Financial Section
THE JAPAN STEEL WORKS, LTD.

Six-Year SummaryYears ended March 31

Millions of Yen

Consolidated

2009

2008

2007

2006

2005

2004

¥227,113¥220,851¥207,138¥173,353¥158,274¥136,309

16,034

17,484

12,515

6,586

3,284

2,000

296,909262,453

232,444

196,656

184,683

180,019

90,12585,23175,621

66,03958,07554,689Amounts per share (yen):
Net income . . . . . . . . . . . . . . . . . . .

¥43.19¥47.10¥33.71¥17.57

¥8.70

¥5.39

Non-Consolidated

2009

2008

2007

2006

2005

2004

¥196,030¥189,318¥177,493¥145,555¥129,948¥114,272

15,44915,878

12,233

6,026

2,429

1,392

277,301

243,433

215,693

180,734

168,808

168,571

82,44977,95869,90760,602

52,89950,810¥41.62¥42.77¥32.95¥16.07

¥6.39

¥3.75

¥12.00¥12.00

¥9.00

¥5.00

¥3.00

¥2.00

Net sales . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . .
Total net assets . . . . . . . . . . . . . . . . .

Millions of Yen

Net sales . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . .
Total net assets . . . . . . . . . . . . . . . . .
Amounts per share (yen):
Net income . . . . . . . . . . . . . . . . . . .
Cash dividends applicable tothe year . . . . . . . . . . . . . . . . . . . . . .

Contents
21 Six-Year Summary
22 Financial Performance (Consolidated)
24 Consolidated Balance Sheets
26 Consolidated Statements of Income
27 Consolidated Statements of Changes in Net Assets
28 Consolidated Statements of Cash Flows
29 Notes to Consolidated Financial Statements
39 Report of Independent Auditors

21

Financial Performance (Consolidated)
Operating Results
Net Sales
Sales by the Machinery Products Business for thereporting period declined slightly year-on-year, but the
Steel Products Business posted good results. Total sales
consequently rose 3% from the previous year, to¥227,113 million (US$2,312 million).

Net Income
Net income fell 8% to ¥16,034 million (US$163
million). The decline is primarily due to losses on thevaluation of investment securities and the disposal of
facilities accompanying equipment investments.
Earnings per share came to ¥43.19 (US$0.44).

Operating Income
Operating income posted an increase of 13% to ¥36,633
million (US$373 million). This is mainly attributable to
growth in sales, as well as cost reductions stemmingfrom a rise in the capacity utilization rate thanks to asteady inflow of orders for steel products and improved
productivity. The Company’s success in pushing throughincreases in selling prices to offset higher prices of raw
materials was also a contributing factor.

Overseas Sales
Sales in East Asian markets declined 11% from theprevious year, to ¥44,343 million (US$451 million).
Sales in North America increased 33% to ¥12,443
million (US$126 million), while sales in other regions
rose 41% to ¥63,065 million (US$642 million). Total
overseas sales grew by 15% to ¥119,853 million(US$1,220 million), accounting for 53% of theCompany’s net sales on a consolidated basis.

Cash Flows
Cash Flow from Operating Activities
Net cash provided by operating activities amounted to¥26,319 million (US$268 million), down from ¥42,040
million for the previous term. This was due to theposting of ¥27,630 million (US$281 million) in income
before income taxes and minority interests, as well as
depreciation expenses in the amount of ¥11,873 million(US$121 million), both of which are non-cash
components, and losses on the valuation of investment
securities, which outweighed income taxes paid andincreased expenditures to boost production.

Cash and cash equivalents stood at ¥39,904 million(US$406 million) at the reporting term-end, up ¥3,771
million year-on-year. This is attributable to the postingof income before income taxes and minority interests inthe amount of ¥27,630 million (US$281 million),compared with ¥30,461 million for the previous term,in addition to proceeds from long-term borrowings.
These positive factors more than offset capital
investment for the enhancement of production
efficiency and expenditures for the acquisition of
investment securities.

28

14% of total sales

11,250

0

5,854

0

2005 2006 2007 2008 2009

22,5007,291

033,75026,319103,937

37,50085,92175,00042

35,63037.9

119,853

38.7

41.5

¥ million
45,00042,04047.1
112,500

Oversea sales

22

％
56

Net Cash Provided by Operating Activities

52.8

65,776

2005 2006 2007 2008 2009

¥ million
150,000

61,2707,721

12,876

10,500Overseas Sales

32,47521,000036,63331,50024,678Operating Income¥ million
42,0002005 2006 2007 2008 2009

Net Cash from Investment Activities
Net cash used in investing activities amounted to ¥33,148
million (US$337 million), up from ¥24,765 million forthe previous term. This was due mainly to an investment of¥22.2 billion (US$226 million) in property, plant andequipment for the purpose of raising production efficiency.
Outlay was also made for the purchase of investment
securities.

Cash Flow from Financing Activities
Net cash provided by financing activities amounted to¥10,614 million (US$108 million), compared with a net
cash outflow of ¥8,571 million for the previous term. This
net cash inflow resulted from ¥20 billion (US$204
million) in proceeds from long- and short-termborrowings, which more than exceeded the payment of¥5,011 million (US$51 million) in dividends toshareholders.

Financial Position
Total assets as of the end of March 2009 stood at ¥296,909
million (US$3,023 million), up ¥34,456 million, or 13%,from the previous term-end. This was due a rise in current
assets caused by an increase in inventory assets (principally
goods in process), and an increase in property, plant andequipment resulting from capital expenditure, mainly in
the Steel Products Business, as well as an increase in leaseassets following the introduction of lease accounting.
Liabilities at the reporting term-end stood at ¥206,783
million (US$2,105 million), up ¥29,561 million, or 17%,
over the previous term-end. This is attributable to anincrease in lease obligations accompanying the
introduction of lease accounting, as well as long-termborrowings. Interest-bearing debt increased by ¥24,796
million to ¥53,388 million (US$543 million). Net assets at
the reporting term-end totaled ¥90,125 million (US$917
million), for an increase of ¥4,894 million, or 6%, over theprevious term-end.

54,00053,38846,95436,00051,06918,00028,592

32,076

Interest-Bearing Debt

¥ million
72,00002005 2006 2007 2008 2009

0

%
36.0

ROE

22,500Equity Ratio

90,12566,03958,07545,00085,231

67,50075,621Net Assets¥ million
90,000

33.5
27.0

31.1

32.4 32.4

30.3

21.8

12.0

9.0

6.0

18.3

17.7

18.0

18.0

10.7
5.9

0

0

2005 2006 2007 2008 2009

%
24.0

2005

2006

2007

2008

2009

2005

2006

2007

2008

2009

23

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
March 31, 2009 and 2008

Thousands ofMillions of Yen

ASSETS

2009

2008

2009

¥ 39,957¥ 36,552$ 406,770

903
48,622143(278)
72,586
3,499
8,823
174,258

176
51,909642(315)
66,815
3,921
8,961
168,6639,193
494,981
1,456(2,830)738,939
35,62089,8201,773,979

Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,642
71,42895,302
8,075
15,546
199,996(108,669)
91,327

9,749
64,05185,829—3,108
162,739(101,462)
61,277

98,157727,151
970,192
82,205
158,261
2,035,997(1,106,271)
929,726

Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,318

623

13,417

Investments, long-term loans and other assets:
Investments in unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . . . .
Investment securities (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments, long-term loans and other assets . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

691
21,450
61
2,017
6,011
(226)
30,004¥296,909

353

7,035
218,365621
20,53361,193Current assets:
Cash on hand and in banks (Note 12) ......................................................
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates .............................................
Trade ..................................................................................................
Other ...................................................................................................
Less allowance for doubtful accounts ..................................................
Inventories (Note 4) ..................................................................................
Deferred tax assets (Note 13) ...................................................................
Other current assets .................................................................................
Total current assets .........................................................................

Property, plant and equipment, at cost (Notes 5, 6 and 8):
Land .........................................................................................................
Buildings and structures ............................................................................
Machinery and equipment ........................................................................
Leased assets ..........................................................................................
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The accompanying notes are an integral part of these statements.

24

U.S. Dollars (Note 3)

24,247
213
1,542
5,726
(196)
31,888¥262,453(2,301)

305,446$3,022,590

Thousands ofMillions of Yen

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances received for products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued income taxes (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities:
Long-term debt (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued retirement benefits (Note 15):
For employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For directors and corporate auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2009

¥

6,198
2,322

U.S. Dollars (Note 3)

2008

¥

6,218
2,135

2009

$

63,097
23,63895
42,457
10,03344,068—
4,038
25,651
134,866692
48,0404,490
49,018
9,756
9,975
5,981
136,308967
432,220
102,138
448,621—
41,108261,132
1,372,961

37,917

20,239386,002

6,303
185
5
27,506
71,917

5,484
149
1,406
13,63340,91364,1661,883
51
280,016
732,129

Net assets:
Shareholders’ equity (Note 18):
Common stock:
Authorized — 1,000,000,000 shares
Issued — 371,463,036 shares in 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost (234,126 shares in 2009 and
190,337 shares in 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,694
5,424
69,627

19,694
5,422
58,492200,489
55,217
708,816(182)
94,563(137)
83,472(1,853)
962,669

Valuation, translation adjustments and other:
Net unrealized gain (loss) on investment securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on deferred hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total valuation, translation adjustments and other . . . . . . . . . . . . . . . . . . . .

(3,868)(379)(435)(4,683)

1,930
(254)
(160)
1,514

(39,377)(3,858)(4,428)(47,674)

Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and net assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

246
90,125¥296,909

244
85,231¥262,453

2,504
917,490$3,022,590

25

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income
For the years ended March 31, 2009 and 2008

Thousands ofMillions of Yen

2009

2008

2009

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales (Note 14). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses (Note 14) . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥227,113
161,560
65,552
28,91936,633¥220,851
160,642
60,20927,73332,475$2,312,053
1,644,711
667,332
294,401
372,931695(440)(9,259)(9,003)369(466)(1,916)(2,014)

7,075(4,479)(94,258)(91,652)

Income before income taxes and minority interests. . . . . . . . . . . . . . . . . . . . . . . .
Income taxes (Note 13):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests in net income of consolidated subsidiaries . . . . . . . . . . . . . . .
Net income (Note 20) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,63030,461

281,279

11,612(39)
23¥ 16,034

14,184(1,228)21¥ 17,484

118,212(397)
234$ 163,229

The accompanying notes are an integral part of these statements.

26

U.S. Dollars (Note 3)

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2009 and 2008

Thousands of
U.S. Dollars(Note 3)

Millions of Yen
2009

2008

Millions of Yen

2009

2009

Common stock:Thousands of
U.S. Dollars(Note 3)

2008

2009

Loss on deferred hedges:

Balance at beginning of year ............. ¥19,694 ¥19,694$200,489

Balance at beginning of year ............. ¥(254) ¥ (1,364)

Balance at end of year ...................... ¥19,694 ¥19,694$200,489

Net changes in items other thanthose in shareholders’ equity...........

(124)

1,110

(1,262)

Balance at end of year ...................... ¥(379) ¥

(254)

$ (3,858)

Balance at beginning of year ............. ¥(160) ¥

(118)

$ (1,629)

Net changes in items other thanthose in shareholders’ equity...........

(275)

(42)

(2,800)

Balance at end of year ...................... ¥(435) ¥

(160)

$ (4,428)

Balance at beginning of year ............. ¥ 1,514 ¥ 4,325$ 15,413

Capital surplus:
Balance at beginning of year ............. ¥ 5,422 ¥ 5,422
Sales of treasury stock......................

1$ 55,197—

10

Balance at end of year ...................... ¥ 5,424 ¥ 5,422$ 55,217

Retained earnings:
Balance at beginning of year ............. ¥58,492 ¥46,019$595,460

Adjustments for inclusion of a
subsidiary in consolidation ..............

111

—

1,130

Net income .......................................

16,034

17,484

163,229

Cash dividends paid .........................

(5,011)(5,012)(51,013)

Balance at end of year ...................... ¥69,627 ¥58,492$708,816

Treasury stock, at cost:
Balance at beginning of year ............. ¥(137) ¥(59)

$ (1,395)

Purchases of treasury stock..............

(47)

(77)

(478)

Sales of treasury stock......................

2

—

20

(182) ¥(137)

$ (1,853)

Balance at end of year ...................... ¥Translation adjustments:

Total valuation, translation
adjustments and other:

Net changes in items other thanthose in shareholders’ equity...........

(6,198)(2,811)(63,097)

Balance at end of year ...................... ¥ (4,683) ¥ 1,514$ (47,674)

Minority interests:
Balance at beginning of year ............. ¥Net changes in items other thanthose in shareholders’ equity...........
Balance at end of year ...................... ¥Total shareholders’ equity:$ (2,586)

244 ¥

218

2

25

246 ¥

244

$

2,484

$

2,504

20

Total net assets:

Balance at beginning of year ............. ¥83,472 ¥71,077$849,761

Net income .......................................

16,034

17,484

163,229

Balance at beginning of year ............. ¥85,231 ¥75,621$867,668

Cash dividends paid .........................

(5,011)(5,012)(51,013)

Net income .......................................

16,034

17,484

163,229

Cash dividends paid .........................

(5,011)(5,012)(51,013)Purchases of treasury stock..............

(47)

(77)

(478)

Purchases of treasury stock..............

(47)

(77)

(478)

Adjustments for inclusion of a
subsidiary in consolidation ..............

111

—

1,130

Sales of treasury stock......................

4

—

41

Adjustments for inclusion of a
subsidiary in consolidation ..............

111

—

1,130

$962,669

Sales of treasury stock......................

4

—

41

Net changes in items other thanthose in shareholders’ equity...........

(6,196)(2,785)(63,076)

Balance at end of year......................... ¥90,125 ¥85,231$917,490

Balance at end of year ...................... ¥94,563 ¥83,472
Net unrealized gain (loss) on
investment securities:
Balance at beginning of year ............. ¥ 1,930 ¥ 5,808
Net changes in items other thanthose in shareholders’ equity...........

$ 19,648

The accompanying notes are an integral part of these statements.

(5,798)(3,878)(59,025)

Balance at end of year ...................... ¥ (3,868) ¥ 1,930$ (39,377)

27

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended March 31, 2009 and 2008

Thousands ofMillions of Yen

2009

2008

2009

¥27,630
11,963
2
(695)
440
—
6,067
765
2,109
(11)
—

¥30,461
9,577
739
(369)
466
37
258
772
1,248
(1,896)(118)$281,279
121,786
20(7,075)
4,479—
61,773
7,788
21,470
(112)
—

7,734
(7,058)(5,771)533
43,707696(434)(17,650)
26,31928,196(5,266)(8,586)(1,890)53,630392(457)(11,525)
42,04078,734(71,852)(58,750)
5,426
444,946
7,085(4,418)(179,680)
267,932

Investing activities:
Increase in tangible and intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in tangible and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investment securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from redemption of investment securities . . . . . . . . . . . . . . . . . . . . . . . .
Reimbursement of long-term deposits on contracts . . . . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in short-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection of long-term loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments upon incorporation of unconsolidated subsidiaries . . . . . . . . . . . . . .
Purchases of shares of common stock of subsidiaries. . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of securities of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(22,200)
133(10,411)
4
—
(426)
300
—
152
(50)
(363)
—
(287)
(33,148)(12,820)
2,549(13,941)
3
200
(446)
(302)
(150)
—
(100)
—
700
(456)
(24,765)(226,000)
1,354(105,986)
41—(4,337)
3,054
—
1,547
(509)
(3,695)—(2,922)(337,453)

Financing activities (Note 8):
Decrease in short-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in long-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in long-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bond payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other.........................................................................................................
Net cash provided by (used in) financing activities. . . . . . . . . . . . . . . .

(20)
20,000(2,105)(30)(5,011)(47)
4(2,172)(2)
10,614(393)
4,000(7,061)(30)(5,012)(77)——
2(8,571)(204)
203,604(21,429)(305)(51,013)(478)
41(22,111)(20)
108,053

Effect of exchange rate changes on cash and cash equivalents . . . . . . . . .
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of the year . . . . . . . . . . . . . . . . . . . . . .
Increase in cash and cash equivalents from newly consolidated subsidiary . . .
Cash and cash equivalents at end of the year (Note 12) . . . . . . . . . . . . . . . . . . .

(114)
3,672
36,13399¥39,904(43)
8,660
27,472—¥36,133(1,161)
37,382367,841
1,008$406,230

Operating activities:
Income before income taxes and minority interests . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in loss (income) of unconsolidated subsidiaries and affiliates . . . . . . . .
Loss on write-downs of investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net retirement benefit obligation at transition . . . . . . . . . . . . . . .
Loss on disposal of tangible and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .
Gain and loss on sales of property, plant and equipment . . . . . . . . . . . . . . . . . . .
Gain on sales of securities of affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Trade assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .

28

U.S. Dollars (Note 3)

The accompanying notes are an integral part of these statements.

THE JAPAN STEEL WORKS, LTD. AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements
Fiscal year 2008 (Year ended March 31, 2009)

1. Basis of Presentation
The Japan Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account in conformity with the financial accounting standards of Japan, and its overseas subsidiaries
maintain their books of account in conformity with those of theirrespective countries of domicile.
Effective April 1, 2008, the Company adopted the “Practical
Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (PITF No. 18). In
accordance with PITF No. 18, the accompanying consolidated financial statements for the year ended March 31, 2009 have been prepared by using, the accounts of foreign consolidated subsidiaries
prepared in accordance with either International Financial ReportingStandards (IFRS) or accounting principles generally accepted in the
United States as adjusted for certain items including those for goodwill, actuarial differences and capitalized development costs. Until
March 31, 2008, the accompanying consolidated financial statements
had been prepared by using the accounts of foreign consolidated
subsidiaries prepared in accordance with accounting principles generally accepted in their countries of domicile.
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted inJapan, which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards, and have been compiled from the consolidated financial
statements prepared by the Company as required by the Financial
Instruments and Exchange Law of Japan.
As permitted by the Financial Instruments and Exchange Law,amounts of less than one million yen have been omitted. As a result,
the totals shown in the accompanying consolidated financial statements (both in yen and in U.S. dollars) do not necessarily agree withthe sums of the individual amounts.
Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year’s
presentation.
2. Summary of Significant Accounting Policies(a) Principles of consolidation and accounting for investments
in unconsolidated subsidiaries and affiliates
Companies over which the Company exercises significant influence interms of their operating and financial policies have been included in
the accompanying consolidated financial statements on an equity
basis. All significant intercompany balances and transactions havebeen eliminated in consolidation.
As of March 31, 2009, the numbers of consolidated subsidiaries
and subsidiaries and affiliates accounted for by the equity method
were 36 and 1 (35 and 1 in 2008), respectively.
Certain overseas subsidiaries are consolidated on the basis of fiscal periods ended December 31, and one domestic subsidiary’s year
end is January 31, both of which differ from that of the Company.
However, the necessary adjustments have been made if the effect ofthe difference is material.
Investments in subsidiaries and affiliates which are neither consolidated nor accounted for by the equity method are carried at cost or
less. Where there has been a permanent decline in the value of suchinvestments, the Company has written them down.
Differences, between the cost and the underlying net equity at fairvalue of investments in consolidated subsidiaries and in companies
accounted for by the equity method have been amortized by thestraight-line-method over 5 years. However, immaterial goodwill andnegative goodwill are charged or credited to income in the year ofacquisition and are included in selling, general and administrative
expenses.
(b) Foreign currency translation
The balance sheet accounts of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect atthe balance sheet date, except for the components of net assets
excluding minority interests which are translated at their historicalexchange rates. Revenue and expense accounts are translated at the
average rates of exchange in effect during the year.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at therates of exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at thebalance sheet date and gain or loss on each translation is credited or
charged to income.
(c) Cash equivalents
All highly liquid investments with a maturity of three months or lesswhen purchased are considered to be cash equivalents.
(d) Inventories
Real estate for sale, finished products and work in process are statedat cost determined principally by the specific identification method.
Raw materials are stated at cost determined principally by the moving
average method.
On July 5, 2006 the Accounting Standards Board of Japan issued
Statement No. 9, “Accounting Standard for Measurement of
Inventories.” The standard requires that inventories held for sale in theordinary course of business be measured at the lower of cost or net
selling value, which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling expenses.
The replacement cost may be used in place of the net selling value if
appropriate. The standard also requires that inventories held for trading purposes be measured at the market price.
Effective the year ended March 31, 2009, the Company and its
domestic consolidated subsidiaries adopted this accounting standard. As a result, operating income decreased by ¥919 million($9,356 thousand) and income before income taxes and minority
interests decreased by ¥1,038 million ($10,567 thousand) comparedwith the corresponding amounts which would have been recorded
under the previous method.
(e) Short-term investments and investment securities
Trading securities are carried at fair value and held-to-maturity securities are carried at amortized cost. Marketable securities classified asother securities are carried at fair value with any changes in unrealized
holding gain or loss, net of the applicable income taxes, included
directly in net assets. Non-marketable securities classified as othersecurities are carried at cost. Cost of securities sold is determined by
the moving average method.
(f) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for possible bad
debts at an amount estimated based on the historical experience withbad debts on normal receivables plus an additional allowance for specific uncollectible amounts determined by reference to the collectabilityof individual doubtful accounts.

29

(g) Provision for warranties for completed construction
The Company provides a provision for warranties for completed construction by estimating losses on future possible claims.
(h) Provision for losses on orders received
The Company provides a provision for losses on orders received, butwhich had not been delivered at the fiscal year end, in the estimatedamount of total losses anticipated in the following fiscal year andthereafter for losses deemed certain to be incurred and whoseamounts can be reasonably estimated.
With respect to orders that had not been delivered as of March
31, 2008, a provision for losses on orders received was made at theestimated amount of total losses anticipated in the following fiscal
year and thereafter for losses which are deemed certain to be
incurred and whose amounts can be reasonably estimated. As aresult, cost of sales increased by ¥647 million and operating income
and income before income taxes and minority interests decreased by
the same amount for the year ended March 31, 2008.
(i) Property, plant and equipment and depreciation
Property, plant and equipment is stated on the basis of cost.
Depreciation of property, plant and equipment is determined by the
declining-balance method over the estimated useful lives of therespective assets, except that the straight-line method is applied tobuildings. With regard to the depreciation method of leased assets,
the straight-line method is applied where the lease period is taken as
the estimated useful life and the residual value is zero.
Significant renewals and additions are capitalized at cost.
Maintenance and repairs are charged to income as incurred.
(Changes in method of accounting for depreciation)(1) Buildings
Effective the year ended March 31, 2008, the Company and its
domestic subsidiaries have changed their method of accounting
for depreciation of buildings acquired on or after April 1, 2007 inaccordance with the revised Corporation Tax Law. The effect of
this change on operating income and income before income taxes
and minority interests was not material for the year ended March
31, 2008.
(2) Structures, machinery and equipment
Until the year ended March 31, 2007, the straight-line method wasapplied to the depreciation of structures, and machinery andequipment excluding certain machinery. Effective the year ended
March 31, 2008, the method of accounting for depreciation ofthese assets has been changed to the declining-balance method.
This change resulted from the fact that, in order to address thesubstantial increase in the number of orders for high-quality andlarge-sized products, influenced by changes in the internationalenergy structure and exposed global environmental problems,
which in turn increased the burden on production facilities and had
increased the cost of repairs, the Company and its subsidiaries
started to transform their production system effective the year
ended March 31, 2008 as set forth in the revised medium-term
management plan, “J-2008(R),” released on May 14, 2007.
As a result of the change in method of accounting for depreciation, depreciation expense increased by ¥3,294 million, operating
income decreased by ¥2,401 million and income before income
taxes and minority interests deceased by ¥2,402 million comparedwith the corresponding amounts which would have been recorded
under the previous method.

30(Additional information)
Regarding property, plant and equipment acquired on or before
March 31, 2007, effective the year ended March 31, 2008, theCompany and its domestic consolidated subsidiaries have adopted amethod of accounting for depreciation that conforms to the revised
Corporation Tax Law. Specifically, when the book value of an asset
reaches 5% of its acquisition cost based on the method of accounting for depreciation applied prior to the revision, the difference
between the amount equivalent to 5% of acquisition cost and memorandum value of the asset is depreciated by the straight-line method
over a period of five years from the year following the year in which
the book value of the asset reaches 5% of its acquisition cost, andsuch depreciation is reported as depreciation expense. As a result,operating income decreased by ¥535 million and income before
income taxes and minority interests deceased by ¥536 million fromthe corresponding amounts which would have been recorded under
the previous method.
Regarding machinery, effective the year ended March 31, 2009,
the Company and its domestic consolidated subsidiaries havechanged certain estimated useful lives in accordance with the revised
Corporation Tax Law.
The effect of this change on operating income and income before
income taxes and minority interests was not material for the year
ended March 31, 2009.
(j) Bond issuance expenses
Bond issuance expenses are charged to income as incurred.
(k) Leases
Until the year ended March 31, 2008, non-cancelable lease transactions were primarily accounted for as operating lease transactions(whether such leases were classified as operating or finance leases),
except that lease agreements which stipulated the transfer of ownership of the leased assets to the lessee were accounted for as financeleases. Effective the year ended March 31, 2009 the Company andits domestic subsidiaries adopted the “Accounting Standard forLease Transactions” (ASBJ Statement No. 13 (First Committee of theBusiness Accounting Council June 17, 1993, revised on March 30,2007)) and the “Guidance on Accounting Standard for Lease
Transactions” (ASBJ Guidance No. 16 (Accounting System Committeeof the Japanese Institute of Certified Public Accountants January 18,
1994, revised on March 30, 2007)), and those lease transactions are
now treated as normal sales and purchase transactions.
The effect of this change on operating income and income before
income taxes and minority interests was not material for the year
ended March 31, 2009.
(l) Retirement benefits
An employee whose employment is terminated is entitled, in mostcases, to a lump-sum severance payment determined by reference tothe current basic rate of pay, length of service and the conditions
under which the termination occurs.
Accrued retirement benefits for employees at March 31, 2009
and 2008 have been provided primarily at an amount calculated
based on the retirement benefit obligation and the fair value of thepension plan assets at the balance sheet dates, as adjusted for theunrecognized net retirement benefit obligation at transition, prior service cost and unrecognized actuarial gain or loss. The retirement benefit obligation is attributed to each period by the straight-line method
over the estimated years of service of the eligible employees. The net
retirement benefit obligation at transition is being amortized principallyover a period of 10 years by the straight-line method. In addition,accrued retirement benefits for directors and corporate auditors areprovided at an amount to be required at the year-end according tointernal regulations.
Prior service cost is being amortized as incurred by the straightline method over a period of 10 years, which is shorter than the average remaining years of service of the eligible employees.
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method overa period of 10 years, which is shorter than the average remaining
years of service of the employees participating in the plans.

4. Inventories
Inventories at March 31, 2009 and 2008 consisted of the following:(m) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated balance sheets at March 31, 2009 and 2008 with respect to thedifferences between financial reporting and the tax bases of the assets
and liabilities, and are measured using the enacted tax rates and laws
which will be in effect when the differences are expected to reverse.

5. Depreciation
Depreciation expense for property, plant and equipment for the years
ended March 31, 2009 and 2008 consisted of the following:

Millions of Yen
2009
2008

Real estate for sale ...................
Finished products .....................
Work in process ........................
Raw materials and supplies .......
Total ...................................

¥

43 ¥
43
1,577
1,602
65,137 60,305
5,829
4,864
¥72,586 ¥66,815

Millions of Yen
2009
2008

Depreciation expense ............... ¥11,460(n) Research and development expenses
Research and development expenses are charged to income whenincurred.
(o) Revenue recognition
Revenues are generally recognized on sales of products at the time of
shipment or on a completed-contract basis, except for those related
to large-scale contracts with long-term construction periods of 2
years or more and contracted amounts of ¥3 billion or more which
are recognized by the percentage-of-completion method.
(p) Derivatives
Derivatives positions are stated at fair value. Gain or loss on derivatives designated as hedging instruments is deferred until the loss orgain on the underlying hedged items is recognized. Foreign currency
receivables and payables are translated at the applicable forward foreign exchange rates if certain conditions are met. In addition, therelated interest differential paid or received under interest-rate swaps
utilized as hedging instruments is recognized over the terms of theswap agreements as an adjustment to the interest expense of theunderlying hedged items if certain conditions are met.
(q) Application of the “Practical Solution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements
On May 17, 2006, the Accounting Standards Board of Japan issued
Practical Issues Task Force No. 18, “Practical Solution on Unificationof Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements.” Effective the year ended March
31, 2009, the Company and its consolidated subsidiaries adopted
this accounting standard, making the necessary adjustments.
The effect of this change on operating income and income before
income taxes and minority interests was not material for the year
ended March 31, 2009.

¥9,249Thousands of
U.S. Dollars
2009

$

438
16,054
663,107
59,340$738,939

Thousands of
U.S. Dollars
2009$116,665

6. Advanced Depreciation
Accumulated advanced depreciation related to government grants
received has been deducted directly from the acquisition costs of certain tangible fixed assets (plant, machinery and equipment). Suchdepreciation expense for the years ended March 31,2009 and 2008is summarized as follows:
Millions of Yen
2009
2008

Advanced depreciation expense ...

¥308

¥308

Thousands of
U.S. Dollars
2009$3,135

7. Contingent Liabilities
Millions of Yen
2009
2008

As endorsers of trade notes receivable:
Endorsed with other ...............
As guarantors of loans:
Muroran Environmental Plant
Service Co., Ltd. ..................
Medical Corporation Bokoi .....
Employees and other..............
Total ...................................

¥

81

616
2,000
781
¥3,480

¥

72

669
1,895
943
¥3,580Thousands of
U.S. Dollars
2009

$

825

6,271
20,3607,951$35,427

Medical Corporation Bokoi had a temporary net asset deficiency at
March 31, 2009. It is reorganizing its businesses based on its
medium-term management plan and its financial condition is
expected to improve after the next fiscal year. The Company wasoffered mortgage collateral in return for its guarantee of the loan to
Medical Corporation Bokoi.

3. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollars is included solely
for convenience, as a matter of arithmetic computation only, at¥98.23 = U.S.$1.00, the rate of exchange prevailing on March 31,
2009. This translation should not be construed as a representationthat yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.
31

8. Short-Term Bank Loans and Long-Term Debt
All short-term bank loans, with interest at annual rates ranging from
0.84% to 1.895% at March 31, 2009 and 1.10% to 1.875% at March
31, 2008, were unsecured.
Long-term debt at March 31, 2009 and 2008 was as follows:
Millions of Yen
2009
2008

Loans from banks andinsurance companies withinterest at annual rates ranging
from 1.4% to 2.15% ................
Less those maturing within one year.....
Lease obligations..........................
Less those maturing within one year ....
0.72% straight bonds, due 2009 ....
Less those maturing within one year ....
0.92% straight bonds, due 2010.....
Long-term indebtedness reflectedin the consolidated balance sheets ...

Thousands of
U.S. Dollars
2009¥30,239 ¥12,344(2,322) (2,105)
6,951—(2,125)
—
—
30
—
(30)
10,00010,000$307,839(23,638)
70,762(21,633)——
101,802¥42,742 ¥20,239$435,122

The aggregate annual maturities of long-term debt and lease obligations subsequent to March 31, 2009 are summarized below:

Year ending March 31,

Thousands ofMillions of Yen
U.S. Dollars
Long-term Lease
Long-term Leasedebt obligations
debt obligations

2010 ..................................... ¥ 2,322 ¥2,125 $ 23,638 $21,633
2011 ..................................... 10,647 1,790 108,388 18,223
2012 .....................................
570 1,436
5,803 14,619
2013 ..................................... 13,540 1,033 137,840 10,516
2014 ..................................... 10,240
319 104,245 3,247
2015 and thereafter...............
2,920
244
29,726 2,484
The assets pledged as collateral for long-term debt of ¥759 million($7,727 thousand) at March 31, 2009 and ¥2,124 million at March
31, 2008 were as follows:

Property, plant and equipment,
at net book value ....................

32

Millions of Yen
2009
2008

Thousands of
U.S. Dollars
2009¥9,723 ¥10,777$98,982

9. Other Income (Expenses) — Other, Net
The details of “Other, net” in “Other income (expenses)” for the years
ended March 31, 2009 and 2008 were as follows:

Loss on sales or disposal ofproperty, plant and equipment ....
Gain on sales of property,
plant and equipment ...............
Gain on sales of raw
materials and supplies .............
Amortization of net retirement
benefit obligation at transition ...
Provision for warranties forcompleted construction...........
Gain on sales of securities ofaffiliates ...................................
Loss on write-downs ofinvestment securities ...............
Impairment loss .........................
Expenses for relocation of
the head office.........................
Other, net .................................
Total ...................................

Millions of Yen
2009
2008

Thousands of
U.S. Dollars
2009¥(2,112) ¥(1,293)$(21,501)

14

1,941

143

225

341

2,291

(693)

(693)

(7,055)

(93)

(665)

(947)

—

118

—

(6,067)
(2)

(258)
(739)

(61,763)
(20)

—
(152)
(529)
(514)
¥(9,259) ¥(1,916)—(5,385)$(94,258)

10. Loss on Impairment of Fixed Assets
Loss on impairment of fixed assets recognized by the Company andits consolidated subsidiaries for the year ended March 31, 2008 was
as follows:
Location

Yokohama-shi, Kanagawa prefecture(a subsidiary engaged in the machinery
products business)

Use

Classification—

Goodwill

The Company and its consolidated subsidiaries group assets into thesmallest possible independent cash flow generating units on the basisof managerial accounting.
The above goodwill was written down to its recoverable value,
resulting in an impairment loss of ¥739 million, because the related
subsidiary was unable to generate the amount of profit set forth in theinitial plan when the investment in the subsidiary had been determined by the Company.
The recoverable value was measured on the basis of a revised
business plan for the asset group.

11. Leases
The following pro forma amounts represent the acquisition cost,
accumulated depreciation/amortization and net book value of theleased property as of March 31, 2008, which would have beenreflected in the accompanying consolidated balance sheet if financelease accounting had been applied to finance leases accounted for as
operating leases:

12. Cash Flow Information(a) Cash and cash equivalents
Cash and cash equivalents in the accompanying consolidated statements of cash flows and cash on hand and in banks in the accompanying consolidated balance sheets at March 31, 2009 and 2008 arereconciled as follows:Year ended March 31, 2008
Millions of Yen
Accumulated
Acquisition depreciation/ Net bookcost
amortization
value

Buildings ...........................
Machinery and vehicles .........
Equipment .........................
Software ...........................
Total ............................

¥

8
4,836
2,721
306
¥7,872

¥

2
2,137
1,381
188
¥3,710

¥

5
2,699
1,340
117
¥4,162

Lease payments relating to finance leases accounted for as operatingleases amounted to ¥1,269 million, which was equal to the depreciation/amortization of the leased assets computed by the straight-line
method over the respective lease terms, for the year ended March
31, 2008.
Future minimum lease payments subsequent to March 31, 2008
under non-cancelable operating leases and finance leases accounted
for as operating leases are summarized as follows:Year ending March 31,

2009........................................
2010 and thereafter .................
Total ...................................

Millions of Yen
Finance leases
Operating leases¥1,297
2,865¥4,162¥ 517
791¥1,308Year ended March 31, 2009

Future minimum lease payments subsequent to March 31, 2009 under
non-cancelable operating leases are summarized as follows:Year ending March 31,

2010........................................
2011 and thereafter .................
Total ...................................

Millions of Yen
Operating leases

Thousands of
U.S. Dollars
Operating leases

¥ 765
1,485
¥2,251$ 7,788
15,118$22,916

Cash on hand and in banks
in the consolidatedbalance sheets ....................
Investment with a maturity of
three months or less from thedate of acquisition .................
Time deposits with maturities ofover three months .................
Cash and cash equivalents inthe consolidated statements ofcash flow ...........................

Millions of Yen
2009
2008

Thousands of
U.S. Dollars
2009¥39,957 ¥36,552$406,770

137

—

1,395

(190)

(418)

(1,934)¥39,904 ¥36,133$406,230(b) Non-cash items
Regarding finance lease transactions, assets and liabilities that havebeen accounted for by the Company and its domestic consolidated
subsidiaries amounted to ¥6,933 million ($70,579 thousand) and¥6,951 million ($70,762 thousand) for the year ended March 31,
2009.
13. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprised corporation tax, enterprise taxes andinhabitants’ taxes which, in the aggregate, resulted in a statutory tax
rate of approximately 40.5% for the years ended March 31, 2009 and2008. Income taxes of the overseas consolidated subsidiaries are
based generally on the tax rates applicable in their respective countries
of incorporation.
The Company has omitted reconciliation between the statutory tax rate
and the effective tax rate for the year ended March 31, 2009 because thedifference between these rates was less than 5%.
The effective tax rate reflected in the accompanying consolidated
statement of income for the year ended March 31, 2008 differs fromthe statutory tax rate for reasons summarized in the table below:
2008

Statutory tax rate .........................................................
Effect of:
Increase in valuation allowance .................................
Income taxes paid for prior years ..............................
Other ........................................................................
Effective tax rates ........................................................

40.5%
3.0
—
(1.0)
42.5%

33

The significant components of the Company’s deferred tax assets
and liabilities at March 31, 2009 and 2008 were as follows:
Millions of Yen
2009
2008

Deferred tax assets:
Accrued enterprise taxes........
Accrued bonuses ...................
Unrealized gain on
intercompany transactions ...
Accrued retirement benefits
for employees ......................
Accrued retirement benefits for
directors and corporate auditors ...
Loss on revaluation of
inventory items...........................
Loss on revaluation ofmonetary goods .......................
Depreciation ...........................
Provision for warranties forcompleted construction........
Provision for losses onorders received ....................
PCB disposal expenses ..........
Tax loss carryforwards............
Loss on deferred hedges ........
Unrealized loss on
investment securities ............
Other......................................
Gross deferred tax assets ..........
Valuation allowance................
Total deferred tax assets............
Deferred tax liabilities:
Reserve for advanced
depreciation.........................
Reserve for special account foradvanced depreciation .........
Reserve for special depreciation...
Prepaid pension cost ..............
Unrealized gain on
investment securities ............
Gain on deferred hedges.........
Reversal of allowance for
doubtful accounts ................
Other......................................
Total deferred tax liabilities..........
Net deferred tax assets..............

¥

326 ¥ 766
1,430
1,493

Thousands of
U.S. Dollars
2009$

1. Retirement benefit obligation... ¥(27,596) ¥(27,918)
2. Plan assets at fair value..........
13,081 17,201
3. Unfunded retirement benefit
obligation (1+2).................... (14,515) (10,717)
4. Unrecognized net retirement
benefit obligation at transition...
765
1,530
8,961
4,887
5. Unrecognized actuarial loss..........
6. Prior service cost ...................
819
974
7. Subtotal (3+4+5+6)................
(3,968) (3,325)
8. Accrued retirement benefits ... ¥ (6,303) ¥ (5,484)
9. Prepaid pension cost ............. ¥ 2,334 ¥ 2,159

Thousands of
U.S. Dollars
2009$(280,933)
133,167

639

584

6,505

3,934

3,583

40,049

179

146

1,822

423

75

4,306

1,004
1,213

1,140
1,176

10,221
12,349

369

320

3,756

149
164
305
418

262
188
176
406

1,517
1,670
3,105
4,255

2,322
469
13,350(3,197)
10,153811
297
11,431(1,443)
9,987

23,638
4,775
135,906(32,546)
103,359

1. Service cost ...........................
2. Interest cost...........................
3. Expected return on plan assets...
4. Amortization of net retirement
benefit obligation at transition ...
5. Amortization of actuarial loss...
6. Amortization of prior service cost...
7. Retirement benefit expenses...

2,526

1,995

25,715The assumptions used in accounting for the above plans were as
follows:

—
161
945

634
—
874

—
1,639
9,620

Discount rate .........................................
Expected rate of return on plan assets ...

757
160

2,124
233

7,706
1,629

61
49
30
14
4,643
5,926
¥ 5,510 ¥ 4,058

621
305
47,267$ 56,093

Millions of Yen
2009
2008

34

Millions of Yen
2009
2008

3,319
14,558

14. Research and Development Expenses
Research and development expenses included in manufacturingcosts and selling, general and administrative expenses for the years
ended March 31, 2009 and 2008 were as follows:

Research and development
expenses.......................................

15. Employees’ Retirement Benefit Plans
The following table sets forth the funded and accrued status of theplans and the amounts recognized in the accompanying consolidatedbalance sheets at March 31, 2009 and 2008 for the Company’s andthe consolidated subsidiaries’ defined benefit pension plans:¥4,178¥3,402Thousands of
U.S. Dollars
2009$42,533(147,765)
7,788
91,225
8,338(40,395)$ (64,166)$ 23,761

The components of retirement benefit expenses for the years ended
March 31, 2009 and 2008 are outlined as follows:
Millions of Yen
2009
2008

Thousands of
U.S. Dollars
2009¥1,785434(329)¥1,756451(410)$18,172
4,418(3,349)

765
974
155
¥3,784772
191
155¥2,916

7,788
9,916
1,578
$38,522

2009

2008

2.00%
2.00%

2.00%
2.00%

16. Securities
Securities are judged to be “substantially declined” when their market
values have declined 30% or more. When their market values havedeclined 50% or more, the impairment losses are recorded on thosesecurities. When their market values have declined between 30% and50%, the impairment losses are recorded on those securities unlesssuch values are considered to be recoverable individually.

17. Liquidation of Notes and Accounts Receivable
Accounts receivable deducted from trade receivables for liquidation atMarch 31, 2009 and 2008 are summarized as follows:
Millions of Yen
2009
2008

Accounts receivable ..................

¥6,011¥6,776

Thousands of
U.S. Dollars
2009$61,193

March 31, 2009(a) Other investment securities with determinable fair value were as
follows:
Acquisition
cost

Carrying value exceeds
acquisition cost:
Stocks ..................................
Carrying value does notexceed acquisition cost:
Stocks ..................................
Total ............................

Millions of Yen
Carrying
Unrealized
value
gain (loss)¥ 5,045¥ 1,870

26,378¥29,553

14,573¥19,618(11,805)¥ (9,934)$ 32,312$ 51,359

268,533
148,356$300,855 $199,715(120,177)$(101,130)

Millions of Yen

Thousands of
U.S. Dollars¥1,831$18,640

End ofMarch 31,
2008(a) Other investment securities with determinable fair value were as
follows:
Acquisition
cost

Millions of Yen
Carrying
Unrealized
value
gain (loss)¥ 6,432¥11,679¥5,246

13,174¥19,606

10,930¥22,609(2,243)¥3,003(b) Other investment securities without determinable fair value were as
follows:
Millions of Yen

Other unlisted securities .............................................

Increaseduringthe year

Issued stock:—
Common shares ....... 371,463,036
Treasury stock:
Common shares .......
234,126 30,687

Decreaseduringthe yearEnd ofMarch 31,2009—

371,463,036

3,473

261,340

Notes 1: The increase in the number of common shares held in treasury of 30,687
was due to the acquisition of fractional shares of less than one unit.
2: The decrease in the number of common shares held in treasury of 3,473
was due to sales of shares to shareholders with fractional shares of lessthan one unit.

(b) Dividends(1) Dividends paid to shareholders(i)Approved:
Ordinary general meeting of shareholders held on June 27, 2008
Type of shares:
Common stock
Total amount ofdividends:¥2,784 million ($28,342 thousand)
Dividends per share:¥7.5 ($0.076)
Record date:
March 31, 2008
Effective date:June 30, 2008(ii)Approved:

March 31, 2008

Carrying value exceeds
acquisition cost:
Stocks ..................................
Carrying value does notexceed acquisition cost:
Stocks ..................................
Total ............................

(a) Total number and periodic changes in number of shares in issue
and treasury stock by type were as follows:$ 19,037(b) Other investment securities without determinable fair value were as
follows:

Other unlisted securities ..........

Year ended March 31, 2009

Number of shares¥ 3,174

Thousands of U.S. Dollars
Acquisition
Carrying
Unrealized
cost
value
gain (loss)

Carrying value exceeds
acquisition cost:
Stocks ..................................
Carrying value does notexceed acquisition cost:
Stocks ..................................
Total ............................

18. Supplementary Information for Consolidated Statements of
Changes in Net Assets¥1,637

Meeting of Board of Directors held on
November 4, 2008
Common stock

Type of shares:
Total amount ofdividends:¥2,227 million ($22,671 thousand)
Dividends per share:¥6 ($0.061)
Record date:
September 30, 2008
Effective date:
December 8, 2008
(2) Dividends whose record date fell in the year ended March 31,
2009, but whose effective date is after the year then ended
Approved:
Ordinary general meeting of shareholders held on June 29, 2009
Type of shares:
Common stock
Total amount ofdividends:¥2,227 million ($22,671 thousand)
Dividends per share:¥6 ($0.061)
Record date:
March 31, 2009
Effective date:June 30, 2009
Source ofdividends:
Retained earnings

35

Year ended March 31, 2008(a) Total number and periodic changes in number of shares in issue
and treasury stock by type were as follows:
Number of shares
End ofMarch 31,
2007

Increaseduringthe year

Issued stock:—
Common shares ....... 371,463,036
Treasury stock:
190,337 43,789
Common shares .......

Decreaseduringthe yearEnd ofMarch 31,2008—

371,463,036—

234,126

Note: The increase in the number of common shares held in treasury of 43,789
was due to the acquisition of fractional shares of less than one unit.

(b) Dividends(1) Dividends paid to shareholders(i)Approved:
Ordinary general meeting of shareholders held on June 28, 2007
Type of shares:
Common stock
Total amount ofdividends:¥3,341 million
Dividends per share:¥9
Record date:
March 31, 2007
Effective date:June 29, 2007(ii)Approved:

Meeting of Board of Directors held on
September 19, 2007
Common stock

Type of shares:
Total amount ofdividends:¥1,670 million
Dividends per share:¥4.5
Record date:
September 30, 2007
Effective date:
December 10, 2007
(2) Dividends whose record date fell in the year ended March 31,
2008, but whose effective date is in the following fiscal year
Approved:
Ordinary general meeting of shareholders held on June 27, 2008
Type of shares:
Common stock
Total amount ofdividends:¥2,784 million
Dividends per share:¥7.5
Record date:
March 31, 2008
Effective date:June 30, 2008
Source ofdividends:
Retained earnings

19. Shareholders’ Equity
The Corporation Law of Japan (the “Law”) provides that an amountequal to 10% of the amount to be disbursed as distributions of capitalsurplus (other than the capital reserve) and retained earnings (otherthan the legal reserve) be transferred to the capital reserve and thelegal reserve, respectively, until the sum of the capital reserve and thelegal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolution of the shareholders, orby the Board of Directors if certain conditions are met.
20. Amounts per Share
Net income per share is calculated based on the net income available
for distribution to shareholders of common stock and the weightedaverage number of shares of common stock outstanding during eachyear. Net assets per share are calculated based on the number ofshares of common stock outstanding at each year end. Amounts per
36

share at March 31, 2009 and 2008 and for the years then ended
were as follows:
Yen
Year ended March 31,
2009
2008

Net income ............................... ¥ 43.19
Net assets ................................ 242.13¥ 47.10228.93

U.S. Dollars
Year ended
March 31,
2009

$0.44
2.46

21. Segment Information
The Company and its consolidated subsidiaries operate in the following three business segments:• Operations in the steel products segment include steel castings
and forgings, steel plates, pressure vessels and steel structures.
• Operations in the machinery products segment include injection
molding machines, film and sheet machinery, blow molding
machines, magnesium injection molding machines, waste treatment
equipment and manufacturing equipment for electronic products.
• Operations in the regional development segment include theFuchu Intelligent Park Project and the leasing of real estate.
(a) Business segment information(Change in method of accounting for depreciation)
As described in Note 2(i), effective the year ended March 31, 2008,
the Company and its domestic consolidated subsidiaries havechanged their method of accounting for depreciation of structures,and machinery and equipment from the straight-line method to thedeclining-balance method.
The effect of this change was to increase depreciation expense in the“Steel products” segment by ¥2,314 million, in the “Machinery products” segment by ¥960 million, in the “Regional development” segment by ¥9 million, and in “Eliminations and corporate” by ¥10 million.
Operating expenses increased in the “Steel products” segment by¥1,573 million, in the “Machinery products” segment by ¥809 million,in the “Regional development” segment by ¥9 million and in“Eliminations and corporate” by ¥9 million. Operating income
decreased by the same amounts as the corresponding increases inoperating expenses for the year ended March 31, 2008 comparedwith the corresponding amounts which would have been recorded
under the previous method.
(Depreciation expense)
As described in Note 2(i), regarding property, plant and equipment
acquired on or before March 31, 2007, effective the year ended
March 31, 2008, the Company and its domestic consolidated subsidiaries have adopted a method of accounting for depreciation that
conforms to the revised Corporation Tax Law. Specifically, when thebook value of an asset reaches 5% of its acquisition cost based on
the method of accounting for depreciation applied prior to the revision, the difference between the amount equivalent to 5% of acquisition cost and memorandum value of the asset is depreciated by thestraight-line method over a period of five years from the year following
the year in which the book value of the asset reaches 5% of its acquisition cost, and such depreciation is reported as depreciation
expense. As a result, depreciation expense increased in the “Steelproducts” segment by ¥365 million, in the “Machinery products” segment by ¥277 million, in the “Regional development” segment by ¥4
million and in “Eliminations and corporate” by ¥10 million. Operating
expenses increased in the “Steel products” segment by ¥278 million,in the “Machinery products” segment by ¥242 million, in the “Regional
development” segment by ¥4 million and in “Eliminations and corporate” by ¥10 million. Operating income decreased by the sameamounts as the corresponding increases in operating expenses forthe year ended March 31, 2008 compared with the corresponding
amounts which would have been recorded under the previous method.
(Provision for losses on orders received)
As described in Note 2(h), with respect to orders that have not yet
been delivered as of March 31, 2008, a provision for losses on orders
received was made at the estimated amount of total losses anticipated in the following fiscal year and thereafter for losses which are
deemed certain to be incurred and whose amounts can be reasonably estimated. As a result, operating expenses increased in the“Machinery products” segment by ¥647 million and operating income
decreased in that segment by the same amount for the year ended
March 31, 2008.

(Inventories)
As described in Note 2(d), effective the year ended March 31, 2009,
the Company and its domestic consolidated subsidiaries haveadopted “Accounting Standard for Measurement of Inventories.” As aresult, operating expenses increased in the “Steel products” segmentby ¥677 million ($6,892 thousand) and in the “Machinery products”
segment by ¥241 million ($2,453 thousand). Operating income
decreased by the same amounts as the corresponding increases inoperating expenses for the year ended March 31, 2009 comparedwith the corresponding amounts which would have been recorded
under the previous method.

Millions of Yen
Year ended March 31, 2009

Sales and operating income:Sales to third parties ...........................................................
Intra-group sales and transfers ............................................
Net sales .....................................................................
Operating expenses ............................................................
Operating income ................................................................
Total assets, depreciation expense, loss on impairment of
goodwill and capital expenditures:
Total assets ........................................................................
Depreciation expense .........................................................
Loss on impairment of goodwill ...........................................
Capital expenditures ...........................................................

Eliminations
and Corporate Consolidated

Steel
Products

Machinery
Products

Regional
Development

Total¥107,883
1,956
109,840
78,367¥ 31,473¥117,462
328
117,791
106,355¥ 11,435¥ 1,767
6
1,773
1,029
¥ 743

¥227,113
2,291
229,405
185,751¥ 43,653¥—(2,291)(2,291)
4,727¥ (7,019)¥227,113—
227,113
190,479¥ 36,633¥122,832
7,559
1
22,555¥ 94,727
3,755
—
3,135

¥13,016311—
43¥230,575
11,625
1
25,734¥66,333247
1
147¥296,909
11,873
2
25,882

Steel
Products

Machinery
Products

Thousands of U.S. Dollars
Year ended March 31, 2009

Sales and operating income:Sales to third parties ........................................................... $1,098,269 $1,195,785
Intra-group sales and transfers ............................................
19,912
3,339
Net sales ..................................................................... 1,118,192 1,199,135
Operating expenses ............................................................
797,791 1,082,714
Operating income ................................................................ $ 320,401 $ 116,410
Total assets, depreciation expense, loss on impairment of
goodwill and capital expenditures:
Total assets ........................................................................ $1,250,453 $ 964,339
Depreciation expense .........................................................
76,952
38,227
Loss on impairment of goodwill ...........................................
10—
Capital expenditures ...........................................................
229,614
31,915

Eliminations
and Corporate Consolidated

Regional
Development

Total$ 17,988
61
18,04910,475$ 7,564$2,312,053
23,323
2,335,386
1,890,980$ 444,396— $2,312,053(23,323)—(23,323) 2,312,053
48,122
1,939,112$ (71,455) $ 372,931$132,505
3,166
—
438

$2,347,297
118,34510
261,977$675,283
2,515
10
1,496

$

$3,022,590
120,86920
263,484

Millions of Yen
Year ended March 31, 2008

Sales and operating income:Sales to third parties ...........................................................
Intra-group sales and transfers ............................................
Net sales .....................................................................
Operating expenses ............................................................
Operating income ................................................................
Total assets, depreciation expense and capital expenditures:
Total assets ........................................................................
Depreciation expense .........................................................
Loss on impairment of goodwill ...........................................
Capital expenditures ...........................................................

Eliminations
and Corporate Consolidated

Steel
Products

Machinery
Products

Regional
Development

Total¥92,6132,235
94,84869,662¥25,185¥126,155308
126,464
113,200¥ 13,263¥ 2,082
66
2,149
1,460
¥ 689

¥220,851
2,610
223,462
184,323¥ 39,138¥—(2,610)(2,610)4,052¥ (6,662)¥220,851—
220,851
188,375¥ 32,475¥90,741
5,802
—
7,896

¥ 94,718
3,023
—
3,563

¥13,276334—
267¥198,737
9,160—
11,727¥63,716
151
739
367

¥262,453
9,311
739
12,09537

(b) Geographical segment information(Change in method of accounting for depreciation)
As described in Note 2(i), effective the year ended March 31, 2008,
the Company and its domestic consolidated subsidiaries havechanged their method of accounting for depreciation of structures,and machinery and equipment from the straight-line method to thedeclining-balance method.

tion cost and memorandum value of the asset is depreciated by thestraight-line method over a period of five years from the year following
the year in which the book value of the asset reaches 5% of its acquisition cost, and such depreciation is reported as depreciation
expense. As a result, operating expenses increased in the “Japan”
segment by ¥525 million and in “Eliminations and corporate” by ¥10
million and operating income decreased by the same amounts as thecorresponding increases in operating expenses for the year ended
March 31, 2008 compared with the corresponding amounts which
would have been recorded under the previous method.

The effect of this change was to increase operating expenses in the“Japan” segment by ¥2,392 million and in “Eliminations and corporate” by ¥9 million and to decrease operating income by the sameamounts as the corresponding increases in operating expenses forthe year ended March 31, 2008 compared with the corresponding
amounts which would have been recorded under the previous
method.
(Depreciation expense)
As described in Note 2(i), regarding property, plant and equipment
acquired on or before March 31, 2007, effective the year ended
March 31, 2008, the Company and its domestic consolidated subsidiaries have adopted a method of accounting for depreciation that
conforms to the revised Corporation Tax Law. Specifically, when thebook value of an asset reaches 5% of its acquisition cost based on
the method of accounting for depreciation applied prior to the revision, the difference between the amount equivalent to 5% of acquisi-(Provision for losses on orders received)
As described in Note 2(h), with respect to orders that had not beendelivered as of March 31, 2008, a provision for losses on orders
received was made at the estimated amount of total losses anticipated in the following fiscal year and thereafter for losses which are
deemed certain to be incurred and whose amounts can be reasonably estimated. As a result, operating expenses increased in the“Japan” segment by ¥647 million and operating income decreased inthat segment by the same amount for the year ended March 31,
2008.
The Company has omitted geographical segment information for theyear ended March 31, 2009 because net sales and total assets in the“Japan” segment were more than 90% of those of all segments.
Millions of Yen

Japan

North
America

Asia(except Japan)

Total¥213,344
6,000
219,344
180,891¥ 38,453¥197,180¥2,685
166
2,851
2,671
¥ 180
¥2,350¥4,821
1,020
5,841
5,648
¥ 193
¥3,895¥220,851
7,186
228,038
189,211¥ 38,826¥203,426

Year ended March 31, 2008

Sales and operating income:Sales to third parties ...........................................................
Inter-area sales and transfers ..............................................
Net sales .....................................................................
Operating expenses ............................................................
Operating income ...............................................................
Total assets .............................................................................

(c) Overseas sales information
Overseas sales, which include export sales of the Company and its
domestic consolidated subsidiaries and sales (other than exports toJapan) of its overseas consolidated subsidiaries, for the years ended
March 31, 2009 and 2008 are summarized as follows:
Millions of Yen
NorthAmerica
Other

Year ended March 31, 2009

East Asia

Overseas sales ..................
Total consolidated sales .....
Overseas sales as apercentage of total
consolidated sales (%)......

¥44,343 ¥12,443

Year ended March 31, 2009

19.5

5.5

Total

¥63,065 ¥119,853¥227,113

27.8

52.8

Thousands of U.S. Dollars
North
East Asia America
Other
Total

Overseas sales .................. $451,420 $126,672 $642,014 $1,220,126
Total consolidated sales .....
$2,312,053
Overseas sales as apercentage of total
19.5
5.5
27.8
52.8
consolidated sales (%)......

38

Eliminations
and Corporate Consolidated¥—(7,186)(7,186)(835)¥ (6,351)¥59,027¥220,851—
220,851
188,375¥ 32,475¥262,453

Total

Year ended March 31, 2008

East Asia

Millions of Yen
NorthAmerica
Other

Overseas sales ..................
Total consolidated sales .....
Overseas sales as apercentage of total
consolidated sales (%)......

¥49,737¥9,371

22.5

4.2¥44,828 ¥103,937¥220,851

20.3

47.1

Report of Independent Auditors

39