Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
Years ended March 31, 2006 and 2007
with Report of Independent Auditors

Yodogawa Steel Works, Ltd.
Consolidated Financial Statements
Years ended March 31, 2006 and 2007

Contents
Consolidated Financial Statements
Report of Independent Auditors .......................................................................................... 1
Consolidated Balance Sheets............................................................................................... 2
Consolidated Statements of Income .................................................................................... 4
Consolidated Statements of Changes in Net Assets ............................................................ 5
Consolidated Statements of Cash Flows ............................................................................. 7
Notes to Consolidated Financial Statements ....................................................................... 9Report of Independent Auditors

The Board of Directors
Yodogawa Steel Works, Ltd.

We have audited the accompanying consolidated balance sheets of Yodogawa Steel Works,
Ltd. and consolidated subsidiaries as of March 31, 2006 and 2007, and the related
consolidated statements of income, changes in net assets, and cash flows for the years thenended, all expressed in yen. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Yodogawa Steel Works, Ltd. andconsolidated subsidiaries at March 31, 2006 and 2007, and the consolidated results of theiroperations and their cash flows for the years then ended in conformity with accounting
principles generally accepted in Japan.
Supplemental Information
As described in Note 2(1), effective April 1, 2005, the Company and consolidated
subsidiaries adopted an accounting standard for the impairment of fixed assets.

The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2007 are presented solely for convenience. Our audit
also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 3.

Osaka, Japan
June 27, 20071

Yodogawa Steel Works, Ltd.
Consolidated Balance Sheets
March 31, 2006 and 2007

Millions of yen
2007
2006
AssetsCurrent assets:
Cash and time deposits (Note 4)
Marketable securities (Note 6)
Notes and accounts receivable (Note 5):
Unconsolidated subsidiaries and affiliates
Trade
Less allowance for doubtful receivables
Inventories
Deferred income taxes (Note 10)
Other current assets
Total current assets

Property, plant and equipment:
Land (Notes 7 and 12)
Buildings and structures (Note 7)
Machinery, equipment and vehicles
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net

Investments and other assets:
Investments in securities (Notes 6 and 8)
Investments in and advances to unconsolidated
subsidiaries and affiliates
Deferred income taxes (Note 10)
Other assets
Total investments and other assets

Total assets

2¥

Thousands of
U.S. dollars(Note 3)
2007

13,093
1,264¥13,271
10,689$112,418
90,546

11,333
26,675(227)
31,196
1,339
5,887
90,56013,806
31,578(367)
36,233
1,291
4,811
111,312116,950
267,497(3,109)306,930
10,93640,754
942,922

20,90854,171
126,128
2,048(139,015)
64,24019,80554,185
129,467749(142,554)
61,652

167,768
459,000
1,096,713
6,345(1,207,573)
522,253

47,87049,320417,789

3,490
471
2,286
54,117

3,874
532
2,841
56,56732,817
4,507
24,066479,179¥ 208,917¥ 229,531$ 1,944,354

Millions of yen
2007
2006
Liabilities and net assets
Current liabilities:
Short-term bank loans (Note 8)
Notes and accounts payable (Note 5):
Unconsolidated subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes (Note 10)
Secured deposits
Other current liabilities (Note 8)
Total current liabilities
Long-term liabilities:
Accrued retirement benefits for employees(Note 9)Accrued retirement benefits for directors andcorporate auditors
Guarantee deposits (Note 8)
Deferred income taxes (Note 10)
Deferred income taxes on land revaluation reserve(Note 10)
Negative goodwill
Other long-term liabilities
Total long-term liabilities
Contingent liabilities (Note 15)
Net assets:
Shareholders’ equity (Note 11)
Common stock:
Authorized: 753,814,067 shares in 2006 and2007
Issued: 184,186,153 shares in 2006 and 2007
Capital surplus
Retained earnings (Note 19)
Treasury stock, at cost – 14,748,753 shares in2006 and 16,655,718 shares in 2007
Total shareholders’ equity
Valuation and translation adjustments
Unrealized holding gain on securities (Note 6)
Land revaluation reserve (Note 12)
Translation adjustments
Total valuation and translation adjustments
Stock acquisition rights
Minority interests
Total net assets
Total liabilities and net assets

¥

–

¥

1,044

Thousands of
U.S. dollars(Note 3)
2007
$

8,844

786
14,617
1,466
4,200
2,684
–
2,200
25,953

1,113
18,574
1,555
4,699
2,737
7,747
4,212
41,681

9,428
157,341
13,17239,80523,18565,62535,680353,080

7,517

7,750

65,650

107
4,007
8,877

78
4,045
9,099

661
34,26577,078

2,368
–
537

23,413

2,384
96
401
23,853

20,195813
3,396
202,058

23,221
23,74086,84323,221
23,54789,393

196,705
199,466
757,247(5,592)
128,212(6,235)
129,926(52,817)
1,100,601

17,744303(1,315)
16,732−
14,607
159,551¥ 208,917

17,036
1,642(1,068)17,61025
16,436
163,997¥ 229,531

144,312
13,909(9,047)
149,174212
139,229
1,389,216$ 1,944,354

See accompanying notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd.
Consolidated Statements of Income
Years ended March 31, 2006 and 2007

Millions of yen
2007
2006
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses(Note 13)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sales of investments in securities(Note 6)
Loss on impairment of investments insecurities (Note 6)
Loss on sales or disposal of property, plantand equipment, net
Equity in earnings of an affiliate
Loss on impairment of fixed assets(Notes 2 and 7)
Other, net
Income before income taxes and minority
interests
Income taxes (Note 10):
Current
DeferredIncome before minority interests
Minority interests
Net income

Thousands of
U.S. dollars(Note 3)2007

¥ 180,036
150,478
29,558¥ 192,319
162,186
30,133$ 1,629,132
1,373,876
255,256

16,21013,34817,181
12,952

145,540
109,716

754
(71)

804
(78)

6,811
(661)

8

1,245

10,546

–

(71)

(601)

(216)
484

(252)
144

(2,135)
1,220(3,381)
541

(525)
(152)

(4,447)(1,288)

11,467

14,067

119,161

5,813
(522)
5,291
6,176

4,674
694
5,368
8,699

39,593
5,879
45,47273,689(1,584)¥ 4,592(2,324)¥ 6,375(19,686)
54,003$

See accompanying notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd.
Consolidated Statements of Changes in Net Assets
Years ended March 31, 2006 and 2007
Millions of yen

Balance at March
31, 2005
Adjustment forreserve for land
value increment
tax of an
overseassubsidiary
Transfer fromretainedearnings tocapital surplus
Cash dividends
Bonuses todirectors andcorporate
auditors
Bonuses to
employees of an
overseassubsidiary
Net income
Acquisition oftreasury stock
Disposition oftreasury stockReversal of land
revaluation
reserve
Other changes
Balance at March
31, 2006
Cash dividends
Bonuses todirectors andcorporate
auditors
Bonuses to
employees of an
overseassubsidiary
Net income
Acquisition oftreasury stock
Disposition oftreasury stockReversal of land
revaluation
reserve
Other changes
Balance at March
31, 2007

Translation
adjustments

Totalvaluationandtranslation
adjustments871¥ (2,686)¥ 6,520––––(2,699)

–
–

–
–

–

(77)

–

(38)
4,592

–
–

(38)
4,592

–

–

(906)

–

0

–

–
–

–
–

–
–

184,186,153

23,221–––

Number ofsharesissuedCommonstock

CapitalsurplusRetainedearnings

Treasurystock, at
cost

Total
shareholders’equityUnrealized
holding
gain onsecurities

184,186,153¥ 23,221¥ 23,222¥ 86,300¥ (4,687)¥ 128,056¥ 8,335

–

–

128

–

–

128

–
–

–
–

390
–

(390)
(2,699)

–
–

–

–

–

(77)

–
–

–
–

–
–

–

–

–

Land
revaluation
reserveStockacquisitionrightsMinority
interests

Total net
assets–¥ 13,922¥148,498

–

–

–

128

–
–

–
–

–
–

–
–

–
(2,699)

–

–

–

–

–

(77)

–
–

–
–

–
–

–
–

–
–

–
–

(38)
4,592

(906)

–

–

–

–

–

–

(906)

1

1

–

–

–

–

–

–

1

(845)
–

–
–

(845)
–

–
9,409

–
(568)

–
1,371

–
10,212

–
–

–
685

(845)
10,897

23,74086,843(5,592)

128,212

17,744303(1,315)

16,732–

14,607

159,551–(2,349)–(2,349)

–

–

–

–

–

–

(2,349)

–

–

(78)

–

(78)

–

–

–

–

–

–

(78)

–

–

–

(22)

–

(22)

–

–

–

–

–

–

(22)

–

–

–

6,375

–

6,375

–

–

–

–

–

–

6,375

–

–

–

–

(645)

(645)

–

–

–

–

–

–

(645)

–

–

(193)

–

2

(191)

–

–

–

–

–

–

(191)

¥

¥

–

–

–

(1,376)–(1,376)

–

–

–

–

–

–

(1,376)

–

–

–

–

–

–

(708)

1,339

247

878

25

1,829

2,732

184,186,153¥ 23,221¥ 23,547¥ 89,393¥ (6,235)¥ 129,926¥ 17,036¥ 1,642¥ (1,068)¥ 17,610¥ 25¥ 16,436¥163,997

5

Yodogawa Steel Works, Ltd.
Consolidated Statements of Changes in Net Assets (continued)

Thousands of dollars
Totalvaluation

Unrealized
TreasuryTotalholding

Land

and

Stock

gain onrevaluation

Translationtranslationacquisition

Minority

Total net

CommonCapitalRetainedstock, atshareholders’stocksurplusearnings

costequitysecurities

reserveadjustments

adjustments

rightsinterests

assets$ 196,705$ 201,101$ 735,646$ (47,370)$ 1,086,082$ 150,309$ 2,567$ (11,139)$ 141,737$–$ 123,736$ 1,351,555––(19,898)–(19,898)

–

–

–

–

–

–

(19,898)

–

–

(659)

–

(659)

–

–

–

–

–

–

(659)

an overseas subsidiary

–

–

(188)

–

(188)

–

–

–

–

–

–

(188)

Net income––

54,003–54,003

–

–

–

–

–

–

54,003–––(5,464)(5,464)

–

–

–

–

–

–

(5,464)–(1,635)–17(1,618)

–

–

–

–

–

–

(1,618)revaluation reserve––(11,657)–(11,657)

–

–

–

–

–

–

(11,657)

Other changes

–

–

–

–

–

(5,997)

11,342

2,092

7,437

212

15,49323,142$ 196,705$ 199,466$ 757,247$ (52,817)$ 1,100,601$ 144,312$ 13,909$ (9,047)$ 149,174$ 212$ 139,229$ 1,389,216

Balance at March 31,
2006
Cash dividends
Bonuses to directors andcorporate auditors
Bonuses to employees ofAcquisition of treasury
stock
Disposition of treasury
stock
Reversal of land

Balance at March 31,
2007

See accompanying notes to consolidated financial statements.
6

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows
Years ended March 31, 2006 and 2007

Cash flows from operating activities:
Income before income taxes and minority
interests
Adjustments for:
Depreciation and amortization
Equity in earnings of an affiliate
Loss on impairment of investments insecurities(Decrease) increase in accrued retirement
benefits
Decrease in accrued bonuses(Decrease) increase in allowance for doubtfulreceivables
Interest and dividend income
Interest expense
Gain on sales of investments in securities
Loss on sales or disposal of property, plantand equipment, net
Loss on impairment of fixed assets
Decrease (increase) in notes and accounts
receivable
Increase in inventories(Decrease) increase in notes and accounts
payableBonuses to directors, corporate auditors andemployees of an overseas subsidiary
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Millions of yen
2007
2006

Thousands of
U.S. dollars(Note 3)2007

¥ 11,467¥ 14,067$ 119,161

5,361
(484)

5,269
(144)

44,634(1,220)

–

71

601

(2)
(1)

168
(78)

1,423
(661)

(297)
(754)
71
(8)

139
(804)
78
(1,245)

1,177(6,811)
661(10,546)

216
3,381

252
525

2,135
4,447

7,310
(6,706)(7,282)(4,832)(61,686)(40,932)(1,713)

4,248

35,985(115)
147
17,873781(73)(8,868)¥ 9,713

(100)
(370)
9,962
831
(79)
(4,832)¥ 5,882(847)(3,133)84,388
7,039(669)(40,932)$ 49,826.
7

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows (continued)
Years ended March 31, 2006 and 2007

Cash flows from investing activities:
Increase in time deposits with a maturity ofmore than three months
Proceeds from time deposits with a maturity ofmore than three months
Purchases of marketable securities
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
Increase in loans receivableCollection of loans receivable
Other
Net cash used in investing activities
Cash flows from financing activities:(Decrease) increase in short-term bank loans
Increase in secured deposits
Purchases of treasury stock
Cash dividends paid to the Company’s
shareholders
Cash dividends paid to shareholders of minority
interests
Other
Net cash (used in) provided by financing
activities
Effect of exchange rate changes on cash andcash equivalents
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at beginning of theyear
Cash and cash equivalents at end of the year
(Note 4)

Millions of yen
2007
2006

Thousands of
U.S. dollars(Note 3)2007

¥ (2,675)(861)$ (7,294)

3,075(1,231)
1,518(5,018)75−
692(3,843)

635
−
5,862
(32,554)81(35)(3,725)
4,095
(927)
1,210
60
(3,572)830(78)(6,858)
2,913
(769)
851
5
(7,043)

7,031
(661)
(58,094)
24,676(6,514)7,209
43(59,661)(4,600)
−
(903)

1,024
7,747
(135)

8,674
65,625(1,144)(2,716)(2,364)(20,025)(2,275)
1(1,106)−(9,369)−(10,493)

5,166

43,761176

8

68(4,176)

4,013

33,994

20,363

16,187137,120¥ 16,187¥ 20,200$ 171,114¥

See accompanying notes to consolidated financial statements.
8

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements
March 31, 2007
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 their records in accordance with accounting principles
generally accepted in Japan, and its overseas subsidiaries maintain their books ofaccount in conformity with those of their respective countries of domicile.
The accompanying consolidated financial statements of the Company and consolidated
subsidiaries are prepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and have been compiled
from the consolidated financial statements prepared by the Company as required by the
Securities and Exchange Law 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 morefamiliar to readers outside Japan.
Certain reclassifications of previously reported amounts have been made to conformthe consolidated financial statements for the year ended March 31, 2006 to the 2007
presentation. Such reclassifications had no effect on consolidated net income.
(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
or undisposed loss. Consolidated net income includes the Company’s equity in thecurrent net income or loss of this company after the elimination of unrealizedintercompany profits.

9

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

1.

Summary of Significant Accounting Policies (continued)(b) Basis of consolidation (continued)
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if
applicable.
The difference, not significant in amount, between the cost ofinvestments in subsidiaries and the equity in their net assets at their respective dates ofacquisition is charged to income as incurred or amortized over a period of 5 years on astraight-line basis.
The financial statements of one consolidated subsidiary whose fiscal year end is
December 31 have been included in consolidation on the basis of a full fiscal year after
making the appropriate adjustments for significant transactions during the period fromits fiscal 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 andliabilities denominated in foreign currencies are translated at their historical rates. Allrevenues and expenses associated with foreign currencies are translated at the rates of
exchange prevailing when such transactions were made. The resulting exchange gainor loss is charged or credited to income.
The balance sheet accounts of the overseas consolidated subsidiary (except for net
assets excluding minority interests) are translated into yen at the rate of exchange in
effect at the balance sheet date. The components of net assets excluding minority
interests are translated at their respective historical rates of exchange. Revenue andexpense accounts are translated into yen at the average rate of exchange in effectduring the year.
Translation adjustments have been presented as a component of net assets in theaccompanying consolidated financial statements.
(d) 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.

10

Yodogawa Steel Works, Ltd.
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 thanthose of subsidiaries and affiliates be classified into three categories: trading securities,
held-to-maturity debt securities or other securities. Under this standard, trading
securities are carried at fair value and gain or loss, both realized and unrealized, arecredited or charged to income. Held-to-maturity debt securities are carried atamortized cost. Marketable securities classified as other securities are carried at fairvalue 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 are carried at cost. Cost of securities sold is determinedprincipally by the moving average method.
(f) Inventories
Inventories are stated at cost determined principally by the average method.
Inventories at the Company’s overseas consolidated subsidiary are stated at the lowerof cost or market, cost being determined by the moving average method.
(g) Property, plant and equipment and depreciation
Depreciation of property, plant and equipment is calculated by the declining-balancemethod over the useful lives of the respective assets, except that the straight-line
method is applied to buildings (other than structures attached to the buildings) acquired
on and after April 1, 1998.
Depreciation of property, plant and equipment at the overseas consolidated subsidiaryis calculated 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

Significant renewals and additions are capitalized at cost.
are charged to income as incurred.

Maintenance and repairs

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

1.

Summary of Significant Accounting Policies (continued)(h) Intangible assets and amortization
Intangible assets are stated on the basis of cost. Amortization is calculated by thestraight-line method over the useful lives of the respective assets.
(i) Allowance for doubtful receivables
The Company and its consolidated subsidiaries provide an allowance for doubtfulreceivables at an amount calculated based on their historical experience of bad debts
on ordinary receivables plus an additional estimate of probable specific bad debts from
customers experiencing financial difficulties.
(j) Research and development costs and computer software
Research and development costs are charged to income as incurred.
Expenditures relating to the development of computer software intended for internal
use are charged to income when incurred, unless these are deemed to contribute to thegeneration of future income or cost savings. Such expenditures are capitalized asassets and amortized by the straight-line method over their estimated useful life of 5
years.
(k) Leases
The Company and its consolidated subsidiaries lease certain equipment under
noncancelable leases referred to as finance leases. Finance leases other than thosewhich transfer the ownership of the leased property to the lessee are accounted for as
operating leases.
(l) 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.

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

1.

Summary of Significant Accounting Policies (continued)(m) Retirement benefits
Employees of the Company and its consolidated subsidiaries are covered by
employees’ retirement benefit and employees’ pension plans. The employees’
retirement benefit plans provide for a lump-sum payment determined by reference totheir basic salary, length of service and conditions under which termination occurs.
Accrued retirement benefits for employees are provided principally at an amountcalculated based on the retirement benefit obligation less the fair value of the pension
plan assets as adjusted for unrecognized actuarial gain or loss and unrecognized priorservice cost. The retirement benefit obligation is attributed to each period by thestraight-line method over the estimated remaining years of service of the eligible
employees.
Actuarial gain or loss is amortized in the year following the year in which the gain orloss is recognized principally by the straight-line method over a period of 10 years,
which is within the estimated average remaining years of service of the eligible
employees.
Prior service cost is being amortized as incurred by the straight-line method over a
period of 15 years, which is within the estimated average remaining years of service ofthe eligible employees.
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. The provision for retirement benefits for directors andcorporate auditors has been made at an estimated amount based on the Company’s oreach consolidated subsidiary’s internal rules.
(n) Hedge accounting
Gain or loss on derivatives designated as hedging instruments is deferred until the gainor loss on the underlying hedged item is recognized. Receivables and payables
hedged by forward foreign exchange contracts which meet certain conditions aretranslated at the corresponding foreign exchange contract rates.

13

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

2.

Changes in Accounting Policy(1) Effective the year ended March 31, 2006, the Company and its consolidated
subsidiaries have adopted an accounting standard for the impairment of fixed assets
which requires that tangible and intangible fixed assets be carried at cost lessdepreciation, and be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable.
Companies are required to recognize an impairment loss in their statement of income if
certain indicators of asset impairment exist and if the book value of an asset exceeds
the undiscounted sum of its future cash flows. The standard states that impairment
losses are to be measured as the excess of the book value over the higher of (1) the fairmarket value of the asset, net of disposition costs, and (2) the present value of future
cash flows arising from ongoing utilization of the asset and from its disposal after use.
The standard covers land, factories, buildings and other forms of property, plant andequipment as well as intangible assets. Fixed assets are to be grouped at the lowest
level for which there are identifiable cash flows which are independent of the cash
flows from other groups of assets.
As a result of the adoption of this accounting standard, a loss on impairment of fixed
assets in the aggregate amount of ¥3,381 million was recognized for the year ended
March 31, 2006. Income before income taxes and minority interests decreased by thesame amount for the year ended March 31, 2006 from the corresponding amountwhich would have been recorded under the previous method.
(2) Effective the year ended March 31, 2007, the Company and its consolidated
subsidiaries have adopted a new accounting standard for share-based payments.
As a result of the adoption of this accounting standard, operating income and income
before income taxes and minority interests decreased by ¥25 million ($211 thousand)for the year ended March 31, 2007 from the amounts which would have been recorded
under the method applied in the previous year.

14

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

2.

Changes in Accounting Policy (continued)(3) Effective the year ended March 31, 2007, the Company has adopted a new accounting
standard for the presentation of net assets in the balance sheet and the related
implementation guidance. In addition, effective the year ended March 31, 2007, theCompany is required to prepare consolidated statements of changes in net assets
instead of consolidated statements of shareholders’ equity. In this connection, thepreviously reported consolidated balance sheet as of March 31, 2006 and consolidated
statement of shareholders’ equity for the year then ended have been restated toconform to the presentation and disclosure of the consolidated financial statements forthe year ended March 31, 2007. Through March 31, 2006, the Company voluntarily
prepared the statement of shareholders’ equity for the convenience of readers outside
Japan. Under this accounting standard, certain items which were previously
presented as assets and liabilities are now presented as components of net assets.
Such items include minority interests. Total shareholders’ equity under the previous
method of presentation amounted to ¥147,536 million ($1,249,775 thousand) at March
31, 2007.
3.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan and has been made at the rate of ¥118.05 = U.S.$1.00,
the approximate exchange rate prevailing on March 31, 2007. The translation should not
be construed as a representation 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.
4.

Cash and Cash Equivalents

A reconciliation of cash and time deposits shown in the consolidated balance sheets to cash
and cash equivalents shown in the consolidated statements of cash flows at March 31, 2006
and 2007 is presented as follows:
Millions of yen
2007
2006
Cash and time deposits
Investment trust funds
Beneficiary interests in trusts and others
Time deposits with original maturities ofmore than three months
Cash and cash equivalents

Thousands of
U.S. dollars
2007¥ 13,093
470
2,700¥ 13,271
5,798
1,500

$ 112,418
49,115
12,706(76)¥16,187(369)¥ 20,200(3,125)$ 171,114

15

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

5.

Notes Receivable and Notes Payable

The balance sheet date of the year ended March 31, 2007 fell on a bank holiday.
Consequently, notes receivable, trade of ¥1,110 million ($9,403 thousand), notes payable,
trade of ¥661 million ($5,599 thousand), and notes payable, construction of ¥149 million($1,262 thousand) with maturity dates of March 31, 2007 were included in the respectivebalances and were settled on the next business day.
6.

Securities

Marketable securities classified as held-to-maturity debt securities at March 31, 2006 and2007 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:
Government bonds
Corporate bonds
Other
Total

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

¥

10
500
510

2006
Millions of yen
Estimated fair Unrealized gain
value
(loss)
¥

10
501
511

¥

0
1
1

70
1,597
200
1,867
¥ 2,377

70
1,383
198
1,651
¥ 2,162

(0)
(214)
(2)
(216)
¥ (215)Carrying value

2007
Millions of yen
Estimated fairvalue

Unrealized gain
(loss)

¥

60
300
360

10
12,203200
12,413¥ 12,773

¥

60
310
370

10
11,865
199
12,074¥ 12,444

¥

0
10
10

(0)
(338)
(1)
(339)
¥ (329)16

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

6.

Securities (continued)
2007
Thousands of U.S. dollars
Estimated fair
Unrealized
Carrying
value
gain (loss)
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:
Government bonds
Corporate bonds
Other
Total

$

508
2,542
3,050

85
103,371
1,694
105,150$ 108,200

$

508
2,626
3,134

85
100,508
1,686
102,279$ 105,413

$

0
84
84

(0)
(2,863)(8)(2,871)$ (2,787)

Other securities with determinable market value at March 31, 2006 and 2007 aresummarized as follows:

Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Other
Securities whose carrying value does
not exceed their acquisition costs:
Equity securities
Corporate bonds
Other
Total

Acquisition
costs

2006
Millions of yen
Carrying
value

Unrealized
gain (loss)¥ 12,315
98
12,413¥ 42,339
108
42,447¥ 30,024
10
30,034

163
600
713
1,476
¥ 13,889

137
579
693
1,409
¥ 43,856

(26)
(21)
(20)
(67)
¥ 29,967

17

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

6.

Securities (continued)

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

Acquisition
costs

2007
Millions of yen
Carrying
value

Unrealized
gain (loss)¥ 12,722
98
12,820¥ 41,849
108
41,957¥ 29,127
10
29,137

587
990
1,577
¥ 14,397

526
985
1,511
¥ 43,468

(61)
(5)
(66)
¥ 29,071

2007
Thousands of U.S. dollars
Carrying
Unrealized
Acquisition
value
gain (loss)
costs
Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Other
Securities whose carrying value does
not exceed their acquisition costs:
Equity securities
Corporate bonds
Total$ 107,768
830
108,598$ 354,502
915
355,417$ 246,734
85
246,819

4,973
8,386
13,359$ 121,957

4,456
8,344
12,800$ 368,217

(517)
(42)
(559)
$ 246,260

Sales of securities classified as other securities for the years ended March 31, 2006 and2007 are summarized as follows:
Millions of yen
2006
2007
Sales
Aggregate gain

¥13
8

¥1,781
1,245

Thousands of
U.S. dollars
2007$15,087
10,54618

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

6.

Securities (continued)

The carrying value of securities without determinable market value at March 31, 2006 and2007 were as follows:
Millions of yen
2007
2006
Held-to-maturity debt securities:
Interest-bearing financial bonds¥ 550

Other securities:
Non-marketable equity securities
Money management funds
Money trusts
Investment in a limited liability
partnership
Preferred subscription certificates

50

$ 424

–

580
−
1,701

4,913
−
14,409

187
1,100

317
1,100

2,685
9,318

594
470

¥

Thousands of
U.S. dollars
2007

The Company recorded a loss on impairment of securities of ¥71 million ($601 thousand)for the year ended March 31, 2007.
The redemption schedule for other securities with maturities and held-to-maturity debt
securities at March 31, 2007 is summarized as follows:

Due in one
year or lessMillions of yen
Due after one Due after five
year through years throughfive years
ten years

Due after ten
years

Government bonds
Corporate bonds
Other

¥

−
9,001
1,500

¥ 10
–
250

¥60
–
–

¥

Total

¥ 10,501

¥ 260

¥60

¥ 4,028

Due in one
year or lessGovernment bonds
Corporate bonds
Other
Total

–
76,247
12,707$ 88,954$

Thousands of U.S. dollars
Due after one Due after five
year through years throughfive years
ten years
$

85
–
2,117
$2,202

$508
–
–
$508

–
4,028
−

Due after ten
years–
34,121–$ 34,121$

19

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

7.

Loss on Impairment of Fixed Assets

The Company and its consolidated subsidiaries recognized a loss on impairment of fixed
assets for the years ended March 31, 2006 and 2007 as follows:

Location

Use

Classification

Nishiwaki City, Hyogo Golf courses Land, buildings andPrefecture
structures, andotherMiyazaki City,
Hotel
Land, buildings andMiyazaki Prefecture
structures, andotherIdle assets
Land, buildings andTakarazuka City,
structures, andHyogo Prefecture, and
other
other
Nishinomiya City,
Idle assets
Land, buildings andHyogo Prefecture
structures, andother
Shirahama Town,
Idle assets
Land, buildings andWakayama Prefecture
structures, andotherVillage of
Idle assets
Buildings andYamanakako,
structures, andYamanashi Prefecture
other
Total

Thousands of
U.S. dollars
2007

Millions of yen
2006
2007

¥ 2,175

¥

–

$

–

1,154

325

2,753

52

–

–

–

155

1,313

–

39

330

–
¥ 3,381

6
¥ 525

51
$ 4,447

The Company and its consolidated subsidiaries group fixed assets by management segment,each of which continuously records receipts and payments. They group idle assets which
are not utilized in their operations on an individual asset basis.
Consequently, the Company and its consolidated subsidiaries have written down the golfcourses group and the hotel group for the year ended March 31, 2006 and the hotel groupfor the year ended March 31, 2007 to their net recoverable value due to a significant
decline in their fair value, and have recorded a related loss on impairment of fixed assets of¥3,329 million and ¥325 million ($2,753 thousand) in the consolidated statements ofincome for the years ended March 31, 2006 and 2007, respectively. This loss on
impairment of fixed assets consisted of land of ¥2,289 million and ¥300 million ($2,541
thousand), buildings and structures of ¥1,016 million and ¥22 million ($186 thousand),machinery, equipment and vehicles of ¥5 million and ¥1 million ($8 thousand), and otherof ¥19 million and ¥2 million ($18 thousand) for the years ended March 31, 2006 and 2007,
respectively. The recoverable amounts of these assets are measured at estimated selling
value and valuation amounts are measured at net realizable value based on appraisals
conducted by real estate appraisers.
20

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

7.

Loss on Impairment of Fixed Assets (continued)

In addition, the Company and its consolidated subsidiaries have written down the idle
assets owned by one domestic consolidated subsidiary for the year ended March 31, 2006
and the Company for the year ended March 31, 2007, which are not expected to be utilized
in the future to their respective net recoverable value, and have recorded a related loss on
impairment of fixed assets of ¥52 million and ¥200 million ($1,694 thousand) in the
consolidated statements of income for the years ended March 31, 2006 and 2007,
respectively. This loss on impairment of fixed assets consisted of land of ¥40 million and¥175 million ($1,482 thousand), and buildings and structures of ¥12 million and ¥25
million ($212 thousand) for the years ended March 31, 2006 and 2007, respectively. 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 as they were
not material.
8.

Short-Term Bank Loans and Guarantee Deposits

Short-term bank loans were nil at March 31, 2006. Short-term bank loans at March 31,
2007 represented overdrafts at an average annual interest rate of approximately 3.18%.
At March 31, 2007, investments in securities of ¥10,936 million ($92,639 thousand) were
pledged as collateral for internal deposits held for employees of ¥325 million ($2,753
thousand), a component of other current liabilities.
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 0.66% and 0.58% at March 31, 2006 and 2007,
respectively.
Interest-free deposits and interest-bearing deposits at March 31, 2006 and 2007 were as
follows:
Millions of yen
2007
2006
Interest-free deposits
Interest-bearing deposits¥ 3,396611¥ 4,007¥ 3,386659¥ 4,045

Thousands of
U.S. dollars
2007$ 28,683
5,582$ 34,26521

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

8.

Short-Term Bank Loans and Guarantee Deposits (continued)

In order to achieve more efficient and flexible financing, the Company has concluded
line-of-credit agreements with certain financial institutions. The status of these lines ofcredit at March 31, 2006 and 2007 were as follows:
Thousands of
U.S. dollars

Millions of yen
Lines of credit
Credit utilized
Available credit

9.

2007
¥ 21,4002006¥ 22,300–¥ 22,300–¥21,4002007$ 181,279–$ 181,279

Retirement Benefits

The funded and accrued status of the employees’ defined benefit plans of the Company andits consolidated subsidiaries, and the amounts recognized in the consolidated balance sheetsat March 31, 2006 and 2007 are summarized as follows:
Millions of yen
2007
2006
Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial gain

¥ (14,530)
7,960¥ (14,693)
7,567$ (124,464)
64,100(6,570)(575)
15(7,126)(38)
10(60,364)(322)
85(7,130)387(7,154)596(60,601)
5,049

Unrecognized prior service cost
Net retirement benefit obligation
Prepaid pension costAccrued retirement benefits

Thousands of
U.S. dollars
2007¥(7,517)¥(7,750)$(65,650)

As permitted under the accounting standard for retirement benefits, certain domestic
consolidated subsidiaries calculate accrued retirement benefits for their employees bysimplified methods.

22

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

9.

Retirement Benefits (continued)

The components of retirement benefit expenses for the years ended March 31, 2006 and2007 are outlined as follows:
Thousands of
U.S. dollars
2007

Millions of yen
2007
2006
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost

¥

579
330
(65)
151
7
¥ 1,002

¥

¥

683
331
(105)
6
7
922

$

$

5,786
2,804
(889)
50
59
7,810

The retirement benefit expenses of certain domestic consolidated subsidiaries which were
calculated by simplified methods have been included in service cost in the above table.
The assumptions used in accounting for the above benefit plans for the years ended March
31, 2006 and 2007 were as follows:

Discount rate
Expected rates of return on plan assets

2006

2007

Principally 2.5%
Principally 1.5%

Principally 2.5%
Principally 1.4%23

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

10. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries
comprise corporation, enterprise and inhabitants’ taxes which, in the aggregate, resulted ina statutory tax rate of approximately 40.5% for the years ended March 31, 2006 and 2007.
A reconciliation of the statutory tax rate and the effective tax rates for the years ended
March 31, 2006 and 2007 as a percentage of income before income taxes and minority
interests is as follows:
Statutory tax rate
Investment tax credits
Nondeductible expenses
Per capita portion of inhabitants’ taxes
Difference in tax rates applicable to the overseas
consolidated subsidiary
Cash dividends received from the overseas
consolidated subsidiaryTax exemption of the overseas consolidated subsidiary
Equity in earnings of an affiliate
Tax loss carryforward of a consolidated subsidiary
Loss on impairment of revalued land
Valuation allowance
Other
Effective tax rates

2006

2007

40.5%
(0.7)
0.4
0.5

40.5%
(1.3)
0.3
0.5

(5.5)

(6.6)

4.1
(1.1)
(1.7)
4.6
4.1
–
0.9
46.1%

1.3
(1.4)
(0.4)
1.1
1.0
3.3
(0.1)
38.2%

24

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

10. Income Taxes (continued)
The significant components of the deferred tax assets and liabilities of the Company and its
consolidated subsidiaries at March 31, 2006 and 2007 are summarized as follows:
Millions of yen
2007
2006
Deferred tax assets:
Accrued retirement benefits
Allowance for doubtful receivables
Accrued bonuses
Valuation loss on inventories
Foreign tax credits
Tax loss carryforwards
Loss on impairment of investments insecurities and golf club memberships
Loss on impairment of fixed assets
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Dividends from an overseas subsidiary
Unrealized holding gain on securities
Land revaluation reserve
Reserve for deferred taxation oncontributions for acquisition of property
Total deferred tax liabilities
Net deferred tax liabilities

Thousands of
U.S. dollars
2007¥ 2,806
68
497
186
328
412

¥ 2,758
99
437
190
132
1,004

$ 23,363
839
3,702
1,609
1,118
8,505

859
1,328
935
7,419
(1,212)
6,207

862
1,524
1,000
8,006
(2,380)
5,626

7,302
12,9108,471
67,819(20,161)
47,658(86)(12,158)(2,368)(132)(11,778)(2,384)(1,118)(99,772)(20,195)(1,030)(15,642)¥ (9,435)(992)(15,286)¥ (9,660)(8,403)(129,488)$ (81,830)

25

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

11. Shareholders’ Equity
The new Corporation Law of Japan (the “Law”), which superseded most of the provisionsof the Commercial Code of Japan (the “Code”), went into effect on May 1, 2006. The
Law provides that an amount equal to 10% of the amount to be disbursed as distributions ofcapital surplus (other than the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve, respectively, until thesum of the capital reserve and the legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders, or by the
Board of Directors if certain conditions are met.
In accordance with the Code, a stock option plan for certain directors and executive officersof the Company was approved at the annual general meeting of the shareholders held on
June 29, 2004. Under the terms of this plan, up to 81,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options became exercisable on July 13, 2004 and arescheduled to expire on June 29, 2024.
In accordance with the Code, a stock option plan for certain directors and executive officersof the Company was approved at the annual general meeting of the shareholders held on
June 29, 2005. Under the terms of this plan, up to 62,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options became exercisable on July 15, 2005 and arescheduled to expire on June 29, 2025.
In accordance with the Code, a stock option plan for certain directors and executive officersof the Company was approved at the annual general meeting of the shareholders held on
June 29, 2006. Under the terms of this plan, up to 53,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options became exercisable on August 1, 2006 andare scheduled to expire on June 29, 2026.

26

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

12. Land Revaluation
At March 31, 2000 and 2002, certain consolidated subsidiaries and an affiliate revalued
their land held for business use in accordance with the “Law on Land Revaluation.”
Differences on land revaluation have been accounted for as land revaluation reserve under
net assets and are 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 thecorresponding carrying value by the following amounts at March 31, 2006 and 2007:
Millions of yen
2007
2006
Land revalued at March 31, 2000
Land revalued at March 31, 2002

¥ (167)(2,289)¥ (2,456)¥ (187)(1,313)¥ (1,500)

Thousands of
U.S. dollars
2007$ (1,584)(11,122)$ (12,706)

13. Research and Development Costs
Research and development costs included in selling, general and administrative expenses
totaled ¥483 million and ¥553 million ($4,684 thousand) for the years ended March 31,
2006 and 2007, respectively.

27

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

14. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciationand net book value of the leased property at March 31, 2006 and 2007, which would havebeen reflected in the consolidated balance sheets if finance leases other than those whichtransfer the ownership of the leased property of the Company and its consolidated
subsidiaries (currently accounted for as operating leases) were capitalized:
Millions of yen
2006
Acquisition Accumulated
costs
depreciation
Machinery,equipment andvehicles

¥362

¥136

Net book
value

¥226

2007
Acquisition Accumulated
costs
depreciation¥410

Net book
value

¥195

¥215

Thousands of U.S dollars
2007
Acquisition Accumulated Net bookvalue
depreciation
costs
Machinery,equipment andvehicles$3,473$1,652$1,821

The related lease payments and depreciation for the years ended March 31, 2006 and 2007
were as follows:
Millions of yen
2007
2006
Lease payments
Depreciation

¥82
82

¥78
78

Thousands of
U.S. dollars
2007
$661
661

Depreciation is calculated by the straight-line method over the respective lease terms
assuming a nil residual value.
No loss on impairment has been recorded on leased property for the years ended March 31,
2006 and 2007.

28

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

14. Leases (continued)
The related future minimum lease payments (including the interest portion thereon)
subsequent to March 31, 2007 under finance leases other than those which transfer theownership of the leased property to the Company and its consolidated subsidiaries are
summarized as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

20082009 and thereafter

¥ 84
131
¥215

$ 712
1,109
$1,821

15. Contingent Liabilities
At March 31, 2007, the Company and its consolidated subsidiaries had the following
contingent liabilities:

Guarantees of housing loans of employees andindebtedness of an unconsolidated subsidiary, andotherMillions of yen

Thousands of
U.S. dollars¥270$2,287

16. Derivatives
The Company and its consolidated subsidiaries enter into various transactions involving
derivatives in order to manage risk arising from adverse fluctuation in foreign currency
exchange rates. Forward foreign exchange contracts entail the market risk of fluctuation
in foreign currency exchange rates. Derivatives positions involve the credit risk that thecounterparties may default on their obligations. The Company and its consolidated
subsidiaries select only financial institutions with high credit ratings as counterparties inorder to minimize their credit risk. The Company and its consolidated subsidiaries do notenter into derivatives transactions whose fluctuation in fair value is material and which
could thus impact their operations significantly.
The Company and its consolidated subsidiaries have established policies for approving andreporting the purpose, nature, counterparty, inherent risk, limit on loss and the level of riskof each transaction. Under these policies governing derivatives, trading is not entered into
for speculative purposes.
At March 31, 2006 and 2007, all open derivatives positions qualified for the application ofdeferral hedge accounting and, thus, disclosure of fair value information has been omitted.
29

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

17. Amounts per Share
Amounts per share at March 31, 2006 and 2007 and for the years then ended were as
follows:
Yen
Net assets
Net income:
Basic
DilutedCash dividends applicable to the
year

2006

2007

U.S. dollars
2007¥ 854.83¥ 880.42$ 7.46

26.44
26.42

37.65
37.61

0.32
0.32

16.00

12.00

0.10

Amounts per share of net assets are computed based on the net assets available for
distribution to the shareholders and the number of shares of common stock outstanding at
the year end.
Basic net income per share is computed based on the net income available for distribution
to shareholders of 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 numberof shares of common stock outstanding during each year after giving effect to the dilutive
potential of shares of common stock to be issued upon the exercise of stock acquisitionrights.
Cash dividends per share represent the cash dividends proposed by the Board of Directors
as applicable to the respective years together with the interim cash dividends paid.

30

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

18. Segment Information
The Company and its consolidated subsidiaries are primarily engaged in the manufactureand sale of a variety of steel products such as steel sheets, construction materials,
prefabricated structures, home furnishings, and steel rolls and gratings. The Company also
engages in other activities such as real estate rental and engineering projects.
The business and geographical segments of the Company and its consolidated subsidiaries
for the years ended March 31, 2006 and 2007 are outlined as follows:Business Segments
Millions of yen
Year ended March 31, 2006

I. Sales and operating income(loss)
Sales to third parties
Intergroup sales andtransfers
Net sales
Operating expenses
Operating income (loss)
II. Total assets, depreciation,
loss on impairment of fixed
assets and capital
expenditures
Total assets
Depreciation
Loss on impairment of
fixed assets
Capital expenditures

Steel sheet
products

Electric
furnaceproducts

Other

Total

Eliminations andgeneralcorporate
assets¥ 163,439¥ 8,843¥ 7,754¥180,036¥–¥ 180,036–
163,439
150,154¥ 13,285

–
8,843
8,965
¥ (122)

4,395
12,14911,016¥ 1,133

4,395
184,431
170,135¥ 14,296(4,395)(4,395)(3,447)¥ (948)–180,036
166,688¥ 13,348¥ 112,504
4,186¥10,251316¥ 18,272
321¥141,027
4,823¥ 67,890
557¥ 208,917
5,380

–
2,670

–
272

3,381
197

3,381
3,139

–
1,174

3,381
4,313

Consolidated

31

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

18. Segment Information (continued)
Business Segments (continued)
Millions of yen
Year ended March 31, 2007

I. Sales and operating income(loss)
Sales to third parties
Intergroup sales andtransfers
Net sales
Operating expenses
Operating income (loss)
II. Total assets, depreciation,
loss on impairment of fixed
assets and capital
expenditures
Total assets
Depreciation
Loss on impairment of
fixed assets
Capital expenditures

Eliminations andgeneralcorporate
assetsConsolidated

Steel sheet
products

Electric
furnaceproducts

Other

Total

¥ 175,568¥ 8,437¥ 8,314¥ 192,319¥–¥ 192,319–
175,568
163,316¥ 12,252

–
8,437
8,550
¥ (113)6,141
14,45512,757¥ 1,698

6,141
198,460
184,623¥ 13,837(6,141)(6,141)(5,256)¥ (885)–
192,319
179,367¥ 12,952¥ 123,504
4,524¥ 9,641304¥ 16,635
339¥ 149,780
5,167¥ 79,751
122¥ 229,531
5,289

–
4,528

–
271

325
456

325
5,255

200
25

525
5,280

Eliminations andgeneralcorporate
assetsConsolidated

Thousands of U.S. dollars
Year ended March 31, 2007

I. Sales and operating income(loss)
Sales to third parties
Intergroup sales andtransfers
Net sales
Operating expenses
Operating income (loss)
II. Total assets, depreciation,
loss on impairment of fixed
assets and capital
expenditures
Total assets
Depreciation
Loss on impairment of
fixed assets
Capital expenditures

Steel sheet
products

Electric
furnaceproducts

Other$ 1,487,234$ 71,470$ 70,428$ 1,629,132 $–1,487,234
1,383,448$ 103,786–
71,47072,427$ (957)52,020122,448
108,064$ 14,384

52,020(52,020)–
1,681,152(52,020)
1,629,132
1,563,939(44,523)
1,519,416$ 117,213 $ (7,497) $ 109,716$ 1,046,201
38,323$ 81,669
2,575$ 140,914
2,872$ 1,268,784 $ 675,570
43,7701,033–
38,357

–
2,296

2,753
3,862

Total

2,753
44,515

–

1,694
212

$ 1,629,132$ 1,944,354
44,803
4,447
44,72732

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

18. Segment Information (continued)
As described in Note 2(2), effective the year ended March 31, 2007 the Company and its
consolidated subsidiaries have adopted a new accounting standard for share-based
payments. As a result of the adoption of this accounting standard, operating expenses inthe steel sheet products segment, electric furnace products segment and other segment for
the year ended March 31, 2007 decreased by ¥22 million ($186 thousand), ¥1 million ($8thousand) and ¥1 million ($8 thousand), respectively, and operating income for thesesegments decreased by the same amounts from the amounts which would have beenrecorded under the method applied in the previous year.
Geographical Segments

Japan

Millions of yen
Year ended March 31, 2006
Eliminations
and general
corporate
assetsAsia
Total

Consolidated

I. Sales and operating
incomeSales to third parties
Interarea sales andtransfers
Net sales
Operating expenses
Operating income¥ 118,625¥ 61,411¥ 180,036¥–¥180,036

17
118,642
108,988¥ 9,654279
61,69058,071¥ 3,619296
180,332
167,059¥ 13,273

(296)
(296)
(371)
¥
75

–
180,036
166,688¥ 13,348

II. Total assets¥ 115,483¥ 31,210¥ 146,693¥ 62,224¥208,917

Japan
I. Sales and operating
incomeSales to third parties
Interarea sales andtransfers
Net sales
Operating expenses
Operating income
II. Total assets

Millions of yen
Year ended March 31, 2007
Eliminations
and general
corporate
assetsAsia
Total

Consolidated¥ 124,692¥ 67,627¥ 192,319¥–¥ 192,319

1,042
125,734
119,056¥ 6,678−
67,62761,417¥ 6,210

1,042
193,361
180,473¥ 12,888(1,042)(1,042)(1,106)¥64–
192,319
179,367¥ 12,952¥ 120,865¥ 37,030¥ 157,895¥ 71,636¥ 229,531

33

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

18. Segment Information (continued)
Geographical Segments (continued)

Japan
I. Sales and operating
incomeSales to third parties
Interarea sales andtransfers
Net sales
Operating expenses
Operating income
II. Total assets

Thousands of U.S. dollars
Year ended March 31, 2007
Eliminations
and general
corporate
assetsAsia
Total

Consolidated$–$ 1,629,132

8,827
1,637,959
1,528,785$ 109,174$(8,827)(8,827)(9,369)542–
1,629,132
1,519,416$ 109,716$ 1,337,526$ 606,828$ 1,944,354$ 1,056,264$ 572,868$ 1,629,132

8,827
1,065,091
1,008,522$ 56,569−
572,868
520,263$ 52,605$ 1,023,846$ 313,680

As described in Note 2(2), effective the year ended March 31, 2007, the Company and its
consolidated subsidiaries have adopted a new accounting standard for share-based
payments. As a result of the adoption of this accounting standard, operating expenses in
the Japan segment for the year ended March 31, 2007 increased by ¥25 million ($211
thousand) and operating income decreased by the same amounts from the amount which
would have been recorded under the method applied in the previous year.
The principal country in the Asia segment is Taiwan.

34

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

18. Segment Information (continued)
Overseas Sales
Overseas sales which include export sales of the Company and its domestic consolidated
subsidiaries and sales (other than exports to Japan) of the overseas consolidated subsidiaryfor the years ended March 31, 2006 and 2007 are summarized as follows:
Millions of yen
Year ended March 31, 2006
Other
Total

Asia
Overseas sales
Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales¥ 51,989¥ 15,087

28.9%

8.4%

¥ 48,889

Overseas sales
Consolidated net sales¥ 20,267

25.4%

Asia
$414,138

67,076
180,036
37.3%

Millions of yen
Year ended March 31, 2007
North
America
Other

Asia
Overseas sales
Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales

¥

10.5%

¥ 9,822¥ 78,978192,319

5.1%

41.0%

Thousands of U.S. dollars
Year ended March 31, 2007
North
AmericaOther$171,681

Total$ 83,203$

Total
669,022
1,629,132

Until the year ended March 31, 2006, overseas sales in the North America area were
included in those in other area. Effective the year ended March 31, 2007, overseas sales
in the North America area were separately presented as the percentage of overseas sales in
the North America area against consolidated net sales was in excess of 10%. Overseas
sales in the North America area for the year ended March 31, 2006 were ¥9,193 million.
19. Subsequent Event
The following appropriation of retained earnings of the Company, which has not beenreflected in the accompanying consolidated financial statements for the year ended March
31, 2007, was approved at a meeting of the Board of Directors held on May 22, 2007:
Cash dividends of ¥7 (U.S.$0.06) per share

Millions of yen

Thousands of U.S. dollars¥1,180$9,99635