co., Ltd.
Kanatech Co., Ltd.
Providence Brewery Co., Ltd.
Daiichi Machine Industries Co., Ltd.

(1) Number of consolidated companies: 4
Consolidated company name:
Assist Co., Ltd.
SRG Kanamoto Co., Ltd.
Kanatech Co., Ltd.
Daiichi Machine Industries Co., Ltd.
Providence

Brewery

Co.,

Ltd.,

a

consolidated subsidiary during the priorconsolidated accounting fiscal year, wasliquidated in April 2003. Providence
Brewery’s financial results have been
eliminated

from

the

StatementsofIncomeConsolidated
and

the

Consolidated Statements of Cash Flows,
and the company has been removed
from the scope of consolidation.
Taniguchi Co., Ltd., a consolidated
subsidiary during the prior consolidated
accounting

fiscalyear,

mergedwithKanamoto Co., Ltd. on August 1, 2003.
Taniguchi’s financial results have been
eliminated

from

the

StatementsofIncomeConsolidated
and

the

Consolidated Statements of Cash Flows,
and the company has been removed(2) Main non-consolidated subsidiaries
Non-consolidated subsidiary company
namePolyshield Services Co., Ltd.
Kanamoto Shikoku Co., Ltd.

from the scope of consolidation.
(2) Main non-consolidated subsidiaries
Non-consolidated subsidiary company
namePolyshield Services Co., Ltd.
Kanamoto Shikoku Co., Ltd.

(Reason for exclusion from consolidation)(Reason for exclusion from consolidation)

The

size

of

the

non-consolidated

application of equity
method accounting

size

of

the

non-consolidated

subsidiaries is small and their net assets,

sales

loss

sales and fiscal year profit or loss

(amount corresponding to equity) and(amount corresponding to equity) andretainedretainedandfiscalyear profit

earningsor(amount

earnings(amount

corresponding to) are small in size and docorresponding to) are small in size andnot

do not have a material effect on the

have

a

material

effectontheconsolidated financial statements

consolidated financial statements
2. Matters pertaining toThesubsidiaries is small and their net assets,

Two unconsolidated subsidiaries andtwoaffiliatedcompanies

Same as at left

(Active

Technology Corporation and Active Power
Corporation) have been omitted fromitems to which equity method accounting
is applied because their respective effecton consolidated net income or loss andconsolidated capital surplus is immaterial
and none of the companies is importantto the company’s overall operations.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 22

3. Matters pertaining to

The fiscal year-end for all of thethe fiscal year closing

consolidated

date for consolidated

August 31.

subsidiaries

When

subsidiary

preparingcompanies

theSame as at leftisconsolidated

financial statements the Company used
the subsidiaries’financial statements asof August 31, adjusted for significant
transactions that occurred between thesubsidiaries’ fiscal

year-end

andtheconsolidation date that have a material
effectontheconsolidated

financialresults
4. Accounting principles
and standards used fornormal accounting
treatment(1) Appraisal standards
and appraisal
methods forprincipal assets

a. Negotiable securities
Other negotiable securities

a. Negotiable securities
Other negotiable securities
Securities with a market price

Securities with a market price

The Company has adopted the market

Same as at left

value method (the full amount of thevaluation difference is charged to equity
using

the

directtransfertocapitalmethod, with the disposal cost determinedby the moving average method) based on
the market price on the consolidated
accounting fiscal year closing date orsimilar prices
Securities without market prices
The Company has adopted the cost

Securities without market prices
Same as at left

method, cost being determined by themoving average method
b. Construction equipmentb. Construction equipment
Amount after deduction of depreciation
Same as at left
expense calculated according to thedeclining-balance method from the original
prices, by separate fiscal year of purchase(Supplemental information)
The Company formerly used 7 years as
the depreciable life for floor plate and steel
plate. In consideration of the period overwhich such products can be used physicallyand economically, however, based upon
their physical condition and customers’
intentions to rent, respectively, beginning in
the consolidated accounting fiscal year
under review the Company changed the
durable life of such products to 10 years
based upon a projection of the period fortheir possible use.
As a result, during the consolidated
accounting fiscal year under review,
depreciation expense was ¥209,320,000
lower, and gross profit, operating income,ordinary income and income before taxes
and adjustments were ¥209,320,000
higher, respectively, compared to what they
otherwise would have been had theaccounting standards used in previous
periods been applied.
The effect of this change on information
by business segment is described in therelevant section of this report.
Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 23

(2) Depreciation
methods forprincipal
depreciable assets

c. Merchandise inventories and supplies(i) Merchandise inventories
Lower of cost or market based on the
Last-in, First-out method(ii) Supplies
The Latest Purchase Cost method
a. Tangible fixed assets
The
Companyhasadoptedthedeclining-balance method. Buildings onland that is leased under a fixed-term landlease agreement, however, are depreciatedusing the straight-line method using theremaining period of the fixed-term lease as
the depreciable life and zero residual value.
For certain consolidated subsidiaries, theCompany has adopted the straight-line
method for buildings and structuresacquired on or after April 1, 2000 but
excluding fixtures and equipment.
The depreciable lives mainly used by theCompany are as follows.
Rental assets
5-10 years
Buildings(3) Accounting
standards forprincipal allowancesand reservesc. Merchandise inventories and supplies(i) Merchandise inventories
Same as at left(ii) Supplies
Same as at left
a. Tangible fixed assets
Same as at left

31-34 years(Supplemental information)
The Company formerly used 7 years as
the depreciable life for temporary rental
structures. In consideration of the period
over which such products can be usedphysically and economically, however,based upon improved product quality andcustomers’intentions to rent, respectively,
beginning in the consolidated accounting
fiscal year under review the Company
changed the durable life of such products to
10 years based upon a projection of theperiod for their possible use.
As a result, during the consolidated
accounting fiscal year under review
depreciation expense was ¥232,276,000
lower, and gross profit, operating income,ordinary income and income before taxes
and adjustments were ¥232,276,000
higher, respectively, compared to what they
otherwise would have been had theaccounting standards used in previous
periods been applied.
The effect of this change on information
by business segment is described in therelevant section of this report.
b. Intangible fixed assets
Software for use within the Company isdepreciated using the straight-line method
based on the assumed useful life for internaluse (5 years)
a. Reserve for doubtful accounts
To provide for losses on doubtful accounts
such as accounts receivable, the Company
charges to income an amount based on
actual loss experience for normal accounts,
plus an amount for projected unrecoverable
amounts based on assessments ofindividual accounts.

b. Intangible fixed assets
Same as at left

a. Reserve for doubtful accounts
Same as at left

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 24

b. Accrued bonuses to employeesb. Accrued bonuses to employees

To fully provide for expenditures ofbonusestheCompany

will

paySame as at leftto

employees, an amount is appropriated to
the reserve during the year based upon asalary estimate amountc. Accrued employees retirement benefitc. Accrued employees retirement benefit
The Company provides for employees’Same as at left
accrued retirement benefits based upon
the projected amounts of the liability for
accrued employees retirement benefits
and the value of pension assets at the endof the consolidated accounting fiscal year.
At the end of each consolidated accounting
fiscal year, the Company appropriates anamount to the reserve to provide for theliability recognized during the period. Past
years’service liabilities are fully amortizedin the year incurred.
The difference based on an actuarial
calculation is charged to income beginningin the consolidated accounting fiscal year
following the year in which incurred, withtheamounts

allocated

proportionately

using the straight-line method, based on a
specified number of years (10 years) thatis less than the average remaining periodof employment for employees at the timethe difference arises.
d. Retirement allowances to directors andauditors
The Company provides for retirement

d. Retirement allowances to directors andauditors
Same as at left

allowances to directors and auditors based
upon pertinent rules and appropriated tothe account proportionately at the end of
the consolidated fiscal year based upon
length of service.
(4) Lease transactions

For finance lease transactions except forSame as at left

leases that transfer ownership of theproperty to the lessee, rent expenses are(5) Hedge accounting
for principal hedging
methods

charged to income as payments are made.
a. Hedge transactions
The

Company

accounts

for

hedge

a. Hedge transactions
Same as at lefttransactions using allocations based on
accounting

standards

forforeigncurrency-denominated transactions, andspecialruleaccounting

accounting
standards

based
for

on

financial

products.
b. Hedge methods and hedged transactions
The Company uses currency swaps andb. Hedge methods and hedged transactions
Same as at left

forward transactions in order to avoid thecurrency fluctuation risk related to theCompany’s foreign currency-denominatedstraight bonds and liabilities for import
payments. The Company also uses interest
swaps to avoid interest rate fluctuation risk
related to interest on bank borrowing.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 25

c. Hedging policies
The

c. Hedging policies

Company’
s

use

of

derivative

Same as at lefttransactions is limited to hedging risk
within the scope of the Company’s assetsand liabilities subject to market fluctuation
risk.
d. Method for evaluating the effectiveness of d. Method for evaluating the effectiveness ofhedgeshedgesThe Company does not evaluate theSame as at left

effectiveness of its hedge transactions
because it can assume that its currency
swap

transactions

andforwardtransactions will completely offset market
fluctuations or changes in cash flow from
the

time

hedge

begins

until

it

is

terminated. In addition, the Company’sinterest

swap

transactions

fulfilltherequirements for special rule accounting,and the Company has elected to use this in(6）Accounting
treatment ofconsumption tax

place of an evaluation of effectiveness.
Accounting treatment of consumption tax

Accounting treatment of consumption tax

Consumption tax is taken out of all

Same as at left

Statement of Income items and Balance
Sheet items, except mainly for receivables
and payables.

(7）Accounting
standards fortreasury stock andreversal of legal
reserves──────

Beginning in the consolidated accounting
fiscal year under review, the Company has
adoptedthe

AccountingStandardforTreasury Stock and Reversal of Legal
Reserves (Corporate Accounting Standard
No. 1), which will be applied in Japan toconsolidated financial statements from theconsolidated accounting fiscal year thatbegins after April 1, 2002.
The

effectofthisCompany’s incomechangeonthestatement

for

the

consolidated accounting fiscal year underreview is not material.
Based on amendment of the provisions
concerning

consolidated

statements,

thefinancialshareholders’ equity

section of the Consolidated Balance Sheets
and

the

Retained

Statement
EarnedofConsolidated

have been preparedusing the amended consolidated balance
sheet provisions.
(8) Per share
information──────

Beginning in the consolidated fiscal year
under review, the Company has adopted
the Accounting Standard for Earnings Per
Share (Corporate Accounting Standard No.
2)

and

the

Implementation

and

the

Implementation Guidance for AccountingStandard

for(Corporate

Earnings
Accounting

per

Share

Standards

Implementation Guidance No. 4). which
will be applied in Japan to consolidated
financial statements from the consolidated
accounting fiscal year that begins after
April 1, 2002. The effect of this change is
described

in

the

Note

Concerning

Information Per Share.
Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 26

5. Valuation of

The company has adopted the market

consolidated

value appraisal method for the evaluation

subsidiary assets andof assets and liabilities of consolidated

liabilities

subsidiaries.

6. Amortization of theAsageneralrule,eliminations

theCompany‘
s

of

the

consolidation

offsetting

adjustment accountcompany’s investment account and theSame as at left

Same as at leftparentsubsidiaries’capital accounts are based on
the date of investment rule.
The portion of the excess of cost overunderlying net assets at the date ofinvestment

resulting

from

the

offsetelimination for which the cause is notknown is transferred to the appropriate
account. The remainder is transferred tothe consolidation account is amortized over
five years using level amortization, expect
for extremely small amounts that are
written off completely in the year in which
they occur.
7. Appropriation ofretained earnings

The Statement of Consolidated Retained
Earnings

iscreated

based

upon

Same as at lefttheappropriation of net income decided uponby the Company during the consolidated
accounting fiscal year.
8. Items included inFunds included in cash (cash and cash

cash and equivalents

equivalents)on the Consolidated

Statement of Cash Flows include cash on

Statement of Cashhand, deposits that can be withdrawn on

Flowsdemandandinvestments

on

the

highlythatliquidmatureSame as at left

Consolidated

short-term

withinthreemonths of the date of acquisition and which
can be easily converted into cash and thathave minimal risk of a change in price.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 27

(Changes in accounting treatment)
Prior Consolidated Fiscal Year
(From November 1, 2001
to October 31, 2002)
1. Change in revenue

Current Consolidated Fiscal Year
(From November 1, 2002
to October 31, 2003)

In prior years the Company accounted forand expense

revenuefrominsuranceclassifications wheninsuranceaccounting forrevenues whenever it suffered damages toaccidents involving

rental assets and equipment utilized underequipment underleases as the result of an accident, andlease contract

accounted for the asset book value as abenefits

inbenefits──────

asnon-operating

loss on abandonment of fixed assets inextraordinary

losses

and

the

lease

equipment contract cancellation charge asa miscellaneous loss in non-operating
expenses, respectively. Beginning in thefiscal year under review, the Company
changedits

accounting

treatmenttoaccount for insurance benefits as operating
revenues and account for the rental asset
book value and lease equipment contract
cancellation charge as cost of revenues
from operations.
The Company made this change because
the Company seeks to recover the fullamountofcapitalinvestedintheequipment rental business through rental
charges as equipment is leased and theinsurance benefits received following an
accident

can

also

be

consideredas

recovery of invested capital, and because
the amount of revenue from insurance
benefits has been increasing.
As a result, operating revenue increasedby¥204,754,000,

operatinggrossincomeprofitandincreasedby¥75,843,000, respectively, and ordinary
incomedecreasedby¥61,017,000,

compared to what they otherwise would
have been had the accounting standards
used in previous periods been applied. Thechange had no effect on income before
taxes and adjustments.
The effect of this change on information
by business segment is described in therelevant section of this report.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 28

2. Change in accounting

In prior years, the Company accounted

treatment forfor payments of employee housing rents inrevenue andselling,

expenses for

expenses, and accounted for the employee

employee housing

portion of such expenses in non-operating

rents

revenues. Beginning in the fiscal year

generaland──────

administrative

under review, the Company changed its
accounting

methodtoexcludetheemployee portion of employee housing
rent

expensefrom

sellingandadministrative expenses.
The Company adopted this change inorder to disclose the actual amount of theCompany’s housing rental burden, because
the materiality of the amounts in question
has been increasing as the Company
increases the number of its employees.
As a result, operating income increasedby ¥165,232,000 compared to what itotherwise

would

have

been

had

the

accounting standards used in previous
periods been applied. The change had noeffect on ordinary income and income
before taxes and adjustments.
The effect of this change on information
by business segment is described in therelevant section of this report.

(Change in Disclosure Method)
Prior Consolidated Fiscal Year
(From November 1, 2001
to October 31, 2002)

Current Consolidated Fiscal Year
(From November 1, 2002
to October 31, 2003)

The amount of “cash bonus received”that was included──────

in other non-operating income in prior consolidated
accounting fiscal years has increased and now accounts
for more than ten percent of non-operating income.
Accordingly, the Company reclassified this item into aseparate reporting category. The amount of the “cashbonus received”in the prior consolidated accounting fiscal
year was ¥86,487,000.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 29

6. Notes to the Financial Statements(Notes to the Consolidated Balance Sheets)
Prior Consolidated Fiscal Year(As of October 31, 2002)
1.Total accumulated depreciation
for tangible fixed assets

Current Consolidated Fiscal Year(As of October 31, 2003)

44,097,260,000

1.Total accumulated depreciation
for tangible fixed assets

2.Discount on notes receivable,
trade

84,562,000

2.Discount on notes receivable,trade

3. Balance of notes
receivable-trade endorsed

178,242,000

3.Balance of notes
receivable-trade endorsed

4.Common stock

42,361,092,000−
56,508,000

4.Common stock

Total number of shares issued(common stock)

30,253,241 shares

5.Treasury stock
Number of shares of treasury
stock held by the Company(common stock)
Number of shares of treasury
stock held by consolidated
companies (common stock)4,485 shares

30,253,241 shares

5.Treasury stock
Number of shares of treasury
stock held by the Company(common stock)384,417 shares

15,000 shares

6. Items pertaining to non-consolidated subsidiaries andaffiliated companies are as follows.
Investment securities (stocks)

Total number of shares issued(common stock)

6. Items pertaining to non-consolidated subsidiaries andaffiliated companies are as follows

199,000,000

7. Assets offered as collateral security

Investment securities (stocks)

163,646,000

7. Assets offered as collateral security

Buildings and structures

37,554,000

Buildings and structures

35,100,000

Land

197,434,000

Land

197,434,000

Total

234,988,000

Total

232,534,000

The assets shown above have been pledged as

The assets shown above have been pledged ascollateral for ¥223,400,000 of short-term bankcollateral for ¥170,000,000 of short-term bankloans, ¥118,120,000 of long-term bank loans dueloans, ¥65,316,000 of long-term bank loans due

within one year and ¥226,580,000 of long-term

within one year and ¥70,000,000 of long-term bankbank loans.

loans.

8. Guarantees

8. Guarantees

Joint and several guarantees of
employee bank loans (Bank ofTokyo-Mitsubishi, others)
Guarantee of debt for long-termbank loan to affiliated company(Active Power Co., Ltd.)(Mizuho Bank, Ltd.)
Total

22,334,000

Joint and several guarantees of
employee bank loans (Bank ofTokyo-Mitsubishi, others)

20,902,000

350,000,000

Guarantee of debt for long-termbank loan to affiliated company(Active Power Co., Ltd.)(Mizuho Bank, Ltd.)269,500,000

372,334,000

Total

290,402,000

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 30

(Notes to the Consolidated Statements of Income)Prior Consolidated Fiscal Year
(From November 1, 2001
to October 31, 2002)

Current Consolidated Fiscal Year
(From November 1, 2002
to October 31, 2003)

1. Major expense categories and amounts included in

1. Major expense categories and amounts included inselling, general and administrative expenses

selling, general and administrative expenses

Employee salaries and wages

4,846,212,000

Employee salaries and wages

Depreciation expense

1,021,701,000

Depreciation expense

Rents

1,397,906,000

Rents

Transfer to allowance
doubtful accounts

for

Employees retirement benefit
expenseTransfer to accrued bonuses
to employees
Transfer to retirement
allowances to directors andauditors

925,979,000
1,435,256,000

549,086,000

Transfer to allowance for
doubtful accounts

332,086,000

503,711,000

Transfer to accrued bonuses
to employees

440,369,000

Employees retirement
benefit expense
Transfer to retirement
allowances to directors andauditors
Amortization of consolidation
adjustment account539,350,000
22,016,000

2. Gain on sale or retirement of fixed assets

544,652,000
1,962,000
61,057,000

2. Gain on sale or retirement of fixed assets

Machinery, equipment anddelivery equipment

8,546,000

Land

5,639,000

Buildings and structures
Total

4,801,138,000

81,000Land

324,000

Machinery, equipment anddelivery equipment

41,000365,000

Total

14,266,000

3. Reimbursement of accrued employees retirement──────

3.

benefitDecrease in liability for retirement benefits as a resultof raising the age at which the welfare pension system
will begin paying pension annuities from April 2002.
4. Loss on sale or retirement of fixed assets.

4. Loss on sale or retirement of fixed assets.

(Loss on sale of fixed assets)
Buildings and structures(Loss on sale of fixed assets)

17,583,000Land

306,000

Other

275,000(Loss on retirement of fixed assets)

Telephone subscription rights

23,021,000

Rental equipment

Buildings and structures

33,637,000

Buildings and structuresdelivery equipment

2,195,000(Loss on retirement of fixed assets)

Rental equipment
Machinery, equipment and

172,000

Buildings and structures

104,212,000

Machinery,equipmentdelivery equipment

18,215,000
44,936,000
and2,913,000

Other

20,319,000

Other

20,429,000

Total

199,356,000

Total

88,863,000

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 31

(Notes to the Consolidated Statements of Cash Flows)
Prior Consolidated Fiscal Year
(From November 1, 2001
to October 31, 2002)

Current Consolidated Fiscal Year
(From November 1, 2002
to October 31, 2003)

1. Relationships between fiscal year ending balance for

1. Relationships between fiscal year ending balance forcash and equivalents and amounts for items shown on

cash and equivalents and amounts for items shown on

the fiscal year consolidated balance sheet

the fiscal year consolidated balance sheet

Cash and equivalents

Cash and equivalents

15,437,482,000

Term deposits with a maturity
longer than 3 months
Items considered to be cash
and equivalents

11,928,637,000−4,234,000

Term deposits with a maturity
longer than 3 months−8,017,000

15,433,247,000

Items considered to be cash
and equivalents−11,920,620,000

2. Assets and liabilities of companies that became newly2.

──────

consolidated companies as the result of purchases of theirstock.
The details of assets and liabilities and their relationship to
the

stock

purchaseamountandexpenditures(net

amount) for stock purchases at the start of consolidation
for newly consolidated companies as the result of purchaseof stock are as follows.
Daiichi Machine Industries Co., Ltd.
Current assets

939,031,000

Fixed assets

805,543,000

Current liabilities–990,508,000

Long-term liabilities–380,626,000

Consolidation adjustment–31,866,000

Minority interest–65,352,000

Daiichi Machine Industries
purchase price276,222,000

Daiichi Machine Industries cash
and cash equivalents–161,948,000

Net: Amount expended to acquire
Daiichi Machine Industries

114,274,000

3. Details of major non-cash transactions

3. Details of major non-cash transactions

The amount of assets and liabilities related to

The amount of assets and liabilities related to

installment transactions that are newly accounted for

installment transaction that is newly accounted for

during this consolidated accounting fiscal year isduring this consolidated accounting fiscal year is¥3,637,011,000 respectively.

¥2,548,392,000 respectively.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 32

(Notes for leasing transactions)
Prior Consolidated Fiscal Year
(From November 1, 2001
to October 31, 2002)

Current Consolidated Fiscal Year
(From November 1, 2002
to October 31, 2003)

1. Finance lease transactions except for leases that

1. Finance lease transactions except for leases thattransfer ownership of the property to the lessee.

transfer ownership of the property to the lessee.

(1)

(1)

Amounts

corresponding

to

lease

property

Amounts

corresponding

to

lease

propertyacquisition price, accumulated depreciation andacquisition price, accumulated depreciation andoutstanding balances at the end of the fiscal year

outstanding balances at the end of the fiscal year

accounting period.

accounting period.

Acquisition
price
（¥’
000）

Accumulated
depreciation
（¥’
000）

Outstandingbalance（¥’000）

Acquisition
price
（¥’
000）

Accumulated Outstanding
depreciation
balance
（¥’
000）
（¥’
000）

Rentalassets25,612,138

8,300,356

17,311,781

Rentalassets28,088,694

7,343,977 20,744,717

Otherassets666,755

383,756

282,999

Other
assets555,869

Total

26,278,894

8,684,113

17,594,780

Total

28,644,564(2) Outstanding balance of future lease payments at
the end of the fiscal year

255,092

300,7777,599,069 21,045,494(2) Outstanding balance of future lease payments at
the end of the fiscal year

Within one year

4,662,895,000

Within one year

4,927,999,000

After one year

13,357,075,000

After one year

16,287,547,000

18,019,970,000

Total(3) Amount of lease payments, depreciation expense
and interest expense

21,215,546,000

Total(3) Amount of lease payments, depreciation expense
and interest expense

Lease payments

4,343,353,000

Lease payments

5,625,507,000

Depreciation expense

3,732,378,000

Depreciation expense

5,034,577,000

384,087,000Interest expense(4) Accounting method for amount equivalent todepreciation expense

Interest expense

687,650,000(4) Accounting method for amount equivalent todepreciation expense

Straight-line depreciation using the lease term as

Same as at left

the depreciable life and zero residual value.
(5) Accounting method for amount equivalent tointerest expense(5) Accounting method for amount equivalent tointerest expense

Interest method using the difference between total

Same as at left

lease payments and the acquisition price of thelease property, allocated to each year.
2. Operating leases

2. Operating leases

Future lease payments

Future lease payments

Within one year

1,543,331,000

Within one year

1,793,079,000

After one year

2,642,701,000

After one year

3,238,604,000

Total

4,186,032,000

Total

5,031,683,000

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 33

（Notes related to negotiable securities）
Negotiable securities
1. Other negotiable securities with market prices
Prior consolidated accounting
fiscal year
(As of October 31, 2002)
Type

Acquisition
price
(¥’
000)

Amountreported ontheconsolidatedbalance sheet

(¥’
000)

Acquisition
price
(¥’
000)

Amountreported ontheconsolidatedbalance sheet

(¥’
000)

Valuation
profit or
loss
(¥’
000)

1,276,349

403,459

1,129,925

1,845,514

715,589a. Government
bonds

−

−

−

−

−

−

b. Corporate
bonds

−

−

−

−

−

−

c. Other

−

−

−

−

−

−

−

−

−

−

−

−

872,890

1,276,349

403,459

1,129,925

1,845,514

715,589

1,143,040

782,536−360,503

146,306

123,543−22,762

−

−

−

−

−

−

141,005

136,959−4,04656,94555,093−1,852

−

−

−

−

−

−

(3) Othernegotiablesecurities

1,214,013

989,085−224,928

1,114,308

1,039,849−74,459

Subtotal

2,498,059

1,908,581−589,477

1,317,560

1,218,485−99,074

3,370,949

3,184,931−186,017

2,447,485

3,064,000

616,514(2) Bonds(3) Othernegotiablesecurities
Subtotal(1) Stock

Negotiablesecurities
whosebalance ontheconsolidatedbalancesheet is lessthan theacquisition
price

Valuation
profit or
loss
(¥’
000)

872,890(1) Stock
Negotiablesecurities
whosebalance ontheconsolidatedbalancesheet
exceeds theacquisition
price

Current consolidated accounting
fiscal year
(As of October 31,2003)(2) Bonds
a. Government
bonds
b. Corporate
bondsc. OtherTotal

2. Other negotiable securities sold during the prior consolidated accounting fiscal
year and the current consolidated accounting fiscal year
(Unit: Yen thousands)
Prior Consolidated Fiscal Year
(From November 1, 2001 to October 31, 2002)
Selling amountCurrent Consolidated Fiscal Year
(From November 1, 2002 to October 31, 2003)

Total gain on sale

Total loss on sale

Selling amount

Total gain on sale

Total loss on sale

158,559

71,351

1,924,477

152,482

17,581

3. Details of other negotiable securities that do not have a market value(Unit: Yen thousands)

Type

Prior consolidated accounting
fiscal year
(As of October 31, 2002)

Current consolidated accounting
fiscal year
(As of October 31, 2003)

Amount shown on the consolidatedbalance sheet

Amount shown on the consolidatedbalance sheet

Other negotiable securities
Unlisted stocks (excluding
over-the-counter stocks)

373,500

383,700

Unlisted foreign bonds−−

Corporate bonds withwarrants for new stock−−

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 34

4. Planned future redemption amounts of other securities that have a maturity date
(Unit: Yen thousands)

Type

Prior consolidated accounting fiscal year
(As of October 31, 2002)
After one After five
WithinAfter tenyear andyears
one year within five within ten
years
years
years

Current consolidated accounting fiscal year
(As of October 31, 2003)
After one
After five
WithinAfter tenyear andyears
one year within five within ten
years
years
years

1. Bonds
a. Government
bonds
b. Corporate bondsc. Other
2. Other securities
Total

−

−

−

−

−

−

−

−

75,07561,884−−23,36831,725

−

−

−

−

−

−

−

−

−

−

−

11,738776,815

27,15915,824−894,330

38,17275,07573,622776,815

27,15939,192

31,725894,330

38,172

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 35

（Notes related to accrued employees retirement benefit）

1. Summary of the employees retirement benefit system adopted by the Company
The Company and its consolidated subsidiaries have established a pension fund system and a retirement
lump-sum benefit system as a defined benefit plan. In addition, when an employee retires or leaves the Company,
in some cases the Company pays an additional retirement amount that is not covered by the reserve for accrued
employees retirement benefit when using actuarial accounting based on retirement benefit accounting.

2. Details of the Company’s liability for accrued employees retirement benefit
Prior consolidated
accounting fiscal year
(As of October 31, 2002)(1) Liability for accrued employees retirement benefit(2) Pension assets(3) Liability for unreserved
retirement benefit (1) ＋(2)accruedemployees−5,409,447−6,204,505

2,983,066

3,385,495−2,426,381−2,819,009−−

750,657

1,041,695−−−1,675,725−1,777,314(4) Unamortized amount of the one-time valuationdifference for change in accounting standards(5) Unrecognized actuarial differences(6) Unrecognized past
(reduction in liability)

years’ service

obligation(7) Net liability shown on the consolidated balance sheet(3)＋(4)＋(5)＋(6)(8) Prepaid pension expense(9) Accrued employees retirement benefit (7)−(8)(Unit: Yen thousands)
Current consolidated
accounting fiscal year
(As of October 31, 2003)−−−1,675,725−1,777,314(Note) The Company’s consolidated companies have adopted the simple method for calculating the accrued employees
retirement benefit.

3. Details of accrued employees retirement benefit expense
Prior consolidated accounting
fiscal year
(From November 1, 2001
to October 31, 2002)(Unit: Yen thousands)
Current consolidated
accounting fiscal year
(From November 1, 2002
to October 31, 2003)

99,006535,547(1) Service costs

413,255

412,069(2) Interest costs

143,049

159,633(3) Expected return on plan investments（reduction）

110,125

116,437(4) Write-off of past years’service liability expense−395,091−

47,91879,858−−Retirement benefit expense(5) Write-off of expense for actuarial based difference(6) Amount of one-time valuation difference for changein accounting standards charged as an expense(Note) The retirement benefit expense of consolidated companies that have adopted the simple method is charged toservice costs.

4. Matters related to the basis for accounting for the accrued employees retirement
benefit and other items
Prior consolidated
accounting fiscal year
(As of October 31, 2002)

Current consolidated
accounting fiscal year
(As of October 31, 2003)(1) Discount rate

3.00%

2.50%

(2) Expected rate of return on plan investments

4.00%

4.00%

Service period fixed
benefit basis

Service period fixed
benefit basis

１year

−

10 years beginning from thenext consolidated accounting
fiscal year

10 years beginning from thenext consolidated accounting
fiscal year−−

(3) Method of allocating projected benefits to periods ofservice(4) Amortization period of past years’service liability(5) Amortization period for actuarial differences(6) Number of years for amortization of one-timevaluation difference for change in accounting standards

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 36

（Notes related to tax effect accounting）
Prior Consolidated Fiscal Year
(From November 1, 2001
to October 31, 2002)

Current Consolidated Fiscal Year
(From November 1, 2002
to October 31, 2003)

1. Major factors creating deferred tax assets and deferred

1. Major factors creating deferred tax assets and deferred

tax liabilities

tax liabilities

Deferred tax assets

Deferred tax assets

Amount in excess of limit forinclusion
Disallowance of deferredbusiness taxes

223,215,000
500,000

Amount in excess of limit forinclusion

242,551,000

Disallowance of deferredbusiness taxes

51,852,000

Excess accrued employees
retirement benefit

696,487,000

Excess accrued employees
retirement benefit

729,123,000

Amount in excess of limit for
retirement benefit

81,980,000

Amount in excess of limit for
retirement benefit

79,625,000

Amount in excess of limit for
accrued bonuses to employees

149,778,000

Amount in excess of limit for
accrued bonuses to employees

146,397,000

Disallowance of excess
depreciation

388,081,000

Disallowance of excess
depreciation

414,445,000

Amount of loss carried forward

176,365,000

Amount of loss carried forward

154,478,000

Other

298,748,000

Other

220,060,000

Deferred tax asset subtotal

2,015,155,000

Deferred tax asset subtotal

2,038,534,000

Valuation reserve−176,365,000

Valuation reserve−144,868,000

Total deferred tax assets

1,838,790,000

Total deferred tax assets

1,893,666,000

Deferred tax liability

Deferred tax liability

Valuation difference onnegotiable securities

77,569,000

Valuation difference onnegotiable securities

249,072,000

Total deferred tax liability

77,569,000

Total deferred tax liability

249,072,000

Net deferred tax assets

1,644,594,000

Net deferred tax assets

1,916,359,000

2. Causes of principal differences between the statutory

2. Causes of principal differences between the statutory

tax rate and burden ratio for corporate and other taxes

tax rate and burden ratio for corporate and other taxes

following application of tax effect accounting by major

following application of tax effect accounting by major

category.

category.

Statutory corporate tax rate

41.7％

（Adjustment）

Statutory corporate tax rate

41.7％

（Adjustment）

Local tax equalization

3.9％

Local tax equalization

4.5％

Items not included permanently in
losses such as expense account

1.1％

Items not included permanently in
losses such as expense account

1.4％

Consolidated subsidiary losses

1.2％

Consolidated subsidiary losses

2.6％

Reduction adjustment to deferred tax
assets at end of the fiscal year due tochange in the tax rate

1.3％

Other

0.8％

Burden ratio for corporate and othertaxes after application of tax effectaccounting

52.3％

Valuation loss on investment inconsolidated companies

−3.4％

Other

−1.1％

Burden ratio for corporate andother taxes after application of tax
effect accounting

43.4％

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 37

3. The statutory corporate tax rate used in the calculationof deferred tax assets and deferred tax liabilities for the
consolidated accounting fiscal year under review waschanged from 41.7% in the prior fiscal year to 40.4%
with the promulgation of the Law to Partially Amend the
Local Tax Law (Law No. 9 of 2003) on March 31, 2003
(However, the amendment is expected to be annulled
after November 1, 2004). As a result, the total amountof deferred tax assets (the amount after deducting
deferred tax liabilities) decreased by ¥23,594,000, andthe adjustment for corporate and other taxes and thevaluation difference for other negotiable securities
increasedby¥31,608,000

and¥8,014,000,

respectively, compared to what they otherwise would
have been had the statutory corporate tax rate used inprevious periods been applied.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 38

IV

Business Segment Information

1. Segment Information by Type of BusinessPrior consolidated accounting fiscal year (From November 1, 2001 to October 31, 2002)(Unit: Yen thousands)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

56,558,591

7,435,642

1,257,635−−

56,558,591

Operating expenses
Operating income

Eliminations
or entirecompany

Consolidated

65,251,870−

65,251,870

−

−

−

−

7,435,642

1,257,635

65,251,870−

65,251,870

54,450,377

7,388,021

1,253,270

63,091,668−127,340

62,964,327

2,108,214

47,6214,365

2,160,202

127,340

2,287,543

Assets70,990,352

3,443,460

1,437,308

75,871,121

23,442,328

99,313,449

Depreciation expense

7,950,023

6,182

11,822

7,968,028

151,860

8,119,889

Capital disbursements

4,677,086

1,938

−

4,679,024

31,2194,710,243

Total

I. Revenues and operating
incomeRevenues(1) Sales to outside
customers(2) Sales or transfers
between related segments
Total

II. Assets, depreciation
expense and capital
disbursements(Notes) 1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, thenature of the business and the business markets.
2. Principal products, by businessBusiness

Principal products

Construction equipment rentals
Steel sales
Information products andother businesses

Construction equipment such as hydraulic shovels, generators, temporary
construction materials, construction safety equipment, temporary modular
housing units, special rustproof and waterproof shields
Steel bar, sheet steel, steel products such as round bar, steel scrap
Computers and peripheral devices, telecommunications-related equipment,
microturbine generators, microbrewery

3. The total amount for assets that were eliminated or included in the categories for all companies was¥23,442,328 and represents primarily idle working capital (cash, deposits and negotiable securities)
long-term investment funds (investment securities) and assets used in administrative departments at theparent company.
4. As described in “(4) Accounting principles and standards used for normal accounting treatment,”beginning in
the prior consolidated fiscal year the Company changed the depreciable life it uses for floor plate and steel
plate from 7 years to 10 years. As a result of this change, operating expenses for construction-related
businesses decreased by ¥209,320,000 and operating income increased by the same amount, respectively,
for the consolidated fiscal year compared to what they otherwise would have been had the accounting
standards used in prior consolidated fiscal year been applied.
During the prior consolidated fiscal year, the Company similarly changed the durable life for temporary rental
structures from 7 years to 10 years. As a result of this change, operating expenses for construction-related
businesses decreased by ¥232,276,000 and operating income increased by the same amount, respectively,
for the prior consolidated fiscal year, compared to what they otherwise would have been had the accounting
standards used in prior consolidated fiscal year been applied.
As described in “Changes in Accounting Treatment,” the Company has changed its accounting treatment forrevenue and expenses when it suffers damages to rental assets and equipment utilized under leases as theresult of an accident. Beginning in the prior consolidated fiscal year, the Company will recognize revenue
received from insurance benefits as operating revenues rather than insurance benefits, and the rental asset
book value and the lease equipment contract cancellation charge will be recognized as cost of revenues rather
than as a loss on abandonment of fixed assets and miscellaneous loss, respectively. As a result of this change,
revenue increased by ¥204,754,000, operating expenses for construction-related businesses increased bySummary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 39

¥128,910,000 and operating income increased by ¥75,843,000, respectively, for the prior consolidated fiscal
year, compared to what they otherwise would have been had the accounting standards used in priorconsolidated fiscal year been applied.
During the prior consolidated fiscal year, the Company changed its accounting method to exclude theemployee-paid portion of employee housing rent expense from rental housing fees. As a result of this change,
operating expenses for construction-related businesses decreased by ¥160,393,000, operating expenses forthe steel sales-related business decreased by ¥3,532,000 and operating expenses for the information
products business and other businesses decreased by ¥1,306,000, respectively, and the operating income foreach business increased by the same amounts, respectively, compared to what they otherwise would havebeen had the accounting standards used in prior consolidated fiscal year been applied

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 40

Consolidated fiscal year under review (From November 1, 2002 to October 31, 2003)(Unit: Yen thousands)
Construction
equipment
rentalbusiness

Steel sales
business

Information
products
businessand otherbusinesses

56,395,818

6,373,971

916,494−−

56,395,818

Operating expenses
Operating income

Eliminations
or entirecompany

Consolidated

63,686,284−

63,686,284

−

−

−

−

6,373,971

916,494

63,686,284−

63,686,284

54,190,370

6,379,114

891,738

61,461,223−82,603

61,378,619

2,205,447−5,14224,7552,225,061

82,6032,307,665

Assets65,282,946

2,775,383

1,066,994

69,125,324

19,884,798

89,010,122

Depreciation expense

6,471,681

5,339

10,2906,487,311

163,349

6,650,660

Capital disbursements

3,842,592

66,476

13,1973,922,266

477,971

4,400,238

Total

I. Revenues and operating
incomeRevenues(1) Sales to outside
customers(2) Sales or transfers
between related segments
Total

II. Assets, depreciation
expense and capital
disbursements(Notes) 1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, thenature of the business and the business markets.
2. Principal products, by businessBusiness

Principal products

Construction equipment rentals
Steel sales
Information products andother businesses

Construction equipment such as hydraulic shovels, generators, temporary
construction materials, construction safety equipment, temporary modular
housing units, special rustproof and waterproof shields
Steel bar, sheet steel, steel products such as round bar, steel scrap
Computers and peripheral devices, telecommunications-related equipment,
microturbine generators

3. The total amount for assets that were eliminated or included in the categories for all companies was¥19,884,798,000 and represents primarily idle working capital (cash, deposits and negotiable securities)
long-term investment funds (investment securities) and assets used in administrative departments at theparent company.

2. Segment information by location
The Company does not report segment information by location because the Company did not have any
consolidated subsidiaries or important offices located in countries or regions outside of Japan during the priorconsolidated fiscal year and the current consolidated fiscal year.

3. Foreign sales
The Company did not have any foreign sales during the prior consolidated fiscal year and the current consolidated
fiscal year.

V

Notes related to Derivative Transactions
Prior consolidated fiscal year (From November 1, 2001 to October 31, 2002)
Because it applies hedge accounting, the Company had no material items to report.

Current consolidated fiscal year (From November 1, 2002 to October 31, 2003)
Because it applies hedge accounting, the Company had no material items to report.

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 41

VI

Transactions with Affiliated Companies
Prior consolidated accounting fiscal year (From November 1, 2001 to October 31, 2002)
The Company had no material items to report.

Current consolidated accounting fiscal year (From November 1, 2002 to October 31, 2003)
Directors and major shareholders, etc.
Category

Name

Address

CapitalBusiness or occupation

Ownership percentage ofvoting rights, etc.

Director

TaichuKanamoto

Shibuya-ku,
Tokyo

−

Chairman,
Kanamoto Co., Ltd.

Direct 5.0%

Details oftransaction

Transaction amount

Item

FY-end balanceLand purchase¥5,678,000--

Related matters
Concurrent
Directorpost, etc.
-

Businessrelationship-(Note) Transaction terms and conditions or policy for deciding transaction terms and conditions
The land purchase price was determined based on the appraised price and the terms of payment werelump-sum payment in cash.

(Per share information)
PeriodCategory
Net assets per share
Net income per share of common stock
Net income per share of common stock after
adjustment for potential ordinary shares

Prior consolidated
accounting fiscal year
(As of October 31, 2002)

Current consolidated
accounting fiscal year
(As of October 31, 2003)¥1,033.30¥1,068.25¥39.99¥29.96¥30.76¥27.11(Supplemental information)
Beginning in the consolidated
fiscal year, the company has
adopted the Accounting Standard
for Earnings Per Share (Corporate
Accounting Standard No. 2) andthe Implementation Guidance for
Accounting Standard for Earnings
per Share (Corporate AccountingStandards
Implementation
Guidance No. 4). The earnings per
share
when
the
accounting
standard and the implementation
guidance are applied to the priorconsolidated fiscal year are as
follows.
（Prior consolidated fiscal year）
Net assets per share¥1,033.04
Net income per share of common
stock¥39.43
Net income per share of common
stock after adjustment forpotential ordinary shares¥30.33

Summary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 42

(Note) The basis for calculating consolidated fiscal year earnings per share is as follows.
PeriodPrior consolidated accounting
fiscal year
(As of October 31,2002)

Current consolidated accounting
fiscal year
(As of October 31,2003)

Net income（¥,000）−

913,875

Amount not attributed to common stock
shareholders (¥ ‘000)−

14,100Net income
(¥ ‘
000)

−

899,775−

30,030,383−

13,961−(13,961)−

3,677,771

Category
Net income per share of common stock

relatedAverage number ofduring the fiscal year

tocommonstock

outstanding

shares

Net income per share of common stock after
adjustment for potential ordinary sharesFiscal year net income adjustment(Interest expense
deduction amount])[Taxequivalent

Change in number of shares of common
stock (shares)(Convertible bonds)(3,677,771)−

Summary of latent stock not included in theNewcalculation of interim period (fiscal year)

options) based on the provisions

earnings per share on a fully diluted basis
because it does not have a dilution effect

−

of

stock

Articlewarrants

280-19of(stocktheoldCommercial CodeSummary of Consolidated Fiscal Year Financial Statements, FY Ended October 31, 2003

P. 43