Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
and Consolidated Subsidiaries
March 31, 2014
with Independent Auditor’s Report

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Financial Statements
March 31, 2014

Contents
Independent Auditor’s Report ............................................................................................. 1

Consolidated Financial Statements
Consolidated Balance Sheet ................................................................................................ 2
Consolidated Statement of Income...................................................................................... 4
Consolidated Statement of Comprehensive Income ........................................................... 5
Consolidated Statement of Changes in Net Assets ............................................................. 6
Consolidated Statement of Cash Flows ............................................................................... 8
Notes to Consolidated Financial Statements ..................................................................... 10

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2014

Millions of yen
2013
2014
AssetsCurrent assets:
Cash and deposits (Notes 4, 5 and 12)
Marketable securities (Notes 4, 5 and 6)
Notes and accounts receivable (Note 5):
Unconsolidated subsidiaries and affiliates (Note 23)
TradeLess allowance for doubtful receivables
Inventories (Note 7)
Deferred income taxes (Note 15)
Other current assets (Notes 4 and 12)
Total current assets

Property, plant and equipment:
Land (Notes 8, 18 and 24)
Buildings and structures (Notes 8 and 24)
Machinery, equipment and vehicles (Note 8)
Leased assets
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net (Note 25)

Investments and other assets:
Investments in securities (Notes 5, 6 and 12)
Investments in unconsolidated subsidiaries andaffiliates (Note 25)
Deferred income taxes (Note 15)
Other assets (Note 12)
Total investments and other assets

Total assets (Note 25)

2

Thousands of
U.S. dollars(Note 3)2014

¥ 27,406
8,813¥ 26,877
5,404$ 261,145
52,507

12,554
22,344(223)
23,921739
5,155
100,709

14,36426,023(229)
29,901606
6,600
109,546

139,565
252,847(2,225)
290,527
5,888
64,126
1,064,380

18,792
51,878127,056
85
7,717(153,897)
51,631

19,182
57,720138,9121,441
3,482(161,940)
58,797

186,378
560,824
1,349,709
14,001
33,832(1,573,455)
571,289

27,21331,361

304,712

4,456
558
3,237
35,464

4,603
650
2,819
39,43344,724
6,316
27,390383,142¥ 187,804¥ 207,776$ 2,018,811

Millions of yen
2013
2014
Liabilities and net assets
Current liabilities:
Current portion of finance lease obligations
Notes and accounts payable (Note 5):
Unconsolidated subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes (Note 15)
Allowance for bonuses to employees
Other current liabilities (Notes 10 and 12)
Total current liabilities
Long-term liabilities:
Accrued retirement benefits for employees (Note 14)
Liability for retirement benefits (Note 14)
Accrued retirement benefits for directors andcorporate auditors
Guarantee deposits (Note 10)
Finance lease obligations, less current portion
Negative goodwill (Note 25)
Deferred income taxes (Note 15)
Deferred income taxes on land revaluation reserve(Note 15)
Other long-term liabilities
Total long-term liabilities

¥

17

¥

146

Thousands of
U.S. dollars(Note 3)
2014
$

1,419

387
15,176
2,446
3,236
1,234
824
3,204
26,524539
18,805
3,236
3,345
2,294
902
3,267
32,534

5,237
182,715
31,44232,501
22,2898,764
31,743
316,110

7,463
–

–
9,615

–
93,422

86
3,247
15
17
1,846

73
3,120
1,150
7
2,471

709
30,315
11,17468
24,009917
639
14,230917
1,356
18,7098,910
13,175
181,782

23,221
23,497
92,13523,221
23,46093,846225,622
227,944
911,834(10,132)
128,721(10,104)
130,423(98,173)
1,267,227

6,568
(1)
1,557
(3,431)–
4,693
134
13,502147,050¥ 187,804

8,923
(0)
1,545
933
(1,511)9,890
156
16,064
156,533¥ 207,776

86,698(0)
15,012
9,065(14,681)
96,094
1,516
156,082
1,520,919$ 2,018,811

Contingent liabilities (Note 13)
Net assets:
Shareholders’ equity (Note 17):
Common stock:
Authorized: 753,814,067 shares in 2013 and2014
Issued: 184,186,153 shares in 2013 and 2014
Capital surplus
Retained earnings (Note 26)
Treasury stock, at cost – 26,402,891 shares in 2013
and 26,530,317shares in 2014
Total shareholders’ equity
Accumulated other comprehensive income (loss):
Unrealized holding gain on securities (Note 6)
Unrealized loss from hedging instruments
Land revaluation reserve (Note 18)
Translation adjustments
Retirement benefit liability adjustments (Note 14)
Total accumulated other comprehensive income
Stock acquisition rights (Note 17)
Minority interests
Total net assets
Total liabilities and net assets

See accompanying notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Income
Year ended March 31, 2014

Millions of yen
2013
2014
Net sales (Notes 23, 24 and 25)
Cost of sales (Notes 7 and 24)
Gross profit¥ 141,084
122,189
18,895¥ 157,552
134,872
22,680$ 1,530,820
1,310,455
220,365

15,265
3,630

16,557
6,123

160,873
59,492

714
(57)
87
172
19
121
137
285

762
(112)
93
400
10
142
44
283

7,404
(1,088)
904
3,886
97
1,380
427
2,750

(175)

(231)

(2,244)

(74)

(85)

(826)

(405)

(266)

(2,585)

(150)
–
(1)
6
4,309

(7)
914
(948)
127
7,249

(68)
8,881
(9,211)
1,234
70,433

1,475
73
1,548
2,761

3,083
256
3,339
3,910

29,9552,487
32,44237,991

Selling, general and administrative expenses(Notes 17, 19 and 24)
Operating income (Note 25)
Other income (expenses):
Interest and dividend income
Interest expense
Gain on insurance claims
Foreign exchange gain, net
Amortization of negative goodwill (Note 25)
Equity in earnings of an affiliate
Gain on revaluation of derivatives
Gain on sales of investments in securities, net
Expenses related to employees seconded tooverseas unconsolidated subsidiaries
Loss on sales or disposal of property, plant andequipment, net
Loss on impairment of investments in securities(Note 6)
Loss on impairment of fixed assets(Notes 8, 24 and 25)
Insurance income (Note 9)
Loss on disaster (Note 9)
Other, net (Notes 24 and 25)
Income before income taxes and minority interests
Income taxes (Note 15):
Current
DeferredIncome before minority interests
Minority interests
Net income

Thousands of
U.S. dollars(Note 3)
2014

¥

(245)
2,516

¥

(640)
3,270

$

(6,219)31,772

See accompanying notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year ended March 31, 2014

Millions of yen
2013
2014
Income before minority interests
Other comprehensive (loss) income:Unrealized holding gain on securities
Unrealized (loss) gain from hedging instruments
Translation adjustments
Share of other comprehensive income of anaffiliate accounted for by the equity method
Total other comprehensive income (Note 16)
Comprehensive income
Total comprehensive income attributable to:Shareholders of the Company
Minority interests of consolidated subsidiaries

Thousands of
U.S. dollars(Note 3)2014

¥ 2,761¥ 3,910$ 37,991

2,759
(1)
3,565

2,363
1
6,719

22,96010
65,283

26
6,349¥ 9,11018
9,101¥ 13,011

175
88,428$ 126,419¥ 7,352
1,758¥ 9,991
3,020$ 97,075
29,344

See accompanying notes to consolidated financial statements.
5

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets
Year ended March 31, 2014
Millions of yen

Balance at April 1,
2012
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Change in scope of
consolidation
Reversal of land
revaluation reserve
Other changes
Balance at April 1,
2013
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Reversal of land
revaluation reserve
Other changes
Balance at March 31,
2014

Balance at April 1,
2012
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Change in scope of
consolidation
Reversal of land
revaluation reserve
Other changes
Balance at April 1,
2013
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Reversal of land
revaluation reserve
Other changes
Balance at March 31,
2014

Number ofshares issued

Common stock

Capital surplus

Retained earnings

184,186,153––¥ 23,221––¥ 23,497––¥ 90,758(1,194)
2,516

–

–

–

–

–

–

Total shareholders’equityTreasury stock, at cost
(9,628)––¥ 127,848(1,194)
2,516

–

(505)

(505)

(0)

–

1

1

–

–

51

–

51

–
–

–
–

–
–

4
–

–
–

4
–

184,186,153¥ 23,221¥ 23,497¥ 92,135¥ (10,132)¥ 128,721

–
–

–
–

–
–

(1,571)
3,270––(1,571)
3,270

–

–

–

–

(1,331)(1,331)

–

–

(37)

–

1,359

1,322

–
–

–
–

–
–

12
–

–
–

12
–

184,156,153¥ 23,221¥ 23,460¥ 93,846¥ (10,104)¥ 130,423

Unrealized
holding gain on
securities

Unrealized loss
from hedging
instruments

Land revaluation
reserve

Translation
adjustments¥ 3,817
–
–

¥ –
–
–

¥ 1,561––¥ (5,293)
–
–

–

–

–

–

–

–

–

–

–

–
2,751

¥

Millions of yen
Total
accumulated
Retirement
other
benefit liability
comprehensive
adjustments
incomeStock acquisitionrightsMinority
interests

Total net assets

85
–
–

¥ 119
–
–

¥ 11,664––¥ 139,716(1,194)
2,516

–

–

–

–

(505)

–

–

–

–

–

1

–

–

–

–

–

–

51

–
(1)

–
(4)

–
1,862

–
–

–
4,608

–
15

–
1,838

4
6,461

¥ 6,568¥ (1)¥ 1,557¥ (3,431)–¥ 4,693¥ 134¥ 13,502¥ 147,050

–
–

–
–

–
–

–
–

–
–

–
–

–
–

–
–

(1,571)
3,270

–

–

–

–

–

–

–

–

(1,331)

–

–

–

–

–

–

–

–

1,322

–
2,355

–
1

–
(12)

–
4,364

–
(1,511)

–
5,197

–
22

–
2,562

12
7,781

¥ 8,923¥ (0)¥ 1,545933¥ (1,511)¥ 9,890¥ 156¥ 16,064¥ 156,533

¥

¥

¥

–
–
–

¥

6

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets (continued)
Year ended March 31, 2014

Balance at April 1, 2013
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Reversal of land
revaluation reserve
Other changes
Balance at March 31, 2014

Balance at April 1, 2013
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Reversal of land
revaluation reserve
Other changes
Balance at March 31, 2014

Thousands of U.S. dollars (Note 3)
Retained earnings
Treasury stock, at cost
$ 895,210$ (98,445)(15,264)–
31,772–

Total shareholders’ equity$ 1,250,691(15,264)
31,772

Common stock$ 225,622––

Capital surplus$ 228,304
–
–

–

–

–

(12,932)(12,932)

–

(360)

–

13,204

12,844––$ 225,622––$ 227,944

116–$ 911,834––$ (98,173)

116

Unrealized
holding gain on
securities$ 63,817––

Unrealized loss
from hedging
instruments$ (10)––

Land
revaluation
reserve$ 15,128––

Translation
adjustments$ (33,337)––

Thousands of U.S. dollars (Note 3)
Total
accumulated
Retirement
other
benefit liability comprehensive
adjustment
income$–$ 45,598––––$ 1,267,227

Stockacquisitionrights$ 1,302––

Minority
interests$ 131,189––

Total net assets$ 1,428,780(15,264)
31,772

–

–

–

–

–

–

–

–

(12,932)

–

–

–

–

–

–

–

–

12,844–22,881$ 86,698

–
10
$ (0)

–
(116)
$ 15,012–
42,402$ 9,065–(14,681)$ (14,681)–
50,496$ 96,094–214$ 1,516–
24,893$ 156,082

116
75,603$ 1,520,919

See accompanying notes to consolidated financial statements.
7

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year ended March 31, 2014

Millions of yen
2013
2014
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Amortization of negative goodwill
Equity in earnings of an affiliate
Increase (decrease) in accrued retirement benefits
for employees
Decrease in liability for retirement benefits(Decrease) increase in accrued bonuses
Increase in allowance for doubtful receivables
Interest and dividend income
Interest expense
Gain on revaluation of derivatives
Gain on sales of investments in securities
Loss on impairment of investments in securities
Loss on sales or disposal of property, plant andequipment, net
Loss on impairment of fixed assets
Decrease (increase) in notes and accounts
receivable
Decrease (increase) in inventories
Increase in notes and accounts payable
Insurance income
Other
Subtotal
Insurance claims received
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Thousands of
U.S. dollars(Note 3)2014

¥ 4,309¥ 7,249$ 70,433

3,988
(19)
(121)

4,352
(10)
(142)

42,285(97)(1,380)

153
–
(54)
29
(714)
57
(137)
(285)
405

(12)
(189)
78
2
(762)
112
(44)
(283)
266

(117)
(1,836)758
19(7,404)
1,088(427)(2,750)
2,585

74
150

85
7

826
68

1,076
2,817
288
(87)
215
12,14487765(57)(2,749)¥ 10,190(4,951)(4,753)
3,532(1,007)(1,289)
2,241
1,007
820
(114)
(2,102)¥ 1,852(48,105)(46,182)
34,318(9,785)(12,523)
21,774
9,784
7,967(1,107)(20,423)$ 17,995

See accompanying notes to consolidated financial statements.
8

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows (continued)
Year ended March 31, 2014
Thousands of
U.S. dollars(Note 3)2014

Millions of yen
2013
2014
Cash flows from investing activities:
Investments in time deposits with a maturity ofmore than three months
Proceeds from time deposits with a maturity ofmore than three months
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant andequipment
Purchases of intangible fixed assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Payment for loans receivableCollection of loans receivable
Proceeds from subsidy income
Other
Net cash used in investing activities
Cash flows from financing activities:
Short-term bank loans, net
Proceeds from sales of treasury stock
Purchases of treasury stock
Cash dividends paid to the Company’s
shareholders
Cash dividends paid to minority shareholders ofconsolidated subsidiaries
Proceeds from sale and leaseback transactions
Repayment of lease obligations
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents resulting
from change in scope of consolidation
Cash and cash equivalents at end of the year
(Note 4)¥(100)

¥ (5,999)$ (58,288)300
0(8,208)4,469
10(7,320)43,422
97(71,123)

70
(481)
(31)
1,055
(705)
636
–
15
(7,449)80(80)(1,531)
1,096
(661)
465
425
(7)
(9,053)777(777)(14,876)
10,649(6,422)
4,518
4,129
(68)
(87,962)

–
0
(502)

946
1,317
(1,328)

9,192
12,796(12,903)(1,203)(1,583)(15,381)

(455)
–
(19)
(2,179)

(191)
1,466
(248)
379

(1,856)
14,244(2,410)
3,682

626

1,764

17,1401,188
33,825(5,058)36,338(49,145)
353,070

1,325

–

–

¥ 36,338¥ 31,280$ 303,925

See accompanying notes to consolidated financial statements.
9

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2014
1.

Summary of Significant Accounting Policies(a) Basis of preparation
Yodogawa Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintaintheir books of account and records in accordance with accounting principles generally
accepted in Japan, and its overseas subsidiaries maintain their books of account inconformity with those of their respective countries of domicile.
The accompanying consolidated financial statements of the Company and consolidated
subsidiaries (collectively, the “Group”) are prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain respects as to the applicationand disclosure requirements of International Financial Reporting Standards, and havebeen compiled from the consolidated financial statements prepared by the Company as
required by the Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain reclassifications
and rearrangements have been made to the consolidated financial statements issued
domestically in order to present them in a format which is more familiar to readers outside
Japan.
Certain reclassifications of previously reported amounts have been made to conform theaccompanying consolidated financial statements for the year ended March 31, 2013 to the2014 presentation. Such reclassifications had no effect on consolidated net income or
net assets.
(b) Basis of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and all subsidiaries over which substantial control is exerted through either
majority ownership of voting stock and/or by other means. All significant intercompany
balances and transactions have been eliminated in consolidation.
An investment in one affiliate (a company over which the Company has the ability to
exercise significant influence) is stated at cost plus equity in its undistributed earnings orundisposed loss. Consolidated net income or loss includes the Company’s equity in thecurrent net income or loss of this company after the elimination of unrealizedintercompany profits.
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if
applicable. The difference between the cost of investments in subsidiaries and the equity
in their net assets at their respective dates of acquisition is amortized over a period of 5
years on a straight-line basis. Negative goodwill arising from transactions that occurredon or after April 1, 2010 is credited to income when incurred.

10

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

1.

Summary of Significant Accounting Policies (continued)(b) Basis of consolidation (continued)
The financial statements of certain consolidated subsidiaries whose fiscal year end is
December 31 have been included in consolidation on the basis of a full fiscal year after
making the necessary adjustments for significant transactions during the period from theirfiscal year end to the Company’s balance sheet date.
(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen
at the rates of exchange in effect at the balance sheet date. Other assets and liabilities
denominated in foreign currencies are translated at their historical rates. All revenues
and expenses associated with foreign currencies are translated at the rates of exchange
prevailing when such transactions were made. The resulting exchange gain or loss iscredited or charged to income.
The balance sheet accounts of the overseas consolidated subsidiaries (except for net assets
excluding minority interests) are translated into yen at the rate of exchange in effect at thebalance sheet date. The components of net assets excluding minority interests aretranslated at their respective historical rates of exchange. Revenue and expense accounts
are translated into yen at the average rate of exchange in effect during the year.
Translation adjustments have been presented as a component of net assets and minority
interests in the accompanying consolidated financial statements.
(d) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks withdrawable on
demand, and short-term investments which are readily convertible into cash subject to an
insignificant risk of any changes in their value and which were purchased with an original
maturity of three months or less.

11

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

1.

Summary of Significant Accounting Policies (continued)(e) Securities
The accounting standard for financial instruments requires that securities other than thoseof subsidiaries and affiliates be classified into three categories: trading securities, held-tomaturity debt securities or other securities. Under this standard, trading securities arecarried at fair value and gain or loss, both realized and unrealized, is credited or charged
to income. Held-to-maturity debt securities are carried at amortized cost. Marketablesecurities classified as other securities are carried at fair value with any changes in
unrealized holding gain or loss, net of the applicable income taxes, reported as a separate
component of net assets. Non-marketable securities classified as other securities arecarried at cost. Cost of securities sold is determined principally by the moving averagemethod.
(f) Derivatives
Derivatives are measured at fair value.
(g) Inventories
Inventories of the Company and its domestic consolidated subsidiaries are principallystated at the lower of cost or net selling value, cost being determined by the averagemethod. Inventories of overseas consolidated subsidiaries are stated at the lower of costor net selling value, cost being determined by the moving average method.
(h) Property, plant and equipment and depreciation (except for leased assets)
Depreciation of property, plant and equipment is calculated by the declining-balancemethod over the estimated useful lives of the respective assets, except that the straightline method is applied to buildings (other than structures attached to the buildings)
acquired on or after April 1, 1998.
Depreciation of property, plant and equipment at overseas consolidated subsidiaries iscalculated by the straight-line method.
The useful lives adopted for calculating depreciation are principally as follows:
Buildings and structures
Machinery, equipment and vehicles

3 to 60 years
3 to 36 years

12Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

1.

Summary of Significant Accounting Policies (continued)(i) Research and development costs
Research and development costs are charged to income as incurred.
(j) Leases
Leased assets under finance lease transactions that transfer ownership to the lessee aredepreciated by the same method used for owned fixed assets.
Leased assets under finance lease transactions which do not transfer ownership of theleased assets to the lessee are depreciated to a residual value of zero by the straight-line
method using the contract term as the useful life. Among the finance lease transactions
which do not transfer ownership of the leased assets to the lessees, those that started onor before March 31, 2008 are accounted for in the same manner as operating leases.
(k) Allowance for doubtful receivables
The Group provides an allowance for doubtful receivables at an amount calculated basedon their historical experience of bad debts on ordinary receivables plus an additional
estimate of probable specific bad debts from customers experiencing financial difficulties.
(l) Allowance for bonuses to employees
The Company and its domestic consolidated subsidiaries provide an allowance forbonuses to employees based on the estimated amount to be paid to employees after thebalance sheet date, which is attributable to the current fiscal year.
(m) Accrued retirement benefits for directors and corporate auditors
The directors and corporate auditors of the Company’s domestic consolidated subsidiaries
have customarily been entitled to lump-sum payments under the unfunded retirement
benefit plans. Accrued retirement benefits for these directors and corporate auditors
have been provided at an estimated amount based on each consolidated subsidiary’s
internal rules.

13

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

1.

Summary of Significant Accounting Policies (continued)(n) Retirement benefits
The retirement benefit obligation is attributed to each period by the straight-line method
over the estimated years of service of the eligible employees.
Prior service cost is being amortized as incurred by the straight-line method over a periodof principally 10 years, which is within the estimated average remaining years of serviceof the eligible employees.
Actuarial gain or loss is amortized in the year following the year in which the gain or loss
is recognized by the straight-line method over a period of principally 10 years, which iswithin the estimated average remaining years of service of the eligible employees.
Certain consolidated subsidiaries calculate liability for retirement benefits and retirement
benefit expenses for the defined benefit corporate pension plans and the retirement lumpsum plans based on the amount which would be payable at the year end if all eligible
employees terminated their services voluntarily (“Simplified method”).
(o) Income taxes
Deferred income taxes are provided for temporary differences between the balances ofassets and liabilities for financial reporting purposes and the corresponding balances for
tax reporting purposes.
(p) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive ofconsumption taxes. Consumption taxes and local consumption taxes paid not offset byconsumption taxes and local consumption taxes received in accordance with Consumption
Tax Act of Japan are charged to income when incurred.
(q) Recognition of revenues and costs of construction contracts
Revenues and costs of construction contracts of which the percentage of completion canbe reliably estimated, are recognized by the percentage-of-completion method. The
percentage of completion is calculated at the cost incurred as a percentage of the estimatedtotal cost. The completed-contract method continues to be adopted for contracts forwhich the percentage of completion cannot be reliably estimated.

14

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

1.

Summary of Significant Accounting Policies (continued)(r) Hedge accounting
Gain or loss on derivatives designated as hedging instruments is deferred until the loss orgain on the underlying hedged items is recognized. Receivables hedged by forward
foreign exchange contracts which meet certain conditions are translated at thecorresponding foreign exchange contract rates (“Allocation method”). The evaluationof effectiveness of such forward foreign exchange contracts is omitted because significant
terms of the hedging instruments and underlying hedged items are the same and theCompany assumes that movements of cash flows are completely offset.
(s) Accounting standards issued but not yet effective
Accounting standards for retirement benefits
On May 17, 2012, the Accounting Standards Board of Japan (“ASBJ”) issued“Accounting Standard for Retirement Benefits” (ASBJ Statement No.26) and “Guidanceon Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25). The
standard provides guidance for the accounting for unrecognized actuarial differences andunrecognized prior service costs, the calculation methods for retirement benefit obligationand service costs, and enhancement of disclosures taking into consideration
improvements to financial reporting and international trends.
Revisions to the calculation methods for the retirement benefit obligation and service costs arescheduled to be adopted from the beginning of the fiscal year ending March 31, 2015. However,the standard and guidance will not be applied retrospectively to the consolidated financial
statements of prior years because transitional treatment is provided in the standard andguidance.
The Company is in the process of evaluating the effect on its consolidated financial
statements from the adoption of these accounting standards.

15

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

2.

Change in Accounting Policies

The Company and its domestic consolidated subsidiaries adopted “Accounting Standard for
Retirement Benefits” (ASBJ Statement No.26 of May 17, 2012) and “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No.25 of May 17, 2012) (except for
certain provisions described in the main clause of Section 35 of the standard and in the mainclause of Section 67 of the guidance) as of the end of the fiscal year ended March 31, 2014.
These accounting standards require entities to apply a revised method for recording theretirement benefit obligations, after deducting pension plan assets, as a liability for retirement
benefits. In addition, unrecognized actuarial differences and unrecognized prior service
costs are recorded as a liability for retirement benefits. Concerning the application of the
Accounting Standard for Retirement Benefits, based on the provisional treatment set out inClause 37 of the standard, the effects of such changes in the current fiscal year have beenrecorded in retirement benefits liability adjustments through accumulated othercomprehensive income.
As a result of this change, liability for retirement benefits was recognized in the amount of¥9,615 million ($93,422 thousand), accumulated other comprehensive income decreased by¥1,511 million ($14,681 thousand) and minority interests decreased by ¥204 million ($1,982
thousand) as of March 31, 2014. In addition, net assets per share decreased by ¥9.6 ($0.09)
as of March 31, 2014.

3.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made at the rate of ¥102.92 = U.S.$1.00, the approximate
exchange rate prevailing on March 31, 2014. The translation should not be construed as arepresentation that yen have been, could have been, or could in the future be, converted into
U.S. dollars at the above or any other rate.

16

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

4.

Cash and Cash Equivalents

A reconciliation of cash and deposits shown in the accompanying consolidated balance sheet
to cash and cash equivalents shown in the accompanying consolidated statement of cash flows
at March 31, 2013 and 2014 is presented as follows:
Millions of yen
2013
2014
Cash and deposits
Investment trust funds included in“Marketable securities”
Beneficiary interests in trusts included in“Other current assets”
Time deposits with a maturity of morethan three months
Cash and cash equivalents

5.

Thousands of
U.S. dollars
2014¥ 27,406¥ 26,877$ 261,145

8,303

5,404

52,506

1,000

1,000

9,716

(371)
¥ 36,338(2,001)¥ 31,280(19,442)$ 303,925

Financial Instruments

Overview(a) Policy for financial instruments
In consideration of plans for capital investment, the Group primarily utilizes cash on hand.
In case of a lack of cash on hand, the Group raises funds by bond issuances or bankborrowings. The Group manages temporary cash surpluses through low-risk financial
assets. The Group uses derivatives for the purpose of reducing risk and does not enter
into derivatives for speculative purposes.
(b) Types of financial instruments and related risk
Trade receivables, notes and accounts receivables, are exposed to credit risk in relation tocustomers. In addition, the Group is exposed to foreign currency exchange risk arisingfrom trade receivables denominated in foreign currencies.
Investments in securities and marketable securities are exposed to market risk. The
former is composed mainly of the shares of common stock of other companies with which
the Group has business relationships, held-to-maturity debt securities and hybrid financial
instruments containing embedded derivatives. The latter is composed mainly ofcommercial paper and negotiable certificates of deposits.
Trade payables, notes and accounts payable, have payment due dates within six months.
The Group is exposed to foreign currency exchange risk arising from trade payables
denominated in foreign currencies.
17

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

5.

Financial Instruments (continued)

Overview (continued)(b) Types of financial instruments and related risk (continued)
Regarding derivatives, the Group enters into forward foreign exchange contracts to reduce
the foreign currency exchange risk arising from trade receivables, trade payables andloans receivables denominated in foreign currencies for the purpose of efficient risk
management.
Information regarding the method of hedge accounting is addressed in Note 1 (r).
(c) Risk management for financial instruments
For trade receivables, each related division monitors the credit worthiness of their main
customers periodically, and monitors due dates and outstanding balances by customer.
In addition, the Company and its domestic consolidated subsidiaries are making efforts to
identify at an early point and mitigate risks of bad debts from customers who havefinancial difficulties.
The overseas consolidated subsidiaries request customers to issue non-cancelable lettersof credit to hedge credit risk.
The Group only acquires held-to-maturity debt securities and commercial paper issued bycompanies with high credit ratings or sound credit profiles. Accordingly, the Group
believes that the credit risk deriving from such securities is insignificant. The Groupalso believes that the credit risk of derivatives is insignificant as the Group enters into
derivative transactions only with financial institutions with high credit ratings.
For trade receivables and trade payables denominated in foreign currencies, the Group
enters into forward foreign exchange contracts to hedge the risks arising from fluctuations
in foreign exchanges rates.
For marketable securities and investments in securities, the Group periodically reviews
the fair value of such financial instruments and the financial position of the issuers. In
addition, the Group continuously evaluates whether or not securities other than thoseclassified as held-to-maturity debt securities should be maintained taking into accounttheir fair value and relationships with the issuers.
The Group enters into derivative transactions based on internal regulations which set forth
the purpose, contents, counterparties, holding risk, maximum upper limit of loss amounton the position and the reporting and approval of risk amounts.

18

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

5.

Financial Instruments (continued)

Overview (continued)(c) Risk management for financial instruments (continued)
Based on a report from each division, the Group prepares and updates its cash flow plans
on a timely basis and maintains sufficient solvency to manage liquidity risk. In order toprovide for unexpected cash requirements, the Company has entered into the line-of-credit
agreements with certain financial institutions and its overseas consolidated subsidiaries isable to obtain short-term borrowings from certain financial institutions.
(d) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market prices, if available.
When there are no quoted market prices available, fair value is reasonably estimated.
Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value.
Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet, estimated fair value
and unrealized loss as of March 31, 2013 and 2014 are shown in the following table. The
following table does not include financial instruments for which it is extremely difficult todetermine the fair value.

Assets:Cash and deposits
Notes and accounts receivable
Unconsolidated subsidiaries and affiliates
Trade
Marketable securities and investments insecurities
Total assets

Carrying value

Millions of yen
2013
Estimated
fair value¥ 27,406¥ 27,406

12,554
22,344

12,554
22,344––(137)¥ (137)30,41030,273¥ 92,714¥ 92,577

387
15,176¥ 15,563

¥

(20)

¥

Liabilities:
Notes and accounts payable
Unconsolidated subsidiaries and affiliates
Trade
Total liabilities¥

Derivative transactions*¥

Unrealized loss
¥

–

387
15,176¥ 15,563

¥
¥

–
–
–

(20)

¥

–

19

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

5.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)

Assets:Cash and deposits
Notes and accounts receivable
Unconsolidated subsidiaries and affiliates
Trade
Marketable securities and investments insecurities
Total assets
Liabilities:
Notes and accounts payable
Unconsolidated subsidiaries and affiliates
Trade
Total liabilities
Derivatives*

Carrying value

Millions of yen
2014
Estimated
fair value¥ 26,877¥ 26,877

14,36426,02314,36426,023––35,500¥ 102,764

35,434¥ 102,698(66)¥ (66)

¥

¥

¥

539
18,805¥ 19,344¥(210)

Unrealized loss¥

539
18,805¥ 19,344
¥
(210)

¥
¥

–

–
–
–
–

Thousands of U.S. dollars
2014
Estimated
Carrying value
fair value
Unrealized loss
Assets:Cash and deposits
Notes and accounts receivable
Unconsolidated subsidiaries and affiliates
Trade
Marketable securities and investments insecurities
Total assets
Liabilities:
Notes and accounts payable
Unconsolidated subsidiaries and affiliates
Trade
Total liabilities
Derivatives**$ 261,145

139,565
252,847

139,565
252,847––

344,928$ 998,485

344,287$ 997,844(641)$ (641)

$

$

$

5,237
182,715$ 187,952$ (2,040)

5,237
182,715$ 187,952$ (2,040)$–$ 261,145

$
$

–
–
–
–

The value of assets and liabilities arising from derivative transactions is shown at net value,
and with the amount in parentheses representing net liability position.

20

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

5.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
Calculation method of estimated fair value of financial instruments is as follows:
Cash, deposits, notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates thefair value.
Marketable securities and investments in securities
The fair value of equity securities is based on quoted market prices. The fair value of debt
securities is based on either quoted market prices or the prices provided by the financial
institutions making markets in these securities. For information on securities classified byholding purpose, please refer to Note 6.
Notes and accounts payable
Since this item is settled in a short period of time, its carrying value approximates the fairvalue.
Derivative transactions
Please refer to Note 21.
The carrying value of financial instruments without determinable market value at March 31,
2013 and 2014 is presented as follows:

Unlisted stocks
Money trusts
Investment in a limited liability
partnership
Preferred stocks
Total

Millions of yen
2013
2014
¥ 216
¥ 432
4,304
–
213
883
¥ 5,616186
647¥ 1,265

Thousands of
U.S. dollars
2014$ 4,198
–

1,807
6,286
$ 12,291

Because no quoted market price is available, it is extremely difficult to determine the fair value.
Therefore, the above financial instruments are not included as part of the amounts presented
in the preceding fair value of financial instruments table.

21

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

5.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
The redemption schedule for monetary assets and investments by maturity dates at March 31,
2013 and 2014 is as follows:

Due in one
year or less
Deposits
Notes and accounts receivable
Marketable securities andinvestments in securities
Held-to-maturity debt securities
National and local
government bonds
Corporate bonds
Other marketable securities withmaturities
Bonds
Other
Total

–
–

10
4,500

–
–

500

–
2,500

–

300
–
¥ 300

200
–
¥ 740

–
–
¥ 2,500

4,100¥ 70,867¥ 26,811
40,387¥¥––

Due after ten
years

34,898¥ 27,359

Due in one
year or less
Deposits
Notes and accounts receivable
Marketable securities andinvestments in securities
Held-to-maturity debt securities
National and local
government bonds
Corporate bonds
Other marketable securities
with maturities
Bonds
Other
Total

Millions of yen
2013
Due after one Due after five
year throughyears throughfive years
ten years

40

Millions of yen
2014
Due after one Due after five
year through years throughfive years
ten years
¥

–
–

¥

¥

–
–

–
–

Due after
ten years
¥

–
–

–
–

10
–

40
500

–
1,800

–
4,700
¥ 71,898

300
–
¥ 310

200
–
¥ 740

–
–
¥ 1,800

22

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

5.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
Thousands of U.S. dollars
2014
Due after one
year throughfive years

Due in one
year or less
Deposits
Notes and accounts receivable
Marketable securities andinvestments in securities
Held-to-maturity debt securities
National and local
government bonds
Corporate bonds
Other marketable securities withmaturities
Bonds
Other
Total

6.

$ 260,503
392,412$Due after five
years throughten years––

Due after ten
years

–
–

$

–
–

$

–
–

97
–

389
4,858

–
17,489–45,667$ 698,582

2,915–$ 3,012

1,943–$ 7,190––$ 17,489

Securities

Marketable securities classified as held-to-maturity debt securities at March 31, 2013 and 2014
are summarized as follows:

Carrying value
Securities whose estimated fair value
exceeds their carrying value:
Government bonds
Corporate bonds
Securities whose estimated fair value does
not exceed their carrying value:
Corporate bonds
Total

51
3,506
3,557

¥

3,879

3,673

¥ 7,367¥ 7,230(206)¥ (137)

¥

50
3,438
3,488

Millions of yen
2013
Estimated
Unrealized gain
fair value(loss)

¥

1
68
69

23

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

6.

Securities (continued)

Carrying
value
Securities whose estimated fair value
exceeds their carrying value:
Government bonds
Corporate bonds
Securities whose estimated fair value
does not exceed their carrying value:
Corporate bonds
Total

¥

50
443
493

1,724
¥ 2,217

Millions of yen
2014
Estimated
fair value¥

Unrealized
gain (loss)

51
500
551

¥

1,601
¥ 2,152

1
57
58

(123)
¥ (65)

Thousands of U.S. dollars

Securities whose estimated fair value
exceeds their carrying value:
Government bonds
Corporate bonds
Securities whose estimated fair value
does not exceed their carrying value:
Corporate bonds
Total

Carrying
value

2014
Estimated
fair value

$

$

486
4,304
4,790

16,751$ 21,541

496
4,858
5,354

15,555$ 20,909

Unrealized
gain (loss)

$

10
554
564

(1,196)$ (632)24

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

6.

Securities (continued)

Other securities with determinable market value at March 31, 2013 and 2014 are summarized
as follows:

Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Corporate bonds
Other
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Corporate bonds
Total

Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Corporate bonds
Other
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Other
Total

Carrying
value

Millions of yen
2013
Acquisition
costs

Unrealized
gain (loss)¥ 18,960
710
104
19,774¥ 8,495
700
97
9,292

¥ 10,46510
710,482

2,976
293
3,269
¥ 23,043

3,838
301
4,139
¥ 13,431

(862)
(8)
(870)
¥ 9,612

Carrying
value

Millions of yen
2014
Acquisition
costs

Unrealized
gain (loss)¥ 23,356
1,012
110
24,478¥ 9,681
1,001
97
10,779¥ 13,675
11
13
13,699

3,401
5,404
8,805
¥ 33,283

3,867
5,404
9,271
¥ 20,050

(466)
–

(466)
¥ 13,233

25

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

6.

Securities (continued)
Thousands of U.S. dollars
2014
Carrying
Acquisition
Unrealized
value
costs
gain (loss)

Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Corporate bonds
Other
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Other
Total

$ 226,933
9,833
1,069
237,835$ 94,063
9,726
943
104,732$ 132,870
107
126
133,103

33,04552,50785,552$ 323,387

37,57352,50790,080$ 194,812(4,528)–(4,528)$ 128,575

Sales of securities classified as other securities for the years ended March 31, 2013 and 2014
are summarized as follows:

Millions of yen
2013
2014
Sales
Aggregate gain

¥ 1,002
334

¥ 354
289

Thousands of
U.S. dollars
2014$ 3,440
2,808

The Group recorded loss on impairment of investments in securities with determinable market
value of ¥405 million and ¥45 million ($437 thousand) for the years ended March 31, 2013
and 2014, respectively. Loss on impairment is recorded on securities whose fair value has
declined by 50% on more, or whose fair value has declined by 30% on more, but less than
50%, if the decline is deemed to be irrecoverable.

26

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

7.

Inventories

The following is a summary of inventories at March 31, 2013 and 2014:

Finished goods
Work in process
Raw materials and supplies

Millions of yen
2013
2014
¥ 12,213¥ 14,396
3,216
3,976
8,492
11,529¥ 23,921¥ 29,901

Thousands of
U.S. dollars
2014$ 139,876
38,632
112,019$ 290,527

Gain on reversal of devaluation of inventories included in cost of sales totaled ¥495 million
for the year ended March 31, 2013 and loss on devaluation of inventories included in cost of
sales totaled ¥434 million ($4,217 thousand) for the year ended March 31, 2014.

8.

Loss on Impairment of Fixed Assets

The Company and its consolidated subsidiaries recognized loss on impairment of fixed assets
for the years ended March 31, 2013 and 2014 as follows:

Location
Nishiwaki City,
Hyogo Prefecture

Miyazaki City,
Miyazaki Prefecture
Nerima City,
Tokyo Prefecture
Hakuba Village,
Nagano Prefecture
Suzaka City,
Nagano Prefecture
Total

Use
Classification
Golf course Land, buildings
and structuresand machinery,equipment andvehiclesIdle assets Land
Idle assets

Millions of yen
2013
2014

Thousands of
U.S. dollars
2014

¥ 133

¥ –

$ –

10

7

68

6

–

–

1

–

–

0
¥ 150

0
¥ 7

0
$ 68

Land

Idle assets

Land

Idle assets

Land

27

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

8.

Loss on Impairment of Fixed Assets (continued)

The Company and its consolidated subsidiaries group fixed assets by management segment,each of which continuously records cash receipts and payments. They group idle assets not
utilized in their operations on an individual asset basis.
Consequently, the Company and its consolidated subsidiaries have written down the carrying
values of the golf course and its asset group whose operating income has been continuously
negative to their respective net recoverable values, and have recorded a related loss on
impairment of fixed assets of ¥133 million for the year ended March 31, 2013, which consistedof land of ¥98 million, building and structures of ¥34 million and machinery, equipment andvehicles of ¥1 million.
In addition, the Company and its consolidated subsidiaries have written down the carrying
values of the idle assets owned by the Company and its consolidated subsidiaries for the years
ended March 31, 2013 and 2014, which are not expected to be utilized in the future, to theirrespective net recoverable values, and have recorded a related loss on impairment of fixed
assets of ¥17 million and ¥7 million ($68 thousand) for the years ended March 31, 2013 and2014, respectively. This loss on impairment of fixed assets consisted of land of ¥17 million
for the year ended March 31, 2013, and land of ¥7 million ($68 thousand) for the year ended
March 31, 2014.
The recoverable amounts of these assets are measured at estimated selling value, at a valuationassessed for property tax purposes or at the comparable published land prices.

9.

Insurance Income and Loss on DisasterIn connection with a fire at the Ichikawa Plant in July 2013, the Company recorded a loss on
disaster of ¥948 million ($9,211 thousand) including overhead production costs incurred
during the suspension of operations and repair expenses, mainly for machinery and equipment,
and the corresponding insurance income of ¥914 million ($8,881 thousand) for the year ended
March 31, 2014.

10. Short-Term Bank Loans and Guarantee Deposits
Short-term bank loans were nil at March 31, 2013. Short-term bank loans of ¥960 million($9,328 thousand) included in other current liabilities at an average annual interest rate was
2.63% at March 31, 2014
Guarantee deposits consisted of interest-free deposits, most of which were golf-clubmembership deposits, and interest-bearing deposits, which were principally deposits from
customers at average annual interest rates of 0.82% and 0.80% at March 31, 2013 and 2014,
respectively.
28

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

10. Short-Term Bank Loans and Guarantee Deposits (continued)
Interest-free deposits and interest-bearing deposits at March 31, 2013 and 2014 were as
follows:

Interest-free deposits
Interest-bearing deposits

Millions of yen
2013
2014
¥ 2,524¥ 2,352723
768¥ 3,247¥ 3,120

Thousands of
U.S. dollars
2014$ 22,853
7,462$ 30,315

11. Line-of-credit Agreements
In order to achieve more efficient and flexible financing, the Company has concluded line-ofcredit agreements with certain financial institutions. The status of these lines of credit atMarch 31, 2013 and 2014 was as follows:

Millions of yen
2013
2014
Lines of credit
Credit utilized
Available credit¥ 19,450–¥ 19,450¥ 19,450–¥ 19,450

Thousands of
U.S. dollars
2014$ 188,982–$ 188,982

12. Pledged Assets
Assets pledged as collateral for indebtedness at March 31, 2013 and 2014 are summarized asfollows:

Cash and deposits
Other current assets
Investments in securities
Other assets

Millions of yen
2013
2014
¥ 60
¥ 60
69
–
17
17
179
315
¥ 325
¥ 392

Thousands of
U.S. dollars
2014
$ 583
–
165
3,061
$ 3,809

Indebtedness secured by these assets as collateral was ¥52 million and ¥52 million ($505
thousand), a component of other current liabilities at March 31, 2013 and 2014 respectively.

29

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

13. Contingent Liabilities
The Company was contingently liable for guarantees of borrowings from financial institutions
and others of an unconsolidated subsidiary in the aggregate amounts of ¥47 million and ¥31
million ($301 thousand), at March 31, 2013 and 2014, respectively.
In addition, the Company is repairing machinery supplied to a customer located in Africa due
to a product defect, damages during the shipment and other reasons. The Company wascontingently liable for additional repair costs in the amount of approximately ¥300 million and¥300 million ($2,915 thousand), at March 31, 2013 and 2014, respectively. The total amountto be paid by the Company will depend on future negotiations with the manufacturer of themachinery.

14. Retirement Benefits Plans
The Company and its domestic consolidated subsidiaries have two types of defined benefit
retirement plans: a defined benefit pension plan and a lump sum payment plan. Moreover,
two overseas consolidated subsidiaries have a defined benefit pension plan. Additional
severance payments may also be provided for an early retirement program. Furthermore, theCompany has adopted a retirement benefit trust.
Certain consolidated domestic subsidiaries are accounted for using Simplified method for
calculating liability for retirement benefits and retirement benefit expenses.
For the year ended March 31, 2013
The funded and accrued status of the employees’ defined-benefits retirement plans of theGroup, and the amounts recognized in the accompanying consolidated balance sheet at March
31, 2013 was summarized as follows:

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial loss
Unrecognized prior service cost
Net retirement benefit obligation recognized in the
consolidated balance sheet
Prepaid pension expenses
Accrued retirement benefits for employees

Millions of yen
2013¥ (14,155)
4,208(9,947)
3,111
(13)

¥

(6,849)614(7,463)

As permitted under the accounting standards for retirement benefits, certain domestic
consolidated subsidiaries have calculated their retirement benefit obligation based on the
Simplified method.
30

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

14. Retirement Benefits Plans (continued)
The components of retirement benefit expenses for employees for the year ended March 31,
2013 was outlined as follows:
Millions of yen
2013
¥ 639
226
(66)
195
(1)
¥ 993

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Retirement benefit expenses for employees

Retirement benefit expenses for certain domestic subsidiaries, whose benefit obligation is
calculated based on the amount which would be payable at the year end if all eligible
employees terminated their services voluntarily, have been included in service cost.
The assumptions used in accounting for the above benefit plans for the years ended March 31,
2013 was as follows:
2013
Discount rate
Expected rate of return on plan assets

Principally 1.3%
Principally 1.9%

31

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

14. Retirement Benefits Plans (continued)
The changes in the retirement benefit obligation during the year ended March 31, 2014 are as
follows:

Retirement benefit obligation at April 1, 2013
Service cost*
Interest cost
Actuarial differences
Retirement benefit paid
Prior service cost
Retirement benefit obligation at March 31, 2014*

Millions of yen
2014¥ 14,156
641
176
(209)
(914)
565
¥ 14,415

Thousands of
U.S. dollars
2014$ 137,544
6,228
1,710
(2,031)(8,881)5,490$ 140,060

Retirement benefit expenses for certain consolidated subsidiaries, whose benefit
obligation is calculated by the Simplified method, have been included in service cost.

The changes in plan assets at fair value during the year ended March 31, 2014 are as follows:

Plan assets at fair value at April 1, 2013
Expected return on plan assets
Actuarial differences
Contributions by the employers
Retirement benefit paid
Other*
Plan assets at fair value at March 31, 2014*

Millions of yen
2014¥ 4,208
75
246
598
(387)
60
¥ 4,800

Thousands of
U.S. dollars
2014$ 40,886
729
2,390
5,810
(3,760)583$ 46,638“Other” mainly consists of the effect of foreign currency exchange translation adjustmentson pension plan assets at fair value attributable to an overseas subsidiary and thedifference of actual and expected returns on plan assets at fair value from the retirement
benefit plans of consolidated subsidiary to which the Simplified method applied.

32

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

14. Retirement Benefits Plans (continued)
The following table sets forth the funded status of the plans and the amounts recognized in the
consolidated balance sheet as of March 31, 2014 for the Company’s and the consolidated
subsidiaries’ defined benefit plans:

Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Liability for retirement benefits in the consolidatedbalance sheet, net
Liability for retirement benefits
Liability for retirement benefits in the consolidatedbalance sheet, net

Millions of yen
2014¥ 14,402(4,800)9,602
13Thousands of
U.S. dollars
2014$ 139,934(46,638)
93,296
126

9,615

93,422

9,615

93,422¥ 9,615$ 93,422

Note: The above includes retirement benefit plans calculated under the Simplified method.
The components of retirement benefit expense for the year ended March 31, 2014 are as
follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior service cost
Retirement benefit expense

Millions of yen
2014
¥ 641
176
(75)
223
(2)
¥ 963

Thousands of
U.S. dollars
2014$ 6,228
1,710
(729)
2,167
(19)
$ 9,357

The balance of prior service cost and actuarial loss included in accumulated othercomprehensive income before the deduction of tax effects as of March 31, 2014 is summarized
as follows:
Thousands ofMillions of yen
U.S. dollars
2014
2014
Prior service cost
¥ (11)$ (107)2,523
24,514
Actuarial loss
¥ 2,512$ 24,407
Total
33

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

14. Retirement Benefits Plans (continued)
The fair value of plan assets, by major category, as a percentage of total plan assets as of March
31, 2014 is as follows:
2014
28 %
42
17
13
100 %

Bonds
StocksGeneral account at insurance companies
Other
Total

Note: 16% of the total plan assets is held in a retirement benefit trust.
The expected return on assets has been estimated based on the anticipated allocation to each
asset class and the expected long-term returns on assets held in each category.
The assumptions used in the actuarial calculation for the above defined benefit pension plans
for the year ended March 31, 2014 are as follows:
2014
Discount rate
Expected rate of return on plan assets(weighted average)

Principally 1.3%
1.9%

The contribution paid by consolidated subsidiaries to the defined contribution pension plansamounted to ¥35 million ($340 thousand) for the year ended March 31, 2014.

34

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

15. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprise
corporation, enterprise and inhabitants’ taxes which, in the aggregate, resulted in statutory tax
rate of approximately 37.9% for the years ended March 31, 2013 and 2014.
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March 31,
2013 and 2014 as a percentage of income before income taxes and minority interests is asfollows:

Statutory tax rate
Permanently non-deductible expenses
Per capita portion of inhabitants’ taxes
Differences in tax rates applicable to the overseas
consolidated subsidiaries
Cash dividends received from the overseas
consolidated subsidiary
Adjustments of accounting standards applied by
the overseas consolidated subsidiary
Foreign tax credit
Tax loss carryforwards of consolidated
subsidiaries
Increase in valuation allowance
Permanently non-taxable income
Tax credit for research and development costs
Equity in earnings of an affiliate
Decrease in deferred tax assets resulting fromchange in the statutory tax rate applicable to thefiscal years beginning on or after April 1, 2014
Other
Effective tax rates

2013
37.9 %
0.9
1.3

2014
37.9 %
0.6
0.7

(1.7)

(3.4)

(1.4)

1.4

(1.9)
1.6

1.5
0.5

1.8
1.7
(2.1)
(0.4)
(0.8)

5.2
2.5
(1.2)
(0.3)
(0.8)

–
(1.0)
35.9 %

0.7
0.8
46.1 %

35

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

15. Income Taxes (continued)
The significant components of the deferred tax assets and liabilities of the Group at March 31,
2013 and 2014 are summarized as follows:

Millions of yen
2013
2014
Deferred tax assets:
Accrued retirement benefits for
employees
Liability for retirement benefits
Allowance for doubtful receivables
Accrued enterprise taxes
Accrued bonuses
Loss on devaluation of inventories
Foreign tax credit
Tax loss carryforwards
Loss on impairment of investments insecurities and golf-club memberships
Loss on impairment of fixed assets
Unrealized loss from hedging
instruments
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Dividends from an overseas
consolidated subsidiary
Unrealized holding gain on securities
Land revaluation reserve
Reserve for deferred taxation oncontributions for acquisition of property
Reserve for special depreciation
Other
Total deferred tax liabilities
Net deferred tax liabilities¥ 2,179
–
83
118
312
143
3
620

¥

–
2,993
83
136
318
247
–
520

Thousands of
U.S. dollars
2014

$

253
29,081
806
1,321
3,090
2,400
–
5,052

781
219

770
216

7,482
2,099

1
1,015
5,474
(2,152)
3,322

0
1,031
6,314
(2,176)
4,138

0
9,765
61,349(21,143)
40,206(45)(3,007)
(917)

(142)
(4,279)(917)(1,380)(41,576)(8,910)

(668)
(7)
(144)
(4,788)¥ (1,466)

(643)
(119)
(170)
(6,270)¥ (2,132)(6,248)(1,156)(1,651)(60,921)$ (20,715)36

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

15. Income Taxes (continued)
Note: Net deferred tax liabilities as of March 31, 2013 and 2014 are reflected in the following
accounts in the consolidated balance sheet:

Millions of yen
2013
2014
Current assets
Investments and other assets
Long-term liabilities: Deferred income taxes
Deferred income taxes onland revaluation reserve

¥

739
558
(1,846)
(917)

¥

606
650
(2,471)Thousands of
U.S. dollars
2014
$

5,888
6,316
(24,009)(917)(8,910)The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No.10 of 2014) was
promulgated on March 31, 2014 and, as a result, the Company and its domestic subsidiaries
are no longer subject to the Special Reconstruction Corporation Tax effective for fiscal years
beginning on or after April 1, 2014.
In line with these revisions, the Company and its domestic subsidiaries changed the statutory
tax rate to calculate deferred tax assets and liabilities mainly from 37.9% to 35.5% for
temporary differences expected to be realized or settled from the fiscal year beginning April
1, 2014.
The effect of the announced reduction of the effective statutory tax rate was immaterial.

37

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

16. Other Comprehensive Income
Reclassification adjustments and tax effects of other comprehensive income for the years
ended March 31, 2013 and 2014 are summarized as follows:

Millions of yen
2013
2014
Unrealized holding gain on securities:
Gain arising during the year
Reclassification adjustments
Before tax effectTax effectTotal
Unrealized loss from hedging instruments:
Loss (gain) arising during the year
Before tax effectTax effect
Total
Translation adjustments:
Amount arising during the year
Share of other comprehensive income of anaffiliate accounted for by the equity
method:Amount arising during the year
Total other comprehensive income

Thousands of
U.S. dollars
2014¥ 3,863
121
3,984(1,225)
2,759¥ 3,652(17)
3,635(1,272)
2,363$ 35,484(165)
35,319(12,359)
22,960

(1)
(1)
0
(1)

1
1
(0)
1

10
10
(0)
10

3,565

6,719

65,28326¥ 6,34918¥ 9,101175$ 88,428

38

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

17. Shareholders’ Equity
The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of theamount to be disbursed as distributions of capital surplus (other than the capital reserve) andretained earnings (other than the legal reserve) be transferred to the capital reserve and thelegal reserve, respectively, until the sum of the capital reserve and the legal reserve equals
25% of the capital stock account. Such distributions can be made at any time by resolutionof the shareholders, or by the Board of Directors if certain conditions are met.
The legal reserve of the Company was nil at March 31, 2013 and 2014.
Stock options
The Company has stock option plans. The following stock option plans for certain directors
and executive officers of the Company were approved at annual general meetings of theshareholders for the 2004 and 2005 plans in accordance with the former Commercial Code ofJapan and meetings of the Board of Directors for the 2006 plan through to the 2013 plan inaccordance with the Law.
Stock option expenses charged to income for the years ended March 31, 2013 and 2014
amounted to ¥16 million and ¥27 million ($262 thousand), respectively.
The stock option plans of the Company at March 31, 2013 and 2014 are summarized asfollows:

Date of approval
Number of options granted
Exercisable period
Vesting conditions

Vesting period for services
received

The 2004 plan

The 2005 plan

The 2006 plan

June 29, 2004
81,000From June 30, 2023
to June 29, 2024
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2023
From July 12, 2004 to
the date of the annual
general meeting of
the shareholders forthe fiscal year ending
March 31, 2006

June 29, 2005
62,000From June 30, 2024
to June 29, 2025
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2024
From July 14, 2005 to
the date of the annual
general meeting of
the shareholders forthe fiscal year ending
March 31, 2007

July 14, 2006
53,000From June 30, 2025
to June 29, 2026
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2025
From July 31, 2006 to
the date of the annual
general meeting of
the shareholders forthe fiscal year ending
March 31, 200839

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

17. Shareholders’ Equity (continued)

Date of approval
Number of options granted
Exercisable period
Vesting conditions

Vesting period for services
received

Date of approval
Number of options granted
Exercisable period
Vesting conditions

Vesting period for services
received

The 2007 plan

The 2008 plan

The 2009 plan

July 17, 2007
43,000From June 30, 2026
to June 29, 2027
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2026
From August 1, 2007
to the date of theannual general
meeting of theshareholders for the
fiscal year ending
March 31, 2009

July 15, 2008
60,000From June 30, 2027
to June 29, 2028
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2027
From August 1, 2008
to the date of theannual general
meeting of theshareholders for the
fiscal year ending
March 31, 2010

July 15, 2009
69,000From June 30, 2028
to June 29, 2029
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2028
From August 1, 2009
to the date of theannual general
meeting of theshareholders for the
fiscal year ending
March 31, 2011

The 2010 plan

The 2011 plan

The 2012 plan

July 14, 2010
102,000
From June 30, 2029
to June 29, 2030
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2029
From July 29, 2010 tothe date of the annual
general meeting of
the shareholders forthe fiscal year ending
March 31, 2012

July 15, 2011
98,000From June 30, 2030
to June 29, 2031
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2030
From August 2, 2011
to the date of theannual general
meeting of theshareholders for the
fiscal year ending
March 31, 2013

July 17, 2012
77,000From June 30, 2031
to June 29, 2032
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2031
From August 2, 2012
to the date of theannual general
meeting of theshareholders for the
fiscal year ending
March 31, 201440

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

17. Shareholders’ Equity (continued)
The 2013 plan
Date of approval
Number of options granted
Exercisable period
Vesting conditions

Vesting period for services
received

January 16, 2014
72,000From June 30, 2032
to June 29, 2033
In the event a grantee
resigns from both
positions of director
and executive officer,
the options are
exercisable from the
day following theirresignation until June29, 2032
From July 29, 2013 to
the date of the annual
general meeting of
the shareholders forthe fiscal year ending
March 31, 201541

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

17. Shareholders’ Equity (continued)
Stock option activity plans are summarized as follows:

Number of stock
options which
are not yet
vested:Outstanding at
April 1, 2013
GrantedForfeited
VestedOutstanding at
March 31,
2014
Number ofstock options
which havealready been
vested:Outstanding at
April 1, 2013
VestedExercised
Forfeited
Outstanding at
March 31,2014
Exercise price
Weighted
average fairvalue per stockat the exercise
date
Fair value ofstock options
as of the grantdate

The 2004
plan

The 2005
plan

The 2006
plan

The 2007
plan

The 2008
plan

The 2009
plan

The 2010
plan

The 2011
plan

The 2012
plan

The 2013
plan

15,000–––12,000–––19,000–––21,000–––31,000–––48,000–––61,000–––59,000–––77,000––––72,000––15,00012,00019,00021,00031,00048,00061,00059,00077,00072,000

6,000
–
3,000
–

4,000
–
2,000
–

8,000
–
2,000
–

8,000
–
–
–

23,000–11,000–21,000–––23,000–––19,000
–
–
–

–
–
–
–

–
–
–
–

3,000

2,000

6,000

8,000

12,00021,00023,000–19,000

–

¥

1

¥

1

¥

1

¥

1

¥

1

¥

1

¥

1

¥

1

¥

1

¥

1

¥

442

¥

442

¥

442

¥

–

¥

412

¥

–

¥

–

¥

–

¥

–

¥

–

¥

–

¥

–

¥

478

¥

546

¥

416

¥

365

¥

280

¥

240

¥

204

¥

375

42

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

17. Shareholders’ Equity (continued)
Valuation method for estimating fair value was the Black-Scholes model. The major
assumptions used were as follows:
Major assumptions
Expected volatility
Expected holding period
Expected dividend
Risk-free rate

Note
(a)
(b)
(c)

The 2013 plan
26.286%
10 years¥7.5 per share
0.617%(a) Expected volatility was computed by the actual stock price of the Company during theperiod from January 2004 to December 2013.
(b) The expected dividend was calculated at the actual amount paid for the year ended March
31, 2013.
(c) The risk-free rate was determined based on Japanese government bonds whose
redemption period corresponds to the expected holding period described above.
Because it is difficult to reasonably estimate the number of stock options that will expire, theestimation reflects only the actual number of expired stock options.
Treasury stock
Movements in treasury stock during the years ended March 31, 2013 and 2014 are summarized
as follows:

Treasury stock (*1)

April 1, 2012
24,976,317

Treasury stock (*2)

April 1, 2013
26,402,891

Number of shares
2013
Increase
Decrease
1,427,843
1,269
Number of shares
2014
Increase
Decrease
3,145,426
3,018,000

March 31, 2013
26,402,891

March 31, 2014
26,530,317(*1) The increase in the number of shares of treasury stock consists of 1,411,000 shares due tothe purchase of shares based on the resolution of the Board of Directors meeting, 6,693
shares due to the purchase of fractional shares of less than one voting unit and 10,150
shares attributable to the Company acquired by its affiliates under the equity method.
The decrease in the number of shares of treasury stock (1,269 shares) is due to the sales
to shareholders of 1,269 fractional shares at their request.
43

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

17. Shareholders’ Equity (continued)(*2) The increase in the number of shares of treasury stock consists of 3,118,000 shares due topurchase of shares based on the resolution of the Board of Directors meeting, 20,303
shares due to the purchase of fractional shares of less than one voting unit and 7,123 shares
attributable to the Company acquired by its affiliates under the equity method.
The decrease in the number of shares of treasury stock consist of 3,000,000 shares due toa third-party allotment based on the resolution of the Board of Directors meeting and
18,000 shares due to the exercise of stock options.

18. Land Revaluation
At March 31, 2000 and 2002, certain consolidated subsidiaries and an affiliate revalued theirland held for business use in accordance with the “Law on Land Revaluation.” Differenceson land revaluation have been accounted for as land revaluation reserve under net assets andare stated at the Company’s share of the net amount of the relevant tax effect. The method
followed for land revaluation was determined in accordance with the “Enforcement Act
Concerning Land Revaluation.”
The fair value of the land revalued at March 31, 2000 and 2002 was less than the corresponding
carrying value by the following amounts at March 31, 2013 and 2014:Land revalued at March 31, 2000
Land revalued at March 31, 2002

Millions of yen
2013
2014
¥ (293)¥ (312)(623)(662)¥ (916)¥ (974)

Thousands of
U.S. dollars
2014$ (3,032)(6,432)$ (9,464)

A certain portion of land revalued at March 31, 2000 and 2002 is related to real estate forinvestment, rental and idle properties at March 31, 2013 in the amounts of ¥11 million and¥239 million, respectively.
A certain portion of land revalued at March 31, 2000 and 2002 is related to real estate forinvestment, rental and idle properties at March 31, 2014 in the amounts of ¥13 million ($126
thousand) and ¥271 million ($2,633 thousand), respectively.

19. Research and Development Costs
Research and development costs included in selling, general and administrative expenses
totaled ¥427 million and ¥538 million ($5,227 thousand) for the years ended March 31, 2013
and 2014, respectively.
44

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

20. Leases(1) Finance leases
The Company and its consolidated subsidiaries lease mainly machinery, vehicles and others(machinery and equipment) as leased assets under finance lease transactions which transfer
ownership to the Group and mainly, information processing systems as leased assets underfinance lease transactions which do not transfer ownership to the Group.
The depreciation method for leased assets is addressed in Note 1. Summary of Significant
Accounting Policies (j) Leases.
The following pro forma amounts represent the acquisition costs, accumulated depreciationand net book value of the leased assets at March 31, 2013 and 2014, which would have beenreflected in the accompanying consolidated balance sheet if finance leases, other than thosewhich transfer the ownership of the leased assets to the Group, that started on or before March
31, 2008 (which are currently accounted for as operating leases) had been capitalized:
Millions of yen

Machinery andequipment

Acquisition
costs

2013
Accumulated
depreciation

Net bookvalue

Acquisition
costs

2014
Accumulated
depreciation

Net book
value

¥ 10

¥8

¥2

¥6

¥6

¥0

Thousands of U.S dollars
2014
Acquisition Accumulated Net bookcosts
depreciation
value
Machinery andequipment

$

58

$

58

$0

The related lease payments and depreciation for the years ended March 31, 2013 and 2014
were as follows:

Lease payments
Depreciation

Millions of yen
2013
2014
¥2
¥1
2
1

Thousands of
U.S. dollars
2014
$ 10
10

Depreciation is calculated by the straight-line method over the respective lease terms assuming
a nil residual value.
The related future minimum lease payments (including the interest portion thereon)
subsequent to March 31, 2014 under finance leases other than those which transfer theownership of the leased assets to the Group are summarized as follows:Year ending March 31,
2015

Millions of yen¥ 0

Thousands of
U.S. dollars$
045

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

20. Leases (continued)(1) Finance leases (continued)
No loss on impairment has been recorded on leased assets for the years ended March 31, 2013
and 2014.

(2) Operating leases
Future minimum lease receipts subsequent to March 31, 2014 under operating leases are as
follows:

Years ending March 31,

Millions of yen
¥ 16
136
¥ 152

2015
2016 and thereafterThousands of
U.S. dollars
$ 155
1,322
$1,477

There were no operating leases for the year ended March 31, 2013.

21. Derivatives
The outstanding currency-related derivatives positions not designated as hedging instruments
at March 31, 2013 and 2014 are as follows:
Thousands of
New Taiwan dollars

Millions of yen
2013

Type of transaction
Over-the-counter transactions
Forward foreign exchange contracts:
Selling USD

Contract value(notional
principal amount)Contract value
over one year

Estimated
fair value

Unrealized
loss

TWD 243,109

TWD –

¥ (0)

¥ (0)

Thousands of
New Taiwan dollars

Type of transaction
Over-the-counter transactions
Forward foreign exchange contracts:
Selling USD

Millions of yen
2014

Thousands of
U.S. dollars

Contract value(notional
principal amount)Contract value
over one year

Estimated
fair value

Unrealized
loss

Estimated
fair value

Unrealized
loss

TWD 141,711

TWD –

¥ (2)

¥ (2)

$ (19)$ (19)

46

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

21. Derivatives (continued)
Millions of yen
2013

Type of transaction
Over-the-counter transactions
Forward foreign exchange contracts:
Selling Chinese Yuan

Contract value(notional
principal amount)Contract value
over one year

Estimated
fair value

Unrealized
loss¥ 1,131¥ 1,131¥ (18)¥ (18)
Thousands of
U.S. dollars

Millions of yen
2014Type of transaction
Over-the-counter transactions
Forward foreign exchange contracts:
Selling Chinese Yuan

Contract value(notional
principal amount)Contract value
over one year

Estimated
fair value

Unrealized
loss

Estimated
fair value

Unrealized
loss¥ 1,733¥ 1,733¥(208)¥ (208)$(2,021)$(2,021)

Fair value is based on the prices obtained from financial institutions.
The outstanding currency-related derivatives positions designated as hedging instruments at
March 31, 2013 and 2014 are as follows:
Millions of yen
2013
Method ofhedge accounting
Deferral hedge accounting
Allocation method forforward foreign exchange
contracts

Hedge transactions
and major hedged items
Forecasted transactions in foreign currencies:
Selling USD, Accounts receivable
Forward foreign exchange contracts: Selling
USD, Accounts receivable

Contract value(notional principal
amount)Contract value
over one year

Estimated
fair value

12

¥

–

¥ (2)

¥ 850

¥

–

¥

¥

–

Millions of yen
2014

Method ofhedge accounting
Deferral hedge accounting
Allocation method forforward foreign exchange
contracts

Hedge transactions
and major hedged items
Forecasted transactions in foreign currencies:
Selling USD, Accounts receivable
Forward foreign exchange contracts: Selling
USD, Accounts receivable
Forward foreign exchange contracts: Buying
USD, Accounts payable

Contract
value(notional principal
amount)Contract value
over one year

Estimated
fair value

22

¥

–

¥ (0)

¥ 217

¥

–

¥

–

¥ 205

¥

–

¥

–

¥

47

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

21. Derivatives (continued)
Thousands of U.S. dollars
2014

Method ofhedge accounting
Deferral hedge accounting
Allocation method forforward foreign exchange
contracts

Hedge transactions
and major hedged items
Forecasted transactions in foreign currencies:
Selling USD, Accounts receivable
Forward foreign exchange contracts: Selling
USD, Accounts receivable
Forward foreign exchange contracts: Buying
USD, Accounts payable

Contract
value(notional principal
amount)Contract value
over one year

Estimated
fair value

214

$

–

$ (0)

$ 2,108

$

–

$

–

$ 1,992

$

–

$

–

$

Fair value is based on the prices obtained from financial institutions.
The fair value of forward foreign exchange contracts that qualify for allocation method is
included in the carrying value of hedged accounts receivable and payable.

22. Amounts per Share
Amounts per share at March 31, 2013 and 2014 and for the years then ended were as follows:Yen
Net assets
Net income:
Basic
DilutedCash dividends

2013¥ 845.55

2014¥ 890.00

15.82
15.78
7.50

20.76
20.70
10.00

U.S. dollars
2014$ 8.65
0.20
0.20
0.10

Amounts per share of net assets are computed based on the number of shares of common stock
outstanding at the year end.
Basic net income per share is computed based on the net income attributable to shareholdersof common stock and the weighted-average number of shares of common stock outstanding
during the year. Diluted net income per share is computed based on the net income available
for distribution to the shareholders and the weighted-average number of shares of common
stock outstanding during each year after giving effect to the dilutive potential of shares ofcommon stock to be issued upon the exercise of stock acquisition rights.
The average number of shares of common stock used to compute basic net income per sharefor the years ended March 31, 2013 and 2014 were 159,033 thousand and 157,500 thousand,respectively. The dilutive potential of shares of common stock for the years ended March 31,
2013 and 2014 were 425 thousand and 462 thousand, respectively.
Cash dividends per share represent the cash dividends proposed by the Board of Directors asapplicable to the respective years together with the interim cash dividends paid.

48

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

23. Transactions with Related Parties
Transactions and balances with related parties as of and for the years ended March 31, 2013
and 2014 are summarized as follows:
Transactions
Name ofaffiliated company

Type of transaction
Sales

Millions of yen
2013
2014
¥ 31,361¥ 34,206

Thousands of
U.S. dollars
2014$ 332,355

Balances
Sadoshima
Corporation
Account nameNotes and accounts
receivable

Millions of yen
2013
2014

Thousands of
U.S. dollars
2014¥ 11,418$ 127,759¥ 13,149

The Company owns 50.0% of the voting rights of Sadoshima Corporation, a steel productwholesaler for the Company. Certain board members of Sadoshima Corporation serve
concurrently as board members of the Company. Selling prices of products are determinedbased on price negotiations each fiscal year, after considering market prices, overall costs andthe Company’s proposals regarding desired prices.
24. Investment, Rental and Idle Properties
The Company and certain consolidated subsidiaries own office buildings, land, and parking
lots as rental properties and idle properties mainly in Osaka Prefecture, other domestic areas
and Taiwan.
The carrying value in the consolidated balance sheet at March 31, 2013 and 2014 and thecorresponding fair value of rental properties and idle properties are as follows:2012
Rental properties and idle
properties
Real estate including certain
portions used as rental
property
Total

Millions of yen
Carrying value
Net change
2013

Fair value
2013¥ 4,426¥ (35)¥ 4,391¥ 7,650

4,818¥ 9,244(64)¥ (99)

4,754¥ 9,145

11,408¥ 19,058

49

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

24. Investment, Rental and Idle Properties (continued)

2013
Rental properties and idle
properties
Real estate including certain
portions used as rental
property
Total

Fair value
2014¥ 4,391¥ 132¥ 4,523¥ 7,835

4,754¥ 9,145

(65)
¥ 67

4,689
¥ 9,212

11,157¥ 18,992

Thousands of U.S. dollars
Carrying value
Net change
2014

Fair value
2014

2013
Rental properties and idle
properties
Real estate including certain
portions used as rental
property
Total

Millions of yen
Carrying value
Net change
2014$ 42,664$ 1,283$ 43,947$ 76,127

46,191$ 88,855

(631)
652

45,560$ 89,507

108,405$ 184,532$

The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss.
The components of net change in carrying value for the year ended March 31, 2013 included
increases mainly due to translation adjustments in the amount of ¥185 million and decreases
mainly due to depreciation of buildings in the amount of ¥139 million and sales of properties
in the amount of ¥76 million.
The components of net change in carrying value for the year ended March 31, 2014 included
increases mainly due to translation adjustments in the amount of ¥235 million ($2,283
thousand) and decreases mainly due to depreciation of buildings in the amount of ¥149 million($1,448 thousand).

Fair value of domestic rental properties are principally measured based on the real-estateappraisal assessed by the external real-estate appraiser. However, unless the appraisal orindicators that are regarded to reflect the fair value of the properties appropriately change
significantly since the date of acquisition or the date of the latest appraisal, the Company andcertain domestic consolidated subsidiaries measure the fair value of the properties based onsuch appraisal or indicators obtained previously and adjusted as appropriately.
50

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

24. Investment, Rental and Idle Properties (continued)
Fair value of rental properties in Taiwan is measured based on the property prices announced
by the government.
Revenues, costs and expenses relevant to investment, rental and idle properties for the years
ended March 31, 2013 and 2014 are as follows:
Millions of yen
2013
Rental revenues¥ 851

Rental costs¥ 576

Difference¥ 275

Other loss, net on sales
and others¥ (25)

Millions of yen
2014
Rental revenues¥ 823

Rental costs¥ 557

Difference¥ 266

Other gain, net on
sales and others¥
3

Thousands of U.S. dollars
2014
Rental revenues$ 7,997

Rental costs$ 5,412Difference$ 2,585

Other gain, net on
sales and others$
29

The rental revenues and rental costs for certain properties of which only a part are used asrental properties are not included in the above table because the Company and certain
consolidated subsidiaries use a portion of these properties for the purposes of rendering
services and conducting management activities. The rental revenues are recorded under net
sales or other income and the rental costs are recorded under cost of sales, selling, general andadministrative expenses or other, net, as part of other expenses, in the consolidated statementof income.

51

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

25. Segment Informationi)Outline of segment information
The reportable segments of the Group are components for which discrete financial
information is available, and whose operating results are regularly reviewed by the Boardof Directors of the Company in order to make decisions about resource allocation and toassess business performance.
The Group’s business units are divided by the similarity of the products or services soldby each business unit. Each business unit develops its own strategies and operates its
businesses independently.
Therefore, the Group consists four reportable segments based on business units: “Steel
Sheet Segment,” “Roll Segment,” “Grating Segment” and “Real Estate Segment.”
The “Steel Sheet Segment” engages in the manufacture and sale of cold rolled steel,polished hoop steel, hot dip galvanizing steel sheets, painted hot dip galvanizing steel
sheets, other construction materials, building materials and exterior products and others
and in designing and engineering of construction work. The “Roll Segment” engages in
the manufacture and sale of rolls for iron, steel and non-ferrous products and others. The“Grating Segment” engages in the manufacture and sales of gratings. The “Real Estate
Segment” engages in the sale, purchase and lease of real estate such as buildings and car
parking lots.

ii) Calculation methods used for net sales, income or loss, assets and other items of eachreportable segment
The accounting policies of the segments are substantially the same as those described in
the summary of significant accounting policies in Note 1. In addition, segment income(loss) is adjusted to be consistent with operating income in the consolidated statement ofincome.

52

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

25. Segment Information (continued)iii) Information on net sales, income or loss, assets and other items of each reportablesegment
Information by reportable segment for the years ended March 31, 2013 and 2014 aresummarized as follows:
Millions of yen
Year ended March 31, 2013

Net sales
Sales to third
partiesInter-segment
sales andtransfers
Total
Segment income(loss)
Segment assets

Steel Sheet
Segment

Reportable Segments
Roll
Grating Real Estate
Segment Segment Segment

Sub-Total

Other

Total

¥ 130,549¥ 3,535¥ 3,350¥901¥ 138,335¥ 2,749¥ 141,084¥–¥ 141,084–¥ 130,549–¥ 3,535–¥ 3,350424¥ 1,325424¥ 138,759

3,737¥ 6,486

4,161¥ 145,245(4,161)¥ (4,161)–¥ 141,084¥ 4,522¥ 108,462¥ (188) ¥76¥ 3,534 ¥ 3,238¥ 664¥ 8,477¥ 5,074¥ 123,711¥ (243)¥ 8,108¥ 4,831¥ 131,819¥ (1,201)¥ 55,985¥ 3,630¥ 187,804

¥

¥

¥

¥

¥

¥

¥

Other items
Depreciation
andamortization¥
Investment in an
affiliateaccounted forby the equity
methodIncrease inproperty, plantand equipment
and intangible
assets

3,325

276

¥

87

71

3,759

168

3,927

Adjustments
andeliminations

61

Consolidated

3,988

3,202

–

309

2

3,513

–

3,513

–

3,513

8,763

113

8

13

8,897

874

9,771

17

9,788

53

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

25. Segment Information (continued)iii) Information on net sales, income or loss, assets and other items of each reportablesegment (continued)
Millions of yen
Year ended March 31, 2014

Net sales
Sales to third
partiesInter-segment
sales andtransfers
Total
Segment income(loss)
Segment assets
Other items
Depreciation
andamortization
Investment in
an affiliate
accounted forby the equity
methodIncrease inproperty, plantand equipment
and intangible
assetsReportable Segments
Steel Sheet
Roll
Grating Real Estate
Segment Segment Segment
Segment

Sub-Total

Other

Total

¥ 146,791¥ 2,508¥ 3,599¥872¥ 153,770¥ 3,782¥ 157,552¥–¥ 157,552–¥ 146,791–¥ 2,508–¥ 3,599443¥ 1,315443¥ 154,213

2,897¥ 6,679

3,340¥ 160,892(3,340)¥ (3,340)–¥ 157,552¥ 6,702¥ 129,388¥ (720)¥ 3,413¥93¥ 3,825¥ 625¥ 8,366¥ 6,700¥ 144,992¥ 343¥ 8,313¥ 7,043¥ 153,305¥ (920)¥ 54,471¥ 6,123¥ 207,776

¥

¥

¥

¥

¥

¥

¥

¥

¥

3,677

275

74

69

4,095

203

4,298

Adjustments
andeliminations

54

Consolidated

4,352

3,304

–

318

2

3,624

–

3,624

–

3,624

7,119

184

17

4

7,324

804

8,128

24

8,152

Adjustments
andeliminations

Consolidated–$ 1,530,820

Thousands of U.S. dollars
Year ended March 31, 2014

Net sales
Sales to third
partiesInter-segment
sales andtransfers
Total
Segment income(loss)
Segment assets

Steel Sheet
Segment

Reportable Segments
Roll
Grating Real Estate
Segment Segment Segment

Sub-Total

Other

Total

$ 1,426,263$ 24,368 $ 34,969 $8,473$ 1,494,073$ 36,747$ 1,530,820

4,304

32,452(32,452)–$ 1,563,272$ (32,452)$ 1,530,820

–

–

–

$

$ 1,426,263$ 24,368 $ 34,969 $ 12,777

4,304
28,148$
1,498,377$ 64,895$ 65,118$ 1,257,171$ (6,996) $904 $ 6,073$ 33,162 $ 37,165 $ 81,286$
65,099$ 1,408,784$ 3,333$ 80,771$
68,432$ 1,489,555$ (8,940)$ 529,256$
59,492$ 2,018,811$ 2,672 $$

39,788$ 1,973$$$

Other items
Depreciation
andamortization$
Investment in an
affiliateaccounted forby the equity
methodIncrease inproperty, plantand equipment
and intangible
assets35,727719 $

670

41,761524

42,285

32,103

–

3,090

19

35,212–35,212–35,212

69,170

1,788

165

39

71,162

7,812

78,974233

79,20754

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

25. Segment Information (continued)
Net sales categorized by country and region based on locations of customers within the Groupfor the years ended March 31, 2013 and 2014 are summarized as follows:Japan¥ 93,531

Millions of yen
2013
TaiwanOther¥ 20,152¥ 27,401

Total¥ 141,084

Japan¥ 102,795

Millions of yen
2014
TaiwanOther¥ 24,470¥ 30,287

Total¥ 157,552

Japan$ 998,785

Thousands of U.S. dollars
2014
TaiwanOther$ 237,758$ 294,277

Total$ 1,530,820

Property, plant and equipment, net, categorized by geographical area at March 31, 2013 and2014 are summarized as follows:Japan¥ 33,094Japan¥ 34,055

Taiwan¥ 10,313

Millions of yen
2013
China
¥ 5,061

Other¥ 3,163

Total¥ 51,631

Taiwan¥ 11,189

Millions of yen
2014
China
¥ 10,166

Other¥ 3,387

Total¥ 58,797

Other$ 32,909

Total$ 571,289

Thousands of U.S. dollars

Japan$ 330,888

Taiwan$ 108,716

2014
China
$ 98,776

55

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

25. Segment Information (continued)
Net sales to major customers for the years ended March 31, 2013 and 2014 are as follows:

Millions of yen
2013
2014

Customer nameSadoshima
Corporation¥ 31,361¥ 34,206

Thousands of
U.S. dollars
2014

Related Segments“Steel Sheet Segment,”“Grating Segment,”“Real Estate Segment”
and “Other”$ 332,355

Loss on impairment of fixed assets by reportable segment for the years ended March 31, 2013
and 2014 is summarized as follows:

Steel Sheet
Segment
Loss on impairment of
fixed assets¥–

Steel Sheet
Segment
Loss on impairment of
fixed assets¥–

Steel Sheet
Segment
Loss on impairment of
fixed assets$–

Millions of yen
Year ended March 31, 2013
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
¥ –

¥ –

¥ –

¥ –

¥ –

¥

$ –

$ –

¥ 10

¥ 150

Adjustments andeliminations

Total

0

¥

Thousands of U.S. dollars
Year ended March 31, 2014
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
$ –

Total

¥ 140

Millions of yen
Year ended March 31, 2014
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other¥ –Adjustments andeliminations

$

0

7

¥

Adjustments andeliminations
$

68

7

Total
$

56

68

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

25. Segment Information (continued)
The amortization and balance of negative goodwill by reportable segment as of and for theyears ended March 31, 2013 and 2014 are summarized as follows:

Amortization
Balance at the year end

Amortization
Balance at the year end

Amortization
Balance at the year end

Steel Sheet
Segment¥ 13
12

Millions of yen
Year ended March 31, 2013
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
¥ –
¥ 0
¥ –
¥ 2
–
0
–
1

Adjustments andeliminations
¥ 4
4

Total
¥ 19
17

Steel Sheet
Segment¥ 7
5

Millions of yen
Year ended March 31, 2014
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
¥ –
¥ 0
¥ –
¥ 1
–
0
–
1

Adjustments andeliminations
¥ 2
1

Total
¥ 10
7

Steel Sheet
Segment$ 68
48

Thousands of U.S. dollars
Year ended March 31, 2014
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
$ –
$ 0
$–
$ 10
–
0
–
10

Adjustments andeliminations
$ 19
10

Total
$ 97
68

Negative goodwill credited to income by reportable segment for the year ended March 31,
2014 is summarized as follows:
Millions of yen
Year ended March 31, 2014
Reportable Segments
Steel Sheet
Roll
Grating
Real Estate
Segment Segment Segment
Segment
Other
Negative goodwill
credited to income

¥ 36

¥–

¥

1

¥–

¥

4

Adjustments andeliminations

Total

¥

¥ 50

9

57

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements (continued)

25. Segment Information (continued)
Thousands of U.S. dollars
Year ended March 31, 2014
Reportable Segments
Steel Sheet
Roll
Grating
Real Estate
Segment Segment Segment
Segment
Other
Negative goodwill
credited to income

$ 350

$ –

$ 10

$ –

$ 39

Adjustments andeliminations

Total

$ 87

$486

Negative goodwill was credited to income for the year ended March 31, 2014 due to purchasesof a subsidiary’s shares, which was included in other, net, as part of other income (expenses)
in the consolidated statement of income.
There was no negative goodwill credited to income for the year ended March 31, 2013.

26. Subsequent Events(a) Cash dividends
The following distribution of retained earnings of the Company, which has not beenreflected in the accompanying consolidated financial statements for the year ended March
31, 2014, was approved at a meeting of the Board of Directors held on May 12, 2014:
Thousands ofMillions of yen
U.S. dollars
Cash dividends of ¥5 ($0.05) per share¥ 794$ 7,715(b) Purchase of treasury stock

At the meeting of the Board of Directors of the Company held on May 12, 2014, in
accordance with Article 459 (1) of the law and Article 35 of the Company’s bylaw, theCompany approved the purchase of up to 1,200 thousand shares of treasury stock for an
aggregate acquisition cost not exceeding ¥500 million ($4,858 thousand) during theperiod from May 13, 2014 through June 23, 2014, to support the execution of a flexible
capital management policy in response to changes in the business environments.
As a result, the Company purchased 1,200 thousand shares of treasury stock for a total
amount of ¥494 million ($4,800 thousand) from the market.

58