Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
Years ended March 31, 2007 and 2008
with Report of Independent Auditors

Yodogawa Steel Works, Ltd.
Consolidated Financial Statements
Years ended March 31, 2007 and 2008

Contents
Report of Independent Auditors .......................................................................................... 1

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

The Board of Directors
Yodogawa Steel Works, Ltd.

We have audited the accompanying consolidated balance sheets of Yodogawa Steel Works,
Ltd. and consolidated subsidiaries as of March 31, 2007 and 2008, and the related
consolidated statements of income, changes in net assets, and cash flows for the years thenended, all expressed in yen. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Yodogawa Steel Works, Ltd. andconsolidated subsidiaries at March 31, 2007 and 2008, and the consolidated results of theiroperations and their cash flows for the years then ended in conformity with accounting
principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2008 are presented solely for convenience. Our audit
also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 3.

Osaka, Japan
June 26, 20081

Yodogawa Steel Works, Ltd.
Consolidated Balance Sheets
March 31, 2007 and 2008

Millions of yen
2007
2008
AssetsCurrent assets:
Cash and time deposits (Note 4)
Marketable securities (Note 6)
Notes and accounts receivable (Note 5):
Unconsolidated subsidiaries and affiliates
Trade
Less allowance for doubtful receivables
Inventories
Deferred income taxes (Note 11)
Other current assets
Total current assets

Property, plant and equipment, at cost:
Land (Notes 7, 9 and 13)
Buildings and structures (Notes 7 and 9)
Machinery, equipment and vehicles(Notes 7 and 9)
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net

Investments and other assets:
Investments in securities (Notes 6 and 9)
Investments in and advances to unconsolidated
subsidiaries and affiliates
Deferred income taxes (Note 11)
Other assets
Total investments and other assets

Total assets

2¥ 13,271
10,689¥13,058
4,721

Thousands of
U.S. dollars(Note 3)
2008$

130,332
47,12013,806
31,578(367)
36,233
1,291
4,811
111,312

12,91635,403(323)
34,596
1,274
4,098
105,743

128,915353,359(3,224)345,305
12,71640,902
1,055,425

19,80554,185

18,79951,617

187,633
515,191

129,467749(142,554)
61,652

128,170979(142,500)
57,065

1,279,269
9,772(1,422,298)
569,567

49,32036,116360,475

3,874
532
2,841
56,567

4,390
790
2,756
44,05243,817
7,885
27,508439,685¥ 229,531¥ 206,860$ 2,064,677

Millions of yen
2007
2008
Liabilities and net assets
Current liabilities:
Short-term bank loans (Note 8)
Notes and accounts payable (Note 5):
Unconsolidated subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes (Note 11)
Secured deposits
Other current liabilities
Total current liabilities
Long-term liabilities:
Accrued retirement benefits for employees(Note 10)
Accrued retirement benefits for directors andcorporate auditors
Guarantee deposits (Note 8)
Negative goodwill
Deferred income taxes (Note 11)
Deferred income taxes on land revaluation reserve(Note 11)
Other long-term liabilities
Total long-term liabilities
Contingent liabilities (Note 16)
Net assets:
Shareholders’ equity (Note 12):
Common stock:
Authorized: 753,814,067 shares in 2007 and2008
Issued: 184,186,153 shares in 2007 and 2008
Capital surplus
Retained earnings (Note 20)
Treasury stock, at cost – 16,655,718 shares in2007 and 18,473,745 shares in 2008
Total shareholders’ equity
Valuation and translation adjustments:
Unrealized holding gain on securities (Note 6)
Land revaluation reserve (Note 13)
Translation adjustments
Total valuation and translation adjustments
Stock acquisition rights
Minority interests
Total net assets
Total liabilities and net assets

¥

1,044

¥

702

Thousands of
U.S. dollars(Note 3)
2008
$

7,007

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

1,316
18,343
1,582
3,931
2,130
–
3,521
31,525

13,135
183,082
15,79039,235
21,260–35,143
314,652

7,750

7,455

74,409

78
4,045
96
9,099

69
3,878
122
4,425

689
38,706
1,218
44,1662,384
401
23,853

1,105
192
17,246

11,0291,916
172,133

23,221
23,54789,39323,221
23,776
94,437

231,770
237,309942,579(6,235)
129,926(7,431)
134,003(74,169)
1,337,489

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

8,680
1,422
(1,570)8,532
49
15,505
158,089¥ 206,860

86,635
14,193(15,670)
85,158489
154,756
1,577,892$ 2,064,677

See accompanying notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd.
Consolidated Statements of Income
Years ended March 31, 2007 and 2008
Thousands of
U.S. dollars(Note 3)2008

Millions of yen
2007
2008
Net sales
Cost of sales
Gross profit¥ 192,319
162,186
30,133¥ 207,398
179,150
28,248$ 2,070,047
1,788,102
281,945

17,181
12,952

16,992
11,256

169,598
112,347

804
(78)

1,012
(101)

10,101(1,008)

1,245

313

3,124

(71)

(569)

(5,679)

(252)
144

(407)
432

(4,062)
4,311

(525)

(6)

(60)

–
–
–
–
–

(152)

780
19
(271)
19
(217)
41

7,785
190
(2,705)190(2,166)409

14,067

12,301

122,777

4,674
694
5,368
8,699

3,748
65
3,813
8,488

37,409649
38,05884,719Selling, general and administrative expenses(Note 14)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sales of investments in securities(Note 6)
Loss on impairment of investments insecurities (Note 6)
Loss on sales or disposal of property, plantand equipment, net
Equity in earnings of an affiliate
Loss on impairment of fixed assets(Note 7)
Gain on execution of an option on equity
securities
Amortization of negative goodwill
Loss on devaluation of derivatives
Reversal of allowance for disposal cost
Loss on discontinued products
Other, net
Income before income taxes and minority
interests
Income taxes (Note 11):
Current
DeferredIncome before minority interests
Minority interests
Net income¥(2,324)
6,375¥(1,434)
7,054$(14,313)70,406

See accompanying notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd.
Consolidated Statements of Changes in Net Assets
Years ended March 31, 2007 and 2008
Millions of yen

Balance at March
31, 2006
Cash dividends
Bonuses todirectors andcorporate
auditors
Bonuses to
employees of an
overseassubsidiary

Translation
adjustments

Totalvaluationandtranslation
adjustments

StockacquisitionrightsMinority
interests

Total net
assetsNumber ofsharesissuedCommonstock

CapitalsurplusRetainedearnings

Treasurystock, at
cost

Total
shareholders’equityUnrealized
holding
gain onsecurities

184,186,153¥ 23,221¥ 23,740¥ 86,843¥ (5,592)¥ 128,212¥ 17,744¥ 303¥ (1,315)¥ 16,732¥ –¥ 14,607¥ 159,551–––(2,349)–(2,349)

–

–

–

–

–

–

(2,349)

–

–

–

(78)

–

(78)

–

–

–

–

–

–

(78)

Land
revaluation
reserve

–

–

–

(22)

–

(22)

–

–

–

–

–

–

(22)

Net income
Acquisition oftreasury stock
Disposition oftreasury stockReversal of land
revaluation
reserve

–

–

–

6,375

–

6,375

–

–

–

–

–

–

6,375

–

–

–

–

(645)

(645)

–

–

–

–

–

–

(645)

–

–

(193)

–

2

(191)

–

–

–

–

–

–

(191)

–

–

–

(1,376)–(1,376)

–

–

–

–

–

–

(1,376)

Other changes
Balance at March
31, 2007
Cash dividends
Bonuses todirectors andcorporate
auditors of an
overseassubsidiary
Bonuses to
employees of an
overseassubsidiary

–

–

–

–

–

–

(708)

1,339

247

878

25

1,829

2,732

184,186,153

23,221

23,54789,393(6,235)

129,926

17,036

1,642(1,068)17,61025

16,436

163,997–––(2,190)–(2,190)

–

–

–

–

–

–

(2,190)

–

–

–

(10)

–

(10)

–

–

–

–

–

–

(10)

–

–

–

(30)

–

(30)

–

–

–

–

–

–

(30)

Net income
Acquisition oftreasury stock
Disposition oftreasury stockReversal of land
revaluation
reserve

–

–

–

7,054

–

7,054

–

–

–

–

–

–

7,054

–

–

–

–

(2,185)(2,185)

–

–

–

–

–

–

(2,185)

–

–

229

–

989

1,218

–

–

–

–

–

–

1,218

–

–

–

220

–

220

–

–

–

–

–

–

220

Other changes
Balance at March
31, 2008

–

–

–

–

–

–

(8,356)

(220)

(502)

(9,078)24(931)(9,985)

184,186,153¥ 23,221¥ 23,776¥ 94,437¥ (7,431)¥ 134,003¥ 8,680¥ 1,422¥ (1,570)¥ 8,532¥ 49¥ 15,505¥158,089

See accompanying notes to consolidated financial statements.
5

Yodogawa Steel Works, Ltd.
Consolidated Statements of Changes in Net Assets (continued)
Years ended March 31, 2007 and 2008
Thousands of U.S. dollars (Note 3)
Total
Unrealized

valuation

TreasuryTotalholding

Land

and

Stock

gain onrevaluation

Translationtranslationacquisition

Minority

Total net

CommonCapitalRetainedstock, atshareholders’stocksurplusearnings

costequitysecurities

reserveadjustments

adjustments

rightsinterests

assets$ 231,770$ 235,023$ 892,235$(62,232)$ 1,296,796$ 170,037$ 16,389$ (10,660)$175,766$ 250$ 164,048$ 1,636,860––(21,858)–(21,858)

–

–

–

–

–

–

(21,858)

–

–

(100)

–

(100)

–

–

–

–

–

–

(100)

Balance at March 31,
2007
Cash dividends
Bonuses to directors andcorporate auditors ofan overseas subsidiary
Bonuses to employeesof an overseas
subsidiary

–

–

(299)

–

(299)

–

–

–

–

–

–

(299)

Net income––

70,406–70,406

–

–

–

–

–

–

70,406–––(21,808)(21,808)

–

–

–

–

–

–

(21,808)

–

2,286

–

9,871

12,157

–

–

–

–

–

–

12,157

revaluation reserve

–

–

2,195

–

2,195

–

–

–

–

–

–

2,195

Other changes

–

–

–

–

–

(83,402)(2,196)(5,010)(90,608)239(9,292)(99,661)$ 231,770$ 237,309$ 942,579$(74,169)$ 1,337,489$ 86,635$ 14,193$ (15,670)$ 85,158$ 489$ 154,756$ 1,577,892

Acquisition of treasury
stock
Disposition of treasury
stock
Reversal of land

Balance at March 31,
2008

See accompanying notes to consolidated financial statements.
6

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows
Years ended March 31, 2007 and 2008

Millions of yen
2008
2007
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
Loss on impairment of investments in securities
Increase (decrease) in accrued retirement benefits(Decrease) increase in accrued bonuses
Increase (decrease) in allowance for doubtfulreceivables
Interest and dividend income
Interest expense
Gain on sales of investments in securities
Loss on sales or disposal of property, plant andequipment, net
Loss on impairment of fixed assets
Increase in notes and accounts receivable(Increase) decrease in inventories
Increase in notes and accounts payable
Bonuses to directors, corporate auditors andemployees of an overseas subsidiary
Gain on execution of an option on equity
securities
Loss on devaluation of derivatives
Loss on discontinued products
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Thousands of
U.S. dollars(Note 3)2008

¥ 14,067¥ 12,301$ 122,777

5,269
–
(144)
71
168
(78)

5,981
(19)
(432)
569
(220)
16

59,697(190)(4,311)
5,679(2,196)
160

139
(804)
78
(1,245)(50)(1,012)
101
(313)

(500)
(10,101)
1,008(3,124)252
525(7,282)(4,832)
4,248

407
6
(3,152)
1,178
81

4,062
60
(31,460)
11,758
808

(100)

(40)

(399)

–
–
–
(370)
9,962
831
(79)
(4,832)¥ 5,882

(780)
271
217
519
15,6291,082(103)(4,339)¥ 12,269(7,785)
2,705
2,166
5,180
155,994
10,799(1,028)(43,308)$ 122,457

See accompanying notes to consolidated financial statements.
7

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows (continued)
Years ended March 31, 2007 and 2008

Millions of yen
2007
2008
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
Purchases of marketable securities
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant andequipment
Purchases of intangible fixed assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Proceeds from sale of a hotel business (Note 4)
Execution of loans receivableCollection of loans receivable
Proceeds from execution of an option on securities
Other
Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term bank loans
Increase (decrease) in secured deposits
Proceeds from sales of treasury stock
Purchases of treasury stock
Cash dividends paid to the Company’s
shareholders
Cash dividends paid to shareholders of minority
interests of consolidated subsidiaries
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
(Note 4)

¥

(861)

¥

Thousands of
U.S. dollars(Note 3)
2008

(204)

$ (2,036)

75–
692(3,843)362(2,689)1,407(3,314)

3,613(26,839)
14,043(33,077)830(78)(6,858)
2,913
–
(769)
851

574
(47)
(4,289)
4,422
300
(282)
350

5,729
(469)
(42,809)44,1362,994(2,814)3,494–
5(7,043)780–(2,630)

7,785–(26,250)

1,024
7,747
–
(135)

(309)
(7,747)
1,219(2,182)(3,084)(77,323)
12,167(21,779)(2,364)(2,204)(21,998)(1,106)(1,743)(17,397)

5,166(12,966)(129,414)

8

(22)

(220)

4,013

(3,349)(33,427)

16,187

20,200201,617¥ 20,200¥ 16,851$ 168,190

See accompanying notes to consolidated financial statements.
8

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements
March 31, 2008

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 conformthe consolidated financial statements for the year ended March 31, 2007 to the 2008
presentation. Such reclassifications had no effect on consolidated net assets and net
income.
(b) Basis of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and all subsidiaries over which substantial control is exerted through either
majority ownership of voting stock and/or by other means. All significant
intercompany balances and transactions have been eliminated in consolidation.
An investment in one affiliate (a company over which the Company has the ability to
exercise significant influence) is stated at cost plus equity in its undistributed earnings
or undisposed loss. Consolidated net income includes the Company’s equity in thecurrent net income or loss of this company after the elimination of unrealizedintercompany profits.

9

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

1.

Summary of Significant Accounting Policies (continued)(b) Basis of consolidation (continued)
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if
applicable. The difference, not significant in amount, between the cost of investments
in subsidiaries and the equity in their net assets at their respective dates of acquisition
is charged to income as incurred or amortized over a period of 5 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 fromits fiscal year end to the Company’s balance sheet date.
(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into
yen at the rates of exchange in effect at the balance sheet date. Other assets andliabilities denominated in foreign currencies are translated at their historical rates. Allrevenues and expenses associated with foreign currencies are translated at the rates of
exchange prevailing when such transactions were made. The resulting exchange gainor loss is credited or charged to income.
The balance sheet accounts of the overseas consolidated subsidiary (except for net
assets excluding minority interests) are translated into yen at the rate of exchange in
effect at the balance sheet date. The components of net assets excluding minority
interests are translated at their respective historical rates of exchange. Revenue andexpense accounts are translated into yen at the average rate of exchange in effectduring the year.
Translation adjustments have been presented as a component of net assets in theaccompanying consolidated financial statements.
(d) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks withdrawable
on demand, and short-term investments which are readily convertible into cash subject
to an insignificant risk of any changes in their value and which were purchased with an
original maturity of three months or less.

10

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

1.

Summary of Significant Accounting Policies (continued)(e) Securities
The accounting standard for financial instruments requires that securities other thanthose of subsidiaries and affiliates be classified into three categories: trading securities,
held-to-maturity debt securities or other securities. Under this standard, trading
securities are carried at fair value and gain or loss, both realized and unrealized, 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) Inventories
Inventories are stated at cost determined principally by the average method.
Inventories at the Company’s overseas consolidated subsidiary are stated at the lowerof cost or market, cost being determined by the moving average method.
(g) Property, plant and equipment and depreciation
Depreciation of property, plant and equipment is calculated by the declining-balancemethod over the 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 the overseas consolidated subsidiaryis calculated by the straight-line method.
The useful lives adopted for calculating depreciation are principally as follows:
Buildings and structures
Machinery, equipment and vehicles

3 to 60 years
3 to 36 years

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

11

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

1.

Summary of Significant Accounting Policies (continued)(h) Intangible assets and amortization
Intangible assets are stated on the basis of cost. Amortization is calculated by thestraight-line method over the estimated useful lives of the respective assets.
(i) Allowance for doubtful receivables
The Company and its consolidated subsidiaries provide an allowance for doubtfulreceivables at an amount calculated based on their historical experience of bad debts on
ordinary receivables plus an additional estimate of probable specific bad debts from
customers experiencing financial difficulties.
(j) Research and development costs and computer software
Research and development costs are charged to income as incurred.
Expenditures relating to the development of computer software intended for internal
use are charged to income when incurred, unless these are deemed to contribute to thegeneration of future income or cost savings. Such expenditures are capitalized asassets and amortized by the straight-line method over their estimated useful life of 5
years.
(k) Leases
The Company and its consolidated subsidiaries lease certain equipment under
noncancelable leases referred to as finance leases. Finance leases other than thosewhich transfer the ownership of the leased property to the lessee are accounted for as
operating leases.
(l) Income taxes
Deferred income taxes are provided for temporary differences between the balances ofassets and liabilities for financial reporting purposes and the corresponding balances
for tax reporting purposes.
(m) Retirement benefits
Employees of the Company and its consolidated subsidiaries are covered by
employees’ retirement benefit and employees’ pension plans. The employees’
retirement benefit plans provide for a lump-sum payment determined by reference totheir basic salary, length of service and conditions under which termination occurs.

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

1.

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

13

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

2.

Changes in Accounting Policies

Effective the year ended March 31, 2008, the Company and its domestic consolidated
subsidiaries have changed their method of accounting for depreciation based on anamendment to the Corporation Tax Law of Japan. Tangible fixed assets acquired on orafter April 1, 2007 are to be depreciated based on a nil salvage value. As a result,operating income decreased by ¥51 million ($509 thousand) and income before income
taxes and minority interests decreased by ¥53 million ($529 thousand) for the year ended
March 31, 2008 from the corresponding amounts which would have been recorded underthe method applied in the previous year.
In addition, effective the year ended March 31, 2008, Tangible fixed assets acquired on or
prior to March 31, 2007 are to be depreciated based on the difference between theequivalent of 5% of acquisition cost and memorandum value over a period of 5 years once
they have been fully depreciated to the limits of their respective depreciable amounts. As
a result of this change, operating income decreased by ¥548 million ($5,470 thousand) andincome before income taxes and minority interests decreased by ¥555 million ($5,539
thousand) for the year ended March 31, 2008 from the corresponding amounts which would
have been recorded under the method applied in the previous year.

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 ¥100.19 = U.S.$1.00,
the approximate exchange rate prevailing on March 31, 2008. 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.

14

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

4.

Cash and Cash Equivalents

A reconciliation of cash and time deposits shown in the accompanying consolidatedbalance sheets to cash and cash equivalents shown in the accompanying consolidated
statements of cash flows at March 31, 2007 and 2008 is presented as follows:
Millions of yen
2008
2007
Cash and time deposits
Investment trust funds
Beneficiary interests in trusts and other
Time deposits with a maturity of morethan three months
Cash and cash equivalents

Thousands of
U.S. dollars
2008¥ 13,271
5,798
1,500

¥13,058
3,199
1,000

$ 130,332
31,9299,981(369)¥ 20,200(406)¥16,851(4,052)$ 168,190

During the year ended March 31, 2008, a hotel business of a consolidated subsidiary was
sold. The assets and liabilities of the hotel business, and the sale value and proceeds fromsale are summarized as follows:

Current assets
Fixed assets
Current liabilities
Loss on sale of a hotel business
Sale value
Cash and cash equivalent
Proceed from sale

5.

Millions of
yen
2008
¥ 47
305
(51)
(1)
300
–
¥ 300

Thousands of
U.S. dollars
2008
$ 469
3,044
(509)
(10)
2,994
–
$ 2,994

Notes Receivable and Notes Payable

The balance sheet date of the year ended March 31, 2007 fell on a bank holiday.
Consequently, notes receivable - trade of ¥1,110 million, notes payable - trade of ¥661
million, and notes payable - construction of ¥149 million with maturity date of March 31,
2007 were included in the respective balances and were settled on the next business day.

15

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

6.

Securities

Marketable securities classified as held-to-maturity debt securities at March 31, 2007 and2008 are summarized as follows:

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

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

¥

60
300
360

2007
Millions of yen
Estimated fair
value

¥

60
310
370

Unrealized
gain (loss)

¥

0
10
10

10
12,203200
12,413¥ 12,773

10
11,865
199
12,074¥ 12,444

(0)
(338)
(1)
(339)
¥ (329)Carrying
value

2008
Millions of yen
Estimated fairvalue

Unrealized
gain (loss)

¥

270
1,298
1,568

¥ 272
1,302
1,574

¥

2
4
6

10
4,395
250
4,655
¥ 6,223

10
4,171
249
4,430
¥ 6,004

(0)
(224)
(1)
(225)
¥ (219)16

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

6.

Securities (continued)
2008
Thousands of U.S. dollars
Carrying
Estimated fair Unrealized
value
gain (loss)
value

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

$ 2,695
12,955
15,650$ 2,715
12,995
15,710

$

20
40
60

100
43,8672,495
46,462$ 62,112100
41,631
2,485
44,216$ 59,926(0)(2,236)(10)(2,246)$ (2,186)

Other securities with determinable market value at March 31, 2007 and 2008 aresummarized as follows:

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

Acquisition
costs

2007
Millions of yen
Carrying
value

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

587
990
1,577
¥ 14,397

526
985
1,511
¥ 43,468

(61)
(5)
(66)
¥ 29,071

17

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

6.

Securities (continued)

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

Acquisition
costs

2008
Millions of yen
Carrying
value

Unrealized
gain (loss)¥ 11,028490
1,110
12,628¥ 25,714
496
1,113
27,323¥ 14,686
6
314,695

4,533¥ 17,161

3,967¥ 31,290(566)¥ 14,1292008
Thousands of U.S. dollars
Carrying
Unrealized
Acquisition
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
Total$ 110,071
4,891
11,079126,041$ 256,652
4,951
11,109272,712$ 146,581
60
30
146,671

45,244$ 171,285

39,595$ 312,307(5,649)$ 141,022

Sales of securities classified as other securities for the years ended March 31, 2007 and2008 are summarized as follows:

Sales
Aggregate gain
Aggregate loss

Millions of yen
2008
2007
¥ 1,781
¥ 204
1,245
159
–
(0)

Thousands of
U.S. dollars
2008$ 2,036
1,587
(0)

18

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

6.

Securities (continued)

The carrying value of securities without determinable market value at March 31, 2007 and2008 were as follows:

Millions of yen
2007
2008
Held-to-maturity debt securities:
Interest-bearing financial bonds
Other securities:
Non-marketable equity securities
Money trusts
Investment in a limited liability
partnership
Preferred subscription certificates

¥

50

¥

–

Thousands of
U.S. dollars
2008
$

–

580
1,701

608
1,202

6,068
11,997

317
1,100

414
1,100

4,132
10,979The Company recorded a loss on impairment of investments in securities of ¥71 millionand ¥569 million ($5,679 thousand) for the years ended March 31, 2007 and 2008,
respectively.
The redemption schedule for other securities with maturities and held-to-maturity debt
securities at March 31, 2008 is summarized as follows:

Due in one
year or lessGovernment bonds
Corporate bonds
Other
Total

¥ 200
2,070
1,240
¥ 3,510Due in one
year or lessGovernment bonds
Corporate bonds
Other
Total

$ 1,996
20,661
12,376$ 35,033

Millions of yen
Due after one Due after five
year through years throughfive years
ten years
¥ 80
–
10
¥ 90

¥–
–
–
¥–

Thousands of U.S. dollars
Due after one Due after five
year through years throughfive years
ten years
$ 798
–
100
$ 898

$–
–
–
$–

Due after ten
years
¥

–
4,400
–
¥ 4,400

Due after ten
years
$

–
43,917–$ 43,917

19

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

7.

Loss on Impairment of Fixed Assets

The Company and its consolidated subsidiaries recognized loss on impairment of fixed
assets for the years ended March 31, 2007 and 2008 as follows:

LocationMiyazaki City,
Miyazaki Prefecture
Nishinomiya City,
Hyogo Prefecture

Use
Hotel

Idle assets

Shirahama Town,
Idle assets
Wakayama Prefecture
Village of
Idle assets
Yamanakako,
Yamanashi Prefecture
Total

Classification
Land, buildings andstructures, andotherLand, buildings andstructures, andotherLand, buildings andstructures, andother
Buildings andstructures, andotherMillions of yen
2007
2008

Thousands of
U.S. dollars
2008

¥ 325

¥6

$ 60

155

–

–

39

–

–

6
¥ 525

–
¥6

–
$ 60

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
which are not utilized in their operations on an individual asset basis.
Consequently, the Company and its consolidated subsidiaries have written down the
carrying value of the hotel group to its net recoverable value due to a significant decline inits fair value, and have recorded a related loss on impairment of fixed assets of ¥325
million and ¥6 million ($60 thousand) in the accompanying consolidated statements ofincome for the years ended March 31, 2007 and 2008, respectively. The loss on
impairment of fixed assets consisted of land of ¥300 million, buildings and structures of¥22 million, machinery, equipment and vehicles of ¥1 million, and other of ¥2 million forthe year ended March 31, 2007, and other of ¥6 million ($60 thousand) for the year ended
March 31, 2008. The recoverable amounts of these assets are measured at estimatedselling value which is measured at net realizable value based on appraisals conducted byreal estate appraisers.
In addition, the Company and its consolidated subsidiaries wrote down the carrying valueof the idle assets owned by the Company for the year ended March 31, 2007, which are notexpected to be utilized in the future, to their respective net recoverable value, and haverecorded a related loss on impairment of fixed assets of ¥200 million in the accompanying
consolidated statement of income for the year ended March 31, 2007. This loss on
impairment of fixed assets consisted of land of ¥175 million, and buildings and structuresof ¥25 million for the year ended March 31, 2007. The recoverable amounts of theseassets are measured at estimated selling value, at a valuation assessed for property tax
purposes or at the comparable published land prices as they were not material.
20

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

8.

Short-Term Bank Loans and Guarantee Deposits

Short-term bank loans represented overdrafts at average annual interest rates ofapproximately 3.18% and 2.39% at March 31, 2007 and 2008, respectively.
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 0.58% and 0.90% at March 31, 2007 and 2008,
respectively.
Interest-free deposits and interest-bearing deposits at March 31, 2007 and 2008 were as
follows:

Interest-free deposits
Interest-bearing deposits

Millions of yen
2007
2008
¥ 3,386¥ 3,224659
654¥ 4,045¥ 3,878

Thousands of
U.S. dollars
2008$ 32,179
6,527$ 38,706

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, 2007 and 2008 was as follows:

Lines of credit
Credit utilized
Available credit

9.

Millions of yen
2007
2008
¥ 21,400¥ 21,400––¥ 21,400¥ 21,400

Thousands of
U.S. dollars
2008$ 213,594–$213,594

Pledged Assets

Assets pledged at March 31, 2008 as collateral for indebtedness are summarized as follows:
Millions of yen
Land
Buildings and structures
Machinery, equipment and vehicles
Investments in securities

¥

41
2,561
1,990
69
¥ 4,661

Thousands of
U.S. dollars$

409
25,561
19,862689$ 46,521

Indebtedness secured by these assets as collateral was nil at March 31, 2008.
21

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

10. Retirement Benefits
The funded and accrued status of the employees’ defined benefit pension plans of theCompany and its consolidated subsidiaries, and the amounts recognized in theaccompanying consolidated balance sheets at March 31, 2007 and 2008 are summarized asfollows:
Thousands of
U.S. dollars
2008

Millions of yen
2007
2008
Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial (gain) loss
Unrecognized prior service cost
Net retirement benefit obligation
Prepaid pension costAccrued retirement benefits¥(14,693)
7,567(7,126)(38)
10(7,154)596¥ (7,750)¥(13,967)
5,634(8,333)
1,773–(6,560)895¥ (7,455)$(139,405)
56,233(83,172)
17,696–(65,476)
8,933$ (74,409)

As permitted under the accounting standard for retirement benefits, certain domestic
consolidated subsidiaries calculate accrued retirement benefits for their employees bysimplified methods.
The components of retirement benefit expenses for the years ended March 31, 2007 and2008 are outlined as follows:
Millions of yen
2007
2008
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost

¥ 683
331
(105)
6
7
¥ 922

¥ 740
331
(223)
14
7
¥ 869

Thousands of
U.S. dollars
2008$ 7,386
3,304(2,226)14070$ 8,674

The retirement benefit expenses of certain domestic consolidated subsidiaries which were
calculated by simplified methods have been included in service cost in the above table.
The assumptions used in accounting for the above benefit plans for the years ended March
31, 2007 and 2008 were as follows:
Discount rate
Expected rates of return on plan assets

2007

2008

Principally 2.5%
Principally 1.4%

Principally 2.5%
Principally 3.2%
22

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

11. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries
comprise corporation, enterprise and inhabitants’ taxes which, in the aggregate, resulted ina statutory tax rate of approximately 40.5% for the years ended March 31, 2007 and 2008.
A reconciliation of the statutory tax rate and the effective tax rates for the years ended
March 31, 2007 and 2008 as a percentage of income before income taxes and minority
interests is as follows:

Statutory tax rate
Investment tax credits
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 subsidiaryTax exemption of the overseas consolidated subsidiary
Equity in earnings of an affiliate
Tax loss carryforwards of a consolidated subsidiary
Taxation on deemed dividends
Valuation allowance
Permanently non-taxable income
Reversal of land revaluation reserve
Other
Effective tax rates

2007

2008

40.5%
(1.3)
0.3
0.5

40.5%
(0.3)
0.4
0.4

(6.6)

(4.1)

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

2.4
(0.5)
(1.5)
(2.0)
–
7.0
(1.0)
(10.1)
(0.2)
31.0%

23

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

11. Income Taxes (continued)
The significant components of the deferred tax assets and liabilities of the Company and its
consolidated subsidiaries at March 31, 2007 and 2008 are summarized as follows:
Millions of yen
2007
2008
Deferred tax assets:
Accrued retirement benefits
Allowance for doubtful receivables
Accrued bonuses
Valuation loss on inventories
Foreign tax credits
Tax loss carryforwards
Loss on impairment of investments insecurities and golf-club memberships
Loss on impairment of fixed assets
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Dividends from an overseas subsidiary
Unrealized holding gain on securities
Land revaluation reserve
Reserve for deferred taxation oncontributions for acquisition of property
Total deferred tax liabilities
Net deferred tax liabilities

Thousands of
U.S. dollars
2008¥ 2,758
99
437
190
132
1,004

¥ 2,533
131
444
179
111
955

$ 25,282
1,308
4,432
1,787
1,108
9,532

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

963
87
1,003
6,406
(2,378)
4,028

9,612
868
10,01063,939(23,735)
40,204(132)(11,778)(2,384)(76)(5,379)(1,105)(759)(53,688)(11,029)(992)(15,286)¥ (9,660)(934)(7,494)¥ (3,466)(9,322)(74,798)$ (34,594)

12. 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)
and retained earnings (other than the legal reserve) be transferred to the capital reserve andthe legal 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 byresolution of the shareholders, or by the Board of Directors if certain conditions are met.
In accordance with the former Commercial Code of Japan (“the Code”), 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. Under the terms of this plan,
up to 81,000 shares of common stock were granted at ¥1 ($0.01) per share. The options
became exercisable on July 13, 2004 and are scheduled to expire on June 29, 2024.
24

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

12. Shareholders’ Equity (continued)
In accordance with the Code, a stock option plan for certain directors and executive officersof the Company was approved at the annual general meeting of the shareholders held on
June 29, 2005. Under the terms of this plan, up to 62,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options became exercisable on July 15, 2005 and arescheduled to expire on June 29, 2025.
In accordance with the Code, a stock option plan for certain directors and executive officersof the Company was approved at the annual general meeting of the shareholders held on
June 29, 2006. Under the terms of this plan, up to 53,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options became exercisable on August 1, 2006 andare scheduled to expire on June 29, 2026.
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.
Under the terms of this plan, up to 43,000 shares of common stock were granted at ¥1($0.01) per share. The options became exercisable on August 2, 2007 and are scheduled
to expire on June 29, 2027.
Treasury stock
Movements in treasury stock during the years ended March 31, 2007 and 2008 aresummarized as follows:

Treasury stock

Treasury stock

March 31, 2006
14,748

Thousands of Shares
2007
Increase
Decrease
1,910
3March 31, 2007
16,655

March 31, 2007
16,655

Thousands of Shares
2008
Increase
Decrease
3,856
2,038

March 31, 2008
18,473

13. Land Revaluation
At March 31, 2000 and 2002, certain consolidated subsidiaries and an affiliate revalued
their land held for business use in accordance with the “Law on Land Revaluation.”
Differences on land revaluation have been accounted for as land revaluation reserve under
net assets and are stated at the Company’s share of the net amount of the relevant tax effect.
The method followed for land revaluation was determined in accordance with the“Enforcement Act Concerning Land Revaluation.”25

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

13. Land Revaluation (continued)
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, 2007 and 2008:

Millions of yen
2007
2008
Land revalued at March 31, 2000
Land revalued at March 31, 2002

¥ (187)(1,313)¥ (1,500)

Thousands of
U.S. dollars
2008¥ (199)(992)¥ (1,191)$ (1,986)(9,901)$ (11,887)

14. Research and Development Costs
Research and development costs included in selling, general and administrative expenses
totaled ¥553 million and ¥515 million ($5,140 thousand) for the years ended March 31,
2007 and 2008, respectively.

15. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciationand net book value of the leased property at March 31, 2007 and 2008, which would havebeen reflected in the accompanying consolidated balance sheets if finance leases other thanthose which transfer the ownership of the leased property to the Company and its
consolidated subsidiaries (currently accounted for as operating leases) were capitalized:
Millions of yen
2007
2008
Acquisition Accumulated Net book Acquisition Accumulated
costs
depreciation
value
costs
depreciation
Machinery,equipment andvehicles

¥ 410

¥ 195

¥ 215

¥ 413

¥ 265

Net book
value

¥ 148

Thousands of U.S dollars
2008
Acquisition Accumulated Net bookcosts
depreciation
value
Machinery,equipment andvehicles$ 4,122$ 2,645$ 1,47726

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

15. Leases (continued)
The related lease payments and depreciation for the years ended March 31, 2007 and 2008
were as follows:
Millions of yen
2007
2008
Lease payments
Depreciation

¥ 78
78

¥ 86
86

Thousands of
U.S. dollars
2008
$ 858
858

Depreciation is calculated by the straight-line method over the respective lease terms
assuming a nil residual value.
No loss on impairment has been recorded on leased property for the years ended March 31,
2007 and 2008.
The related future minimum lease payments (including the interest portion thereon)
subsequent to March 31, 2008 under finance leases other than those which transfer theownership of the leased property to the Company and its consolidated subsidiaries are
summarized as follows:Year ending March 31,
20092010 and thereafter

Millions of yen
¥ 74
74
¥148

Thousands of
U.S. dollars
$ 739
738
$1,477

16. Contingent Liabilities
At March 31, 2008, the Company and its consolidated subsidiaries had the following
contingent liabilities:

Guarantee of bank loan of an overseas
unconsolidated subsidiary

Millions of yen

Thousands of
U.S. dollars

¥ 22

$ 220

Since January 24, 2008, the Company has been investigated by the Japan Fair Trade
Commission due to suspicion of being involved in a price cartel regarding galvanized steel
coils and painted steel coils with certain other participants. The Company and certain
other participants may incur losses; however, the losses cannot be estimated with certainty
at this time. Consequently, the Company cannot determine the related impact on its
consolidated financial statements due to this event at this time.
27

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

17. Derivatives
The Company and its consolidated subsidiaries enter into various transactions involving
derivatives in order to manage the risk arising from adverse fluctuation in foreign currency
exchange rates, interest rates and share prices. Compound financial instruments that
contain embedded derivatives are also utilized by the Company and its consolidated
subsidiaries in order to manage surplus funds. Derivatives positions involve the credit riskthat the counterparties may default on their obligations. The Company and its
consolidated subsidiaries select only financial institutions with high credit ratings ascounterparties in order to minimize their credit risk. The Company and its consolidated
subsidiaries do not enter into derivatives transactions whose fluctuation in fair value ismaterial and which could thus impact their operations significantly. In addition, thoughcompound financial instruments are subject to market risk where the value of those
instruments decreases due to fluctuation, credit risk is deemed to be low as the Company
and its consolidated subsidiaries do not anticipate nonperformance by any of thecounterparties, all of whom are financial institutions with high credit ratings.
The Company and its consolidated subsidiaries have established policies for approving andreporting the purpose, nature, counterparty, inherent risk, limit on loss and the level of riskof each transaction. Under these policies governing derivatives, trading is not entered into
for speculative purposes.
At March 31, 2007 and 2008, all open derivatives positions qualified for the application ofdeferral hedge accounting and, thus, disclosure of fair value information has been omitted.
Disclosure of fair value information on compound financial instruments, which can not be
declassified and fair value of embedded derivatives can not be determined, has been
omitted and fair value of compound financial instruments as a whole has been included infair value information on securities presented in Note 6.

18. Amounts per Share
Amounts per share at March 31, 2007 and 2008 and for the years then ended were as
follows:
Yen
Net assets
Net income:
Basic
DilutedCash dividends

2007

2008

U.S. dollars
2008¥ 880.42¥ 860.00$ 8.58

37.65
37.61
12.00

41.98
41.93
17.00

0.42
0.42
0.17

Amounts per share of net assets are computed based on the number of shares of common
stock outstanding at the year end.
28

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

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

19. Segment Information
The Company and its consolidated subsidiaries are primarily engaged in the manufactureand sale of a variety of steel products such as steel sheets, construction materials,
prefabricated structures, home furnishings, and steel rolls and gratings. The Company also
engages in other activities such as real estate rental and engineering projects.
The business and geographical segments of the Company and its consolidated subsidiaries
for the years ended March 31, 2007 and 2008 are outlined as follows:Business Segments
Millions of yen
Year ended March 31, 2007

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

Steel sheet
products

Electric
furnaceproducts

Other

Total

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

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

6,141
198,460
184,623¥ 13,837(6,141)(6,141)(5,256)¥ (885)–
192,319
179,367¥ 12,952¥ 123,504¥ 9,641¥16,635¥149,780¥ 79,751¥ 229,531

4,524

304

339

5,167

122

5,289

–
4,528

–
271

325
456

325
5,255

200
25

525
5,280

Consolidated

29

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

19. Segment Information (continued)
Business Segments (continued)
Millions of yen
Year ended March 31, 2008

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

Steel sheet
products

Electric
furnaceproducts

Other

Total

Eliminations andgeneralcorporate
assets¥ 187,191¥ 12,630¥ 7,577¥ 207,398¥–¥ 207,398

1
187,192
176,998¥ 10,194–
12,63011,990¥ 640

5,818
13,395
12,070¥ 1,325

5,819
213,217
201,058¥ 12,159(5,819)(5,819)(4,916)¥ (903)–
207,398
196,142¥ 11,256¥ 115,778¥ 15,937¥ 18,821¥ 150,536¥ 56,324¥ 206,860

5,047

436

404

5,887

114

6,001

–
1,731

–
312

6
755

6
2,798

–
203

6
3,001

Eliminations andgeneralcorporate
assetsConsolidated–$ 2,070,047

Consolidated

Thousands of U.S. dollars
Year ended March 31, 2008

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

Steel sheet
products

Electric
furnaceproducts

Other$1,868,360$126,061$ 75,626$2,070,047 $10
1,868,370
1,766,623$ 101,747–
126,061
119,673$ 6,388

58,070133,696
120,471$ 13,225

58,080(58,080)–
2,128,127(58,080) 2,070,047
2,006,767(49,067) 1,957,700$ 121,360 $ (9,013) $ 112,347$1,155,584$159,068$187,853$1,502,505 $ 562,172

50,374

4,352

4,032

58,7581,138

59,896–
17,277

–
3,114

60
7,536

60
27,927–2,026

60
29,953

Total$2,064,677

30

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

19. Segment Information (continued)
As described in Note 2, in accordance with the 2007 revision of the Corporation Tax Law,effective the year ended March 31, 2008, the method of accounting for depreciation of
tangible fixed assets acquired on or after April 1, 2007 has been changed to the procedure
stipulated in the revised law. As a result, operating expenses in the Steel sheet products
segment, the Electric furnace products segment and the Other segment for the year ended
March 31, 2008 increased by ¥39 million ($389 thousand), ¥8 million ($80 thousand) and¥4 million ($40 thousand), respectively, and operating income decreased by the sameamounts from the corresponding amounts which would have been recorded under the
method applied in the previous year.
In addition, effective the year ended March 31, 2008, tangible fixed assets acquired on or
prior to March 31, 2007 are to be depreciated based on the difference between theequivalent of 5% of acquisition cost and memorandum value over a period of 5 years once
they have been fully depreciated to the limits of their respective depreciable amounts. As
a result, operating expenses in the Steel sheet products segment, the Electric furnace
products segment and the Other segment for the year ended March 31, 2008 increased by¥433 million ($4,322 thousand), ¥87 million ($868 thousand) and ¥29 million ($289
thousand), respectively, and operating income decreased by the same amounts from thecorresponding amounts which would have been recorded under the method applied in theprevious year.
Geographical Segments

Japan
I. Sales and operating
income:Sales to third parties
Intersegment sales
and transfers
Net sales
Operating expenses
Operating income
II. Total assets

Millions of yen
Year ended March 31, 2007
Eliminations
and general
corporate
assetsAsia
Total
Consolidated¥ 124,692¥67,627¥192,319¥–¥192,319

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

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

31

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

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

I. Sales and operating
income:Sales to third parties
Intersegment sales
and transfers
Net sales
Operating expenses
Operating income
II. Total assets

I. Sales and operating
income:Sales to third
partiesIntersegment sales
and transfers
Net sales
Operating expenses
Operating income
II. Total assets

Japan

Millions of yen
Year ended March 31, 2008
Eliminations
and general
corporate
assetsAsia
Total
Consolidated¥131,775¥ 75,623¥207,398

16
131,791
122,766¥ 9,025–75,62372,490¥ 3,133¥126,253¥ 33,930

Japan

Thousands of U.S. dollars
Year ended March 31, 2008
Eliminations
and general
corporate
assetsAsia
Total
Consolidated¥–¥ 207,398

16
207,414
195,256¥ 12,158

¥

(16)
(16)
886
(902)

–
207,398
196,142¥ 11,256¥160,183¥ 46,677¥ 206,860$1,315,251$754,796$2,070,047$–$2,070,047

160
1,315,411
1,225,332$ 90,079–
754,796
723,525$ 31,271

160
2,070,207
1,948,857$ 121,350

(160)
(160)
8,843
$ (9,003)–
2,070,047
1,957,700$ 112,347$1,260,136$338,656$1,598,792$465,885$2,064,677

The principal country in the Asia segment is Taiwan.
As described in Note 2, in accordance with the 2007 revision of the Corporation Tax Law,effective the year ended March 31, 2008, the method of accounting for depreciation of
tangible fixed assets acquired on or after April 1, 2007 has been changed to the procedure
stipulated in the revised law. As a result, operating expenses in the Japan segment for theyear ended March 31, 2008 increased by ¥51 million ($509 thousand) and operating income
decreased by the same amount from the corresponding amounts which would have beenrecorded under the method applied in the previous year.

32

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

19. Segment Information (continued)
Geographical Segments (continued)
In addition, effective the year ended March 31, 2008, tangible fixed assets acquired on or
prior to March 31, 2007 are to be depreciated based on the difference between theequivalent of 5% of acquisition cost and memorandum value over a period of 5 years once
they have been fully depreciated to the limits of their respective depreciable amounts. As
a result, operating expenses in the Japan segment for the year ended March 31, 2008
increased by ¥548 million ($5,470 thousand) and operating income decreased by the sameamount from the corresponding amounts which would have been recorded under the
method applied in the previous year.

Overseas Sales
Overseas sales, which include export sales of the Company and its domestic consolidated
subsidiaries and sales (other than exports to Japan) of the overseas consolidated subsidiary,
for the years ended March 31, 2007 and 2008 are summarized as follows:

Asia
Overseas sales
Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales¥ 20,267¥ 9,822¥ 78,978192,319

25.4%

10.5%

5.1%

41.0%

Millions of yen
Year ended March 31, 2008
Other
Total

¥ 56,812¥ 32,938¥ 89,750
207,398

27.4%

15.9%

43.3%

Asia
Overseas sales
Consolidated net sales

Total¥ 48,889

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

Millions of yen
Year ended March 31, 2007
North
Other
America$567,043

Thousands of U.S. dollars
Year ended March 31, 2008
Other
Total
$ 328,755$ 895,798
2,070,047

For the year ended March 31, 2008, overseas sales in the North America area were includedin those in the Other area as overseas sales in the North America area as a percentage ofconsolidated net sales was less than 10%. Overseas sales in the North America area forthe year ended March 31, 2008 were ¥13,959 million ($139,325 thousand).
33

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

20. Subsequent Event
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, 2008, was approved at a meeting of the Board of Directors held on May 15, 2008:

Cash dividends of ¥11 ($0.11) per share

Millions of yen

Thousands of U.S. dollars¥ 1,835$ 18,31534