Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
Years ended March 31, 2000 and 2001
with Independent Auditors’ Report

Yodogawa Steel Works, Ltd.
Consolidated Financial Statements
Years ended March 31, 2000 and 2001

Contents

Consolidated Financial Statements
Independent Auditors’ Report on Consolidated Financial Statements................................ 1
Consolidated Balance Sheets............................................................................................... 2
Consolidated Statements of Income .................................................................................... 4
Consolidated Statements of Shareholders’ Equity.............................................................. 5
Consolidated Statements of Cash Flo ws ............................................................................. 6
Notes to Consolidated Financial Statements ....................................................................... 8

Independent Auditors’ Reporton Consolidated Financial Statements
The Board of Directors and the Shareholders
Yodogawa Steel Works, Ltd.
We have audited the consolidated balance sheets of Yodogawa Steel Works, Ltd. andconsolidated subsidiaries as of March 31, 2000 and 2001, the related consolidated
statements of income, shareholders’ equity, and cash flows for the years then ended, allexpressed in yen. Our audits were made in accordance with aud iting standards,
procedures and practices generally accepted and applied in Japan and, accordingly,
included such tests of the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
In our opinion, the accompanying consolidated financial statements, expressed in yen,present fairly the consolidated financial position of Yodogawa Steel Works, Ltd. andconsolidated subsidiaries at March 31, 2000 and 2001, and the consolidated results of
their operations and the ir cash flows for the years then ended in conformity withaccounting principles and practices generally accepted in Japan applied on a consistentbasis.
As described in Note 1, Yodogawa Steel Works, Ltd. and consolidated subsidiaries haveadopted new accounting standards for consolidation and tax-effect accounting effective
the year ended March 31, 2000 and for employees’ retirement benefits, financial
instruments and foreign currency translation effective the year ended March 31, 2001 in
the preparation of their consolidated financial statements.
The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2001 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 2.

Osaka, Japan
June 28, 2001

See Note 1 which explains the basis of preparation of the consolidated financial
statements of Yodogawa Steel Works, Ltd. and consolidated subsidiaries under Japanese
accounting principles and practices.

1

Yodogawa Steel Works, Ltd.
Consolidated Balance Sheets
March 31, 2000 and 2001
Thousands of
U.S. dollars(Note 2)
2001

Millions of yen
2000
2001
AssetsCurrent assets:
Cash and cash equivalents
Short-term investments
Marketable securities (Note 3)
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates
Trade
Less allowance for doubtful receivables
Inventories
Deferred income taxes (Note 7)
Other current assets
Total current assets
Property, plant and equipment, at cost (Note 4):
Land (Note 8)
Buildings and structures
Machinery, equipment and vehicles
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net¥ 31,578
2,163
20,704¥ 24,313
464
3,339

$

196,231
3,745
26,94912,18132,789(217)
31,732947
4,806
136,683

14,23533,332(169)
32,528831
3,309
112,182

114,891
269,024(1,364)
262,534
6,707
26,707905,424

22,501
48,051
120,218
11,260(125,232)
76,79822,95853,657
132,548755(129,535)
80,383

185,295
433,067
1,069,798
6,094(1,045,481)
648,773

Investments and other assets:
Investments in securities (Notes 3 and 4)
Investments in and advances tounconsolidated subsidiaries and affiliates
Deferred income taxes (Note 7)
Other assets
Total investments and other assets

2,041

18,711

151,017

4,443
1,549
2,968
11,001

3,130
1,380
4,022
27,24325,262
11,13832,462219,879

Translation adjustments

4,924

–

–

¥ 229,406¥ 219,808$ 1,774,076

Total assets

2Millions of yen
2000
2001
Liabilities and shareholders ’ equity
Current liabilities:
Short-term bank loans (Note 4)
Current portion of long-term debt (Note 4)
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes (Note 7)
Reserve for loss on restructuring
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 4)
Deferred income taxes on land revaluation
reserve (Notes 7 and 8)
Accrued retirement benefits (Note 5)
Guarantee deposits (Note 4)
Other long-term liabilities
Total long-term liabilities
Minority interests

Thousands of
U.S. dollars(Note 2)
2001

¥ 13,330
2,570¥ 15,010
5,740$ 121,146
46,328855
25,401
3,322
3,762
447
269
2,439
52,395913
25,639
2,527
3,701
427
–
2,669
56,626

7,369
206,933
20,39529,871
3,446–
21,542457,030

15,7686,128

49,459

285
8,603
1,474
646
26,776

570
9,276
5,051
598
21,6234,600
74,86740,767
4,827
174,520

13,55011,27891,02523,221–
23,611
393
90,940––23,221
23,612544
86,883(1,905)–
187,417
190,573
4,390
701,235(15,375)(1,480)136,685¥229,406(2,074)130,281¥219,808(16,739)
1,051,501$1,774,076

Contingent liabilities (Note 11)
Shareholders’ equity (Note 6):
Common stock, ¥50 par value:
Authorized:
March 31, 2000 - 781,945,000 shares
March 31, 2001 - 772,439,000 shares
Issued:March 31, 2000 - 212,317,086 shares
March 31, 2001 - 202,811,086 shares
Additional paid-in capitalLand revaluation reserve (Note 8)
Retained earnings (Note 14)
Translation adjustments
Treasury stock, at cost - 4,938,831 shares in2000 and 6,864,571 shares in 2001
Total shareholders’ equity
Total liabilities and shareholders’ equity

See accompanying notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd.
Consolidated Statements of Income
Years ended March 31, 2000 and 2001
Millions of yen
2000
2001
Net sales
Cost of sales
Gross profit

Thousands of
U.S. dollars(Note 2)
2001

¥153,991
130,738
23,253¥153,863
131,230
22,633$1,241,832
1,059,160
182,672

19,8103,443

19,786
2,847

159,694
22,978

613
(645)
2,744
(410)

576
(587)
991
(433)

4,649
(4,738)
7,998(3,495)

170

2,301

18,571(337)
56(1,266)
(269)

(187)
(164)
–
–

(1,509)(1,324)
–
–

–
–

1,627
(725)

13,132(5,851)–(1,002)(2,559)337(20,654)
2,721

3,097

4,024

32,478

Income before minority interests

1,121
(271)
850
2,247

600
306
906
3,118

4,843
2,470
7,313
25,165

Minority interests in earnings of consolidated
subsidiaries
Net income

(600)
1,647

(771)
2,347

(6,222)
18,943

Selling, general and administrative expenses(Note 9 )Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sales of securities
Loss on revaluation of securities
Gain on sales of property, plant andequipment
Loss on disposal of property, plant andequipment
Equity in earnings (loss) of an affiliate
Loss on liquidation of a subsidiary
Provision for reserve for loss on restructuring
Gain on contribution of securities to
employees’ retirement benefit trust
Loss on restructuring
Net retirement benefit obligation at transition(Note 1(m))
Other, net
Income before income taxes and minority
interests
Income taxes (Note 7):
Current
Deferred¥¥

U.S. dollars(Note 2)

Yen
Amounts per share:
Net income

¥7.71

$

¥11.66$94

See accompanying notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd.
Consolidated Statements of Shareholders’ Equity
Years ended March 31, 2000 and 2001
Thousands of
U.S. dollars(Note 2)
2001

Millions of yen
2000
2001
Common stock
Balance at beginning and end of the year
Additional paid-in capital
Balance at beginning of the year
Add:
Transfer from retained earnings
Balance at end of the year
Land revaluation reserve
Balance at beginning of the year
Net change during the year
Balance at end of the year
Retained earnings
Balance at beginning of the year
Add:
Net income
Cumulative adjustment arising frominitial adoption of tax-effect accounting(Note 1(l))
Increase resulting from initial inclusion ofsubsidiaries in consolidation
Increase resulting from merger of aconsolidated subsidiary
Deduct:Decrease resulting from initial inclusionof a subsidiary in consolidation
Cash dividends paid
Bonuses to directors and statutory auditors
Bonuses to employees of an overseas
subsidiary
Transfer to additional paid-in capital
Retirement of treasury stock
Balance at end of the year
Translation adjustments
Balance at beginning of the year
Net change during the year
Balance at end of the year

¥ 23,221¥ 23,221$187,417¥ 23,611¥ 23,611$190,5650¥ 23,611

1¥ 23,612

8$190,573

¥

¥

$

¥

–
393
393

¥

393
151
544

$

3,172
1,218
4,390

¥ 91,923¥90,940$733,979

1,647

2,347

18,943

1,745

–

–

1,199

–

–

–

8

65

–
1,507
77

2,308
1,416
67

18,628
11,429
541

7
0
3,983
¥ 90,940

17
1
2,603
¥86,883137
8
21,009$701,235

¥

¥

$

¥

–
–
–

–
(1,905)¥ (1,905)–(15,375)$ (15,375)

See accompanying notes to consolidated financial statements.
5

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows
Years ended March 31, 2000 and 2001

Millions of yen
2000
2001
Cash flows from operating activities
Income before income taxes and minority
interests
Adjustments for:
Depreciation and amortization
Amortization of goodwill arising fromconsolidation
Equity in (earnings) loss of an affiliate
Loss on revaluation of securities
Loss on liquidation of a subsidiary
Provision for reserve for loss on restructuring
Increase in accrued retirement benefits
Decrease in accrued bonuses
Increase (decrease) in allowance for doubtfulreceivables
Interest and dividend income
Interest expense
Gain on sales of securities
Gain on sales of property, plant andequipment
Loss on disposal of property, plant andequipment
Loss on restructuring
Net retirement benefit obligation at transition
Decrease (increase) in notes and accounts
receivable
Increase in inventories(Decrease) increase in notes and accounts
payablePayment of bonuses to directors, statutory
auditors and employees of an overseas
subsidiary
Other
SubtotalInterest and dividends received
Interest paid
Payment for liquidation of a subsidiary
Payment for restructuring
Income taxes paid
Net cash provided by operating activities

Thousands of
U.S. dollars(Note 2)2001

¥ 3,097¥ 4,024$ 32,478

9,869

8,626

69,621

(61)
(56)
410
1,266
269
295
(84)

(61)
164
429
–
–
633
(201)

(492)
1,324
3,462
–
–
5,109
(1,622)

898
(613)
645
(2,744)

(246)
(576)
587
(991)

(1,985)(4,649)4,738(7,998)(170)(2,301)(18,571)

246
–
–

107
725
459

864
5,851
3,705

7,204
(1,191)(2,320)(400)(18,725)(3,228)(7,278)

464

3,745

(84)
526
12,444576(649)(1,206)–(2,792)
8,373

(84)
(542)
8,496
584
(638)
–
(158)
(638)
7,646

(678)
(4,378)68,571
4,713(5,149)–(1,275)(5,149)61,711

6

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows (continued)
Years ended March 31, 2000 and 2001

Cash flows from investing activities
Payments for time deposits with a maturity ofmore than three months
Proceeds from time deposits with a maturity ofmore than three months
Purchases of securities
Proceeds from sales of securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant andequipment
Purchases of other assets
Increase in loans receivableCollection of loans receivable
Other
Net cash used in investing activities
Cash flows from financing activities
Increase in short-term bank loans
Issuance of long-term debt
Repayment of long-term debt
Redemption of bonds
Purchases of treasury stock
Cash dividends paid to the Company’s
shareholders
Cash dividends paid to minority shareholders ofconsolidated subsidiaries
Net cash used in financing activities
Effect of exchange rate changes on cash andcash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of theyear
Increase in cash and cash equivalents arisingfrom initial consolidation of subsidiaries
Cash and cash equivalents at end of the year

Millions of yen
2000
2001

Thousands of
U.S. dollars(Note 2)
2001

¥ (7,745)¥ (2,845)$ (22,962)

8,291(3,631)
7,295(13,945)

4,545(5,020)
5,987(11,518)

36,683(40,517)
48,321(92,962)239(57)(1,230)224–(10,559)

2,564
(31)
(101)
1,129
30
(5,260)20,694
(250)
(815)
9,112
242
(42,454)

200
400
(439)
–
(3,983)

1,668
1,100
(940)
(6,918)(2,603)

13,463
8,878(7,587)(55,835)(21,009)(1,507)(1,416)(11,429)(585)(5,914)(851)(9,960)(6,868)(80,387)(484)(8,584)205(7,369)1,655(59,475)

37,442

31,578254,867

2,720¥ 31,578104¥ 24,313

839$196,231

See notes to consolidated financial statements.
7

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements
March 31, 2001

1. Summary of Significant Accounting Policies(a) Basis of Preparation
The accompanying consolidated financial statements of Yodogawa Steel Works, Ltd.
(the “Company”) and its consolidated subsidiaries have been prepared in accordancewith accounting principles and practices generally accepted and applied in Japan,
which may differ in certain material respects from accounting principles and practices
generally accepted in countries and jurisdictions other than Japan, and have been
compiled from those prepared by the Company as required under the Securities andExchange Law of Japan.
In addition, the notes to the consolidated financial statements include information
which is not required under accounting principles generally accepted in Japan but ispresented herein as additional information.
Certain reclassifications of previously reported amounts have been made to theconsolidated financial statements for the year ended March 31, 2000 to conform themto the 2001 presentation. Such reclassifications had no effect on consolidated net
income or shareholders’ equity.
(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.
Investments in affiliates (companies over which the Company has the ability to
exercise significant influence) are stated at cost plus equity in their undistributed
earnings or losses. Consolidated net income includes the Company’s equity in thecurrent net income or loss of such companies, after the elimination of unrealizedintercompany profits.
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 the date of acquisitionis amortized over a period of five years on a straight-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
from its fiscal year end to the Company’s balance sheet date.
8

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

1. Summary of Significant Accounting Policies (continued)(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.
All revenues and expenses associated with foreign currencies are translated at therates of exchange prevailing when such transactions were made. The resulting
exchange loss and gain are charged or credited to income.
The balance sheet accounts of the foreign consolidated subsidiary (except forshareholders’ equity) are translated into yen at the rates of exchange in effect at thebalance sheet date. Components of shareholders’ equity are translated at theirrespective historical rates of exchange. Revenue and expense accounts aretranslated into yen at the average rate of exchange in effect during the year.
Effective April 1, 2000, the Company and its domestic consolidated subsidiaries
adopted a revised accounting standard for foreign currency translation. The effect of
the adoption of this standard on the consolidated financial statements was immaterial
for the year ended March 31, 2001.
Due to a change effective the year ended March 31, 2001 in the regulations relating to
the presentation of translation adjustments, translation adjustments have beenpresented as a component of shareholders’ equity and minority interests inconsolidated subsidiaries (instead of as a component of assets or liabilities) in theaccompanying consolidated financial statements for the year ended March 31, 2001.
(d) Cash Equivalents
For the purpose of the consolidated statements of cash flows, cash and cash
equivalents consist of cash on hand, deposits with banks withdrawable on demand,and short-term investments which are readily convertible to cash subject to an
insignificant risk of changes in their value and which were purchased with an original
maturity of three months or less.

9

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

1. Summary of Significant Accounting Policies (continued)(e) Securities
Up to the year ended March 31, 2000, marketable securities were primarily stated at
the lower of cost or market, cost being determined by the moving average method.
Effective April 1, 2000, the Company and its consolidated subsidiaries adopted a new
accounting standard for financial instruments which requires that securities beclassified into three categories: trading securities, held-to- maturity debt securities orother securities. Under this standard, trading securities are carried at fair value andgain and loss, both realized and unrealized, are cha rged to income. Held-to-maturity
debt securities are carried at their amortized cost. Marketable securities classified asother securities are carried at fair value with changes in unrealized holding gain or
loss, net of the applicable income taxes, reported as a separate component ofshareholders’ equity. Non-marketable securities classified as other securities arecarried at cost.
As permitted under the new standard, the Company and its consolidated subsidiaries
have postponed recording marketable securities classified as other securities at fairvalue to the year ending March 31, 2002. The following pro forma amounts
represent the carrying value, fair value, unrealized holding gain (net of the applicable
income taxes), and the deferred tax liability (the applicable income taxes on the
unrealized holding gain) and minority interests, which would have been reflected in
the consolidated balance sheet as of March 31, 2001 if marketable securities
classified as other securities were carried at fair value:

Carrying value
Fair value
Unrealized holding gain
Deferred tax liability
Minority interests

Millions ofyen

Thousands of
U.S. dollars¥21,106
31,719
6,122
4,457
34

$170,347
256,005
49,41135,973274

As of April 1, 2000, the Company and its consolidates subsidiaries assessed theirintent in holding their securities, classified them as “held-to- maturity debt securities”
and “other securities,” and accounted for the securities at March 31, 2001 in
accordance with the new standard referred to above. As a result, securities of¥17,215 million ($138,943 thousand), which had been included in marketablesecurities at March 31, 2000, were reclassified to investments in securities as of April
1, 2000. The effect of the adoption of this standard for financial instruments was toincrease income before income taxes and minority interests by ¥1,647 million($13,293 thousand).
10

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

1. Summary of Significant Accounting Policies (continued)(f) Inventories
Inventories are stated at cost principally determined by the last-in, first-out method.
Inventories at the foreign consolidated subsidiary are stated at the lower of 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 (except for structures attached to the buildings)
acquired subsequent to April 1, 1998.
Depreciation of property, plant and equipment at the foreign 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 50 years
4 to 17 years

Significant renewals and additions are capitalized at cost. Maintenance and repairs
are charged to income as incurred.
(h) Intangible Assets
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
Up to the year ended March 31, 2000, the Company and its domestic consolidated
subsidiaries provided an allowance for doubtful receivables principally at an
estimated aggregate amount of probable bad debts plus the maximum amountpermitted to be charged to income under the Corporation Tax Law of Japan.
Effective April 1, 2000, the Company and its consolidated subsidiaries have adopted
a new accounting standard for financial instruments. Under the new accounting
standard, the Company and its consolidated subsidiaries have provided an allowancefor doubtful receivables an amount calculated based on their historical experience ofbad debts on ordinary receivables plus an additional estimate of probable specific bad
debts from customers experiencing financial difficulties. The aggregate effect of the
adoption of the new standard is disclosed in Note 1(e), “Securities.”11

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

1. Summary of Significant Accounting Policies (continued)(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
five 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
Up to the year ended March 31, 1999, deferred income taxes were not provided fortiming differences in the recognition of income and expenses for financial and tax
reporting purposes.
Effective April 1, 1999, the Company and its consolidated subsidiaries adopted
tax-effect accounting for the interperiod allocation of income taxes. The cumulative
effect of this change in method of accounting was reported as “Cumulative
adjustment arising from initial adoption of tax-effect accounting” in the consolidated
statement of shareholders’ equity for the year ended March 31, 2000. The effect of
this change was that deferred income taxes - current assets, deferred income taxes non-current assets, deferred income taxes - non-current liabilities arising from land
revaluation, and retained earnings at March 31, 2000 increased by ¥947 million,¥1,549 million, ¥285 million, and ¥2,041 million, respectively, and net income for theyear then ended increased by ¥296 million.
(m) Retirement Benefits
Employees of the Company and its consolidated subsidiaries are covered by an
employees’ retirement benefits plan and an employees’ pension plan. The
employees’ retirement benefits plan provides for a lump-sum payment determined byreference to the basic salary, length of service and conditions under which thetermination occurs.
The employees’ pension plan, which is a funded
non-contributory plan, partially covers the benefits under the employees’ retirement
benefits plan to employees who retire after fifteen or more years of service.
12

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

1.

Summary of Significant Accounting Policies (continued)(m) Retirement Benefits (continued)
Up to the year ended March 31, 2000, accrued retirement benefits were stated at theamount which would be required to be paid if all employees covered by theretirement benefits plan voluntarily terminated their employment at the balance sheet
date, less the assets of the pension plan.
Effective April 1, 2000, the Company and the domestic consolidated subsidiaries
have adopted a new accounting standard for retirement benefits. In accordance withthis standard, accrued retirement benefits for employees at March 31, 2001 have been
provided mainly at an amount calculated based on the retirement benefit obligationand the fair value of the pension plan assets as of March 31, 2001, as adjusted for
unrecognized actuarial loss. The retirement benefit obligation is attributed to eachperiod by the straight- line method over the estimated years of service of the eligible
employees. The net retirement benefit obligation at transition of ¥2,559 million($20,654 thousand) has been fully charged to income for the year ended March 31,
2001. The effect of the adoption of the new standard for retirement benefits was todecrease income before income taxes and minority interests by ¥1,133 million($9,144 thousand) for the year ended March 31, 2001.
Actuarial gain and loss are amortized in the year following the year in which the gainor loss is recognized principally by the straight- line method over 10 years, which iswithin 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 15
years, which is within the estimated average remaining years of service of the eligible
employees.
The directors and statutory auditors of the Company and its domestic consolidated
subsidiaries are customarily entitled to lump-sum payments under the unfunded
retirement benefit plans. The provision for retirement benefits for directors andstatutory auditors has been made at an estimated amount based on each Company’s
internal rules.
(n) Hedge Accounting
Under the new accounting standard for financial instruments effective April 1, 2000,
gain or loss on derivatives designed as hedging instruments is deferred until the loss
or gain on the underlying hedged item is recognized. Interest rate swaps which meetcertain conditions are accounted for as if the interest rates applied to the swaps hadoriginally applied to the underlying debt and others. 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)

1. Summary of Significant Accounting Policies (continued)(o) Amounts Per Share
The computation of consolidated net income per share is based on the weighted
average number of shares of common stock outstanding during each year.

2. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is included solely forconvenience, as a matter of arithmetic computation only, at the rate of ¥123.90 =U.S.$1.00, the approximate exchange rate prevailing on March 31, 2001. The translation
should not be construed as a representation that yen have been, could have been, or couldin the future be, converted into U.S. dollars at the above or any other rate.

3.

Fair Value of Securities

Information with respect to the book and fair value of marketable securities included incurrent assets and investments in securities in investments and other assets at March 31,
2000 is summarized as follows:
Millions of yen
Book value
Fair valueMarketable securities:
Equity securities
Debt securities
Other securities
Investments in securities:
Equity securities
Debt securities¥16,392401
891
17,684¥39,164
418
876
40,458298
524
822¥18,506

457
740
1,197
¥41,655

14

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

3.

Fair Value of Securities (continued)

Information regarding marketable securities classified as held-to- maturity debt securities
at March 31, 2001 is summarized as follows:

Carrying
value
Securities whose fair value exceeds
their carrying value:
Government bonds
Other
Securities whose carrying value
exceeds their fair value:
Corporate bonds
Other
Total

¥

26
600
626

500
968
1,468
¥2,094

Millions of yen
Estimated fair
value

¥

Unrealized
gain (loss)

28
600
628

¥ 2
0
2

487
906
1,393
¥2,021

(13)
(62)
(75)
¥(73)

Thousands of U.S. dollars
Carrying
Estimated fair
Unrealized
value
value
gain
Securities whose fair value exceeds
their carrying value:
Government bonds
Other
Securities whose carrying value
exceeds their fair value:
Corporate bonds
Other
Total

$

210
4,843
5,053

4,036
7,812
11,848$16,901

$

226
4,843
5,069

$ 16
0
16

3,931
7,312
11,243$16,312

(105)
(500)
(605)
$(589)

Sales of securities classified as other securities amounted to ¥2,910 million ($23,487
thousand), with an aggregate gain of ¥991 million ($7,998 thousand) and an aggregate
loss of ¥125 million ($1,009 thousand) for the year ended March 31, 2001.

15

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

3.

Fair Value of Securities (continued)

Non-marketable securities classified as other securities at March 31, 2001 were as
follows:

Other securities:
Non-marketable equity securities
Money management funds
Medium-term government bond funds
Free financial funds

Millions ofyen

Thousands of
U.S. dollars¥1,053
2,845
1,521
4,705

$ 8,499
22,962
12,27637,974

The redemption schedule for held-to-maturity debt securities with maturities as of March
31, 2001 is summarized as follows:

Due in one
year or lessGovernment bonds
Corporate bonds
Other debt securities
Total

¥

0
1,000
1,310
¥2,310Millions of yen
Due after one
year throughfive years
¥

26
1,100
377
¥1,503Due after five
years throughten years
¥ 0
–
25
¥25

Thousands of U.S. dollars
Due after one
Due after fiveDue in one
year throughyears throughfive years
ten years
year or lessGovernment bonds
Corporate bonds
Other debt securities
Total

$

0
8,071
10,573$18,644

$

210
8,878
3,043
$12,131

$

0
–
202
$202

16

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

4. Short-Term Bank Loans, Long-Term Debt and Guarantee Deposits
Short-term bank loans at March 31, 2000 and 2001 represented overdrafts and notes
payable to banks. At March 31, 2000, overdrafts and notes payable to banks amounted
to ¥12,530 million at an annual interest rate of approximately 0.74% and ¥800 million atan annual interest rate of approximately 1.4%, respectively. At March 31, 2001,
overdrafts and notes payable to banks amounted to ¥14,160 million ($114,286 thousand)at an annual interest rate of approximately 1.58%, and ¥850 million ($6,860 thousand) at
an annual interest rate of approximately 1.44%, respectively.
Long-term debt at March 31, 2000 and 2001 was as follows:
Thousands of
U.S. dollars
2001

Millions of yen
2000
2001
1.8% unsecured bonds, payable in yen,due 2003
2.0% unsecured bonds, payable in yen,due 2004
Unsecured loans from banks and an
insurance company, due from 2001
through 2003, at interest rates ranging
from 1.24% to 1.91%
6.3% unsecured bonds, payable in
Taiwan dollars, due 2001
Less current portion¥ 5,000¥ 5,000$ 40,355

5,000

–

–

6,708

6,868

55,432

1,630
18,338(2,570)¥15,768–
11,868(5,740)¥ 6,128–
95,787(46,328)$ 49,459

The aggregate annual maturities of long-term debt subsequent to March 31, 2001 aresummarized as follows:
Millions ofyen

Thousands of
U.S. dollars¥ 5,740
5,228
900¥11,868$46,328
42,195
7,264$95,787

Year ending March 31,
2002
2003
2004

17

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

4. Short-Term Bank Loans, Long-Term Debt and Guarantee Deposits (continued)
The assets pledged as collateral for short-term bank loans and other current liabilities at
March 31, 2001 were as follows:
Millions ofThousands ofyen
U.S. dollars
Property, plant and equipment, at net book value
Investments in securities¥32,495
50¥32,545$262,268
404$262,672

Guarantee deposits consisted principally of guarantee deposits from tenants at annualinterest rates ranging from 1% to 4%. The aggregate annual maturities of guarantee
deposits subsequent to March 31, 2001 are summarized as follows:
Millions ofyen

Thousands of
U.S. dollars

Year ending March 31,
2002
2003
2004
2005
2006
2007 and thereafter

¥

4
4
4
4
–
5,035
¥5,051

$

32
32
32
32
–
40,639$ 40,767

5. Retirement Benefits
The funded and accrued status of the employees’ defined benefit plans of the Company
and its domestic consolidated subsidiaries, and the amounts recognized in the
consolidated balance sheet as of March 31, 2001 are 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
Prepaid pension costAccrued retirement benefits

Millions ofyen

Thousands of
U.S. dollars¥(15,336)
6,116(9,220)1,805
51(7,364)462¥ (7,826)$(123,777)
49,362(74,415)
14,568412(59,435)
3,729$ (63,164)

18

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

5. Retirement Benefit (continued)
The components of retirement benefit expenses for the year ended March 31, 2001 areoutlined as follows:
Millions ofThousands ofyen
U.S. dollars
Service cost
Interest cost
Expected return on plan assets
Amortization of net retirement benefit obligation
at transition
Amortization of actuarial loss
Amortization of prior service cost

¥ 803
489
(163)

$ 6,481
3,947(1,315)2,559
6
7¥3,701

20,65448
56$29,871

The discount rate and expected rate of return on plan assets used as assumptions inaccounting for the employees’ retirement benefit plans as of March 31, 2001 wereprinc ipally 2.5% and 4.5%, respectively. The discount rate assumed at April 1, 2000
was 3.5%.
At March 31, 2001, the Company and its domestic consolidated subsidiaries recorded¥1,450 million ($11,703 thousand) of accrued retirement benefits to directors andstatutory auditors.

6. Shareholders ’ Equity
The Commercial Code of Japan provides that an amount equivalent to at least 10% of
cash dividends paid and bonuses to directors and statutory auditors, and exactly 10% ofinterim cash dividends paid be appropriated to the legal reserve until such reserve equals
25% of stated capital. The Code also provides that neither additional paid- in capital nor
the legal reserve is available for dividends but both may be used to reduce or eliminate a
deficit by resolutio n of the shareholders or may be transferred to stated capital byresolution of the Board of Directors. The Company’s legal reserve, which is included inretained earnings, amounted to ¥3,250 million and ¥3,402 million ($27,457 thousand) as
of March 31, 2000 and 2001, respectively.

7. 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 42.0% for the years ended March 31, 2000 and 2001.

19

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

7. Income Taxes (continued)
A reconciliation of the statutory tax rate and the effective tax rates for the years ended
March 31, 2000 and 2001, as a percentage of income before income taxes and mino rityinterests, is as follows:
2000
2001
Statutory tax rate
Investment tax credits
Non-taxable income
Excess allowance for doubtful receivables
Unrecognized deferred tax assets arising fromtax loss carryforward of subsidiaries
Differences in tax rates applicable to foreignsubsidiaries
Cash dividends received from foreign subsidiaries
Other
Effective tax rates

42.0%(18.5)
(5.8)
13.0

42.0%
(10.2)
(3.5)
–

2.7

(15.5)(12.2)
6.1
2.8
30.1%

(7.6)
3.8
13.5
22.5%

Deferred income taxes reflect the tax effect of the temporary differences between theamounts of the assets and liabilities recorded for financial and tax reporting purposes.
The significant components of the deferred tax assets and liabilities of the Company andits consolidated subsidiaries as of March 31, 2000 and 2001 are summarized as follows:

Millions of yen
2000
2001
Deferred tax assets:
Accrued retirement benefits
Investment tax credits
Allowance for doubtful receivables
Depreciation
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Land revaluation reserve
Reserve for deferred taxation oncontributions for acquisition ofproperty
Differed tax liabilities
Net deferred tax assets

Thousands of
U.S. dollars
2001¥ 2,138
288
523
200
795
3,944
(485)
3,459

¥ 2,427
452
528
201
767
4,375
(618)
3,757

$ 19,588
3,648
4,262
1,622
6,191
35,311(4,988)30,323

(285)

(570)

(4,600)(963)(1,248)¥ 2,211(1,546)(2,116)¥ 1,641(12,478)(17,078)$ 13,245
20

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

7. Income Taxes (continued)
Net deferred tax assets as of March 31, 2001 are classified as follows:

Current assets
Noncurrent assets
Noncurrent liabilities

Millions ofyen

Thousands of
U.S. dollars

¥ 831
1,380
(570)
¥1,641$ 6,707
11,138(4,600)$13,245

8. Revaluation of Land
At March 31, 2000, Hakuyo Sangyo Co., Ltd., a domestic consolidated subsidiary,
revalued its land held for business use in accordance with the “Law on Land
Revaluation.” Differences on the land revaluation ha ve been accounted for as land
revaluation reserve under shareholders’ equity at the net amount of the tax effect and theallocation to minority interests. The method followed for this land revaluation wasdetermined in accordance with the “Enforcement Act Concerning Land Revaluation.”
The carrying value of this land before and after the revaluation was as follows:
Millions of
yen
As of March 31, 2000:
Carrying value before revaluation
Carrying value after revaluation¥1,0192,375

As of March 31, 2001, the carrying value of ¥2,375 million ($19,169 thousand) exceeded
the fair value by ¥162 million ($1,308 thousand).

9. Research and Development Costs
Research and development costs included in selling, general and administrative expenses
for the years ended March 31, 2000 and 2001 were as follows:

Millions of yen
2000
2001
¥679

¥696

Thousands of
U.S. dollars
2001$5,61721

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

10.

Leases

The following pro forma amounts present the acquisition costs, accumulated depreciationand net book value of the leased property as of March 31, 2000 and 2001, which would
have been reflected in the balance sheets if finance leases other than those which transfer
the ownership of the leased property of the Company and its consolidated subsidiaries(which are currently accounted for as operating leases) were capitalized:
Millions of yen
2000
Acquisition Accumulated
costs
depreciation
Machinery,equipment
and vehicles

¥544

¥264

Net book
value

¥280

2001
Acquisition Accumulated
costs
depreciation¥606

Net book
value

¥359

¥247

Thousands of U.S. dollars
2001
Acquisition Accumulated Net bookcosts
depreciation
value
Machinery,equipment
and vehicles$4,891$2,897$1,994

The related lease payments and depreciation for the years ended March 31, 2000 and 2001
were as follows:
Thousands ofMillions of yen
U.S. dollars
2000
2001
2001
Lease payments
Depreciation

¥100
100

¥119
119

$960
960

Depreciation is calculated by the straight-line method over the respective lease terms.
The related future minimum payments (including the int erest portion thereon) subsequent
to March 31, 2001 under finance leases other than those which transfer the ownership ofthe leased property to the Company and its consolidated subsidiaries are summarized asfollows:
Millions ofThousands ofyen
U.S. dollars
Year ending March 31,
20022003 and thereafter

¥ 99
148
¥247

$ 799
1,195
$1,99422

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

11. Contingent Liabilities
As of March 31, 2001, the Company and its consolidated subsidiaries had the following
contingent liabilities:

Guarantees of housing loans of employees andindebtedness of unconsolidated subsidiaries
Trade notes receivable discounted with banks
Contingent liability for an in-substance defeasanceon bonds

12.

Millions ofyen

Thousands of
U.S. dollars

¥ 214
1,999

$ 1,727
16,134

5,002

40,371

Derivatives

The Company and its consolidated subsidiaries have entered into various transactions
involving derivatives in order to manage certain risks arising from adverse fluctuations inforeign currency exchange rates and interest rates. Derivatives positions involve the riskthat the counterparties may default on their obligations. Forward foreign exchange
contracts and interest rate swaps entail the risk of fluctuations in foreign currency
exchange rates and interest rates, respectively. The Company and its consolidated
subsidiaries select only financial institutions with high credit ratings as counterparties inorder to minimize their risk.
The Company and its consolidated subsidiaries have not entered into derivatives
transactions whose fluctuation in fair value is material and which could thus impact
significantly on their operations. The Company and its consolidated subsidiaries haveestablished policies to report and approve the purpose, nature, counterparties, inherent risk,
limit on loss and the level of risk of each transaction. Under their derivatives policies,
trading in derivatives is not entered into for speculative purposes.
At March 31, 2000, no such contracts or positions remained open. At March 31, 2001,
all derivatives transactions qualified for the application of deferral hedge accounting andhave not been separately disclosed.

13. 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, steel rolls and billets, and gratings. The
Company also engages in other activities such as real estate rental and engineering
projects.

23

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

13.

Segment Information (continued)

The business and geographical segments of the Company and its consolidated subsidiaries
for the years ended March 31, 2000 and 2001 are outlined as follows:Business Segments
Millions of yen
Year ended March 31, 2000

I. Sales and operating
incomeSales to third parties
Intergroup sales andtransfers
Total sales
Operating expenses
Operating income(loss)
II. Assets, depreciationand capital
expenditures
Total assets
Depreciation
Capital expenditures

Steel sheet
products

Electric
furnaceproducts

Other

Total

Eliminations andgeneralcorporate
assets¥136,700¥11,705¥ 5,586¥153,991¥

1
136,701
132,969–
11,705
12,047

12,18017,766
16,732

12,181
166,172
161,748(12,181)(12,181)(11,200)–
153,991
150,548¥ 3,732¥ (342)¥ 1,034¥ 4,424¥(981)¥ 3,443¥129,237
8,548
12,224¥12,750801
159¥21,735
412
442¥163,722
9,761
12,825¥ 65,684
113
166¥229,406
9,874
12,991

Consolidated–¥153,863

Consolidated–¥153,991

Millions of yen
Year ended March 31, 2001

I. Sales and operating
incomeSales to third parties
Intergroup sales andtransfers
Total sales
Operating expenses
Operating income(loss)
II. Assets, depreciationand capital
expenditures
Total assets
Depreciation
Capital expenditures

Steel sheet
products

Electric
furnaceproducts

Other

Total

Eliminations andgeneralcorporate
assets¥132,979¥10,423¥10,461¥153,863¥

0132,979
130,565

4
10,427
10,165

7,069
17,53016,374

7,073
160,936
157,104(7,073)(7,073)(6,088)–
153,863
151,016¥ 2,414¥262¥ 1,156¥ 3,832¥ (985)¥ 2,847¥135,672
7,420
20,448¥ 11,998
536
213¥22,032555
825¥169,702
8,511
21,486¥50,106115
142¥219,808
8,626
21,62824

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

13. Segment Information (continued)
Business Segments (continued)
Thousands of U.S. dollars
Year ended March 31, 2001

I. Sales and operating
incomeSales to third parties
Intergroup sales andtransfers
Total sales
Operating expenses
Operating income(loss)
II. Assets, depreciationand capital
expenditures
Total assets
Depreciation
Capital expenditures

Eliminations andgeneralcorporate
assetsConsolidated$–$1,241,832

Steel sheet
products

Electric
furnaceproducts

Other

Total

$1,073,277$84,124$ 84,431$1,241,832

0
1,073,277
1,053,793

32
84,15682,042

57,054141,485
132,155

57,086
1,298,918
1,267,990(57,086)(57,086)(49,136)–
1,241,832
1,218,854$

19,484$ 2,114$ 9,330$

30,928$ (7,950)$$1,095,012
59,887
165,036$96,836
4,326
1,719

$177,821
4,479
6,659

$1,369,669
68,692
173,414$404,407
929
1,146$1,774,076
69,621
174,560

22,978Geographical Segments
Millions of yen

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

Year ended March 31, 2000
Eliminations
and general
Southeast
corporate
Asia
Total
assetsConsolidated¥122,955¥31,036¥153,991¥–¥153,991

4,797
127,752
126,387¥ 1,365–
31,03628,958¥ 2,078

4,797
158,788
155,345¥ 3,443(4,797)(4,797)(4,797)¥––
153,991
150,548¥ 3,443¥150,040¥23,735¥173,775¥ 55,631¥229,406

25

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

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

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

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

Millions of yen
Year ended March 31, 2001
Eliminations
and general
Southeast
corporate
Asia
Total
assetsConsolidated¥123,326¥30,537¥153,863¥–¥153,863

575
123,901
122,621¥ 1,280–
30,53728,970¥ 1,567575
154,438
151,591¥ 2,847

(575)
(575)
(575)
¥
–

–
153,863
151,016¥ 2,847¥153,483¥26,119¥179,602¥ 40,206¥219,808

Japan

Thousands of U.S. dollars
Year ended March 31, 2001
Eliminations
and general
Southeast
corporate
Asia
Total
assets$ 995,367$246,465$1,241,832$–$1,241,832

4,641
1,000,008
989,677$ 10,331–
246,465
233,818$ 12,647

4,641
1,246,473
1,223,495$ 22,978(4,641)(4,641)(4,641)$––
1,241,832
1,218,854$ 22,978$1,238,765$210,807$1,449,572$ 324,504$1,774,076

Consolidated

26

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

13. Segment Information (continued)
Geographical Segments (continued)
As described in Note 1(m), the Company and its domestic consolidated subsidiaries haveadopted a new accounting standard for retirement benefits effective April 1, 2000. The
effects of this adoption on the above segment information for the year ended March 31,
2001 are summarized as follows:

By business segment:
Decrease in operating income in “steel sheet
products” segment
Decrease in operating income in “electric furnace
products” segment
Decrease in operating income in “other” segment
By geographic area:
Decrease in operating income in “Japan” area

Millions ofyen

Thousands of
U.S. dollars

¥112

$ 904

44
45

355
363

¥201

$1,622Millions of yen
Year ended March 31, 2000
Asia
Other
Total
Overseas sales
Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales¥29,590¥7,793¥ 37,383
153,991

19.2%

5.1%

24.3%

Millions of yen
Year ended March 31, 2001
Asia
Other
Total
Overseas sales
Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales¥25,224¥11,576¥ 36,800
153,863

16.4%

7.5%

23.9%

Thousands of U.S. dollars
Year ended March 31, 2001
Asia
Other
Total
Overseas sales
Consolidated net sales$203,584$93,430$ 297,014
1,241,832

27

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

14. Subsequent Event
The following appropriations of retained earnings of the Company, which have not beenreflected in the accompanying consolidated financial statements for the year ended March
31, 2001, were approved at a shareholders’ meeting held on June 28, 2001:

Cash dividends of ¥3.5 ($0.03) per share
Transfer to legal reserve
Bonuses to directors and statutory auditors

Millions ofyen

Thousands of
U.S. dollars

¥710
76
50

$5,730613
404

28