Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
Year ended March 31, 2013
with Independent Auditor’s Report

Yodogawa Steel Works, Ltd.
Consolidated Financial Statements
Year ended March 31, 2013

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

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

Yodogawa Steel Works, Ltd.
Consolidated Balance Sheet
March 31, 2013

Millions of yen
2012
2013
AssetsCurrent assets:
Cash and deposits (Notes 4, 6 and 12)
Marketable securities (Notes 4, 6 and 7)
Notes and accounts receivable (Notes 5 and 6):
Unconsolidated subsidiaries and affiliates(Note 23)
Trade
Less allowance for doubtful receivables
Inventories (Note 8)
Deferred income taxes (Note 15)
Other current assets (Notes 4 and 12)
Total current assets

Property, plant and equipment:
Land (Notes 9, 18 and 24)
Buildings and structures (Notes 9 and 24)
Machinery, equipment and vehicles (Note 9)
Leased assets
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net (Note 25)

Investments and other assets:
Investments in securities (Notes 6, 7 and 12)
Investments in unconsolidated subsidiaries andaffiliates (Note 25)
Deferred income taxes (Note 15)
Other assets (Note 12)
Total investments and other assets

Total assets (Note 25)2¥22,724
11,309¥27,406
8,813

Thousands of
U.S. dollars(Note 3)
2013$

291,398
93,705

12,49623,081(198)
25,895804
4,138
100,249

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

133,482
237,576(2,371)
254,3447,858
54,811
1,070,803

18,33749,885124,56785
478(149,701)
43,651

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

199,809551,600
1,350,941
904
82,052(1,636,332)
548,974

24,22927,213289,346

6,114
546
3,167
34,056

4,456
558
3,237
35,46447,3795,933
34,418377,076¥ 177,956¥ 187,804$ 1,996,853

Thousands of
U.S. dollars(Note 3)2013

Millions of yen
2012
2013
Liabilities and net assets
Current liabilities:
Current portion of finance lease obligations
Notes and accounts payable (Notes 5 and 6):
Unconsolidated subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes (Note 15)
Other current liabilities (Note 12)
Total current liabilities
Long-term liabilities:
Accrued retirement benefits for employees(Note 14)
Accrued retirement benefits for directors andcorporate auditors
Guarantee deposits (Note 10)
Finance lease obligations, less current portion
Negative goodwill (Note 25)
Deferred income taxes (Note 15)
Deferred income taxes on land revaluation reserve(Note 15)
Other long-term liabilities
Total long-term liabilities

¥

19

¥

17

$

181

791
14,288
1,333
3,467
2,489
3,469
25,856387
15,176
2,446
3,236
1,234
4,028
26,524

4,115
161,361
26,00834,407
13,12142,828282,021

6,988

7,463

79,352

69
3,282
32
36
652

86
3,247
15
17
1,846

914
34,524
159
181
19,628919
406
12,384917
639
14,2309,750
6,794
151,302

23,221
23,49790,75823,221
23,497
92,135

246,901
249,835
979,638(9,628)
127,848(10,132)
128,721(107,730)
1,368,644

3,817
–
1,561
(5,293)85
119
11,664
139,716¥ 177,956

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

69,835(11)
16,555(36,480)
49,8991,425
143,562
1,563,530$ 1,996,853

Contingent liabilities (Note 13)
Net assets:
Shareholders’ equity (Note 17):
Common stock:
Authorized: 753,814,067 shares in 2012 and2013
Issued: 184,186,153 shares in 2012 and 2013
Capital surplus
Retained earnings (Note 26)
Treasury stock, at cost – 24,976,317 shares in2012 and 26,402,891 shares in 2013
Total shareholders’ equity
Accumulated other comprehensive income (loss):
Unrealized holding gain on securities (Note 7)
Unrealized loss from hedging instruments
Land revaluation reserve (Note 18)
Translation adjustments
Total accumulated other comprehensive income
Stock acquisition rights
Minority interests
Total net assets
Total liabilities and net assets

See accompanying notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd.
Consolidated Statement of Income
Year ended March 31, 2013

Millions of yen
2012
2013
Net sales (Notes 23, 24 and 25)
Cost of sales (Notes 8 and 24)
Gross profit¥ 152,777
132,417
20,360¥ 141,084
122,189
18,895$ 1,500,096
1,299,192
200,904

13,946
6,414

15,265
3,630

162,308
38,596

795
(51)
85
49
38
210
(85)
(18)

714
(57)
87
172
19
121
137
285

7,592
(606)
925
1,829
202
1,287
1,457
3,030

(95)

(175)

(1,861)

109
100

(74)
–

(787)
–

(53)

(405)

(4,306)

(125)
148
7,521

(150)
5
4,309

(1,595)53
45,816

2,816
229
3,045
4,476

1,475
73
1,548
2,761

15,683776
16,45929,357

Selling, general and administrative expenses(Notes 17, 19 and 24)
Operating income (Note 25)
Other income (expenses):
Interest and dividend income
Interest expense
Gain on insurance claims
Foreign exchange gain, net
Amortization of negative goodwill (Note 25)
Equity in earnings of an affiliate(Loss) gain on revaluation of derivatives(Loss) gain on sales of investments in securities
Expenses related to employees seconded tooverseas unconsolidated subsidiaries
Gain (loss) on sales or disposal of property, plantand equipment, net
Gain on compensation
Loss on impairment of investments in securities(Note 7)
Loss on impairment of fixed assets(Notes 9, 24 and 25)
Other, net (Notes 24 and 25)
Income before income taxes and minority interests
Income taxes (Note 15):
Current
DeferredIncome before minority interests
Minority interests
Net income

Thousands of
U.S. dollars(Note 3)
2013

¥

(632)
3,844

¥

(245)
2,516

$

(2,605)26,752

See accompanying notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd.
Consolidated Statement of Comprehensive Income
Year ended March 31, 2013

Millions of yen
2012
2013
Income before minority interests
Other comprehensive (loss) income (Note 16):
Unrealized holding (loss) gain on securities
Unrealized loss from hedging instruments
Land revaluation reserve
Translation adjustments
Share of other comprehensive income of anaffiliate accounted for by the equity method
Total other comprehensive (loss) income
Comprehensive income
Comprehensive income attributable to:Shareholders of Yodogawa Steel Works, Ltd.
Minority shareholders of consolidated subsidiaries

Thousands of
U.S. dollars(Note 3)2013

¥ 4,476¥ 2,761$ 29,357

(192)
–
122
(1,587)

2,759
(1)
–
3,565

29,335(11)–
37,90644(1,613)¥ 2,863

26
6,349¥ 9,110276
67,506$ 96,863¥ 3,003(140)¥ 7,352
1,758$ 78,171
18,692

See accompanying notes to consolidated financial statements.
5

Yodogawa Steel Works, Ltd.
Consolidated Statement of Changes in Net Assets
Year ended March 31, 2013
Millions of yen

Balance at April 1,
2011
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Reversal of land
revaluation reserve
Transfer to retained
earnings from capitalsurplus
Other changes
Balance at April 1,
2012
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Change in scope of
consolidation
Reversal of land
revaluation reserve
Other changes
Balance at March 31,
2013

Number ofshares issued

Common stock

Capital surplus

Retained earnings

Treasury stock, at cost

Total shareholders’equity184,186,153¥ 23,221¥ 23,739¥ 88,288¥ (9,275)¥ 125,973

–
–

–
–

–
–

(1,597)
3,844––(1,597)
3,844

–

–

–

–

(358)

(358)

–

–

0

–

5

5

–

–

–

(19)

–

(19)

–
–

–
–

(242)
–

242
–

–
–

–
–

184,186,153¥ 23,221¥ 23,497¥ 90,758¥ (9,628)¥ 127,848

–
–

–
–

–
–

(1,194)2,516––(1,194)
2,516

–

–

–

–

(505)

(505)

–

–

(0)

–

1

1

–

–

–

51

–

51

–
–

–
–

–
–

4
–

–
–

4
–

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

Unrealized
holding gain on
securities
Balance at April 1,
2011
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Reversal of land
revaluation reserve
Transfer to retained
earnings from capitalsurplus
Other changes
Balance at April 1,
2012
Cash dividends
Net income
Acquisition of treasury
stock
Disposition of treasury
stock
Change in scope of
consolidation
Reversal of land
revaluation reserve
Other changes
Balance at March 31,
2013

Unrealized loss
from hedging
instruments

Land revaluation
reserve

Millions of yen
Total
accumulated
otherTranslation
comprehensive
adjustments
incomeStock acquisitionrightsMinority
interests

Total net assets–¥ 1,386¥ (4,474)

907

¥ 110

¥ 11,967¥ 138,957

–
–

–
–

–
–

–
–

–
–

–
–

–
–

(1,597)
3,844

–

–

–

–

–

–

–

(358)

–

–

–

–

–

–

–

5

–

–

–

–

–

–

–

(19)

–
(178)

–
–

–
175

–
(819)

–
(822)

–
9

–
(303)

–
(1,116)¥ 3,995¥¥–¥ 1,561¥ (5,293)

85

¥ 119

¥ 11,664¥ 139,716

–
–

–
–

–
–

–
–

–
–

–
–

–
–

(1,194)
2,516

–

–

–

–

–

–

–

(505)

–

–

–

–

–

–

–

1

–

–

–

–

–

–

–

51

–
2,751

–
(1)

–
(4)

–
1,862

–
4,608

–
15

–
1,838

4
6,461

¥ 6,568¥ (1)¥ 1,557¥ (3,431)¥ 4,693¥ 134¥ 13,502¥ 147,050¥ 3,817¥¥

6

Yodogawa Steel Works, Ltd.
Consolidated Statement of Changes in Net Assets (continued)
Year ended March 31, 2013

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

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

Thousands of U.S. dollars (Note 3)
Retained earnings
Treasury stock, at cost
$ 964,997$ (102,371)

Total shareholders’ equity$ 1,359,362

Common stock$ 246,901

Capital surplus$ 249,835

–
–

–
–

(12,696)
26,752––(12,696)
26,752–––(5,370)(5,370)

–

0

–

11

11

–

–

542

–

542

–
–
$ 246,901––$ 249,835

43–$ 979,638––(107,730)

43–$ 1,368,644

Unrealized
holding gain on
securities$ 40,585

Unrealized loss
from hedging
instruments
$ –

Land
revaluation
reserve$ 16,598$

Thousands of U.S. dollars (Note 3)
Total
accumulated
otherTranslation
comprehensive
adjustments
income$ (56,278)
$
905

Stock
acquisitionrights$ 1,265

Minority
interests$ 124,019

Total net assets$ 1,485,551

–
–

–
–

–
–

–
–

–
–

–
–

–
–

(12,696)
26,752

–

–

–

–

–

–

–

(5,370)

–

–

–

–

–

–

–

11

–

–

–

–

–

–

–

542

–
29,250$ 69,835–(11)$ (11)–(43)$ 16,555–
19,798$ (36,480)–
48,994$ 49,899–
160$ 1,425–
19,543$ 143,562

43
68,697$ 1,563,530

See accompanying notes to consolidated financial statements.
7

Yodogawa Steel Works, Ltd.
Consolidated Statement of Cash Flows
Year ended March 31, 2013

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Amortization of negative goodwill
Equity in earnings of an affiliate(Decrease) increase in accrued retirement benefits
Increase (decrease) in accrued bonuses(Decrease) increase in allowance for doubtfulreceivables
Interest and dividend income
Interest expense
Loss (gain) on revaluation of derivatives
Loss (gain) on sales of investments in securities
Loss on impairment of investments in securities(Gain) loss on sales or disposal of property, plantand equipment, net
Loss on impairment of fixed assets(Increase) decrease in notes and accounts
receivable
Decrease in inventories(Decrease) increase in notes and accounts
payableOther
Subtotal
Insurance claims received
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities¥¥

Millions of yen
2012
2013

Thousands of
U.S. dollars(Note 3)
2013

7,521

$

¥

4,309

45,816

4,881
(38)
(210)
(264)
52

3,988
(19)
(121)
153
(54)

42,403(202)(1,287)
1,627
(574)

(69)
(795)
51
85
18
53

29
(714)
57
(137)
(285)
405

309
(7,592)606(1,457)(3,030)
4,306

(109)
125

74
150

787
1,595

(3,673)
1,521

1,076
2,817

11,441
29,952

(760)
(414)
7,975
85
835
(51)
(871)
7,973

288
128
12,14487765(57)(2,749)¥ 10,190

3,062
1,361
129,123
925
8,134
(606)
(29,229)$ 108,347

See accompanying notes to consolidated financial statements.
8

Yodogawa Steel Works, Ltd.
Consolidated Statement of Cash Flows (continued)
Year ended March 31, 2013

Millions of yen
2012
2013
Cash flows from investing activities:
Investments in time deposits with a maturity ofmore than three months
Proceeds from time deposits with a maturity ofmore than three months
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant andequipment
Purchases of intangible fixed assets
Purchases of investments in securities
Payments for investments in unconsolidated
subsidiaries
Proceeds from sales of investments in securities
Payment for loans receivableCollection of loans receivable
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from sales of treasury stock
Purchases of treasury stock
Cash dividends paid to the Company’s
shareholders
Cash dividends paid to minority shareholders ofconsolidated subsidiaries
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents resulting
from change in scope of consolidation
Cash and cash equivalents at end of the year
(Note 4)

¥

(700)

¥

(100)

Thousands of
U.S. dollars(Note 3)2013$

(1,063)813
900(1,904)300
0(8,208)3,190
0(87,273)

323
(25)
(920)

70
(481)
(31)

744
(5,114)(329)(1,180)
1,123
(264)
364
1
(1,469)

–
1,055
(705)
636
15
(7,449)–
11,217(7,496)6,762
159(79,203)

5
(355)

0
(502)

0
(5,337)(1,609)(1,203)(12,791)

(158)
(18)
(2,135)(455)(19)(2,179)(4,838)(202)(23,168)

(294)
4,075
29,750626
1,188
33,825

6,656
12,632359,649–

1,325

14,088¥ 33,825¥ 36,338$ 386,369

See accompanying notes to consolidated financial statements.
9

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements
March 31, 2013
1.

Summary of Significant Accounting Policies(a) Basis of preparation
Yodogawa Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintaintheir books of account and records in accordance with accounting principles generally
accepted in Japan, and its overseas subsidiaries maintain their books of account inconformity with those of their respective countries of domicile.
The accompanying consolidated financial statements of the Company and consolidated
subsidiaries 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
Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain
reclassifications and rearrangements have been made to the consolidated financial
statements issued domestically in order to present them in a format which is morefamiliar to readers outside Japan.
Certain reclassifications of previously reported amounts have been made to conform theaccompanying consolidated financial statements for the year ended March 31, 2012 to
the 2013 presentation. Such reclassifications had no effect on consolidated net income
or net assets.
(b) Basis of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and all subsidiaries over which substantial control is exerted through either
majority ownership of voting stock and/or by other means.
All significant
intercompany balances and transactions have been eliminated in consolidation.
An investment in one affiliate (a company over which the Company has the ability to
exercise significant influence) is stated at cost plus equity in its undistributed earnings orundisposed loss. Consolidated net income or loss includes the Company’s equity in thecurrent net income or loss of this company after the elimination of unrealizedintercompany profits.
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if
applicable. The difference between the cost of investments in subsidiaries and theequity in their net assets at their respective dates of acquisition is amortized over a
period of 5 years on a straight-line basis. Negative goodwill arising from transactions
that occurred on or after April 1, 2010 is credited to income when incurred.

10

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

1.

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

11

Yodogawa Steel Works, Ltd.
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, iscredited 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) Derivatives
Derivatives are measured at fair value.

(g) Inventories
Inventories of the Company and its domestic consolidated subsidiaries are principallystated at the lower of cost or net selling value, cost being determined by the averagemethod. Inventories of overseas consolidated subsidiaries are stated at the lower ofcost or net selling value, cost being determined by the moving average method.
(h) Property, plant and equipment and depreciation (except for leased assets)
Depreciation of property, plant and equipment is calculated by the declining-balancemethod over the estimated useful lives of the respective assets, except that thestraight-line method is applied to buildings (other than structures attached to thebuildings) acquired on or after April 1, 1998.
Depreciation of property, plant and equipment at overseas consolidated subsidiaries iscalculated by the straight-line method.
The useful lives adopted for calculating depreciation are principally as follows:
Buildings and structures
Machinery, equipment and vehicles

3 to 60 years
3 to 36 years

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

Maintenance and repairs are12

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

1.

Summary of Significant Accounting Policies (continued)(i) Intangible assets and amortization (except for leased assets)
Intangible assets are stated on the basis of cost. Amortization is calculated by thestraight-line method over the estimated useful life of the respective assets, which is 5
years.
(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
Leased assets under finance lease transactions which do not transfer ownership of theleased assets to the lessee are depreciated to a residual value of zero by the straight-line
method using the contract term as the useful life. Among the finance lease transactions
which do not transfer ownership of the leased assets to the lessees, those that started onor before March 31, 2008 are accounted for in the same manner as operating leases.
(l) 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.
(m) 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.
(n) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive ofconsumption taxes. Consumption taxes and local consumption taxes paid not offset byconsumption taxes and local consumption taxes received in accordance with
Consumption Tax Act of Japan are charged to income when incurred.
13

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

1.

Summary of Significant Accounting Policies (continued)(o) Retirement benefits
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 principally 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 principally 10 years, which is within the estimated average remaining years ofservice of the 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. Accrued retirement benefits for directors and corporate
auditors have been provided at an estimated amount based on each consolidated
subsidiary’s internal rules.
(p) Recognition of revenues and costs of construction contracts
Revenues and costs of construction contracts of which the percentage of completion canbe reliably estimated, are recognized by the percentage-of-completion method. The
percentage of completion is calculated at the cost incurred as a percentage of theestimated total cost. The completed-contract method continues to be adopted forcontracts for which the percentage of completion cannot be reliably estimated.
(q) Hedge accounting
Gain or loss on derivatives designated as hedging instruments is deferred until the loss
or gain on the underlying hedged items is recognized. Receivables hedged by forward
foreign exchange contracts which meet certain conditions are translated at thecorresponding foreign exchange contract rates (“Allocation method”). The evaluationof effectiveness of such forward foreign exchange contracts is omitted becausesignificant terms of the hedging instruments and underlying hedged items are the sameand the Company assumes that movements of cash flows are completely offset.

14

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

1.

Summary of Significant Accounting Policies (continued)(r) Accounting standards issued but not yet effective
On May 17, 2012, the Accounting Standards Board of Japan (“ASBJ”) issued ASBJ
Statement No.26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance
No.25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the
Accounting Standard for Retirement Benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April 1, 2000 and the other related
practical guidance, being followed by partial amendments from time to time through2009.
Under these revised accounting standards, unrecognized actuarial gains and losses andprior service cost shall be recognized within net assets after adjusting for tax effects, andthe unfunded retirement benefit obligations or plan the underfunded or overfunded
status of a pension plan shall be assets in excess of the retirement benefit obligation
shall be recognized as a liability or asset. In addition, the expected retirement benefit
obligation can be attributed to each period by the benefit formula basis or by thestraight-line method. The calculation method for the discount rate shall also bechanged.
The Company and its domestic consolidated subsidiaries will apply these revised
accounting standards effective the year ending March 31, 2014. However, the revisionof the method of attributing expected benefits to each period will be applied effective
April 1, 2014. These accounting standards will not be applied retrospectively to theprior year financial statements.
The Company anticipates the impact on its consolidated financial statements due to theadoption of these accounting standards will be material. Net assets of the Company
and its consolidated subsidiaries may fluctuate more mainly because actuarial gains andlosses shall be charged to income as incurred. The Company is currently evaluating
the effect on the consolidated financial statements a result of adoption of these revised
accounting standards.

2.

Change in Accounting Policies

Effective the year ended March 31, 2013, the Company and its domestic consolidated
subsidiaries changed their depreciation method for property, plant and equipment (except forbuildings) acquired on or after April 1, 2012 in accordance with the amended Corporation
Tax Law of Japan. The previously applied 250% declining-balance method was changed to
the 200% declining-balance method. The effect of this change on the consolidated resultsof operations for the year ended March 31, 2013 was immaterial.

15

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

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 ¥94.05 = U.S.$1.00,
the approximate exchange rate prevailing on March 31, 2013. 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 deposits shown in the accompanying consolidated balance sheet
to cash and cash equivalents shown in the accompanying consolidated statement of cash
flows at March 31, 2012 and 2013 is presented as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2013
2013
Cash and deposits
Investment trust funds included in“Marketable securities”
Beneficiary interests in trusts included in“Other current assets”
Time deposits with a maturity of morethan three months
Cash and cash equivalents

5.

¥ 22,724¥ 27,406$ 291,398

10,3038,303

88,283

1,000

1,000

10,633(202)¥ 33,825(371)¥ 36,338(3,945)$ 386,369

Notes Receivable and Notes Payable

Although the balance sheet dates for the years ended March 31, 2012 and 2013 fell on a bankholiday, notes receivable, unconsolidated subsidiaries and affiliates of ¥89 million and ¥178
million ($1,893 thousand), notes receivable, trade of ¥759 million and ¥727 million ($7,730
thousand), notes payable, trade of ¥434 million and ¥453 million ($4,817 thousand), andnotes payable, construction of ¥44 million and ¥5 million ($53 thousand) with maturity datesof March 31, 2012 and 2013, respectively, were excluded from the respective balances but
were settled on the next business day.

16

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

6.

Financial Instruments

Overview(a) Policy for financial instruments
In consideration of plans for capital investment, the Company and its consolidated
subsidiaries (collectively, the “Group”) primarily utilize cash on hand. In case of alack of cash on hand, the Group raises funds by bond issuances and bank borrowings.
The Group manages temporary cash surpluses through low-risk financial assets. The
Group uses derivatives for the purpose of reducing risk and does not enter into
derivatives for speculative purposes. In addition, compound financial instruments that
contain embedded derivatives are utilized by the Group in order to manage surplus
funds.
(b) Types of financial instruments and related risk
Trade receivables, notes and accounts receivables, are exposed to credit risk in relation
to customers. In addition, the Group is exposed to foreign currency exchange risk
arising from trade receivables denominated in foreign currencies.
Investments in securities and marketable securities are exposed to market risk. The
former is composed of mainly held-to-maturity debt securities and the shares ofcommon stock of other companies with which the Group has business relationships. The
latter is composed of mainly negotiable certificates of deposits and commercial paper.
Trade payables, notes and accounts payable, have payment due dates within six months.
The Group is exposed to foreign currency exchange risk arising from trade payables
denominated in foreign currencies. In case of financing, the interest rate for short-termborrowings is fixed.
Regarding derivatives, the Group enters into forward foreign exchange contracts to
reduce the foreign currency exchange risk arising from trade receivables and loans
receivables denominated in foreign currencies.
Information regarding the method of hedge accounting is found in Note 1(q).

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

6.

Financial Instruments (continued)

Overview (continued)(c) Risk management for financial instruments
For trade receivables, each related division monitors the credit worthiness of their main
customers periodically, and monitors due dates and outstanding balances by customer.
In addition, the Company and its domestic consolidated subsidiaries are making efforts
to identify at an early point and mitigate risks of bad debts from customers who havefinancial difficulties.
The overseas consolidated subsidiary requests customers to issue non-cancelable lettersof credit to hedge credit risk.
The Group only acquires held-to-maturity debt securities and commercial paper issuedby companies with high credit ratings or sound credit profiles. Accordingly, the Group
believes that the credit risk deriving from such securities is insignificant. The Groupalso believes that the credit risk of derivatives is insignificant as the Group enters into
derivative transactions only with financial institutions with high credit ratings.
For trade receivables denominated in foreign currencies, the Group enters into forward
foreign exchange contracts to hedge the risks arising from fluctuations in foreignexchanges rates.
For marketable securities and investments in securities, the Group periodically reviews
the fair value of such financial instruments and the financial position of the issuers. In
addition, the Group continuously evaluates whether or not securities other than thoseclassified as held-to-maturity debt securities should be maintained taking into accounttheir fair value and relationships with the issuers.
The Group uses derivatives for hedging purposes. Derivative transactions are limited
to those that correspond to on-balance sheet items, such as bank deposits, debt securities
and others, and does not enter into contracts for which the notional amounts are notbased on corresponding items.
Based on a report from each division, the Group prepares and updates its cash flowplans on a timely basis and maintains adequate solvency to manage liquidity risk. In
order to provide for unexpected cash requirements, the Company has entered into theline-of-credit agreements with certain financial institutions and its overseas consolidated
subsidiary is able to obtain short-term borrowings from certain financial institutions.

18

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

6.

Financial Instruments (continued)

Overview (continued)(d) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market prices, if
available. When there are no quoted market prices available, fair value is reasonably
estimated. Since various assumptions and factors are reflected in estimating the fairvalue, different assumptions and factors could result in different fair value.
Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet, estimated fairvalue and unrealized loss as of March 31, 2012 and 2013 are shown in the following table.
The following table does not include financial instruments for which it is extremely difficult
to determine the fair value.

Carrying value

Millions of yen
2012
Estimated
fair value¥ 22,724¥ 22,724

12,49623,081

12,49623,081––

28,293¥ 86,594

27,917¥ 86,218(376)¥ (376)

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

791
14,288¥ 15,079¥

791
14,288¥ 15,079

¥
¥

–
–
–

Derivative transactions*

¥

–

¥

–

¥

–

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

Unrealized loss
¥

–

19

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)

Carrying value

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

12,554
22,344

12,554
22,344––(137)¥ (137)

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

30,41030,273¥ 92,714¥ 92,577

387
15,176¥ 15,563

¥

(20)

¥

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

Derivative transactions*¥

Unrealized loss
¥

–

387
15,176¥ 15,563

¥
¥

–
–
–

(20)

¥

–

Thousands of U.S. dollars
2013
Estimated
Carrying value
fair value
Unrealized loss
Assets:Cash and deposits
Notes and accounts receivable
Unconsolidated subsidiaries and affiliates
Trade
Marketable securities and investments insecurities
Total assets$ 291,398

133,482
237,576

133,482
237,576––

323,338$ 985,794

321,882$ 984,338(1,456)$ (1,456)

4,115
161,361$ 165,476$

4,115
161,361$ 165,476

$
$

–
–
–

(212)

$

(212)

$

–

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

Derivative transactions*

$

*

–

$ 291,398$

The value of assets and liabilities arising from derivative transactions is shown at net
value, and with the amount in parentheses representing net liability position.
20

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
Calculation method of estimated fair value of financial instruments is as follows:
Cash, deposits, notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates thefair value.
Marketable securities and investments in securities
The fair value of equity securities is based on quoted market prices. The fair value of debt
securities is based on either quoted market prices or the prices provided by the financial
institutions making markets in these securities. For information on securities classified byholding purpose, please refer to Note 7.
Notes and accounts payable
Since this item is settled in a short period of time, its carrying value approximates the fairvalue.
Derivative transactions
Please refer to Note 21.
The carrying value of financial instruments without determinable market value at March 31,
2012 and 2013 is presented as follows:

Unlisted stocks
Money trusts
Negotiable certificates of deposit
Investment in a limited liability
partnership
Preferred stocks
Total

Millions of yen
2012
2013
¥
297
¥
216
3,804
4,304
2,000
–
287
857
¥ 7,245213883¥ 5,616

Thousands of
U.S. dollars
2013$ 2,297
45,763
–

2,265
9,388
$ 59,713

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

21

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
The redemption schedule for monetary assets and investments by maturity dates at March 31,
2012 and 2013 is as follows:
Millions of yen
2012
Due in one
year or less
Deposits
Notes and accounts receivable
Marketable securities andinvestments in securities
Held-to-maturity debt securities
National and local
government bonds
Corporate bonds
Other marketable securities withmaturities
Bonds
Other
Total

¥ 22,681
35,577¥––

Due after five
years throughten years¥––

Due after ten
years
–
–

¥

6
5,500

10
–

20
500

–
2,500

–
5,600
¥ 69,364

300
–
¥ 310

200
–
¥ 720

–
–
¥ 2,500

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

Due after one
year throughfive years

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

34,898

–
–

10
4,500

–
–

500

–
2,500

–

300
–
¥ 300

200
–
¥ 740

–
–
¥ 2,500¥ 27,359

4,100¥ 70,867

¥

¥

–
–

Due after
ten years

40

¥

–
–

22

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
Thousands of U.S. dollars
2013
Due in one
year or less
Deposits
Notes and accounts receivable
Marketable securities andinvestments in securities
Held-to-maturity debt securities
National and local
government bonds
Corporate bonds
Other marketable securities withmaturities
Bonds
Other
Total

Due after one
year throughfive years

Due after five
years throughten years

371,058––106
47,847

–
–

425
5,316

–

3,190

2,127

–

–
–

$ 3,190$ 7,868$ 26,582$ 290,898

43,594$ 753,503

$

–

$

–
–

Due after ten
years
$

–
–

–

26,58223

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

7.

Securities

Marketable securities classified as held-to-maturity debt securities at March 31, 2012 and2013 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
Total

¥

16
1,433
1,449

20
6,742
6,762
8,211

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
Total

¥

50
3,438
3,488

Millions of yen
2012
Estimated
Unrealized gain
fair value(loss)

¥

¥

16
1,461
1,477

¥

20
6,339
6,359
7,836

(0)
(403)
(403)
¥ (375)

Millions of yen
2013
Estimated
fair value

¥

51
3,506
3,557

–

–

3,879
3,879
¥ 7,367

3,673
3,673
¥ 7,230

028
28

Unrealized gain
(loss)

¥

1
68
69

–
(206)
(206)
¥ (137)24

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

7.

Securities (continued)
Thousands of U.S. dollars
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
Total

$

531
36,55537,0862013
Estimated
fair value

Unrealized
gain (loss)

$

$

542
37,27837,820

11
723
734

–

–

–

41,244
41,244$ 78,330

39,05439,05476,874(2,190)(2,190)$ (1,456)$

Other securities with determinable market value at March 31, 2012 and 2013 aresummarized as follows:
Millions of yen
2012
Carrying
value

Unrealized
gain (loss)

8,742
500
–
9,242

¥ 15,322
503–
15,825¥ 6,580
3
–
6,583

4,561
501
98
5,160
¥ 14,402

3,659
501
97
4,257
¥ 20,082

(902)
–
(1)
(903)
¥ 5,680

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

¥

25

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

7.

Securities (continued)
Millions of yen
2013
Carrying
value

Unrealized
gain (loss)

8,495
700
97
9,292

¥ 18,960
710
104
19,774¥ 10,46510
710,482

3,838
301

2,976
293

(862)
(8)

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

¥

–

–

–

4,139
¥ 13,431

3,269¥ 23,043(870)¥ 9,612

Thousands of U.S. dollars
2013
Acquisition
Carrying
Unrealized
costs
value
gain (loss)
Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Corporate bonds
Other
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Corporate bonds
Other
Total

$ 90,325
7,443
1,031
98,799$ 201,595
7,549
1,106
210,250$ 111,270
106
75
111,451

40,8083,200–
44,008$ 142,807

31,643
3,115–
34,758$ 245,008(9,165)(85)–(9,250)$ 102,201

Sales of securities classified as other securities for the years ended March 31, 2012 and 2013
are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2013
2013
Sales
¥ 138
¥ 1,002$ 10,654
Aggregate gain
37
334
3,551
Aggregate loss
(42)
–
–
26

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

7.

Securities (continued)

The Group recorded loss on impairment of investments in securities with determinable
market value of ¥53 million and ¥405 million ($4,306 thousand) for the years ended March
31, 2012 and 2013, respectively.

8.

Inventories

The following is a summary of inventories at March 31, 2012 and 2013:

Finished goods
Work in process
Raw materials and supplies

Millions of yen
2012
2013
¥ 13,112¥ 12,213
3,427
3,216
9,356
8,492
¥ 25,895¥ 23,921

Thousands of
U.S. dollars
2013$ 129,857
34,19590,292$ 254,344

Loss on devaluation of inventories included in cost of sales totaled ¥437 million for the year
ended March 31, 2012. Reversal of loss on devaluation of inventories included in cost of
sales totaled ¥495 million ($5,263 thousand) for the year ended March 31, 2013.

27

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

9.

Loss on Impairment of Fixed Assets

The Company and its consolidated subsidiaries recognized loss on impairment of fixed
assets for the years ended March 31, 2012 and 2013 as follows:

Location
Nishiwaki City,
Hyogo Prefecture

Miyazaki City,
Miyazaki Prefecture
Nerima City,
Tokyo Prefecture
Ishioka City,
Ibaraki Prefecture
Village of Hakuba,
Nagano Prefecture
Suzaka City,
Nagano Prefecture
Kure City,
Hiroshima Prefecture
Gobou City,
Wakayama
Prefecture
Nerima City,
Tokyo Prefecture
Total

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

Land

Idle assets

Land

Idle assets

Land

Idle assets

Land

Idle assets

Land

Idle assets

Land

Idle assets

Buildings

Millions of yen
2012
2013

Thousands of
U.S. dollars
2013

–

¥ 133

$ 1,414

107

10

106

–

6

64

2

–

–

1

1

11

0

0

0

10

–

–

5

–

–

0
¥ 125

–
¥ 150

–
$ 1,595¥

The Company and its consolidated subsidiaries group fixed assets by management segment,each of which continuously records cash receipts and payments. They group idle assets not
utilized in their operations on an individual asset basis.
Consequently, the Company and its consolidated subsidiaries have written down the carrying
values of the golf course and its asset group whose operating income has been continuously
negative to their respective net recoverable values, and have recorded a related loss on
impairment of fixed assets of ¥133 million ($1,414 thousand) for the year ended March 31,
2013, which consisted of land of ¥98 million ($1,041 thousand), buildings and structures of¥34 million ($362 thousand) and machinery, equipment and vehicles of ¥1 million ($11thousand).

28

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

9.

Loss on Impairment of Fixed Assets (continued)

In addition, the Company and its consolidated subsidiaries have written down the carrying
values of the idle assets owned by the Company and its consolidated subsidiaries for theyears ended March 31, 2012 and 2013, which are not expected to be utilized in the future, totheir respective net recoverable values, and have recorded a related loss on impairment of
fixed assets of ¥125 million and ¥17 million ($181 thousand) for the years ended March 31,
2012 and 2013, respectively. This loss on impairment of fixed assets consisted of land of¥125 million and buildings of ¥0 million for the year ended March 31, 2012, and land of ¥17
million ($181 thousand) for the year ended March 31, 2013.
The recoverable amounts of these assets are measured at estimated selling value, at a
valuation assessed for property tax purposes or at the comparable published land prices.

10. Guarantee Deposits
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 0.80% and 0.82% at March 31, 2012 and 2013,
respectively.
Interest-free deposits and interest-bearing deposits at March 31, 2012 and 2013 were as
follows:
Thousands ofMillions of yen
U.S. dollars
2012
2013
2013
Interest-free deposits¥ 2,581¥ 2,524$ 26,837
701
723
7,687
Interest-bearing deposits¥ 3,282¥ 3,247$ 34,524

11. Line-of-credit Agreements
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, 2012 and 2013 was as follows:

Millions of yen
2012
2013
Lines of credit
Credit utilized
Available credit¥ 19,450–¥ 19,450¥ 19,450–¥ 19,450

Thousands of
U.S. dollars
2013$ 206,805–$ 206,80529

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

12. Pledged Assets
Assets pledged as collateral for indebtedness at March 31, 2012 and 2013 are summarized asfollows:

Cash and deposits
Other current assets
Investments in securities
Other assets

Millions of yen
2012
2013
¥ 60
¥ 60
–
69
16
17
167
179
¥ 243
¥ 325

Thousands of
U.S. dollars
2013
$ 638
734
181
1,903
$ 3,456

Indebtedness secured by these assets as collateral was ¥52 million and ¥52 million ($553
thousand), a component of other current liabilities at March 31, 2012 and 2013 respectively.

13. Contingent Liabilities
The Company was contingently liable for guarantees of borrowings from financial
institutions and others of an unconsolidated subsidiary in the aggregate amounts of ¥47
million ($500 thousand) at March 31, 2013.
In addition, the Company is repairing machinery supplied to a customer located in Africa
due to a product defect, damages during the shipment and other reasons. The Company
was contingently liable for additional repair costs in the amount of approximately ¥300
million ($3,190 thousand). The total amount to be paid by the Company will depend on
future negotiations with the manufacturer of the machinery.

30

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

14. Retirement Benefits
The Company and its domestic consolidated subsidiaries have two types of defined benefit
retirement plans: a defined benefit pension plan and a lump sum payment plan. Moreover,
two of overseas consolidated subsidiaries have a defined benefit pension plan. Additional
severance payments may also be provided for an early retirement program. Furthermore,
the Company has adopted a retirement allowance trust.
The funded and accrued status of the employees’ defined-benefits retirement plans of theGroup, and the amounts recognized in the accompanying consolidated balance sheet atMarch 31, 2012 and 2013 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 of yen
2012
2013
¥ (12,597)¥ (14,155)
3,768
4,208
(8,829)(9,947)
2,484
3,111
(15)
(13)
(6,360)(6,849)628614¥ (6,988)¥ (7,463)

Thousands of
U.S. dollars
2013$ (150,505)
44,742(105,763)
33,078(138)(72,823)6,529$ (79,352)

As permitted under the accounting standards for retirement benefits, certain domestic
consolidated subsidiaries have calculated their retirement benefit obligation based on theamount which would be payable at the year end if all eligible employees terminated theirservices voluntarily and the amount of liability reserve noted in the most recent pension
financing for retired employees.

31

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

14. Retirement Benefits (continued)
The components of retirement benefit expenses for the years ended March 31, 2012 and2013 are outlined as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Total

Millions of yen
2012
2013
¥ 580
¥ 639
236
226
(73)
(66)
187
195
(2)
(1)
¥ 928
¥ 993

Thousands of
U.S. dollars
2013$ 6,794
2,403
(702)
2,074
(11)
$ 10,558

Retirement benefit expenses for certain domestic subsidiaries, whose benefit obligation is
calculated based on the amount which would be payable at the year end if all eligible
employees terminated their services voluntarily, have been fully included in service cost.
The assumptions used in accounting for the above benefit plans for the years ended March
31, 2012 and 2013 were as follows:

Discount rates
Expected rates of return on plan assets

2012
Principally 2.0%
Principally 2.0%

2013
Principally 1.3%
Principally 1.9%

32

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

15. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprise
corporation, enterprise and inhabitants’ taxes which, in the aggregate, resulted in statutory
tax rates of approximately 40.5% and 37.9% for the years ended March 31, 2012 and 2013,
respectively.
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March
31, 2012 was omitted because the difference between these rates was less than 5% of thestatutory tax rate.
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March
31, 2013 as a percentage of income before income taxes and minority interests is as follows:

Statutory tax rate
Permanently non-deductible expenses
Per capita portion of inhabitants’ taxes
Difference in tax rates applicable to the overseas consolidated
subsidiary
Cash dividends received from the overseas consolidated
subsidiary
Adjustments of accounting standards applied by the overseas
consolidated subsidiary
Foreign tax credit
Tax loss carryforwards of consolidated subsidiaries
Increase in valuation allowance
Permanently non-taxable income
Tax credit for research and development costs
Equity in earnings of an affiliate
Other
Effective tax rate

2013
37.9 %
0.9
1.3
(1.7)
(1.4)
(1.9)
1.6
1.8
1.7
(2.1)
(0.4)
(0.8)
(1.0)
35.9 %

33

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

15. Income Taxes (continued)
The significant components of the deferred tax assets and liabilities of the Group at March
31, 2012 and 2013 are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2013
2013
Deferred tax assets:
Accrued retirement benefits¥ 2,079¥ 2,179$ 23,169
Allowance for doubtful receivables
62
83
883
Accrued enterprise taxes
175
118
1,255
Accrued bonuses
333
312
3,317
Loss on devaluation of inventories
296
143
1,520
Foreign tax credit
404
3
32
Tax loss carryforwards
582
620
6,592
Loss on impairment of investments insecurities and golf-club memberships
844
781
8,304
Loss on impairment of fixed assets
147
219
2,329
Unrealized loss from hedging–
instruments
1
11
888
1,015
10,791Other
Gross deferred tax assets
5,810
5,474
58,203(2,399)(2,152)(22,881)Less valuation allowance
Total deferred tax assets
3,411
3,322
35,322
Deferred tax liabilities:
Dividends from an overseas
consolidated subsidiary
Unrealized holding gain on securities
Land revaluation reserve
Reserve for deferred taxation oncontributions for acquisition of property
Reserve for special depreciation
Other
Total deferred tax liabilities
Net deferred tax liabilities(113)(1,782)(919)(45)(3,007)
(917)

(478)
(31,972)(9,750)

(694)
–
(124)
(3,632)
¥
(221)

(668)
(7)
(144)
(4,788)¥ (1,466)(7,103)(74)(1,532)(50,909)$ (15,587)34

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

16. Other Comprehensive (Loss) Income
Reclassification adjustments and tax effects of other comprehensive (loss) income for theyears ended March 31, 2012 and 2013 are summarized as follows:
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013
Unrealized holding (loss) gain on securities:(Loss) gain arising during the year
Reclassification adjustments
Before tax effectTax effectTotal
Unrealized loss from hedging instruments:
Loss arising during the year
Before tax effectTax effectTotal
Land revaluation reserve:
Tax effectTranslation adjustments:
Amount arising during the year
Share of other comprehensive income of anaffiliate accounted for by the equity
method:Amount arising during the year
Total other comprehensive (loss) income

¥

(842)
75
(767)
575
(192)

¥

3,863
121
3,984
(1,225)2,759$ 41,074
1,286
42,360(13,025)
29,335

–
–
–
–

(1)
(1)
0
(1)

(11)
(11)
0
(11)

122

–

–

(1,587)

3,565

37,90644¥ (1,613)

26
6,349

276
$ 67,506¥

35

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

17. Shareholders’ Equity
The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of theamount to be disbursed as distributions of capital surplus (other than the capital reserve) andretained earnings (other than the legal reserve) be transferred to the capital reserve and thelegal reserve, respectively, until the sum of the capital reserve and the legal reserve equals
25% of the capital stock account. Such distributions can be made at any time by resolutionof the shareholders, or by the Board of Directors if certain conditions are met.
The legal reserve of the Company was nil at March 31, 2012 and 2013.
Stock options
Stock option expenses charged to income for the years ended March 31, 2012 and 2013
amounted to ¥19 million and ¥16 million ($170 thousand), respectively.
In accordance with the former Commercial Code of Japan (“the Code”), a stock option planfor certain directors and executive officers of the Company was approved at the annual
general meeting of the shareholders held on June 29, 2004 (the 2004 plan). Under theterms of this plan, up to 81,000 shares of common stock were granted at ¥1 ($0.01) per share.
The options are exercisable from June 30, 2023 to June 29, 2024. In the event a grantee
resigns from both positions of director and executive officer, the options are exercisablefrom the day following their resignation until 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 (the 2005 plan). Under the terms of this plan, up to 62,000 shares ofcommon stock were granted at ¥1 ($0.01) per share. The options are exercisable from June30, 2024 to June 29, 2025. In the event a grantee resigns from both positions of director
and executive officer, the options are exercisable from the day following their resignation
until June 29, 2025.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 14, 2006
(the 2006 plan). Under the terms of this plan, up to 53,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options are exercisable from June 30, 2025 to June 29,2026. In the event a grantee resigns from both positions of director and executive officer,
the options are exercisable from the day following their resignation until June 29, 2026.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 17, 2007
(the 2007 plan). Under the terms of this plan, up to 43,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options are exercisable from June 30, 2026 to June 29,2027. In the event a grantee resigns from both positions of director and executive officer,
the options are exercisable from the day following their resignation until June 29, 2027.

36

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

17. Shareholders’ Equity (continued)
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 15, 2008
(the 2008 plan). Under the terms of this plan, up to 60,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options are exercisable from June 30, 2027 to June 29,2028. In the event a grantee resigns from both positions of director and executive officer,
the options are exercisable from the day following their resignation until June 29, 2028.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 15, 2009
(the 2009 plan). Under the terms of this plan, up to 69,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options are exercisable from June 30, 2028 to June 29,2029. In the event a grantee resigns from both positions of director and executive officer,
the options are exercisable from the day following their resignation until June 29, 2029.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 14, 2010
(the 2010 plan). Under the terms of this plan, up to 102,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options are exercisable from June 30, 2029 to June 29,2030. In the event a grantee resigns from both positions of director and executive officer,
the options are exercisable from the day following their resignation until June 29, 2030.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 15, 2011
(the 2011 plan). Under the terms of this plan, up to 98,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options are exercisable from June 30, 2030 to June 29,2031. In the event a grantee resigns from both positions of director and executive officer,
the options are exercisable from the day following their resignation until June 29, 2031.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 17, 2012
(the 2012 plan). Under the terms of this plan, up to 77,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options are exercisable from June 30, 2031 to June 29,2032. In the event a grantee resigns from both positions of director and executive officer,
the options are exercisable from the day following their resignation until June 29, 2032.

37

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

17. Shareholders’ Equity (continued)
Stock option activity plans is summarized as follows:
The 2004

The 2005

The 2006

The 2007

The 2008

The 2009

The 2010

The 2011

The 2012

plan

plan

plan

plan

plan

plan

plan

plan

plan

Number of stock
options which are
not yet vested:
Outstanding at
21,00016,00025,00027,00040,00066,00080,00078,000–Granted

–

–

–

–

–

–

–

–

77,000Forfeited

–

–

–

–

–

–

–

–

–

6,000

4,000

6,000

6,000

9,000

18,00019,00019,000–15,00012,00019,00021,00031,00048,00061,00059,00077,000April 1, 2012

VestedOutstanding at
March 31, 2013
Number of stock
options whichhave alreadybeen vested:
Outstanding at

–

–

2,000

2,000

14,000

3,000

4,000

–

–

6,000

4,000

6,000

6,000

9,000

18,00019,00019,000–Exercised

–

–

–

–

–

–

–

–

–

Forfeited

–

–

–

–

–

–

–

–

–

6,000

4,000

8,000

8,000

23,00021,00023,00019,000

–

–

¥ 478

¥ 546

¥ 416

¥ 365

¥ 280

¥ 240

¥ 204

April 1, 2012
VestedOutstanding at
March 31, 2013
Fair value of stock
options as of the
grant date

¥

–

¥

38

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

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

Note
(a)
(b)
(c)

The 2012 plan
28.358%10 years¥10 per share
0.773%(a) Expected volatility was computed by the actual stock price of the Company during theperiod from August 2002 to July 2012.
(b) The expected dividend was calculated at the actual amount paid for the year ended
March 31, 2012.
(c) The risk-free rate was determined based on Japanese government bonds whose
redemption period corresponds to the expected holding period described above.
Because it is difficult to reasonably estimate the number of stock options that will expire, theestimation reflects only the actual number of expired stock options.
Treasury stock
Movements in treasury stock during the years ended March 31, 2012 and 2013 aresummarized as follows:

Treasury stock

April 1, 2011
23,913,491

Treasury stock

April 1, 2012
24,976,317

Number of shares
2012
Increase
Decrease
1,073,702
10,876
Number of shares
2013
Increase
Decrease
1,427,843
1,269

March 31, 2012
24,976,317
March 31, 2013
26,402,891

39

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

18. Land Revaluation
At March 31, 2000 and 2002, certain consolidated subsidiaries and an affiliate revalued theirland held for business use in accordance with the “Law on Land Revaluation.” Differenceson land revaluation have been accounted for as land revaluation reserve under net assets andare stated at the Company’s share of the net amount of the relevant tax effect. The method
followed for land revaluation was determined in accordance with the “Enforcement Act
Concerning Land Revaluation.”
The fair value of the land revalued at March 31, 2000 and 2002 was less than thecorresponding carrying value by the following amounts at March 31, 2012 and 2013:Land revalued at March 31, 2000
Land revalued at March 31, 2002

Millions of yen
2012
2013
¥ (280)¥ (293)(521)(623)¥ (801)¥ (916)

Thousands of
U.S. dollars
2013$ (3,116)(6,624)$ (9,740)

A certain portion of land revalued at March 31, 2000 and 2002 is related to real estate forinvestment, rental and idle properties at March 31, 2012 in the amounts of ¥15 million and¥196 million, respectively.
A certain portion of land revalued at March 31, 2000 and 2002 is related to real estate forinvestment, rental and idle properties at March 31, 2013 in the amounts of ¥11 million ($117
thousand) and ¥239 million ($2,541 thousand), respectively.

19. Research and Development Costs
Research and development costs included in selling, general and administrative expenses
totaled ¥457 million and ¥427 million ($4,540 thousand) for the years ended March 31, 2012
and 2013, respectively.

40

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

20. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciationand net book value of the leased assets at March 31, 2012 and 2013, which would have beenreflected in the accompanying consolidated balance sheets if finance leases other than thosewhich transfer the ownership of the leased assets to the Group (currently accounted for as
operating leases) were capitalized:
Millions of yen
Acquisition
costs

2012
Accumulated
depreciation

Net book
value

¥ 31

¥ 27

¥4

Machinery,equipment andvehiclesAcquisition
costs

2013
Accumulated
depreciation

Net book
value

¥ 10

¥8

¥2

Thousands of U.S dollars
2013
Acquisition Accumulated Net bookcosts
depreciation
value
Machinery,equipment andvehicles

$ 107

$

85

$ 22

The related lease payments and depreciation for the years ended March 31, 2012 and 2013
were as follows:

Lease payments
Depreciation

Millions of yen
2012
2013
¥ 11
¥2
11
2

Thousands of
U.S. dollars
2013
$ 22
22

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 assets for the years ended March 31,
2012 and 2013.
The related future minimum lease payments (including the interest portion thereon)
subsequent to March 31, 2013 under finance leases other than those which transfer theownership of the leased assets to the Group are summarized as follows:Year ending March 31,
20142015 and thereafter

Millions of yen
¥ 1
1
¥ 2

Thousands of
U.S. dollars
$ 11
11
$ 22

41

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

21. Derivatives
The open currency-related derivatives positions not designated as hedging instruments at
March 31, 2012 and 2013 are as follows:
Thousands of
New Taiwan dollars

Millions of yen
2012Type of transaction
Over-the-counter transactions
Forward foreign exchange contracts:
Selling USD

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

Estimated
fair value

Unrealizedgain

TWD 174,802

TWD –

¥2

¥ 2

Thousands of
New Taiwan dollars

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

Millions of yen
2013

Thousands of
U.S. dollars

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

Estimated
fair value

Unrealized
loss

Estimated
fair value

Unrealized
loss

TWD 243,109

TWD –

¥ (0)

¥ (0)

$ (0)

$ (0)

Thousands of
U.S. dollars

Millions of yen
2013

Type of transaction
Over-the-counter transactions
Forward foreign exchange contracts:
Selling RMBContract value(notional
principal amount)Contract value
over one year

Estimated
fair value

Unrealized
loss

Estimated
fair value

Unrealized
loss¥ 1,131¥ 1,131¥ (18)¥ (18)$ (191)$ (191)

Fair value is based on the prices obtained from financial institutions.

42

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

21. Derivatives (continued)
The open currency-related derivatives positions designated as hedging instruments at March
31, 2012 and 2013 are as follows:
Millions of yen
2012
Method ofhedge accounting
Deferral hedge accounting
Allocation method forforward foreign exchange
contracts

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

Contract value(notional principal
amount)Estimated
fair value

–

¥

–

¥

–

¥ 719

¥

–

¥

–

¥

Forward foreign exchange contracts: Selling
USD, Accounts receivable

Contract value
over one year

Millions of yen
2013

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

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

Contract
value(notional principal
amount)Estimated
fair value

12

¥

–

¥ (2)

¥ 850

¥

–

¥

¥

Forward foreign exchange contracts: Selling
USD, Accounts receivable

Contract value
over one year–

Thousands of U.S. dollars
2013

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

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

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

Estimated
fair value

128

$

–

$ (21)$ 9,038

$

–

$

$

–

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

43

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

22. Amounts per Share
Amounts per share at March 31, 2012 and 2013 and for the years then ended were as
follows:
Yen
Net assets
Net income:
Basic
DilutedCash dividends

2012¥ 803.55

2013¥ 845.55

U.S. dollars
2013$ 8.99

24.07
24.01
10.00

15.82
15.78
7.50

0.17
0.17
0.08

Amounts per share of net assets are computed based on the number of shares of common
stock outstanding at the year end.
Basic net income per share is computed based on the net income attributable to shareholdersof common stock and the weighted-average number of shares of common stock outstanding
during the year. Diluted net income per share is computed based on the net income
available for distribution to the shareholders and the weighted-average number of shares ofcommon stock outstanding during each year after giving effect to the dilutive potential ofshares of common stock to be issued upon the exercise of stock acquisition rights.
The average number of shares of common stock used to compute basic net income per sharefor the years ended March 31, 2012 and 2013 were 159,698 thousand and 159,033 thousand,respectively. The dilutive potential of shares of common stock for the years ended March 31,
2012 and 2013 were 384 thousand and 425 thousand, respectively.
Cash dividends per share represent the cash dividends proposed by the Board of Directors asapplicable to the respective years together with the interim cash dividends paid.

44

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

23. Transactions with Related Parties
Transactions and balances with related parties as of and for the years ended March 31, 2012
and 2013 are summarized as follows:
Transactions
Name ofaffiliated company

Type of transaction
Sales

Millions of yen
2012
2013
¥ 30,560¥ 31,361

Thousands of
U.S. dollars
2013$ 333,450

Balances
Sadoshima
Corporation
Account nameNotes and accounts
receivable

Millions of yen
2012
2013
¥ 11,086¥ 11,418

Thousands of
U.S. dollars
2013$ 121,404

The Company owns 50.0% of the voting rights of Sadoshima Corporation, a steel productwholesaler for the Company. Certain of its board members serve concurrently as board
members of the Company. Selling prices of products are determined based on pricenegotiations each fiscal year, after considering market prices, overall costs and theCompany’s proposals regarding desired prices.

45

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

24. Investment, Rental and Idle Properties
The Company and certain consolidated subsidiaries own office buildings, land, and parking
lots as rental properties and idle properties mainly in Osaka Prefecture, other domestic areas
and Taiwan.
The carrying value in the consolidated balance sheet at March 31, 2012 and 2013 and thecorresponding fair value of rental properties and idle properties are as follows:

2011
Rental properties and idle
properties
Properties of which a part areused as rental properties
Total¥ (319)¥ 4,426¥ 8,620

4,887¥ 9,632(69)¥ (388)4,818¥ 9,244

9,641¥ 18,261

Millions of yen
Carrying value
Net change
2013

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

4,818¥ 9,244(64)¥ (99)

4,754¥ 9,145

11,408¥ 19,058

Thousands of U.S. dollars
Carrying value
Net change
2013

Fair value
2013

2012
Rental properties and idle
properties
Properties of which a part areused as rental properties
Total

Fair value
2012¥ 4,745

2012
Rental properties and idle
properties
Properties of which a part areused as rental properties
Total

Millions of yen
Carrying value
Net change
2012$ 47,060$(372)$ 46,688$ 81,340

51,228$ 98,288(680)$ (1,052)

50,548$ 97,236

121,297$ 202,63746

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

24. Investment, Rental and Idle Properties (continued)
The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss.
The components of net change in carrying value for the year ended March 31, 2012 included
decreases mainly due to impairment loss recognized in the amount of ¥125 million,translation adjustments in the amount of ¥99 million and depreciation of buildings in theamount of ¥160 million.
The components of net change in carrying value for the year ended March 31, 2013 included
depreciation of buildings in the amount of ¥139 million ($1,478 thousand) and salesof properties in the amount of ¥76 million ($808 thousand).
Fair value of domestic rental properties are principally measured based on the real-estateappraisal assessed by the external real-estate appraiser. However, unless the appraisal orindicators that are regarded to reflect the fair value of the properties appropriately change
significantly since the date of acquisition or the date of the latest appraisal, the Company andcertain domestic consolidated subsidiaries measure the fair value of the properties based onsuch appraisal or indicators obtained previously and adjusted as appropriately.
Fair value of rental properties in Taiwan is measured based on the property prices announced
by the government.
Revenues, costs and expenses relevant to investment, rental and idle properties for the years
ended March 31, 2012 and 2013 are as follows:
Millions of yen
2012
Rental revenues¥ 850

Rental costs¥ 598

Difference¥ 252

Other gain (loss), net
on sales and others¥ 66

Millions of yen
2013
Rental revenues¥ 851

Rental costs¥ 576

Difference¥ 275

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

Thousands of U.S. dollars
2013
Rental revenues$ 9,048

Rental costs$ 6,124

Difference$ 2,924

Other gain (loss), net
on sales and others$ (266)47

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

24. Investment, Rental and Idle Properties (continued)
The rental revenues and rental costs for certain properties of which only a part are used asrental properties are not included in the above table because the Company and certain
consolidated subsidiaries use a portion of these properties for the purposes of rendering
services and conducting management activities. The rental revenues are recorded under net
sales or other income and the rental costs are recorded under cost of sales, selling, generaland administrative expenses or other, net, as part of other expenses, in the consolidated
statement of income.

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

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

48

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

25. Segment Information (continued)iii) Information on net sales, income or loss, assets and other items of each reportablesegment
Information by reportable segment for the years ended March 31, 2012 and 2013 aresummarized as follows:
Millions of yen
Year ended March 31, 2012

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

Steel Sheet
Segment

Reportable Segments
Roll
Grating Real Estate
Segment Segment Segment

Sub-Total

Other

Total

¥ 140,660¥ 5,053¥ 3,147¥886¥ 149,746¥ 3,031¥ 152,777¥–¥ 152,777–¥ 140,660–¥ 5,053–¥ 3,147479¥ 1,365479¥ 150,225

2,759¥ 5,790

3,238¥ 156,015(3,238)¥ (3,238)–¥ 152,777¥ 6,383¥ 99,804¥ 519¥ 4,498¥ (141)¥ 3,263¥ 706¥ 8,559¥ 7,467¥ 116,124¥
52¥ 7,034¥ 7,519¥ 123,158¥ (1,105)¥ 54,798¥ 6,414¥ 177,956

¥

¥

¥

¥

¥

¥

¥

¥

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

4,109

347

118

85

4,659

161

4,820

Adjustments
andeliminations

61

Consolidated

4,881

3,117

–

301

2

3,420

–

3,420

–

3,420

1,711

366

27

19

2,123

62

2,185

29

2,214

49

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

25. Segment Information (continued)
Millions of yen
Year ended March 31, 2013

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

Sub-Total

Other

Total

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

3,737¥ 6,486

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

¥

¥

¥

¥

¥

¥

¥

¥

¥

3,325

276

87

71

3,759

168

3,927

Adjustments
andeliminations

61

Consolidated

3,988

3,202

–

309

2

3,513

–

3,513

–

3,513

8,763

113

8

13

8,897

874

9,771

17

9,788

Adjustments
andeliminations

Consolidated

Thousands of U.S. dollars
Year ended March 31, 2013

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

Steel Sheet
Segment

Reportable Segments
Roll
Grating Real Estate
Segment Segment Segment

Sub-Total

Other

Total

$ 1,388,081$ 37,586 $ 35,620 $9,580$ 1,470,867$29,229$ 1,500,096$–$ 1,500,096–$ 1,388,081

–
–
4,508
$ 37,586 $ 35,620 $ 14,088

4,508$ 1,475,375

39,734$ 68,963

44,242$ 1,544,338(44,242)$ (44,242)–$ 1,500,096$ 48,081$ 1,153,238$ (1,999) $808 $ 7,060$ 37,576 $ 34,428 $ 90,133$
53,950$ 1,315,375$ (2,584)$ 86,209$
51,366$ 1,401,584$ (12,770)$ 595,269$
38,596$ 1,996,853$ 2,935 $$

39,968$ 1,786$$$

Other items
Depreciation
andamortization$
Investment in an
affiliateaccounted forby the equity
methodIncrease inproperty, plantand equipment
and intangible
assets35,353925 $

755

41,754649

42,40334,046

–

3,285

21

37,352–37,352–37,352

93,174

1,202

85

138

94,5999,293

103,892180

104,072

50

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

25. Segment Information (continued)
As described in Note 2, effective the year ended March 31, 2013, the Company and its
domestic consolidated subsidiaries changed their depreciation method for property, plant andequipment (except for buildings) acquired on or after April 1, 2012 in accordance with theamended Corporation Tax Law of Japan. The effect of this change on the segment income(loss) for the year ended March 31, 2013 was immaterial.
Net sales categorized by country and region based on locations of customers within theGroup for the years ended March 31, 2012 and 2013 are summarized as follows:Japan¥ 98,561

Millions of yen
2012
TaiwanOther¥ 23,993¥ 30,223

Total¥ 152,777

Japan¥ 93,531

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

Total¥ 141,084

Japan$ 994,482

Thousands of U.S. dollars
2013
TaiwanOther$ 214,269$ 291,345

Total$ 1,500,096

Property, plant and equipment, net, categorized by geographical area at March 31, 2012 and2013 are summarized as follows:Japan¥ 33,949

Millions of yen
2012
TaiwanOther¥ 9,635¥ 67

Total¥ 43,651

Japan¥ 33,094

Millions of yen
2013
TaiwanOther¥ 10,313¥ 8,224

Total¥ 51,631

Thousands of U.S. dollars

2013
Japan
$ 351,877

Taiwan$ 109,654

Other$ 87,443

Total$ 548,974

51

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

25. Segment Information (continued)
Net sales to major customers for the years ended March 31, 2012 and 2013 are as follows:

Millions of yen
2012
2013

Customer nameSadoshima
Corporation¥ 30,560¥ 31,361

Thousands of
U.S. dollars
2013$ 333,450

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

Loss on impairment of fixed assets by reportable segment for the years ended March 31,
2012 and 2013 is summarized as follows:

Steel Sheet
Segment
Loss on impairment of
fixed assets¥–

Steel Sheet
Segment
Loss on impairment of
fixed assets¥–

Steel Sheet
Segment
Loss on impairment of
fixed assets$–

Millions of yen
Year ended March 31, 2012
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
¥ –

¥ –

¥ –

¥ 0

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

¥ –

¥ –

¥ 140

Thousands of U.S. dollars
Year ended March 31, 2013
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
$ –

$ –

$ –

$ 1,489

Adjustments andeliminations

Total

¥ 125

¥ 125

Adjustments andeliminations

Total

¥ 10

¥ 150

Adjustments andeliminations

Total

$ 106

$ 1,595

52

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

25. Segment Information (continued)
The amortization and balance of negative goodwill by reportable segment as of and for theyears ended March 31, 2012 and 2013:

Amortization
Balance at the year end

Amortization
Balance at the year end

Amortization
Balance at the year end

Steel Sheet
Segment¥ 14
26

Millions of yen
Year ended March 31, 2012
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
¥ –
¥ 0
¥ 0
¥ 21
–
0
1
3

Adjustments andeliminations
¥ 3
6

Total
¥ 38
36

Steel Sheet
Segment¥ 13
12

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

Adjustments andeliminations
¥ 4
4

Total
¥ 19
17

Steel Sheet
Segment$ 138
127

Thousands of U.S. dollars
Year ended March 31, 2013
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
$ –
$ 0
$–
$ 21
–
0
–
11

Adjustments andeliminations
$ 43
43

Total
$ 202
181

53

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

25. Segment Information (continued)
Negative goodwill credited to income by reportable segment for the year ended March 31,
2012 is summarized as follows:
Millions of yen
Year ended March 31, 2012
Reportable Segments
Steel Sheet
Roll
Grating
Real Estate
Segment Segment Segment
Segment
Other
Negative goodwill
credited to income

¥

3

¥

0

¥

0

¥

–

¥

0

Adjustments andeliminations

Total

¥

¥ 4

1

Negative goodwill was credited to income for the year ended March 31, 2012 due topurchases of a subsidiary’s shares and recorded under other, net, as part of other expenses in
the consolidated statement of income.
There was no

26. Subsequent Events(a) Cash dividends
The following distribution of retained earnings of the Company, which has not beenreflected in the accompanying consolidated financial statements for the year ended
March 31, 2013, was approved at a meeting of the Board of Directors held on May 13,
2013:
Thousands ofMillions of yen
U.S. dollars
Cash dividends of ¥5 ($0.05) per share¥ 795$ 8,453(b) Purchase of treasury stock

A plan to purchase up to 1,300 thousand shares of the Company’s common stock at a
cost up to ¥500 million ($5,316 thousand) was approved at the meeting of the Board of
Directors held on May 13, 2013. This is intended to contribute to the execution of aflexible capital management policy in response to changes in the business environment.
By June 5, 2013, the Company purchased 1,218 thousand shares of the Company’scommon stock at a cost of ¥500 million ($5,316 thousand) in the market.

54