Financial Report 2013
Fiscal year ended March 31, 2013

YAMADA DENKI CO., LTD.
1-1, Sakae-cho, Takasaki-shi,
Gunma 370-0841 JapanTABLE OF CONTENTSOVERVIEW OF OPERATIONS .................................................................................................................................... 1
1. KEY INFORMATION ............................................................................................................................................ 1
2. OVERVIEW OF PERFORMANCE ...................................................................................................................... 2
3. SALES PERFORMANCE ...................................................................................................................................... 4
4. ISSUES TO BE ADDRESSED BY THE GROUP................................................................................................. 5
5. RISK FACTORS...................................................................................................................................................... 6
6. IMPORTANT AGREEMENTS............................................................................................................................ 10
7. RESEARCH AND DEVELOPMENT.................................................................................................................. 10
8. ANALYSIS OF FINANCIAL POSITION, RESULTS OF OPERATIONS AND CASH FLOWS .................. 10
9. CORPORATE GOVERNANCE .......................................................................................................................... 13
CONSOLIDATED BALANCE SHEETS ..................................................................................................................... 16
CONSOLIDATED STATEMENTS OF INCOME ...................................................................................................... 18
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME .................................................................. 19
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS...................................................................... 20
CONSOLIDATED STATEMENTS OF CASH FLOWS............................................................................................. 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................................................................................. 23
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS ................................................. 23
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .......................................................................... 23
3. CHANGE IN ACCOUNTING POLICIES .......................................................................................................... 28
4. CHANGE IN METHOD OF PRESENTATION ................................................................................................. 28
5. BUSINESS COMBINATIONS ............................................................................................................................. 29
6. CASH AND CASH EQUIVALENTS ................................................................................................................... 32
7. SUPPLEMENTAL CASH FLOW INFORMATION.......................................................................................... 32
8. FINANCIAL INSTRUMENTS............................................................................................................................. 33
9. SECURITIES INFORMATION........................................................................................................................... 39
10. DERIVATIVE FINANCIAL INSTRUMENTS ................................................................................................... 41
11. ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT................................................... 42
12. IMPAIRMENT LOSS ........................................................................................................................................... 42
13. LEASE INFORMATION...................................................................................................................................... 43
14. SHORT-TERM AND LONG-TERM DEBTS ..................................................................................................... 43
15. CONVERTIBLE BOND-TYPE BONDS WITH SUBSCRIPTION RIGHTS TO SHARES........................... 45
16. INCOME TAXES .................................................................................................................................................. 46
17. CONTINGENT LIABILITIES ............................................................................................................................ 48
18. RETIREMENT BENEFITS ................................................................................................................................. 48
19. ASSET RETIREMENT OBLIGATIONS............................................................................................................ 49
20. NET ASSETS ......................................................................................................................................................... 50
21. STOCK OPTIONS ................................................................................................................................................ 51
22. COST OF SALES .................................................................................................................................................. 51
23. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........................................................................ 51
24. OTHER INCOME (EXPENSES)......................................................................................................................... 52
25. OTHER COMPREHENSIVE INCOME............................................................................................................. 53
26. SEGMENT INFORMATION ............................................................................................................................... 53
27. RELATED PARTIES ............................................................................................................................................ 55
28. SUBSEQUENT EVENTS ..................................................................................................................................... 56
INDEPENDENT AUDITORS’ REPORT ..................................................................................................................... 60

OVERVIEW OF OPERATIONS
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
March 31, 2013
1. KEY INFORMATION
Thousands
ofU.S. dollars,
unlessotherwise
noted(Note 3)

Millions of yen, unless otherwise noted
As of and year ended March 31

2009

Net sales (Note 1) ················ 1,871,828

2010

2011

2012

2013

2013

2,016,140

2,153,259

1,835,454

1,701,489

18,091,324

Ordinary income ···············

64,605

101,587

137,848

102,226

47,906509,369

Net income ·······················

33,20755,94770,75558,26522,204

236,083

Comprehensive income ····--

71,19258,305

21,240225,842

Net assets ··························

356,452

406,381

470,850

526,743555,391

5,905,275

Total assets ·······················

778,489

899,613929,010

937,841

1,138,389

12,104,085

Net assets per share(yen)······························

3,757.06

4,297.29

4,978.38

5,516.15

5,653.36

60.11(dollars)

Net income per share(yen)······························

353.32594.26751.03618.46235.682.51(dollars)

Diluted net income pershare (yen) (Note 2) ·····

352.47593.84---(dollars)

Equity ratio (%) ················

45.4

45.0

50.5

55.4

46.8

Return on equity (%) ········

9.8

14.8

16.2

11.8

4.2

Price earnings ratio(times)···························

10.92

11.61

7.47

8.36

18.22

Cash flows fromoperating activities ······

50,499133,718

93,072

34,259(12,789)(135,986)

Cash flows frominvesting activities ······(67,347)(108,218)(25,238)(38,063)(39,232)(417,145)

Cash flows fromfinancing activities ······

(307)

8,556

(45,941)(24,361)

47,174

501,594

47,95783,045

104,815

76,344

77,906828,349

11,127

12,28012,43914,006

21,261[9,986][10,294][10,775][10,762][11,410]

Cash and cash
equivalents at end ofyear ·····························
Employees (persons) ········[Average number of
temporary employees
not included in theabove number(persons)] ·······················

Notes: 1. Net sales did not include consumption tax.
2. Diluted net income per share for the fiscal years ended March 31, 2011, 2012 or 2013 is notpresented because the Company and its consolidated subsidiaries had no securities withdilutive effects.
3. For the convenience of readers outside Japan, U.S. dollar amounts have been converted fromyen using the prevailing exchange rate at March 29, 2013, which was ¥94.05 to U.S. $1.

1

2.

OVERVIEW OF PERFORMANCE

During the fiscal year under review, some positive signs had begun to be observed in the Japanese
economy since the December 2012 changeover in government, such as the sudden weakening of the yen,rallying of the stock market and a feeling of optimism toward economic recovery. Nevertheless, theeconomic situation remained uncertain as not only did it continue to be impacted by the protracted
slowdown in the global economy and partial slowdown in the emerging markets, but it also experienced
repercussions from the end of various economic measures and the lack of any clearly decided restoration
policy following the Great East Japan Earthquake.
The consumer electrical appliance retail industry continued to experience a slowdown, heavily
affected by sales decreases resulting from previous demands brought forth by the “Eco-points” program(i.e., the Japanese government’s economic stimulus program to encourage consumers’ purchases ofenergy-saving electrical appliances) and the digitalization of televisions. The market environment
continued to present the harshest conditions in this industry’s history, leading to further acceleration in
movement toward industry restructuring in a fight for survival.
Operating in these circumstances, Yamada Denki Co., Ltd. (the “Company”) and its significant
consolidated subsidiaries (together with the Company, the “Group”) led the industry in utilizing the storesand service network owned by the Group to strengthen coordination with its subsidiaries, SxL
Corporation and Housetec Holdings Inc. By such means, as a leading company in the consumer
electrical appliance retail industry, the Group expanded into new markets by taking a flexible,
comprehensive approach that manufacturers are unable to provide in offering proactive smart houseproposals.
However, the harsh market environment and fierce competitive circumstances of the consumer
electrical appliance retail industry are expected to continue. Keeping in mind that the Group’s capability
must be dramatically improved in order to further strengthen its competitiveness, the Company
subscribed to a private placement of new shares by Best Denki Co., Ltd. ( “Best Denki”) on July 13, 2012,
and announced a capital and business alliance with Best Denki. After receiving a notice from the Japan
Fair Trade Commission on December 10, 2012 that it would not issue a cease and desist order under the
Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, the Company completed
the purchase of shares on December 13, 2012, making Best Denki a consolidated subsidiary. Since
March 1, 2013, integration of the two companies has been taking place to merge sales channels, logistics,
business systems and sales promotion so as to gain greater efficiency.
It is expected that combining the Company’s various infrastructures and operational know-how withBest Denki’s community-based store developments centering on the Kyushu region and know-how on
personnel trainings, which have been developed over many years, will result in a quantum leap in termsof advantages gained from having a large business scale for the entire Group, including Best Denki.
Such combination is also expected to result in the realization of store developments that give fullconsideration to the two companies’ common area strategies in Japan and overseas, as well as a more
efficient infrastructure and network. With this move, the Company aims to improve its competitivenessand management efficiency across the Group while at the same time improving customer satisfaction andcorporate value.
In an effort to improve customer service, the Group has started matching internet prices at stores andproviding same-day delivery service for customers that purchase items on the internet. Under suchdelivery service, the purchased item is delivered by the Company employee from a store located near thecustomer (see advertising pamphlets (Japanese only) for additional details). Through such effort, theGroup is enhancing customer satisfaction through the utilization of its nationwide store network andservice network and differentiating its services from its competitors.
From a product perspective, the market continued to experience a slowdown, heavily affected bysales decreases resulting from previous demands brought forth by the “Eco-points” program and thedigitalization of televisions. Although sales were solid for energy-saving white goods, such as
refrigerators and air conditioners, as well as smart phones and tablet devices, there was a big slump in the2market for visual-related products such as televisions and recorders. The PC market was also sluggish
over the entire year despite a partial revitalization from the launch of Windows 8.
Characteristics of the Group is that it pursues the breadth, depth and possibilities of its field of
business centering on the retail sale of electrical appliances and generates profit through the proactive
operation of solution businesses such as involving services, the internet, point system, corporate matters,
information systems, logistics, smart house proposals and the environment. Approximately 40% of theGroup’s ordinary income was derived from these solution businesses in the fiscal year under review.
As a leading company in the consumer electrical appliance retail industry, the Group initiates genuine
CSR activities. Specifically, the Group is working proactively to hold various events that utilize an
event space named “LABI GATE” (two locations nationwide), which is each attached to an urban retailstore named “LABI”, and to make a contribution to local communities through various economic, culturaland sporting activities.
Details of the Group’s CSR activities are continuously published in its CSR report and a publication
called the “Monthly CSR Activities”, which is posted on the Company website(http://www.yamada-denki.jp/csr/index.html). It is noted that these documents are published inJapanese only.
With regard to store development, the Group proactively pursues store openings and/or closing ofstores in line with its scrap-and-build policy. The number of consolidated retail stores at the end of the
fiscal year under review was 972 (comprising 595 stores directly managed by the Company and 377
stores operated by its consolidated subsidiaries). The total number of stores of the Group, including
stores managed by non-consolidated subsidiaries and franchise stores, was 4,421.
As a result of the above, consolidated net sales decreased 7.3% year on year to ¥1,701,489 million,
operating income decreased 61.9% to ¥33,931 million and net income decreased 61.9% to ¥22,204
million.
The Group has been primarily engaged in the sales of home electrical appliances and home
information appliances, which constitute a single segment. Therefore, disclosures related to segment
information have been omitted.

3

3.
(1)

SALES PERFORMANCE
Sales Results

The Group has been primarily engaged in the sales of home electrical appliances and home
information appliances, which constitute a single segment. Therefore, the table below shows the sales
amount by item.
Year ended March 31, 2013
Items

%

Year-on-yearcomparison(%)

116,609
66,63538,774
120,041
89,65872,170109,516
39,565
323,763976,731

6.9
3.9
2.3
7.1
5.3
4.2
6.4
2.3
19.0
57.4

(56.6)(41.5)
(7.4)
7.6
4.7
1.1
4.2
4.4
(0.7)
(16.0)

205,331
112,621
11,169
7,711
124,566
50,025
511,423

12.1
6.6
0.7
0.5
7.3
2.9
30.1

(6.7)
(1.4)
1.9
(5.4)
3.9
(3.4)
(2.6)

95,837
81,73635,762
213,335
1,701,489

5.6
4.8
2.1
12.5
100.0

(0.2)
439.5
(3.6)
43.8
(7.3)

Amount(Millions of yen)Home electrical appliances
Color televisions
Video/DVD players
Audio equipment
Refrigerators
Washing machines
Cooking appliances
Air conditioners
Other home cooling and heating equipment
OthersHome information appliances
Personal computers
PC peripheral equipment
PC software
Telephones/fax machines
Mobile phones
OthersOther products
Audio and visual software and books
Housing-related products
Others

Notes: 1. “Others” in “Home electrical appliances” includes luminaries, hairdressing and beauty supplies
and tapes.
“Others” in “Home information appliances” includes ink cartridges. “Others” in“Other products” includes jewelry, clothing and sundries.
2. The figures shown above do not include consumption tax.

4

(2)

Sales per Unit
Year ended March 31, 2013
Year-on-year
Amountcomparison (%)
1,701,489(7.3)
2,269,20113.5
750(18.3)
32,40230.6
53(29.0)Net sales - millions of yen
Sales floor space (average) - m²
Sales per square meter - thousands of yen
Employees (average) - persons
Sales per employee - millions of yen

Notes: 1. “Sales floor space” is the store area based on the Act on the Measures by Large-Scale RetailStores for Preservation of Living Environment (or, depending on when the data was submitted,
the same law prior to its revision).
2. The figures shown above do not include consumption tax.
3. “Employees” includes temporary employees.
4. ISSUES TO BE ADDRESSED BY THE GROUP
Concerning the outlook for the market environment surrounding the Group, although there continues
to be firm demands for white goods, especially energy-saving electrical appliances, the Company expects
difficult circumstances to continue, particularly considering the impact of previous demands brought forth
by various measures centered on visual-related products.
To compete successfully in such a market environment, the Group will continue to utilize its
nationwide service network to strengthen coordination with subsidiaries, SxL Corporation (the name ofthis company was changed to YAMADA SXL HOME CO., LTD. on June 1, 2013) and Housetec
Holdings Inc. (this company was combined with Housetec Inc. on June 1, 2013), and introduce the “Total
Smarnity Life Corner” booths to around 190 major stores. While targeting a wide range of customer
needs, such as a new house construction, renovations (from small to large) and sale of land, the Groupwill further expand into new markets as a leading company by taking a flexible, comprehensive approach
in offering proactive smart house proposals.
Despite the absence of concrete numerical targets for saving electricity during the summer of 2013,
the problem of electric power supply from a medium- to long-term perspective is an issue of considerable
importance in Japan. For this reason, the Group will actively propose the use of energy-saving electricalappliances with the view that such work is part of its mission as a distributor. The Group will also workto achieve market expansion through concerted efforts to expand sales of products such as smart phones
and tablet devices.
While creating a differentiation between the Group and its competitors through active developmentof various solution businesses, which will involve proactive efforts to develop internet-related businesses,
the Group will utilize its store network for carrying out various measures to achieve true customer
satisfaction.
With respect to store development, the Group will actively open stores in areas where it has yet tohave a presence in proportion to the market size. The Group also will aim to further enhance its service
network to respond to all customer needs through the development of a nationwide chain with potentials
that are unrivalled anywhere else in the world.
By actively carrying out these management measures, the Group will rise to the challenges of
discovering new potentials and developing new markets for the consumer electrical appliance retailindustry while also placing utmost attention to low-cost operations, improving cash flows, enhancing
profitability and strengthening its management culture.

5

5.

RISK FACTORSOf the items relating to the status of the business and accounting as described in the Annual
Securities Report, those that may materially affect the decisions of investors are provided below.
Items in the text below that concern the future were determined by the Group as of the end of the
fiscal year under review.
(1)

Expansion of the Interstore Network

The Group currently has stores in all the 47 prefectures of Japan as well as overseas. The Group
continues to plan retail store openings overseas, in addition to the continued development of a nationwide
chain of stores, appropriate to the size of the Japanese market, in urban centers, suburbs, small-scaletrading areas and community-based retail areas. However, in order to engage in such extreme expansion
efforts, the Group will have to secure for itself adequately priced land in favorable locations, which will
make it susceptible to competition from competitor companies. The Group expects competition fromcompetitors in areas where its stores have been already established to be fierce. The Group also expects
labor outlays and equipment costs to increase in connection with an increase in the number of new storesand the expansion of retail floor space and territories. It is also possible that the profitability of existing
stores will be affected by new store openings depending on the region, due to saturated markets andconditions of the area in which such stores are opened. In addition, there is a possibility that stores thatare closed due to a revision of the store development policy may not be subleased or sold off. The
Group will generally weigh conditions such as rent expenses and guarantee deposits for store openings, aswell as competition, trading area population and various laws and regulations in order to make carefully
thought-out decisions. However, there is always the possibility that changes or delays could occur in theplanning due to issues relating to real property. Conditions such as those described above may obstructeffective store development efforts and ultimately have a negative impact on the Group’s performanceand financial position. Another consideration is the large amounts of capital necessary for expanding
stores. At present, it is covered by retained earnings and loans. However, any circumstance thatthwarts capital procurement efforts could block the execution of business plans in the future.
(2)

Competition

The consumer electrical appliance retail industry exists in an environment of fierce competition.
The Group is faced with competitor companies in the form of not only large-scale consumer electronics
retailers but also all businesses that handle household electronics including supermarkets, home centersand various mail-order companies, such as internet shopping companies and the like. Although theGroup recognizes its leading position in the industry, it is confronted with various forms of competition
such as with respect to pricing, new store openings and customer and human resource acquisition. Until
now, the Group has concentrated its store openings in suburban areas. However, it has been recently
opening stores in large cities. As a result, competition from other companies whose store development
policy is urban-centric is expected to intensify. The Group believes that there is a possibility ofaggravated competition due to the appearance of new companies on the market, as well as intensifiedcompetition in the area of purchasing as a result of M&As and alliances between companies vying tocompete against the Group. If, for instance, the Group is not able to successfully adapt to such situations,its performance and financial position would most likely suffer. It is also likely that the slashing of saleprices due to the need to compete against other companies, which have started offering products at prices
lower than the Group, would result in decreased profits, further worsening the Group’s performance andfinancial position.
(3)

Risks Related to M&As and Alliances

The Company may execute organizational restructurings, M&As, alliances and sales of business inorder to strengthen its business foundation. The Company will carefully study and examine theconditions before acting in order to alleviate risk. However, contingency liabilities may arise after suchactions take place or due to other unforeseeable issues. The Company also believes t that initial6expectations may not materialize or that investments may not be recovered. Depending on thecircumstances, extraordinary loss or extraordinary income may occur, detrimentally affecting theperformance and financial position of the Group.
(4)

Regulations

Similarly to other retailers, the Group is subject to laws and regulations such as the “Act on the
Measures by Large-Scale Retail Stores for Preservation of Living Environment”, the “Designation ofSpecific Unfair Trade Practices by Large-Scale Retailers Relating to Trade with Suppliers” based on the“Act on Prohibition of Private Monopolization and Maintenance of Fair Trade” (Antimonopoly Act), the“Act against Unjustifiable Premiums and Misleading Representations” (Premiums Law), the “Act against
Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors” (Subcontract Act) and the “Act on
Recycling of Specified Kinds of Home Appliances” (Home Appliance Recycling Act), as applicable.
Newly established laws and/or regulations, revisions to existing rules or stricter interpretations of laws
and regulations by the regulatory authorities may lead to a decrease in demand for the products andservices offered by the Group or an increase in the cost of doing business, thus, negatively affecting theperformance and financial position of the Group.
In relation to the opening of new stores with store area exceeding 1,000 square meters, or the
expansion of existing stores beyond such size, local governments enact and enforce regulations inaccordance with the provisions on store openings under the Act on the Measures by Large-Scale RetailStores for Preservation of Living Environment so as to preserve the living environment of the surrounding
region. The Group is aware that its new store openings and expansion of existing stores are subject toregulations based on such Act and will observe such Act for the consideration of the living environmentof the surrounding region and the like. Depending on the time required for surveys under such Act,
delays or the like in the opening of new stores or the expansion planning for existing stores may affect thestore opening policy of the Group.
Transactions between large-scale retailers and suppliers are subject to regulations based on the
Designation of Specific Unfair Trade Practices by Large-Scale Retailers Relating to Trade with Suppliers,and being a large-scale retailer, the Group is subject to such regulations. The Group will observe such
regulations. It is noted that such regulations may affect conventional trading practices as well as theoperating results of the Group.
Furthermore, increased restrictions under the Construction Business Act, the Building Standards Act,
the Building Lots and Buildings Transaction Business Act and/or other related laws and regulations
applicable to the Group’s housing business may negatively affect the performance of the Group.
(5)

Economic Trends

The Group is dependent on the Japanese market for most of its sales, and domestic consumer trends
impact its performance. Various revisions in laws and regulations or changes in domestic and/or
overseas economic factors, such as interest rates, fuel prices, the number of housing projects started,
unemployment figures, increases in tax rates, changes in exchange rates or stock prices, a slowdown in
the global economy or partial slowdown in emerging markets, may not only push up the cost of sales andbusiness expenses but also reduce disposable incomes and drive down the demands for the Group’s
products. Regarding the Japanese economy, the massive damage caused by the Great East Japan
Earthquake is still significant and progress of recovery efforts remains slow. Furthermore, serious,
nationwide power crunch resulting from the Fukushima Daiichi Nuclear Power Plant incident is having alarge impact primarily on corporate activities but also on personal consumption. The consumer
electrical appliance retail industry has felt the effects of previous demands brought forth by the“Eco-points” program for electrical appliances, which ended on March 31, 2011, and the universal switch
to digital televisions on July 24, 2011, and the consequent lulls in demand in reaction to the above. As aresult, the slump in the market has continued. The fall in disposable incomes and consumer spending inJapan may result in lowering the prices especially of high-priced, high-function electric appliances, which
are some of the products handled by the Group. Under current conditions, with the Europe’s debt

7

problems continuing, economic prospects are clouded with uncertainty, particularly in the financial
markets. In view of these factors, there is absolutely no guarantee that the Japanese economy willcontinue growing, or stop receding. The Group’s business, performance and financial position may be
negatively affected by the decrease in domestic consumer spending.
Furthermore, the Group’s housing business is strongly affected by employment conditions, trends inland prices and interest rates, and trends in personal consumption driven by policies relating to housing
and the housing tax system. Depending on such conditions or trends, the performance of the Group may
be negatively affected, particularly if there is a substantial decline in orders for houses resulting from an
unforeseen deterioration in the market climate.
(6)

Demand Associated with Seasonal and Weather Factors or Events, etc.

As with other retailers, sales and revenue fluctuate monthly. Generally, the Group sees increases
during the bonus season, at the end of the fiscal year and during months with many holidays. There arealso increases when sales of seasonal products fare well. Meanwhile, sales of air conditioners, heaters,
drying machines or the like fluctuate greatly with the weather. Sales are known to drop during coolsummers, warm winters and dry rainy seasons. Also, there are products, such as televisions and the like,that tend to go up whenever there is a special event such as the Olympics or the World Cup. Sadly, it isdifficult to accurately predict irregular demands springing up due to seasonal changes, weather conditions
or other events, not to mention demand for the Group’s products in general. Any significant deviationfrom such predictions may negatively impact the Group’s business, performance and financial position.
(7)

Changes in Consumer Wants and Preferences

In order to maintain and increase the Group’s net sales and income, it is necessary to predict which
products consumers will want or prefer and make sure that sufficient quantities of such products are instock to meet consumer needs. It is considered important to spur demand by regularly introducing new
products and technologies to consumers. If these activities fail to bare fruit, the Group’s performanceand financial position may be negatively affected. Such failure can be caused by a lack of a certain
products due to competition from other retailers, change in the Group’s relationship with manufacturers or
the new product or technology on which a manufacturer is focusing being inconsistent with consumer
needs. Also, the introduction of a new product may result in a decrease in the sales of existing products.
(8)

Product Purchasing

To have favorable Group performance, it is essential to always have in place a system under which
the necessary products are purchased in necessary quantities at appropriate prices. Unfortunately, if
maintaining regular product supplies becomes difficult due to, among other matters, a change in therelationship with business partners or fragmentation in the distribution network caused by a natural
disaster or a traffic accident, product purchasing according to a preconceived plan may become unfeasible.
Such circumstances may negatively affect the Group’s performance and financial position.
(9)

Risks Regarding Quality Assurance for Housing

The Group thoroughly manages the quality of housing with unique, high-quality techniques it hasdeveloped as producer of housing. Even so, the performance and financial position of the Group may be
negatively affected if a serious issue with quality arises due to unforeseen circumstances.
(10) Impairment on Long-Lived Assets
The Group possesses a large number of long-lived assets, including property and equipment andgoodwill, and carries out impairment accounting regarding these assets. However, further recognition of
impairment losses may become necessary if there is deterioration in the profitability of the Group’s stores,
a dramatic fall in the market price of the assets possessed by the Group or the like. Such circumstances
may negatively affect the Group’s performance and financial position.

8

(11) Managing Franchises
The Group is increasing the number of franchises managed as small, community-based retail stores.
However, it cannot guarantee that it will be able to continually open franchises in favorable locations orrenew existing franchise agreements. If the number of franchises does not increase as planned or
decreases, royalties may decline, which will negatively affect the Group’s performance and financial
position. Also, because franchises are not completely under the control of the Group, they may be
managed in a manner that is inconsistent with the Group standards. This may not only negatively affect
the Group’s performance and financial position, but also its reputation.
(12) Handling Personal and Other Secret Information
The Group handles a significant amount of customers’ personal information in relation to, among
other matters, point card certificates, registrations for the Group’s service for 24-hour shopping throughmobile phones, the processing of credit card applications and paid service subscription of several
long-term product warranties. Such information is handled by an internal control system under whichawareness with respect to information management is heightened and ample caution is taken to prevent
leaks. Any such leaks may damage the reputation of the Group and negatively affect its performanceand financial position.
(13) Natural Disasters
In cases where the Group’s operations are interrupted by damages to its store facilities or blackouts asa result of natural disasters from typhoons or earthquakes, products cannot be procured due to an
obstruction, the Group is required to close stores in accordance with evacuation advice due to the effectsof radioactive materials from an accident at a nuclear power station or operations at the Group’s stores are
partially impeded due to the occurrence of a disaster from an infectious disease, such as a new strain of
influenza or the like, there may be a significant decrease in the Group’s sales, which may in turn have asignificant impact on the Group’s performance.

9

6.

IMPORTANT AGREEMENTS

Credit Sales Franchise Agreements
The Company has executed franchise agreements with consumer credit companies regarding credit
sales. Under such agreements, consumer credit companies conduct credit checks on the customers of theCompany and, based on the results of such checks, such companies pay the Company the amount owed
by the approved customers for purchases in lieu of such customers. The consumer credit companies
then becomes responsible for collecting such advances from such customers. Major agreements are as
follows.
Name of consumer credit
company

Execution date

Contract period

JCB Co., Ltd.

April 2005

Upon request for cancellation by one of theparties with three months advanced notice

Orient Corporation

November 1991

Same as above

Mitsubishi UFJ NICOS Co., Ltd.

August 1990

Same as above

UC Card Co., Ltd.

July 1990

Same as above

7. RESEARCH AND DEVELOPMENT
Since the amount of research and development activities is minimal, R&D disclosures have been
omitted. There has been no material change in the research and development activities of the Group in
the fiscal year under review.

8. ANALYSIS OF FINANCIAL POSITION, RESULTS OF OPERATIONS AND CASH FLOWS
Items in the text below that concern the future were determined by the Group as of the end of the
fiscal year under review.
(1)

Important Accounting Policies and Estimates

The consolidated financial statements of the Group have been prepared based on the generally
accepted accounting standards of Japan.
In their preparation, important accounting policies that were applied are as stated in Note 2 to theconsolidated financial statements, entitled the “SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES”.
When calculating provisions and valuating assets or the like, the Group makes estimates andjudgments based on various factors considered reasonable given the past results and conditions ofapplicable transactions, and results of such estimates/judgments are reflected in the preparation of theconsolidated financial statements.
(2)

Analysis of Financial Position

Total assets at the end of the fiscal year under review amounted to ¥1,138,389 million, up ¥200,548
million (21.4%) from the end of the previous fiscal year. This was mainly due to increases in accounts
receivable, merchandise and finished goods resulting from an increase in the number of consolidated
subsidiaries, in addition to an increase in buildings and structures resulting from an increase in thenumber of new stores.

10

Total liabilities amounted to ¥582,998 million, up ¥171,900 million (41.8%) from the end of theprevious fiscal year. This was mainly due to an increase in loans payable.
Net assets amounted to ¥555,391 million, up ¥28,648 million (5.4%) from the end of the previous
fiscal year, mainly reflecting an increase in retained earnings and the like. As a result, the equity ratio
was 46.8% (down 8.6 point compared with the end of the previous fiscal year).
(3)

Analysis of Operating Results(i)

Net sales and gross profit

Net sales during the fiscal year under review decreased ¥133,965 million (7.3%) to ¥1,701,489
million compared with the previous fiscal year.
This decrease was a result of a considerable slump in the electrical appliance market. Such market
continued to experience a slowdown, heavily affected by decrease in sales resulting from previous
demands brought forth by the “Eco-points” program and the digitalization of televisions. Although sales
were solid for energy-saving white goods, such as refrigerators and air conditioners, as well as smart
phones and tablet devices, there was a big slump in the market for visual-related products, such as
televisions and recorders. The PC market was also sluggish over the entire year despite a partial
revitalization from the launch of Windows 8.
Reflecting the decline in net sales, gross profit decreased 9.8% compared with the previous fiscal
year to ¥418,520 million.
(ii)

Selling, general and administrative expenses, other income (expenses) and income before
income taxes and minority interests

Selling, general and administrative expenses for the fiscal year under review increased ¥9,717
million (2.6%) to ¥384,589 million compared with the previous fiscal year. Despite expenses associatedwith consolidating Housetec Holdings Inc. and Best Denki, as well as increases in various expenses inline with new store openings, such as personnel and rent costs, the year-on-year increase in total selling,
general and administrative expenses was kept at a low level, thanks to the continued implementation ofmoney-saving measures and scrupulous efforts to control point-related costs. Operating income
decreased ¥55,048 million (61.9%) to ¥33,931 million compared with the previous fiscal year.
Other income for the fiscal year under review was ¥12,234 million compared to other income of¥11,658 million in the previous fiscal year. This increase was mainly due to increases in both income
and expenses associated with consolidating Housetec Holdings Inc. and Best Denki, gain on negative
goodwill associated with consolidating Best Denki, loss on valuation of investments in non-consolidated
subsidiaries and affiliated companies and the provision of allowance for doubtful accounts.
As a result of the above, income before income taxes and minority interests decreased ¥54,472
million (54.1%) to ¥46,165 million compared with the previous fiscal year.

(iii)

Income taxes-current, income taxes-deferred, income before minority interests, minority
interests in loss and net income

The amount of income taxes during the fiscal year under review was ¥25,238 million, income before
minority interests was ¥20,927 million and minority interests in loss amounted to ¥1,277 million.
As a result of the above, net income decreased ¥36,061 million (61.9%) to ¥22,204 million comparedwith the previous fiscal year.

11

(4)

Cash Flows

As of the end of the fiscal year under review, cash and cash equivalents on a consolidated basis stoodat ¥77,906 million, up ¥1,562 million (2.0%), including an increase of ¥5,691 million due to newconsolidation compared with the end of the previous fiscal year.
Cash flows during the fiscal year under review were as follows.
Cash flows from operating activities
Net cash used in operating activities amounted to ¥12,789 million.
This was mainly due to increases in income taxes paid and inventories, despite an increase in notes
and accounts payable.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥39,232 million.
This was mainly due to purchases of property and equipment associated with store openings andpayments of loans receivable of subsidiaries and affiliated companies.
Cash flows from financing activities
Net cash provided by financing activities amounted to ¥47,174 million.
This was mainly due to proceeds from loans payable and an increase in loans payable, despite theredemption of bonds.

129. CORPORATE GOVERNANCE(1)

Corporate Governance Structures1)

Summary of corporate governance structures, reasons for adopting such structures and thestatus of internal control system development and operation

The Company has adopted the Audit & Supervisory Board system, and it conducts supervision andmonitoring of the execution of operations through its Board of Directors and the Audit & Supervisory
Board. Also, as part of the efforts to facilitate rapid responses to changes in the business environment,
the Company has adopted a corporate executive officer system that establishes a clear separation between
the execution of operations and the business decision-making and management oversight functions. The
senior executives who serve on management committees are the President & CEO and the Executive
Vice-President & COO (both with representative authority). Operating under these senior executives,
the executive officers concentrate on their execution of operations and assume responsibility for the
management of specified functions. The Company has established the CSR Committee, in addition to
the existing Compliance Committee and Internal Audit Office, to oversee the formulation of specific
CSR-related policies and standards covering areas such as business ethics and the like. The CSR
Committee conducts ongoing activities aimed at enhancing internal and external awareness of
CSR-related issues.
The Company adopted the above-described structures in order to implement concrete corporate
governance structures that would lead to the realization of the basic ideals of “improving managementtransparency, conducting fair corporate activities and continuing to maintain and increase corporate andshareholder value”.
The status of corporate governance structures and internal control systems of the Company are as
follows.
(i)

General Meeting of Shareholders

The General Meeting of Shareholders, the Company’s top decision-making body, provides animportant forum for shareholders, as owners of the Company, to obtain and exchange information as wellas to exercise their rights. The Company has an active IR program, and it is intent on disclosing
information in a timely manner to ensure its shareholders the opportunity to exercise their rights
appropriately. Because foreigners make up a large percentage of the shareholders, the Company strives
to figure out ways to meet their needs, in addition to preparing and delivering notices regarding theGeneral Meeting of Shareholders in English in a timely manner.
(ii)

Board of Directors

The Company’s Board of Directors, which comprises 16 directors, convenes meetings once a week.
Extraordinary Board meetings are also convened when necessary. The Company’s Board of Directors
reviews any important issues related to the Company’s business, discusses the status of the Company’s
performance and takes prompt action as required. Separately, directors and executive officers attend
weekly business strategy meetings at which senior management reviews the progress of executing
business strategies.
Please note that the Company has no external directors.
(iii)

Executive Committee

The Executive Committee convenes weekly, as a rule, to enable executive officers to report on the
progress of operations and take prompt action as required. In addition, all executive officers attend an
expanded Executive Committee meeting that is held once a month.

13

(iv)

Audit & Supervisory Board

The Company’s Audit & Supervisory Board system relies on one standing audit and supervisoryboard member and two non-standing (external) Audit and Supervisory Board members. These auditors
participate in the Board of Directors meetings and other important business meetings to monitor the
performance of duties. The Audit & Supervisory Board can work together with the Internal Audit Officeand the auditing firm in carrying out audits such as by exchanging information as necessary and the like.
The non-standing Audit and Supervisory Board member, or his or her designee, can be present atmeetings of the Board of Directors and other meeting where the execution of operations is discussed, atwhich such person may state his/her opinions or demand explanations.
(v)

Internal auditing

The Company has established the Internal Audit Office to strengthen its internal auditing functions.
Reporting directly to the President and employing four full-time staff, such office engages in the auditingof daily business activities, observation of inventory count or the like, internal checks and internal
auditing. Functioning in cooperation with the Audit & Supervisory Board members and the auditing
firm, such as by exchanging information as necessary and the like, such office provides an audit
perspective to ensure that the Company’s business activities are conducted properly and efficiently.
(vi)

Auditing firm
The Company’s independent auditor, KPMG AZSA LLC, audits its financial statements.

(vii) Number of directors and election rules
The Company’s Articles of Incorporation limit the maximum number of directors to 17. An
approval of resolution to elect directors requires a simple majority vote in favor at a General Meeting of
Shareholders attended by shareholders representing at least one-third of the total voting rights. Directors
may not be elected by cumulative voting.
(viii) Others
The Company contracts with a law firm for legal advice, as needed.
2)

Status of the development and operation of risk management structures
Regulations on risk of loss and other systems are as follows.

(i)With respect to risk management, the Company has established a Compliance Committee. Under
its direction, the compliance officers in each division work for thorough implementation of the risk
management system.

(ii)

To address risks that arise in the case of a major accident, disaster or other events, the Company has
prepared an “Emergency Response Manual”. The responsible director will set up an emergency
response center and promptly take action if a disaster or other untoward events occur.

(iii)

The Company has established the Internal Audit Office and In-house Legal Counseling Office,independent from its operating divisions, to audit the business processes of each division, discoversources of risk and prevent occurrence of such risk and improve business processes.

(2)

Status of Internal Auditing and Audits by Audit & Supervisory Board Members

The organizations of the Company’s internal auditing and the Audit & Supervisory Board members
and cooperation between the two are described in item (iv) (Audit & Supervisory Board) and item (v)(Internal auditing) under (1) Corporate Governance Structures.

14

(3)

External Directors and External Audit & Supervisory Board Members

The Company has two external Audit & Supervisory Board members. External Audit &Supervisory Board member Mr. Yutaka Nakamura concurrently serves as Senior Managing Director of
JIN CO., LTD. The Company has a trading relationship with JIN CO., LTD. related to productpurchasing and the like. Mr. Yutaka Nakamura has been elected as external Audit & Supervisory Board
member mainly based on his wealth of business management experience. External Audit & Supervisory
Board member Mr. Masamitsu Takahashi concurrently serves as Representative Partner of Hikari
Certified Public Tax Accountants Corporation. The Company does not have a personal relationship,
capital relationship, trading relationship or share any other interests with Hikari Certified Public Tax
Accountants Corporation. Mr. Masamitsu Takahashi has been elected as External Audit & Supervisory
Board member mainly based on his capacity as a tax accountant, which is valuable with respect to theCompany’s accounting system and internal auditing and will help ensure sound and appropriate ofdecision-making by the Board of Directors. The above-mentioned External Audit & Supervisory Board
members may be present at meetings of the Board of Directors and/or Audit & Supervisory Board andmay work with the Internal Audit Office and the accounting auditor in carrying out audits, during whichsuch members may state their opinions or demand explanations.
The Company has no external directors. The Company is strengthening the monitoring of its
Board of Directors, which has the functions of making decisions as management and managing andsupervising the execution of operations by executive officers, by having two of the three Audit &Supervisory Board members be external Audit & Supervisory Board members. In corporate governance,
it is important that management is monitored externally based on objectivity and impartiality. Based on
the Company’s current corporate governance structures, under which there are two external Audit &Supervisory Board members conducting audits, management of the Company is being effectively
monitored.
Although the Company has not established its own criteria or policies regarding the independence of
external directors and external Audit & Supervisory Board members to be applied when appointing such
persons, the Company refers to criteria established by other institutions, such as of the securities exchange
and the like, in assessing the independence of independent director/auditor considered for appointment.

15

CONSOLIDATED BALANCE SHEETS
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2013 and 2012

Millions of yen
2013
2012
ASSETS
Current assets:
Cash and time deposits (Notes 6 and 8) ··································
Notes and accounts receivable (Notes 8 and 17):
- Trade ···················································································- Non-consolidated subsidiaries and affiliated companies·····
Sub-total·········································································
Inventories (Note 14) ······························································
Deferred tax assets (Note 16)··················································
Other current assets (Notes 8 and 27) ·····································
Allowance for doubtful accounts ············································
Total current assets·························································
Property and equipment:
Buildings and structures, net (Notes 4, 11, 12, 14 and 19)······
Land (Notes 4, 12 and 14)·······················································
Lease assets, net (Notes 11, 12 and 13)···································
Others, net (Notes 11 and 12)··················································
Total property and equipment, net ·································
Intangible assets (Note 12)·····························································
Investments and other assets:
Investment securities (Notes 8 and 9) ·····································
Long-term loans receivable·····················································
Guarantee deposits (Notes 8 and 27)·······································
Deferred tax assets (Note 16)··················································
Other assets (Notes 4 and 12)··················································
Allowance for loss on investments in subsidiaries··················
Allowance for doubtful accounts ············································
Total investments and other assets ·································
Total assets·····················································································

16¥

79,522¥

77,145

Thousands of
U.S. dollars(Note 1)
2013$

845,531

66,305
1,294
67,599270,275
11,64353,893(657)
482,275

27,486
1,133
28,619190,045
13,74944,475(300)
353,733

704,995
13,763
718,758
2,873,733
123,793573,026(6,984)
5,127,857

223,303
179,583
3,360
25,455
431,701
43,078189,259
167,150
4,890
11,772373,071
34,5972,374,301
1,909,437
35,728
270,652
4,590,118
458,038

11,4498,719
123,123
10,80529,752(35)(2,478)181,335

15,84015,301
111,162
15,97819,378(41)(1,178)
176,440

121,735
92,7101,309,124
114,882
316,339(372)(26,346)
1,928,072

937,841$ 12,104,085¥ 1,138,389¥

CONSOLIDATED BALANCE SHEETS
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2013 and 2012
Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013
2012
LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable (Notes 8 and 27)·······················
Short-term loans payable (Notes 8 and 14) ···························
Current portion of bonds (Notes 8 and 15)····························
Lease obligations (Notes 13 and 14) ·····································
Income taxes payable (Note 8)··············································
Provision for bonuses····························································
Provision for directors’ bonuses ············································
Provision for point card certificates ······································
Provision for warranties for completed construction·············
Provision for loss on liquidation of subsidiaries ·················
Other current liabilities (Note 14) ·········································
Total current liabilities ·················································¥

Long-term liabilities:
Bonds (Notes 8 and 15)·························································
Long-term loans payable (Notes 8 and 14) ···························
Lease obligations (Notes 13 and 14) ·····································
Asset retirement obligations (Note 19) ·································
Provision for retirement benefits (Note 18)···························
Provision for directors’ retirement benefits ···························
Provision for product warranties ···········································
Provision for loss on interest repayments······························
Other long-term liabilities (Note 16)·····································
Total long-term liabilities·············································
Total liabilities ·············································································

109,214
113,835
1,988
1,639
6,106
144
21,332232
557
97,666
352,713¥65,58025,00070,064
2,973
6,282
5,057
136
21,482
233
72,422
269,229$

1,161,232
1,210,367
21,141
17,42664,923
1,535
226,8122,470
5,927
1,038,434
3,750,267

59,000102,794
2,374
12,733
19,411
3,463
13,517913
16,080230,285582,998

59,00035,3592,701
9,048
11,0873,363
14,378
6,933
141,869
411,098

627,326
1,092,974
25,240135,384
206,385
36,823
143,727
9,707
170,977
2,448,543
6,198,810

71,05970,977414,484

71,05970,977401,729755,543754,676
4,407,060(23,046)(23,046)(245,038)(721)(1,058)(7,666)(149)
2
22,785555,391

17
4
7,061
526,743(1,589)22
242,267
5,905,275

Contingent liabilities (Note 17)
Net assets (Note 20):
Common stock:
Authorized – 200,000,000 shares
Issued – 96,648,974 shares in 2013 and 2012·················
Capital surplus ······································································
Retained earnings··································································
Treasury stock, at cost – 2,438,797 shares in 2013 and2012··················································································
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities,
net of taxes (Note 9) ·························································
Deferred gains and losses on derivatives under hedge
accounting, net of taxes (Note 10) ····································
Foreign currency translation adjustments······························
Subscription rights to shares (Note 21) ········································
Minority interests ·········································································
Total net assets ······································································
Total liabilities and net assets·······················································¥ 1,138,389

The accompanying notes are an integral part of these financial statements.

17¥937,841$

12,104,085

CONSOLIDATED STATEMENTS OF INCOME
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012
Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013
2012
Net sales (Notes 26 and 27):
- Trade·······················································································- Non-consolidated subsidiaries and affiliated companies ········
Sub-total··········································································¥ 1,687,878
13,611
1,701,489¥ 1,820,325
15,1291,835,454$ 17,946,603
144,721
18,091,324

Cost of sales (Notes 22 and 27) ······················································

1,282,969

1,371,603

13,641,355

Gross profit ·····················································································

418,520463,851

4,449,969

Selling, general and administrative expenses (Notes 18, 23 and
27)·····························································································

384,589374,872

4,089,194

Operating income············································································

33,931

88,979360,775

Other income (expenses):
Interest income (Note 27) ·························································
Interest expenses·······································································
Purchase discounts····································································
Impairment loss (Note 12) ························································
Foreign exchange gains ····························································
Gain on negative goodwill (Note 5)··········································
Loss on valuation of stocks of subsidiaries·······························
Provision of allowance for doubtful accounts···························
Others, net (Notes 24 and 27) ···················································
Total other income ··························································

1,261(1,618)
4,987
(111)
3,653
3,920
(2,500)(1,244)
3,886
12,234

1,277(1,346)
7,075(1,476)
122
(480)
6,486
11,65813,409(17,204)
53,026(1,181)
38,842
41,680(26,581)(13,231)
41,320130,080

Income before income taxes and minority interests ························

46,165

100,637

490,855

Income taxes (Note 16):
Current······················································································
Deferred····················································································
Total income taxes ··························································

15,712
9,526
25,23836,658
5,677
42,335167,060
101,283
268,343

Income before minority interests ····················································

20,92758,302

222,512

Minority interests in income ···························································(1,277)

37(13,571)

Net income······················································································¥

22,204¥58,265¥235.6860.00¥

618.46
76.00

The accompanying notes are an integral part of these financial statements.

18

236,083

U.S. dollars(Note 1)

Yen
Amounts per share of common stock:
Basic net income ······································································Cash dividends applicable to the year ······································

$

$

2.51
0.64

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012
Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013
2012
Income before minority interests ·····················································¥

Other comprehensive income, net of taxes (Note 25):
Valuation difference on available-for-sale securities·················
Deferred gains on derivatives under hedge accounting·············
Foreign currency translation adjustments··································
Share of other comprehensive income of associates
accounted for using equity method ···································
Total other comprehensive income············································

20,927¥58,302$

222,512

449
(34)
(107)

(31)
34
-

4,769
(360)
(1,131)

5
313

3

52
3,330

Comprehensive income····································································¥

21,240¥58,305$

225,842Comprehensive income attributable to:
Owners of parent company ·······················································
Minority interests ······································································¥

22,375(1,135)¥58,25055$

237,908(12,066)

The accompanying notes are an integral part of this financial statement.

19

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Shareholders’ equity

Balance at April 1, 2011 ·····

Number ofshares ofcommonstock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost96,649¥ 71,059¥ 70,977¥ 351,050¥ (23,046)

Millions of yen
Accumulated othercomprehensive income
Deferred
Valuation
gains anddifference on losses onavailable-for- derivatives
sale
under hedge
Subscription
Foreignsecurities, accounting,rights tocurrency
net of taxes net of taxes translation
sharesMinority(Note 9)(Note 10) adjustments (Note 21)
interests¥(1,026) ¥

-

¥

-

¥

-

¥

1,836

Total net
assets¥ 470,850

Cash dividends ·················(7,160)(7,160)Net income························

58,26558,265

Changes in scope of
consolidation ···············

(426)

(426)

Other changes in theyear, net························

Balance at April 1, 2012 ·····

96,64971,05970,977401,729(23,046)(32)

17(1,058)

17

-

4

5,225

5,214

4

7,061

526,743

Cash dividends ·················(7,160)(7,160)Net income························

22,204

22,204

Changes in scope of
consolidation ···············(2,289)(2,289)Other changes in theyear, net························

Balance at March 31, 2013 ·

337

96,649¥ 71,059¥ 70,977¥ 414,484¥ (23,046)(2)

15,724

15,8932¥ 22,785¥ 555,391

Accumulated othercomprehensive income
Deferred
Valuation
gains anddifference on losses onderivatives
available-for-sale
under hedge
Foreign
Subscription
securities, accounting,currency
rights to
net of taxes net of taxes translation
shares(Note 9)(Note 10) adjustments (Note 21)

Minority
interests

Total net
assets

¥

(721)

(17)

¥

(149)

-

¥

(149)

¥

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Commonstock
Balance at April 1, 2012···························· $ 755,543

CapitalsurplusTreasurystock,
at costRetainedearnings$ 754,676 $ 4,271,446$ (245,038) $(11,261) $

181

$

-

$

44

$ 75,079 $5,600,670

Cash dividends········································(76,129)(76,129)

Net income ··············································

236,083

236,083

Changes in scope of consolidation ········(24,340)(24,340)

Other changes in the year, net················

Balance at March 31, 2013 ······················· $ 755,543$ 754,676 $ 4,407,060$ (245,038)

The accompanying notes are an integral part of these financial statements.

20

$

3,595

(181)

(7,666) $-(1,589)$(1,589)

(22)

$

22

167,188

168,991$ 242,267 $5,905,275

CONSOLIDATED STATEMENTS OF CASH FLOWS
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Millions of yen
2013
2012
Cash flows from operating activities:
Income before income taxes and minority interests···················
Depreciation ··············································································
Amortization of goodwill ··························································
Increase in provision for retirement benefits ·····························
Increase in provision for directors’ retirement benefits··············(Decrease) increase in provision for point cardcertificates ···········································································(Decrease) increase in provision for product warranties············
Decrease in provision for loss on disaster··································
Interest income ··········································································
Interest expenses········································································
Foreign exchange gains ·····························································
Gain on negative goodwill·························································
Loss on valuation of investment securities ································
Loss on valuation of stocks of subsidiaries································
Loss on sale and disposal of property and equipment, net·········
Impairment loss ·········································································(Increase) decrease in notes and accounts receivable ················
Decrease in advances received ··················································
Increase in inventories ·······························································
Increase in notes and accounts payable ·····································
Increase (decrease) in consumption taxes payable·····················(Increase) decrease in other current assets·································
Increase (decrease) in other current liabilities ···························
Others, net ·················································································
Sub-total ··············································································
Interest and dividend income received ······································
Interest expenses paid································································
Income taxes paid ······································································Net cash (used in) provided by operating activities ·············

21

¥

¥

46,16521,718
964
2,439
60
(555)
(1,749)(1,328)1,618(546)(3,920)
969
2,500
303
111
(22,897)(2,763)(47,018)
18,636344(5,919)2,999
146
12,277662(1,678)(24,050)(12,789)¥¥

Thousands of
U.S. dollars(Note 1)
2013

100,637
20,246
6
1,930
239

$

490,855
230,925
10,24925,932
642

3,873
384
(1,664)(1,320)
1,346
(122)
4
480
84
1,476
23,981(8,017)(33,829)665(5,512)
3,890
(501)
872
109,148
294(1,380)(73,803)
34,259(5,898)(18,599)(14,120)
17,204(5,800)(41,680)
10,305
26,581
3,224
1,181(243,458)(29,383)(499,929)
198,1453,656(62,940)
31,8891,551
130,532
7,039(17,841)(255,716)$ (135,986)(Continued)

Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013
2012
Cash flows from investing activities:
Payments into time deposits ······················································
Proceeds from withdrawal of time deposits·······························
Purchase of investments in subsidiaries and affiliatedcompanies············································································
Purchase of investments in subsidiaries resulting inchange in scope of consolidation·········································
Proceeds from purchase of investments in subsidiaries
resulting in change in scope of consolidation······················
Payment of loans receivable ······················································
Collection of loans receivable ···················································
Purchase of property and equipment ·········································
Purchase of intangible assets ·····················································
Payment for guarantee deposits ·················································
Proceeds from collection of guarantee deposits·························
Others, net ·················································································Net cash used in investing activities ····································¥(15,172)
15,445¥(12,792)
20,446$(161,319)
164,227

(989)

(26)

(10,520)(6,900)-(73,370)

9,724(3,480)666(37,629)(1,311)(8,124)
7,823
715(39,232)415(16,143)
181(30,687)(585)(5,429)7,476(919)(38,063)

103,396(37,006)
7,079(400,096)(13,935)(86,382)
83,176
7,605(417,145)

Cash flows from financing activities:
Net increase in short-term loans payable ···································
Proceeds from long-term loans payable·····································
Repayment of long-term loans payable ·····································
Redemption of bonds·································································
Repayments of lease obligations················································Cash dividends paid···································································
Others, net ·················································································Net cash provided by (used in) financing activities ·············

88,335
111,457(72,206)(70,000)(3,246)(7,162)(4)
47,174

19,888
1,200(33,647)(4,647)(7,161)
6(24,361)

939,234
1,185,081(802,246)(744,285)(76,150)(40)
501,594

Effect of exchange rate change on cash and cash equivalents··········

718

(385)

7,632

Net decrease in cash and cash equivalents ·······································(4,129)(28,550)(43,905)

Cash and cash equivalents at beginning of year·······························

76,344

104,815

811,744

Increase in cash and cash equivalents from newly consolidated
subsidiaries··········································································

5,691

79

60,510Cash and cash equivalents at end of year (Note 6)···························¥

Supplemental cash flow information (Note 7)
The accompanying notes are an integral part of these financial statements.

22

77,906¥

76,344$

828,349

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Yamada Denki Co., Ltd. and Consolidated Subsidiaries
March 31, 2013 and 2012

1.

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Yamada Denki Co., Ltd. (the “Company”), and its
consolidated subsidiaries, have been prepared in accordance with the provisions set forth in the Japanese
Financial Instruments and Exchange Act and its related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of the International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English
with some expanded descriptions from the consolidated financial statements of the Company prepared inaccordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Financeas required by the Japanese Financial Instruments and Exchange Act. Some supplementary information
included in the statutory Japanese language consolidated financial statements, but not required for fairpresentation, is not presented in the accompanying consolidated financial statements. In addition, certain
reclassifications have been made in the 2012 financial statements to conform to the classifications used in the2013 financial statements. Such reclassifications had no impact on previously reported results of operations orretained earnings.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience ofreaders outside Japan, using the prevailing exchange rate at March 31, 2013, which was ¥94.05 to U.S. $1.
Such translations should not be construed as representations that the Japanese yen amounts have been, could
have been, or could in the future be converted into U.S. dollars at this or any other rate of exchange.
2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its 38 (21 in 2012)
significant subsidiaries (together, the “Group”). Effective from the year ended March 31, 2013, Yamada Denki(Shenyang) Co., Ltd. and YAMADA DENKI (CHINA) CO., LTD. have been included in the scope of
consolidation due to its increased materiality. In addition, effective from June 30, 2012, November 30, 2012
and February 28, 2013, Housetec Holdings Inc. (“Housetec”) and its four subsidiaries, BEST DENKI CO., LTD.
(“Best Denki”) and its ten subsidiaries and one subsidiary newly acquired by Best Denki, respectively, have been
included in the scope of consolidation as a result of the acquisition of Housetec and Best Denki shares. Presso
Holdings Corporation and SxL Okinawa Corporation were excluded from the scope of consolidation because
these two companies were liquidated during the year.
All significant inter-company accounts, transactions and unrealized profits have been eliminated inconsolidation.
All of the Company’s non-consolidated subsidiaries have been insignificant in terms of the aggregatedamount of their assets, net sales, net income and retained earnings and, thus, their impact on the consolidated
financial statements have been immaterial.
Investments in three affiliated companies have been accounted for using the equity method.
Investments in non-consolidated subsidiaries and the remaining affiliated companies were not accounted forusing the equity method, but instead carried at cost, because their impact on the consolidated financial statements
has been immaterial.
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the
portion attributable to minority shareholders, have been recorded based on the fair value at the time the23Company acquired control of the respective subsidiaries. Goodwill (including negative goodwill recognized
before April 1, 2010) is amortized using the straight-line method over three to ten years.
The fiscal year-ends of five foreign consolidated subsidiaries and all domestic consolidated subsidiaries areat the end of December and February, respectively. The financial statements of these subsidiaries as of and forthe years ended December 31, 2012 and 2011 or February 28, 2013 and February 29, 2012, as applicable, wereused in preparing the consolidated financial statements. All material transactions which occurred during theperiods from their respective fiscal year-ends to March 31 have been accounted for in the consolidation process.
The accompanying consolidated financial statements reflect the financial results of Housetec and its four
subsidiaries for the eight-month period from July 1, 2012 to February 28, 2013, Best Denki and its sevendomestic subsidiaries for the three-month period from December 1, 2012 to February 28, 2013 and foreignsubsidiaries of Best Denki, including BEST DENKI MALAYSIA SDN. BHD., BEST DENKI (SINGAPORE)
PTE. LTD., and PT. BESTDENKI INDONESIA, for the three-month period from October 1 2012 to December
31, 2012.
As acquisition of Kurokawa Denki Co., Ltd. (“Kurokawa Denki”), a subsidiary of Best Denki, became
effective as of February 28, 2013, only the balance sheets of Kurokawa Denki were consolidated.
(b) Cash and Cash Equivalents
In preparing the consolidated statements of cash flows, cash and cash equivalents include cash on hand,readily-available bank deposits and short-term highly liquid investments with minimum risk of value fluctuationand maturities not exceeding three months at the time of purchase.
(c)Securities

Under Japanese GAAP, companies are required to examine their intent for holding each security and toclassify their securities as (i) securities held for trading purposes (“Trading Securities”), (ii) debt securities
intended to be held to maturity (“Held-to-maturity Debt Securities”), (iii) equity securities issued by
non-consolidated subsidiaries and affiliated companies or (iv) available-for-sale securities for all other securities
that are not classified in any of the above categories (“Available-for-sale Securities”).
Equity securities issued by non-consolidated subsidiaries and affiliated companies are stated atmoving-average cost. Available-for-sale Securities with fair market values are stated at fair market value.
Unrealized gains and losses on such securities are reported, net of applicable income taxes, as a separate
component of net assets. Realized gain and loss on sale of such securities is computed using themoving-average cost. Other Available-for-sale Securities with no fair market values are stated principally at themoving-average cost. The Company and its consolidated subsidiaries had no Trading Securities or
Held-to-maturity Debt Securities.
Investments in Limited Partnership (“LPS”) and/or similar ventures (considered as securities under theJapanese Financial Instruments and Exchange Act) are stated at the amounts of the corresponding equity portions
using the most recent financials available based on the reporting date stipulated in the contracts relating to such
LPS and/or similar ventures.
(d) Derivative Transactions and Hedge Accounting
Derivative financial instruments are stated at fair value and changes in fair value are recognized as gains orlosses unless derivative transactions are used for hedging purposes.
If derivative financial instruments are used as hedges and meet certain hedging criteria, recognition of gains
or losses resulting from changes in their fair value is deferred until the related losses or gains on the hedged
items are recognized.
Forward foreign exchange contracts which meet specific matching criteria are translated at the foreignexchange rate stipulated in such contracts.
24

Also, if an interest rate swap contract is used as hedge and meets certain hedging criteria, the net amount tobe paid or received under such interest rate swap contract is added to or deducted from the interest on the assets
or liabilities for which such swap contact was executed.
Certain consolidated subsidiaries utilize forward foreign exchange contracts and currency swaps for the
purpose of hedging their exposure to adverse fluctuation in interest rates and managing uncertainty on interest
rates. These contracts are used to limit foreign currency exchange risk attributable to future transactions
denominated in foreign currencies. The Company utilizes interest rate swaps to hedge its exposure to adverse
fluctuation in exchange rates. These contracts are used for its long-term borrowings. The Company and these
consolidated subsidiaries do not enter into such transactions for speculative trading purposes.
The effectiveness of hedge is assessed by the ratio of accumulated fluctuations in market value or cash
flows of hedging instruments to those in market value or cash flows of hedged items. Under Japanese GAAP,
however, such assessment is not required for certain derivatives which meet specific criteria.
(e)Inventories
Inventories are primarily stated at the lower of moving-average cost or market value.

(f)

Property and Equipment (except for lease assets)

Property and equipment are stated at cost. Depreciation is mainly computed using the declining-balancemethod at rates based on the estimated useful lives of the respective assets, except for buildings (excluding
building facilities) acquired on or after April 1, 1998, which are depreciated based on the straight-line method.
The estimated useful lives of significant assets are as follows.
Buildings and structures ···············································································(g)

3 - 47 years

Intangible Assets (except for lease assets)

Intangible assets are amortized using the straight-line method. Software for internal use is amortizedusing the straight-line method over an estimated useful life of five years.
(h) Impairment
The Company and its consolidated subsidiaries review their property and equipment for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may
not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds
the sum of the undiscounted future cash flows expected to result from continued use and eventual disposition ofsuch asset or asset group. The impairment loss is measured as the amount by which the carrying amount of anasset exceeds its recoverable amount, which should be the higher of the discounted cash flows from continued
use and eventual disposition of the asset or the net selling price at disposition.
(i)Long-term Prepaid Expenses
Long-term prepaid expenses are amortized using the straight-line method.

(j)

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided at an amount sufficient to cover possible losses oncollection. It consists of the estimated uncollectible amount with respect to certain identified doubtfulreceivables and the amount calculated based on historical loss experience for other doubtful receivables.

25

(k) Provision for Bonuses
A provision for bonuses is provided at the estimated amount accrued during the current fiscal year to cover
future bonus payment to employees.
(l)Provision for Directors’ Bonuses

A provision for bonuses to directors and Audit & Supervisory Board members is provided at the estimatedamount accrued during the current fiscal year to cover future bonus payments to directors and Audit &Supervisory Board members.
(m) Provision for Point Card Certificates
The Company and its consolidated subsidiaries which conduct similar businesses provide their customers
with credit points when they make purchases at their stores. Thus, the Company and some of its consolidated
subsidiaries set aside a provision for the estimated future costs of credit points.
(n) Provision for Warranties for Completed Construction
Some of the consolidated subsidiaries provide for losses on guarantees and after-service expenses due todefects found after completed construction. The amount of such provision is calculated by multiplying related
sales by the historical rate of such expenses.
(o)Provision for Losses on Interest Repayments

A consolidated subsidiary provides for losses on interest repayments at the estimated amount of future
customer claims for a refund on the portion of the loan interest in excess of the maximum rate prescribed underthe Interest Rate Restriction Act.
(p) Provision for Retirement Benefits
The Company has an unfunded lump-sum payment plan and a defined benefit pension plan. The
subsidiaries have unfunded lump-sum payment plans and defined contribution pension plans and participate in
the retirement benefit plan established by the government.
A provision for retirement benefits is provided based on the estimated amounts of projected benefit
obligations and the fair value of plan assets at the balance sheet date.
Prior service costs are amortized from the fiscal year in which such costs are incurred using the straight-line
method over a certain period of time (five years) not exceeding the average remaining service period of theeligible employees.
Actuarial gains or losses incurred during the year are amortized from the succeeding fiscal year using thestraight-line method over a certain period of time (five years) not exceeding the average remaining service
period of the eligible employees.
(q) Provision for Directors’ Retirement Benefits
The Company and some of its consolidated subsidiaries each sets aside a provision for directors’ and Audit& Supervisory Board members’ retirement benefits based on internal rules. Such provision is calculated at theestimated payable amount if all officers were to retire at the balance sheet date. The payment of such
retirement benefits is subject to approval at a shareholders’ meeting.

26

(r)

Provision for Product Warranties

The Company and its consolidated subsidiaries which conduct similar businesses each sets aside a
provision for warranty for future repair expenses at the estimated amount calculated based on historical repair
expense.
(s)

Allowance for Loss on Investments in Subsidiaries

An allowance for loss on investments in subsidiaries is provided at an amount sufficient to cover possible
losses, taking into account the financial conditions of such subsidiaries, recoverability of the investments andother relevant factors.
(t)Provision for Loss on Liquidation of Subsidiaries

A consolidated subsidiary provides for losses on liquidation of its subsidiaries at the estimated amount ofsuch losses.
(u) Leases
Assets of finance leases are depreciated over the lease term using the straight-line method with zero residual
value.
(v) Recognition of Revenue and Costs
The methods used to recognize revenues and costs under construction contracts are as follows:i) Construction contracts under which the portion of construction to be completed by the end of thecurrent fiscal year may be estimated reliably: Percentage-of-completion method (The percentage
of completion is measured as the ratio of the cost incurred to the estimated total cost.); and,ii) Other construction contracts: Completed-contract method.
(w) Income Taxes
A provision for income taxes is computed based on the income before income taxes and minority interests
included in the statements of income for the Company and each of its consolidated subsidiaries. The assets andliabilities approach is used to recognize deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial statements’ carrying amounts and the tax bases ofassets and liabilities.
(x)

Per Share Information

Basic net income per share of common stock is computed based upon the weighted-average number ofshares outstanding during each year. For diluted net income per share, both net income and shares outstanding
are adjusted based on the assumptions that convertible bonds would be converted and stock options (subscription
rights to shares) exercised. However, the dilutive effect of euro yen convertible bonds due in 2013 and in 2015
and SxL Corporation stock options were not reflected because they were anti-dilutive. For either the year
ended March 31, 2013 or 2012, diluted net income per share was not disclosed because the Company and its
consolidated subsidiaries had no securities with dilutive effect.
Cash dividends per share represent interim dividends declared by the Board of Directors in each fiscal year
and year-end dividends approved by the shareholders at an annual meeting held subsequent to the end of eachfiscal year.

27

(y) New Accounting Pronouncements“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, issued on May 17, 2012) and“Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, issued on May 17, 2012)
have been issued (together, the “New Retirement Benefits Standard”).
Major changes are as follows:(a)Summary

Under the amended rule, actuarial gains and losses and past service costs that are yet to be recognized in
profit or loss would be recognized within the net asset section, after adjusting for tax effects, and the deficit or
surplus would be recognized as a liability or asset without any adjustments.
For determining method of attributing expected benefit to periods, the New Retirement Benefits Standard
now allows to choose benefit formula basis, as well as straight-line basis. Method for determination of discountrate has also been amended.
(b) Effective dates
Effective for the end of the fiscal years ending on or after March 31, 2014. Amendments relating todetermination of retirement benefit obligations and current service costs are effective from the beginning of the
fiscal years ending on or after March 31, 2015. However, no retrospective application of the New Retirement
Benefits Standard to the consolidated financial statements in prior periods will be required.
(c)

Effect of application of the standard

Net assets will increase (or decrease) due to the immediate recognition of actuarial gains and losses on the
consolidated balance sheet. The Companies are currently in the process of determining the effects of the New
Retirement Benefits Standard on the consolidated financial statements.
3.

CHANGE IN ACCOUNTING POLICIESThe Company and some of its consolidated domestic subsidiaries have changed their depreciation method
for property, plant and equipment acquired on or after April 1, 2012 in accordance with the amendment of the
Corporate Tax Act. As a result of this change, “Operating income” and “Income before income taxes andminority interests” for the year ended March 31, 2013 have each increased by ¥531 million ($5,645 thousand).
4.

CHANGE IN METHOD OF PRESENTATION

Until the year ended March 31, 2012, “Investments in real estate” in the amount of ¥12,102 million was
included in “Buildings and structures, net” and “Land” under “Property and equipment”. From the year ended
March 31, 2013, however, such investments have been presented in “Other assets” under “Investments and otherassets” in order to present more accurately the amount of real estate investments being made. Such changecame about due to the increase in number of consolidated subsidiaries, which in turn has increased theimportance of real estate investments. The consolidated financial statements for the year ended March 31, 2012
have been reclassified to reflect such change in the method of presentation.
Specifically, a total of ¥5,610 million, comprising ¥4,723 million previously included and presented in“Buildings and structures, net”, and ¥887 million previously included and presented in “Land”, both under“Property and equipment”, were reclassified as “Other assets” under “Investments and other assets”.

28

5.

BUSINESS COMBINATIONSBusiness combinations that took place through stock purchase for the year ended March 31, 2013 were as
follows.
(a) Business combination through acquisition of Housetec
On June 15, 2012, the Company acquired the common stock of Housetec, whose principal business is the
manufacture and sale of housing and environmental equipment.
1) Outline of the business combinationa) Primary reason for the business combination: To accelerate the development of the Group’s“Smart-house Business” project by acquiring Housetec, whose primary business is the
manufacture and sale of housing equipment such as a bathroom, kitchen and other products
including water heaters and wastewater treatment tanks.
b) Legal form of business combination: Acquisition of sharesc) Name of company after combination: No change to the company’s named) Percentage of voting rights acquired: 100%e) Principal basis for determining the acquiring company: The Company paid cash in consideration
for acquiring Housetec’s common stock.
2) Period in which financial results of the acquired company was reflected in the consolidated financial
statements for the fiscal year ended March 31, 2013: From July 1, 2012 to February 28, 2013
3) Acquisition cost and its breakdown
Thousands of
U.S. dollars(Note 1)Millions of yen

Consideration for the acquisition:
Cash paid·····························································
Expenses directly related to the acquisition:
Advisory costs, and so on ····································
Total ·····································································

¥

9,714

$

103,279

¥

109
9,823

$

1,162
104,4414) Goodwill arising from business combination:a) Amount of goodwill: ¥7,716 million ($82,039 thousand)b) Reason for occurrence of goodwill: The acquisition cost exceeded the net value of the assets
acquired and liabilities assumed.
c) Amortization of goodwill: Straight-line method applied over ten years5) Assets and liabilities recognized at the date of the business combination
Thousands of
U.S. dollars(Note 1)Millions of yen

Current assets······························································
Non-current assets·······················································
Total assets··························································
Current liabilities ························································
Long-term liabilities ···················································
Total liabilities ····················································

¥
¥
¥
¥

13,472
8,198
21,6709,286
10,277
19,563$$$$

143,238
87,169230,407
98,730109,275
208,005

6) Pro forma information in consolidated statements of income for the fiscal year ended March 31, 2013 if thebusiness combination had been completed on April 1, 2012: Since the estimated impact, which has notbeen audited, was minimal, disclosure of such information has been omitted.

29

(b) Business combination through acquisition of Best Denki
On December 13, 2012, the Company acquired the common stock of Best Denki, whose principal businessis the sale of consumer electrical appliances.
1) Outline of the business combination:a) Primary reason for the business combination: To implement Best Denki’s know-how onlaunching stores that closely cater to regional areas centering on the Kyushu region andpersonnel development, together with the Company’s know-how on various infrastructures andsales, all of which would lead to rapid expansion of economies of scale for the entire Group,
including Best Denki, launching of sophisticated stores through sharing domestic/overseas
strategies and realization of infrastructure network efficiency, so that competitiveness andmanagement efficiency across the Group, as well as customer satisfaction and corporate value,
may be improved/enhanced.
b) Legal form of business combination: Acquisition of shares through subscription to private
placementc) Name of company after combination: No change in the company’s named) Percentage of voting rights acquired:
Percentage of voting rights owned before business combination ····································· 7.50%
Percentage of voting rights additionally acquired at the date of business combination···· 43.66%
Percentage of voting rights after acquisition ···································································· 51.16%e) Principal basis for determining the acquiring company: The Company paid cash in consideration
for acquiring Best Denki’s common stock.
2) Period in which financial results of the acquired company was reflected in the consolidated financial
statements for the fiscal year ended March 31, 2013: From December 1, 2012 to February 28, 2013, except
for those of the foreign consolidated subsidiaries of Best Denki. Their financial results were reflected in
the period between October 1, 2012 and December 31, 2012.
3) Acquisition cost and its breakdown
Thousands of
U.S. dollars(Note 1)Millions of yen

Consideration for the acquisition:
Fair value of common stock of Best Denki
owned before the business combination·········Cash paid for additional acquisition·················
Expenses directly related to the acquisition:
Advisory costs, and so on ····································
Total ·····································································

¥

¥

1,016
12,120163
13,299$$10,806
128,868
1,728
141,4024) Difference between acquisition cost of the acquired company and total acquisition cost of individualtransactions leading to acquisition:a) Gain on step acquisition: ¥47 million ($501 thousand)5) Goodwill arising from business combination:a) Amount of gain on negative goodwill: ¥3,920 million ($41,680 thousand)b) Reason for occurrence of negative goodwill: The net value of the assets acquired and liabilities
assumed exceeded the acquisition cost.

306) Assets and liabilities recognized at the date of the business combination
Thousands of
U.S. dollars(Note 1)Millions of yen

Current assets······························································
Non-current assets·······················································
Total assets··························································¥

Current liabilities ························································
Long-term liabilities ···················································
Total liabilities ····················································¥¥

63,35648,486
111,842$

37,03540,376
77,411$¥$$

673,639
515,540
1,189,179
393,779
429,300
823,079

7) The estimated impact on the consolidated statements of income for the fiscal year ended March 31, 2013 if
the business combination had been completed on April 1, 2012:
Thousands of
U.S. dollars(Note 1)Millions of yen

Net sales······································································
Operating income························································
Income before income taxes and minority interests····
Net income··································································¥

145,866(1,397)(3,340)(1,993)$

U.S. dollars(Note 1)Yen

Net income per share ··················································¥

1,550,941(14,857)(35,510)(21,194)(21.16)$(0.22)

The above pro forma information was measured as the difference between the amounts of net sales andprofits/losses calculated on the assumption that the business combination was completed on the first day of
the fiscal year and the same of the acquiring company shown in the consolidated statements of income.
The above information has not been audited.

31

6.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of March 31, 2013 and 2012 in the consolidated statements of cash flows
consisted of the following.
Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013
2012

Cash and time deposits······················································
Time deposits with maturities exceeding three months ····Cash and cash equivalents ················································
7.

¥¥

79,522(1,616)
77,906¥¥

77,145(801)
76,344$$

845,531(17,182)
828,349

SUPPLEMENTAL CASH FLOW INFORMATION

Assets and liabilities acquired through finance leases for the year ended March 31, 2013 were ¥1,153
million ($12,260 thousand) and ¥1,205 million ($12,809 thousand), respectively. Assets and liabilities acquired
through finance leases for the year ended March 31, 2012 were ¥628 million and ¥661 million, respectively.
Asset retirement obligations for the year ended March 31, 2013 and 2012 were ¥1,123 million ($11,935
thousand) and ¥1,399 million, respectively.
Assets and liabilities of newly consolidated subsidiaries through acquisition of shares for the years ended
March 31, 2013 and 2012 were as follows.
Increase in assets and liabilities due to a newly
consolidated subsidiary, Housetec, and net payments
for the stock acquisition:

Millions ofyen
2013¥ 13,472
8,198
7,716
(9,286)(10,277)
9,823(2,923)(6,900)¥Thousands of
U.S. dollars(Note 1)
2013$
143,238
87,16982,039(98,730)(109,275)
104,441(31,071)(73,370)$

Millions ofyen
2013
Current assets··························································¥ 63,356
Non-current assets ··················································
48,487(37,035)
Current liabilities ····················································(40,376)
Long-term liabilities ···············································(3,920)Gain on negative goodwill······································(17,213)
Minority interests····················································(47)
Gain on step acquisition··········································(969)
Common stock owned before business combination ··Acquisition cost····························································
12,283(21,986)
Cash and cash equivalents from the acquisition ···········
9,703
Net proceeds·································································¥

Thousands of
U.S. dollars(Note 1)
2013$
673,639
515,540(393,779)(429,300)(41,680)(183,018)(501)(10,305)
130,596(233,767)
103,171$

Current assets··························································
Non-current assets ··················································
Goodwill ·································································
Current liabilities ····················································
Long-term liabilities ···············································
Acquisition cost····························································Cash and cash equivalents from the acquisition ···········Net payments································································
Increase in assets and liabilities due to a newly
consolidated subsidiary, Best Denki, and net
proceeds from the stock acquisition:

32

Increase in assets and liabilities due to a newly
consolidated subsidiary, SxL Corporation, and net
proceeds from the stock acquisition:
Current assets··························································
Non-current assets ··················································
Goodwill ·································································
Current liabilities ····················································
Long-term liabilities ···············································
Minority interests····················································
Stock acquisition rights···········································
Acquisition cost····························································Cash and cash equivalents from the acquisition ···········Net proceeds·································································
8.

FINANCIAL INSTRUMENTS

I.

Qualitative Information on Financial Instruments

Millions ofyen
2012¥ 13,832
11,325
1,245(12,705)(2,083)(5,162)(8)6,444(6,859)¥415(a) Policies for Using Financial Instruments
The Company and its consolidated subsidiaries raise necessary funds based on capital budgeting, mainly
through loans from banks and issuance of bonds. Temporary surplus funds are invested in highly liquid
instruments, and working capital is financed through bank loans. The Company and its consolidated
subsidiaries utilize derivative financial instruments only to manage risks described below and do not enter intosuch transactions for speculative trading purposes.
(b) Details of Financial Instruments and Related Risk
Trade notes and accounts receivable are exposed to credit risk of customers.
Investment securities, which mainly comprise equity securities issued by those who have business
relationships with the Company and/or its consolidated subsidiaries, are exposed to market risk.
Guarantee deposits, which are mostly related to rental of stores, are exposed to credit risk of lessors.
Most notes and accounts payable are due within two months.
Bank loans and bonds are obtained mainly for capital expenditures. The redemption dates of bonds were
within a maximum period of two years and three years after the balance sheet date for the years ended March 31,
2013 and 2012, respectively.
Most income taxes payable, which consist of unpaid corporate income taxes, inhabitant taxes and enterprisetaxes, are payable within two months after the balance sheet date.
For certain loans payable, the Company utilizes interest rate (floating for fixed rate) swaps in order tomanage interest rate risk. Some of its consolidated subsidiaries utilize currency swaps and currency options inorder to reduce the foreign currency risk of foreign-currency-denominated monetary assets and liabilities. The
Company also uses derivatives as hedging instruments, which is described in “Derivative Transactions andHedge Accounting” under Note 2, entitled the “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES”.
Interest rate swap transactions entered into by the Company involve interest rate risk, and currency swap andcurrency option transactions entered into by some of its consolidated subsidiaries involve foreign currency risk.
Since the counterparties of derivative transactions are limited to highly credible domestic banks, credit risk thatarises from contractual default by counterparty is considered to be fairly low.

33

(c) Policies and Process of Risk Management-

Credit risk management

Credit risk refers to the risk that counterparty will default on its contractual obligation. In accordance with
the Company’s sales management policy, each operating department of the Company periodically monitors theCompany’s counterparties and manages the due dates and balances of trade notes and accounts receivable inorder to reduce credit risk by early identification of a possible default due to financial trouble of any counterparty.
The Company’s consolidated subsidiaries also manage their credit risk in the above manner.
The Company believes that the credit risk under derivative transactions is fairly low because counterpartiesof derivative transactions are limited to financial institutions with high credit ratings.
-

Market risk management

Market risk is the risk that movements in market variables, such as foreign currency exchange rates, interest
rates and market prices, result in financial loss to the Company and/or its consolidated subsidiaries. For certain
loans payable, the Company utilizes interest rate (floating for fixed rate) swaps in order to manage interest raterisk. Moreover, some of its consolidated subsidiaries utilize currency swaps and currency options in order toreduce the foreign currency risk of foreign-currency-denominated monetary assets and liabilities.
The Company continuously reviews portfolios of securities by periodically monitoring fair values of eachsecurity and the financial condition of the issuer as well as market condition and the relationship with the issuer.
The basic policy, authority and maximum amount of derivative transactions are determined at a Board of
Directors’ meeting, and the execution and management of derivative transactions are performed by the Financial
Division. The results of transactions are reported at a Board of Directors’ meeting on a regular basis.
-

Management of liquidity risk related to fund raising

Liquidity risk is the risk of being unable to meet obligations as they become due. The Company manages
liquidity risk by having liquidity on hand and by formulating and renewing the fund management plan based onreports from each department.
(d) Supplemental Information on Fair Value
The fair values of financial instruments are estimated based on quoted market prices, if available, ormanagement estimates and assumptions. Changes in estimates and assumptions used could result in different
values. Additionally, notional amounts of derivative transactions, which are presented in Note 8, entitled the“DERIVATIVE FINANCIAL INSTRUMENTS”, do not indicate market risk of derivative transactions.

II.

Fair Values of Financial Instruments

The following is a summary of book values and estimated fair values of financial instruments as of March
31, 2013 and 2012.

34

Book value

Financial assets:(1) Cash and time deposits ···································(2) Notes and accounts receivable························
Allowance for doubtful accounts (*1) ········¥(3) Investment securities (*2)·······························(4) Guarantee deposits (*3)(including current portion) ···························
Allowance for doubtful accounts (*1) ··········¥
Financial liabilities:(1) Notes and accounts payable····························(2) Short-term loans payable ································(3) Income taxes payable······································(4) Bonds······························································(5) Long-term loans payable(including current portion) ···························
Derivative transactions (*4) ·····································¥¥¥

79,522
67,599(21)
67,578
9,877
114,692(35)
114,657
271,634
109,214
113,835
1,639
59,000146,662
430,350(2)

Fair value
Millions of yen
2013¥

79,522

Valuation
gains/(losses)¥

67,578
10,400¥¥¥¥115,633
273,133
109,214
113,835
1,639
58,215
146,549
429,452
(2)

-

523

¥
¥

¥
¥

976
1,499
(785)
(113)
(898)
-

Thousands of U.S. dollars (Note 1)
2013

Financial assets:(1) Cash and time deposits ···································(2) Notes and accounts receivable························
Allowance for doubtful accounts (*1) ········$(3) Investment securities (*2)·······························(4) Guarantee deposits (*3)(including current portion) ···························
Allowance for doubtful accounts (*1) ··········$
Financial liabilities:(1) Notes and accounts payable····························(2) Short-term loans payable ································(3) Income taxes payable······································(4) Bonds······························································(5) Long-term loans payable(including current portion) ···························
Derivative transactions (*4) ·····································$$

845,531
718,758(220)
718,538
105,014
1,219,483(374)
1,219,109
2,888,192$

845,531$

718,538
110,579$

1,229,482
2,904,130

-

5,565

$

10,373
15,9381,161,232
1,210,367
17,426627,326

1,161,232
1,210,367
17,426
618,980(8,346)

1,559,402
4,575,753(16)

1,558,208
4,566,213(16)(1,194)(9,540)
-

$
$

$
$

(*1) An allowance for doubtful accounts estimated and provided with respect to certain identifiable items
was deducted from each of notes and accounts receivable and guarantee deposits.
(*2) Investment securities include investments in listed affiliated companies accounted for using the equity
method. Valuation gains(losses) represents gains(losses) on valuation of such investments.
(*3) Government bonds pledged by a certain consolidated subsidiary as security deposit were included.
(*4) Debt and credit attributed to derivative transactions are indicated as net amounts, and net debt isdescribed in parenthesis.
35

Book value

Financial assets:(1) Cash and time deposits ···································(2) Notes and accounts receivable························(3) Investment securities ······································(4) Guarantee deposits (*1)(including current portion) ···························¥¥
Financial liabilities:(1) Notes and accounts payable····························(2) Short-term loans payable ································(3) Income taxes payable······································(4) Bonds(including current portion) ···························(5) Long-term loans payable(including current portion) ···························
Derivative transactions (*2) ·····································

77,14528,6198,800
106,170
220,734¥¥¥

65,58025,0006,282

Fair value
Millions of yen
2012

¥

¥
¥

77,14528,6198,800
103,558
218,12265,58025,0006,282

Valuation
gains/(losses)¥¥(2,612)(2,612)¥-129,064

127,033

2,031

67,610293,536(360)

67,727
291,622
(360)

(117)
1,914
-

¥
¥

¥
¥

(*1) Government bonds pledged by a certain consolidated subsidiary as security deposit were included.
(*2) Debt and credit attributed to derivative transactions are indicated as net amounts, and net debt isdescribed in parenthesis.
Explanatory Notes on Fair Values of Financial Instruments(i)

Details of Methodologies and Assumptions Used to Estimate Fair Values of Financial Instruments,
and Securities and Derivative Transactions(a) Financial Assets-(1) Cash and Time Deposits and (2) Notes and Accounts Receivable

Because these assets are settled in the short term, their fair values approximate their book values.
the amounts indicated in the above table were based on their book values.
-

Thus,

(3) Investment Securities

The fair values of equity securities are based on quoted market prices, and the fair values of debt securities
are based on quoted market prices or quotes obtained from financial institutions. Additional information on
securities classified by holding purpose is presented in Note 9, entitled the “SECURITIES INFORMATION”.
-(4) Guarantee Deposits

The fair values of guarantee deposits are based on the present value discounted by the rate which reflects
the applicable due date and credit risk. The fair value of government bonds pledged as security deposit isquoted based on the price information from the contracted financial institution. Additional information on
securities classified by holding purpose is presented in Note 9, entitled the “SECURITIES INFORMATION”.

36

(b) Financial Liabilities-(1) Notes and Accounts Payable, (2) Short-term Loans Payable and (3) Income Taxes Payable

Since these liabilities are payable in the short term, their fair values approximate their book values.
the amounts indicated in the above table were based on their book value.
-

Thus,

(4) Bonds

The fair values of bonds are each based on the present value of principal discounted by the rate whichreflects the remaining maturity period and credit risk.
-(5) Long-term Loans Payable

The fair values of long-term loans payable are each based on the present value of the total of principal andinterest discounted by the rate applicable to similar new loans.
For long-term loans payable with floating interest rates and hedged by interest rate swaps which meetcertain criteria, their fair values are each based on the present value of the total of principal and interest, asadjusted and described in “Derivative Transactions and Hedge Accounting” under Note 2, entitled the“SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES”, and discounted by the rate applicable to similar
new loans.
(c) Derivative Transactions
Details of derivative transactions are described in Note 10, entitled the “DERIVATIVE FINANCIAL
INSTRUMENTS”.
(ii)

Securities for which Fair Value is Virtually Impossible to Estimate

The following securities were excluded from the above table because management of the Company and its
consolidated subsidiaries concluded that their fair values are virtually impossible to estimate.
Book value
Thousands of
U.S. dollars(Note 1)Millions of yen

2013
Investment securities (*1)
(1) Equity securities of subsidiaries andaffiliated companies
Subsidiaries ·············································
Affiliated companies ·······························(2) Available-for-sale securities
Unlisted equity securities ························
Investment in LPS (*2) ·························
Guarantee deposits (*3) ····································

¥

2012

974
44
325
229
14,996

¥

6,600
12

2013

$

143
285
11,702

10,363
469
3,453
2,436
159,449(*1) Unlisted equity securities were excluded from “(3) Investment Securities” because they are not tradedin a market and their fair values are virtually impossible to estimate.
(*2) Investments in LPS were excluded from disclosures of fair values because the fair values of LPS’s
assets, such as unlisted equity securities and the like, are virtually impossible to estimate.
(*3) Guarantee deposits whose redemption schedule cannot be reasonably estimated and whose fair values
are virtually impossible to estimate were excluded from “(4) Guarantee Deposits”.
(iii)

Contractual Maturity of Financial Instruments
The redemptions schedule of monetary claims and securities with fixed maturities were as follows.
37Withinone year

Cash and time deposits ·························
Notes and accounts receivable ··············
Investment securities
Available-for-sale securities with
fixed maturities(1) Debt securities(Corporate bonds)····················(2) Others········································
Guarantee deposits (*) ··························
Total ······················································¥¥

79,522
67,59932
6,565
153,718

Withinone year

Cash and time deposits ·························
Notes and accounts receivable ··············
Investment securities
Available-for-sale securities with
fixed maturities(1) Debt securities(Corporate bonds)····················(2) Others········································
Guarantee deposits (*) ··························
Total ··· ··················································$

845,531
718,758

340
69,808$ 1,634,437

Withinone year

Cash and time deposits ·························
Notes and accounts receivable ··············
Investment securities
Available-for-sale securities with
fixed maturities(3) Debt securities(Corporate bonds)····················(4) Others········································
Guarantee deposits (*) ··························
Total ······················································¥¥

77,14528,61950
6,710
112,524

Millions of yen
2013
Over one year
Over five years
within five
within ten
years
years

Over ten years

¥

¥

¥

-

200
197
29,62230,019¥¥-26,362
26,362¥Thousands of U.S. dollars (Note 1)
2013
Over one year
Over five years
within five
within ten
years
years

$

$

-

2,127
2,097
314,965
319,189$$-

280,297
280,297-

7,400
52,14359,543Over
ten years$$-

78,682554,413
633,095

Millions of yen
2012
Over one year
Over five years
within five
within ten
years
years

Over ten years

¥

¥

¥

-

200
235
25,226
25,661¥¥-

27,02327,023¥-7,400
47,211
54,611(*) Government bonds pledged by a certain consolidated subsidiary as security deposit were included.
Contractual maturities of short-term and long-term loans payable and bonds are described in Note 14,
entitled the “SHORT-TERM AND LONG-TERM LOANS PAYABLE”, and Note 15, entitled the“CONVERTIBLE BOND-TYPE BONDS WITH SUBSCRIPTION RIGHTS TO SHARES,” respectively.

38

9.

SECURITIES INFORMATION

The acquisition costs and book values of Available-for-sale Securities with available fair values as of March
31, 2013 and 2012 were as follows.
Millions of yen
2013
Book value

Securities with book values (fair values)
exceeding acquisition costs:
Equity securities···············································
Debt securities:
Government bonds and others (*) ··············
Others·······························································
Sub-total··························································
Securities with book values (fair value) not
exceeding acquisition costs:
Equity securities··············································
Debt securities:
Government bonds and others (*) ··············
Corporate bonds ·········································
Others······························································
Sub-total··························································
Total ································································

¥

¥

3,682

Acquisition cost

¥

2,093

Difference

¥

1,589

375
6
4,063

355
6
2,454

20
0
1,609

198

230

(32)

9
5,884
2
6,093
10,156

9
7,600
2
7,841
10,295(0)(1,716)(0)(1,748)
(139)

¥

¥

Thousands of U.S. dollars (Note 1)
2013
Book value

Securities with book values (fair values)
exceeding acquisition costs:
Equity securities···············································
Debt securities:
Government bonds and others (*) ···············
Others·······························································
Sub-total···························································
Securities with book values (fair values) not
exceeding acquisition costs:
Equity securities···············································
Debt securities:
Government bonds and others (*) ···············
Corporate bonds ··········································
Others·······························································
Sub-total···························································
Total ·································································
(*)

$

$

39,149Acquisition cost$

22,257

Difference$

16,892

3,992
63
43,204

3,772
61
26,090220
217,114

2,101

2,449

(348)

100
62,56322
64,786
107,990

100
80,80822
83,379109,469(0)(18,245)(0)(18,593)(1,479)$$Government bonds pledged by a certain subsidiary as security deposit were included in guarantee
deposits under the consolidated balance sheets.

Unlisted equity securities of ¥325 million ($3,454 thousand) and investments in LPS of ¥229 million($2,437 thousand) were excluded from above table because they do not have readily determinable market values
and their fair values are virtually impossible to estimate.

39Millions of yen
2012Book value

Securities with book values (fair values)
exceeding acquisition costs:
Equity securities···············································
Debt securities:
Government bonds and others (*) ··············
Sub-total··························································
Securities with book values (fair values) not
exceeding acquisition costs:
Equity securities··············································
Debt securities:
Government bonds and others (*) ··············
Corporate bonds ·········································
Others······························································
Sub-total··························································
Total ································································¥¥

Acquisition cost

783

¥

344

Difference

¥

439

307
1,090

293
637

14
453

1,861

2,438

(577)

18
6,149
7
8,035
9,125

18
7,600
8
10,064
10,701(0)(1,451)(1)(2,029)(1,576)¥¥

Unlisted equity securities of ¥143 million and investments in LPS of ¥285 million were excluded from theabove table because they do not have readily determinable market values and their fair values are virtually
impossible to estimate.
Securities sold during the years ended March 31, 2013 and 2012 were as follow.
Millions of yen
2013

Equity securities··············································

Sales amounts

Gain on sale

¥

¥

5

Loss on sale

-

¥

-

Thousands of U.S. dollars (Note 1)2013

Equity securities··············································

Sales amounts

Gain on sale

$

$

54

Loss on sale

-

$

-

Millions of yen
2012

Equity securities··············································

Sales amounts

Gain on sale

Loss on sale

¥

¥

¥

39

28

－

If the market value of a security as of the fiscal year-end declines more than 50% compared with theacquisition cost of such security, the difference between such security’s fair market value and carrying amount isrecognized as loss on valuation in the period of such decline.
In addition, if the market value of a security as of the fiscal year-end declines 30% to 50% compared withthe acquisition cost of such security, and such decline is considered to be material and unrecoverable, thedifference between such security’s fair market value and carrying amount is recognized as loss on valuation in
the period of such decline.
40

Loss on valuation of marketable Available-for-sale Securities for the years ended March 31, 2013 and 2012were ¥969 million ($10,305 thousand) and ¥4 million, respectively.
10. DERIVATIVE FINANCIAL INSTRUMENTS
The aggregate amounts contracted to be paid or received under, and the fair values and unrealized gains(losses) of, currency-related derivative transactions, other than market trades (and excluding hedging
transactions) as of March 31, 2013 and 2012 were as follows.

Millions of yen
Notional
DueAmountafter
one year
Total

At March 31, 2013:
Foreign currency forward
contracts:
Buy, call ··························
Total ···································

¥

741

¥

-

Fair
value

¥
¥

Millions of U.S.
dollars
Notional
DueAmountafter
one year
Total

At March 31, 2012:
Currency swap contracts:
Pay yen, receive U.S.
dollars···························
Currency option
contracts:
Buy, call ··························
Sell, put ···························
Total ···································

$

4

6
13

$

Unrealized
gains(losses)Thousands of U.S. dollars(Note 1)
Unrealized
gains(losses)
Fair value

¥
¥

$
$

Millions of yen

739
739

(2)
(2)

7,863
7,863

$
$

(16)
(16)

Millions of yen
Unrealized
gains(losses)

Fair
value

-

¥

(65)

-

(284)
¥ (349)

¥

(65)

¥

(32)
(143)
(240)

The fair value has been quoted based on the price information from the contracted financial institution.
Derivative instruments which qualified as hedging instruments as of March 31, 2013 and 2012 were as
follows.
Notional amount
Total
Over one year
Millions of yen

At March 31, 2013:
Interest rate swap contracts:
Pay fixed, receive floating············································ ¥105,352¥

72,850Fair value

¥

(*1)

Thousands of U.S. dollars (Note 1)

At March 31, 2013:
Interest rate swap contracts:
Pay fixed, receive floating············································ $41

1,120,170$

774,588$(*1)

Notional amount
Total
Over one year
Millions of yen

At March 31, 2012:
Interest rate swap contracts:
Pay fixed, receive floating············································ ¥Currency swap contracts:
Buy - U.S. dollars·························································

53,276¥27,35259

Fair value

¥

(*1)

-

(11) (*2)(*1) The fair value of an interest rate swap contract is included in the fair value of the corresponding hedged
long-term loan payable described under note 8, entitled the “FINANCIAL INSTRUMENTS”, since suchderivative contract is accounted for as component of the corresponding hedged long-term loan payable.
(*2) The fair value has been quoted based on the price information from the contracted financial institution.
11. ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT

2013

Accumulated depreciation ················································¥

Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2012¥

215,828

152,277$

2,294,818

12. IMPAIRMENT LOSSAs a minimum unit for generating cash flows, each retail store or branch office is grouped and assessed.
The book values of cash-generating units which may incur operating losses continuously were written down tosuch units’ respective recoverable amounts. Investment/rental properties and idle assets are individuallyconsidered, and an impairment loss is recognized if, with respect to an investment/rental property, the fair value
becomes significantly lower than the carrying amount, or with respect to an idle asset, there is no prospect for
future use.
An impairment loss was recorded at the amount by which the carrying amount of each group of assets
exceeded its recoverable value. The recoverable amounts from such asset groups were mainly based on the net
selling price, which in turn was based on the value assessed for property tax purposes. The net selling prices ofintangible assets, lease assets and long-term prepaid expenses were set at zero.
The summary of impairment losses recorded for the fiscal years ended March 31, 2013 and 2012 is as follows.
Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013

Buildings and structures·················································
Land ···············································································
Lease assets····································································
Other tangible assets ······················································
Intangible assets ·····························································
Long-term prepaid expenses ··········································
Total ···············································································

¥

¥

50
28
17
2
14
111

2012

¥

¥

891
40
111
295
72
67
1,476

$

$

536
296
180
23
146
1,181

Impairment losses for the year ended March 31, 2013 mainly related to retail stores and a property locatedin Akita prefecture used for the Group’s own business. Impairment losses for the year ended March 31, 2012
mainly related to retail stores and an investment/ rental property located in Kanagawa Prefecture.

42

13. LEASE INFORMATIONAs Lessee(i)Finance lease transactions without title transfer

The Company and its consolidated subsidiaries lease mainly retail buildings and equipment and a set ofcomputer equipment.
(ii)

Operating lease transactions

Future minimum lease payments under non-cancelable operating leases as of March 31, 2013 and 2012were as follows.

Millions of yen
2013

Due within one year ························································
Due after one year ··························································
Total ············································································

¥
¥

2012

12,25887,48399,741¥¥

11,68591,200102,885

Thousands of
U.S. dollars(Note 1)
2013$

130,337
930,171$ 1,060,508

As Lessor(i)

Operating lease transactions

Future minimum lease receivables under non-cancelable operating leases as of March 31, 2013 and 2012were as follows.

Millions of yen
2013

Due within one year ·························································
Due after one year ···························································
Total ·············································································

¥
¥

286
1,489
1,775

2012

¥
¥

246
1,735
1,981

Thousands of
U.S. dollars(Note 1)
2013

$
$

3,040
15,832
18,872

14. SHORT-TERM AND LONG-TERM DEBTS
The weighted-average rates of interest for short-term loans payable were approximately 0.55% and 1.13%
as of March 31, 2013 and 2012, respectively.
The weighted-average rates of interest for current portion of long-term loans payable were approximately
1.08% and 1.33% as of March 31, 2013 and 2012, respectively.
The weighted-average rates of interest for long-term loans payable (excluding current portion) wereapproximately 0.86% and 1.35% as of March 31, 2013 and 2012, respectively, and long-term loans payable were
to be due in 2014 through 2019 and 2013 through 2019 as of March 31, 2013 and 2012, respectively.
The weighted-average rates of interest for finance lease obligations have not been disclosed since related
interest charges are allocated using the straight-line method over the lease terms.
The weighted-average rate of interest for current portion of other interest bearing liabilities (current portionof long-term accounts payable) was approximately 1.59% as of March 31, 2013.
43

The weighted-average rate of interest for other interest bearing liabilities (long-term accounts payable)
excluding current portion was approximately 2.65% as of March 31, 2013, and long-term accounts payable wasto be due in 2014 through 2018 as of March 31, 2013.
Short-term and long-term debts as of March 31, 2013 and 2012 consisted of the following.

Millions of yen
2013

Short-term loans payable ·················································
Long-term loans payable (due within one year)···············
Lease obligations (due within one year) ··························
Other interest bearing liabilities- Long-term other payable (due within one year)
Sub-total·····································································
Long-term loans payable (excluding amounts due
within one year)····························································
Lease obligations (excluding amounts due within oneyear) ·············································································
Other interest bearing liabilities- Long-term other payable (excluding amounts due
within one year)····························································
Sub-total·····································································
Total ···········································································

¥

¥

2012

113,835
43,868
1,988¥

Thousands of
U.S. dollars(Note 1)
2013

25,00032,251
2,973$ 1,210,367
466,428
21,141

163
159,854

60,224

1,733
1,699,669

102,794

35,359

1,092,974

2,374

2,701

25,240

1,272
106,440
266,294

38,06098,284

13,5191,131,733$ 2,831,402¥

The following assets were pledged as collateral for, in addition to other transactions, long-term loans
payable (including current portion) of ¥0 million ($0 thousand) and ¥4,286 million as of March 31, 2013 and2012, respectively.

Millions of yen
2013

Cash and time deposits (*1) ·············································
Inventories (*2)································································
Buildings and structures···················································
Land (*3) ·········································································
Total ···········································································

¥

¥

2012

100
120
220

¥

¥

84
1,468
3,557
5,109

Thousands of
U.S. dollars(Note 1)
2013

$

1,063
-

$

1,273
2,336

(*1) Pledged as collateral for bank overdraft contracts with a maximum amount of ¥100 million ($1,063
thousand) as of March 31, 2013(*2) Pledged as collateral for bank loans of ¥395 million of designated buyers of inventories as of March 31,
2012(*3) Of the Land pledged, ¥120 million ($1,272 thousand) and ¥152 million were pledged as collateral for
housing loans of ¥86 million ($919 thousand) and ¥101 million, respectively, of customers as ofMarch 31, 2013 and 2012, respectively.
The aggregate annual maturities of long-term loans payable as of March 31, 2013 were as follows.

44Thousands of
U.S. dollars(Note 1)Millionsof yenFiscal year ending March 31,

2014 ···································································································
2015 ···································································································
2016 ···································································································
2017 ···································································································
Thereafter···························································································
Total ···························································································¥¥

43,86835,67924,188
23,117
19,810146,662$

466,428
379,358
257,183
245,790
210,643
1,559,402$

The aggregate annual maturities of finance lease obligations as of March 31, 2013 were as follows.
Thousands of
U.S. dollars(Note 1)Millionsof yenFiscal year ending March 31,

2014 ···································································································
2015 ···································································································
2016 ···································································································
2017 ···································································································
Thereafter···························································································
Total ···························································································

¥

¥

1,988
1,017
546
347
464
4,362

$

21,141
10,813
5,802
3,688
4,937
46,381$

The aggregate annual maturities of long-term other payable as of March 31, 2013 were as follows.
Thousands of
U.S. dollars(Note 1)Millionsof yenFiscal year ending March 31,

2014 ···································································································
2015 ···································································································
2016 ···································································································
2017 ···································································································
Thereafter···························································································
Total ···························································································

¥

¥

163
165
447
143
517
1,435

$

$

1,733
1,760
4,749
1,516
5,494
15,252The Company has entered into loan commitment agreements amounting to ¥50,000 million ($531,632
thousand) with seven financial institutions. Under these credit facilities, ¥50,000 million ($531,632 thousand)has been executed as of March 31, 2013.
15. CONVERTIBLE BOND-TYPE BONDS WITH SUBSCRIPTION RIGHTS TO SHARESThe outstanding balance of convertible bond-type bonds of the Company and the current conversion prices
into common stock as of March 31, 2013 and 2012 were as follows.

45

Conversion priceper share

Outstanding balance
Thousands ofMillions
U.S. dollarsof yen(Note 1)
2013
2012
2013

Yen

Euro yen zero coupon
convertible bondsdue 2013················
Euro yen zero coupon
convertible bondsdue 2015················
Total¥ 14,137.50¥¥ 13,750.40¥-

59,00059,000¥70,064(70,064)

59,000¥ 129,064(70,064)$$-

627,326
627,326

Conversion
periodMarch 28,
2008 – March
14, 2013
March 28,
2008 – March
17, 2015

No subscription rights were exercised for the year ended March 31, 2013 or 2012.
The amounts in parentheses are due within one year.
16. INCOME TAXES
Taxes on income consist of corporate income taxes, inhabitant taxes and enterprise taxes. The aggregate
statutory tax rates on income before income taxes and minority interests were approximately 37.8% and 40.4%
for the years ended March 31, 2013 and 2012, respectively.
Significant components of deferred tax assets and liabilities as of March 31, 2013 and 2012 were as
follows.

46

Millions of yen
2013

Deferred tax assets:
Loss on valuation of inventories ······································
Impairment loss································································
Loss on valuation of investment securities ······················
Loss on valuation of stock of subsidiaries ·······················
Provision for bonuses·······················································
Provision for point card certificates ·································
Provision for retirement benefits······································
Provision for directors’ retirement benefits······················
Provision for product warranties······································
Asset retirement obligations ············································
Consolidated subsidiaries’ tax loss carry-forward············
Others···············································································
Sub-total···········································································
Valuation allowance ·························································
Total deferred tax assets···················································
Deferred tax liabilities:
Unrealized gains on valuation of land······························
Loss recognized corresponding to asset retirement
obligations ····································································
Foreign currency exchange gains·····································
Others···············································································
Total deferred tax liabilities ·············································Net deferred tax assets ·····················································

¥

¥

2012

2,608
8,350
797
4,121
2,309
8,064
6,169
1,214
4,856
4,559
24,441
7,716
75,204(48,592)
26,612

¥

4,365
3,507
1,440
1,716
1,939
8,170
3,929
1,195
5,221
3,204
19,577
4,221
58,484(26,742)
31,742Thousands of
U.S. dollars(Note 1)
2013$

27,72588,7868,479
43,81924,55385,74365,596
12,906
51,62848,473259,869
82,044
799,621(516,668)
282,953(2,259)(1,117)(24,019)(2,274)(1,319)(1,078)(6,930)19,682(2,015)(218)(3,350)28,392(24,176)(14,020)(11,472)(73,687)
209,266¥$

Net deferred tax assets were included in the following accounts in the consolidated balance sheets as ofMarch 31, 2013 and 2012.

Millions of yen
2013

Current assets – Deferred tax assets·································
Investments and other assets – Deferred tax assets··········
Long-term liabilities – Other long-term liabilities ···········¥

11,643
10,805(2,766)

2012¥

13,74915,978(1,335)

Thousands of
U.S. dollars(Note 1)
2013$

123,793
114,882(29,409)

Reconciliations between the statutory income tax rate and the actual effective income tax rate, as
percentage of income before income taxes and minority interests, for the year ended March 31, 2013 was asfollows. Such information has not been presented for the year ended March 31, 2012 because the difference
between the statutory income tax rate and the effective income tax rate was less than 5% of the effective
statutory income tax rate.

47

2013

Statutory income tax rate
Per capita inhabitant taxes
Change in valuation allowance
Amortization of negative goodwill
Tax rate differences for net loss subsidiaries
Others, net

37.8%
1.8
9.7
(3.2)
8.4
0.2

Effective income tax rate

54.7%

17. CONTINGENT LIABILITIESThe Group was contingently liable for transferred accounts receivable of ¥13,863 million ($147,401
thousand) to credit card companies as of March 31, 2013.
The Group was contingently liable for guarantees of debt made by home buyers and the like in the amountof ¥779 million ($8,282 thousand) as of March 31, 2013.
18. RETIREMENT BENEFITS
Provisions for retirement benefits as of March 31, 2013 and 2012 consisted of the following.

Millions of yen
2013¥

Projected benefit obligation ········································
Fair value of pension assets ········································
Unrecognized actuarial gains and losses·····················
Unrecognized prior service costs ································Net amount recognized in the consolidatedbalance sheets··················································
Prepaid pension cost ···················································
Provision for retirement benefits···························

¥

2012

38,658(17,264)(3,813)133
17,714
1,697
19,411¥¥14,806(2,402)(1,625)308
11,087
11,087

Thousands of
U.S. dollars(Note 1)
2013

$

$

411,039(183,566)(40,548)
1,417
188,342
18,043
206,385

Retirement benefit costs for the years ended March 31, 2013 and 2012 were as follows.

Millions of yen
2013¥

Service costs ·······························································
Interest cost ·································································
Expected return on plan assets ····································
Amortization of actuarial differences··························
Amortization of prior service costs ·····························
Other (contributions to defined contribution
pension plans)··························································Net periodic retirement benefit costs ····················

¥

2,466
468
(144)
555
(64)
265
3,546

2012

¥

¥

1,900
258
(39)
489
(61)
70
2,617

Thousands of
U.S. dollars(Note 1)
2013

$

$

26,221
4,973(1,527)
5,902
(686)
2,816
37,699The discount rates used by the Group were mainly 1.46% and 2.00% for the years ended March 31, 2013
and 2012, respectively. The rate of expected return on plan assets used by the Group was mainly 2.00% for48

both the years ended March 31, 2013 and 2012. The estimated amount of all retirement benefits to be paid at
the future retirement date is allocated equally to each service year using the estimated number of total service
years. Actuarial gains and losses are recognized as income or expense in equal amounts over five years
commencing from the succeeding period. Prior service costs are amortized over five years from the fiscal year
in which such costs are incurred using the straight-line method.
SxL Corporation, a consolidated subsidiary newly acquired during the year ended March 31, 2012,
participates in multi-employer plans for which the required contribution amounts are expensed as incurred. The
latest available actual data on such plans after the deemed date of acquisition of SxL Corporation (October 1,2011) is as follows.
(1) Matters concerning the funded status of the entire plans as of March 31, 2012
Thousands of
U.S. Dollars(Note 1)Millions of yen

March 31, 2012
Amount of pension assets
Amount of benefit obligation
Net

¥
¥

39,662(52,090)(12,428)$$

421,712(553,854)(132,142)(2) Share of the pension fund contribution made by the Group as a percentage of the total plan for the year
ended March 31, 2013 was 16.1%.
(3) Supplemental explanation
The net balance presented in (1) above is mainly composed of the outstanding amount of prior service
cost of ¥11,233 million ($119,436 thousand) and pension shortfall carried forward of ¥1,195 million($12,706 thousand). Prior service cost of the multi-employer plans are amortized over 20 years throughamortization of principal and interest using the straight-line method, and a special contribution of ¥113
million ($1,198 thousand) was recognized as expense in the accompanying consolidated financial
statements for the year ended March 31, 2013.
The share in (2) above does not correspond to the actual share of the obligations owed by the Group.
19. ASSET RETIREMENT OBLIGATIONS
Asset Retirement Obligations Included in the Consolidated Balance Sheets
Asset retirement obligations included in the consolidated balance sheets primarily represent contractual
obligations for restoration related to term leasehold interests in retail stores and the like.
The Company and its consolidated subsidiaries mainly estimate asset retirement obligations by using
discount rates ranging from 0.40% to 2.29% with a term of 1 to 47 years.
Changes in asset retirement obligations for the years ended March 31, 2013 and 2012 were as follows.

49Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013¥

Beginning balance·······················································
Increase due to purchase of property andequipment ································································
Adjustments due to passage of time····························
Decrease due to implementation of asset retirement
obligations ·······························································
Increase due to exchange translation of asset
retirement obligations denominated in foreign
currencies ································································
Other increases ···························································
Ending balance····························································

¥

2012

9,048

¥

7,656

$

96,204

901
222

967
183

9,577
2,358

(181)

(6)

(1,928)15
2,728
12,733

248
9,048

154
29,019135,384¥$

Asset Retirement Obligations Not Included in the Consolidated Balance Sheets
Certain other asset retirement obligations for leasehold contracts, for which the related amount could not bereasonably estimated due to uncertainty regarding the disbursement schedule and/or the incurrence of expense,
have not been included in the consolidated balance sheets.
20. NET ASSETS
Net assets comprise three subsections, which are shareholders’ equity, accumulated other comprehensive
income and minority interests.
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”) and related
regulations.
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of the Board of Directors, designate an amount notexceeding one-half of the prices of the new shares as additional paid-in capital, which is included in capitalsurplus.
Under the Companies Act, in cases where a dividend distribution of surplus is made, the smaller of anamount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of theadditional paid-in-capital and legal earnings reserve must be set aside as additional paid-in-capital or legal
earnings reserve. The legal earnings reserve has been included in retained earnings in the accompanying
consolidated balance sheets.
Under the Companies Act, the legal earnings reserve and additional paid-in capital can be used to eliminate
or reduce a deficit or capitalized by a resolution at the shareholders’ meeting. Under the Companies Act, allpaid-in capital and legal earnings reserve may be transferred to other capital surplus and retained earnings,
respectively, which may become available for distribution as dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with Japanese laws and regulations.
At the Ordinary General Meeting of Shareholders held on June 27, 2013, the shareholders approved cash
dividends amounting to ¥5,653 million ($60,102 thousand). Such appropriations have not been accrued in the
consolidated financial statements as of March 31, 2013 as they are to be recognized in the period in which they
are approved by the shareholders.

5021. STOCK OPTIONSNo stock option expense was recognized for the years ended March 31, 2013 and 2012.
The stock options issued by SxL Corporation and outstanding as of March 31, 2013 were as follows.
2009 stock option

Persons granted ····························································· 4 directors and 71 employees
Number of options granted expressed in number ofcommon stock····························································· 597,000 shares
Date of grant·································································· December 14, 2009
Vesting condition··························································· Continued employment from the date of grant to theend of vesting period (September 30, 2011)
Service period covered ·················································· From December 14, 2009 to September 30, 2011
Exercise period······························································ From December 15, 2011 to September 30, 2013
The stock option activity expressed in number of common stock for the year ended March 31, 2013 was asfollows.
2009 stock option

Number of stock options expressed in number of common stock
March 31, 2012 – Outstanding (*) ····················································
Vested ··························································································
Exercised·····················································································
Forfeited ······················································································March 31, 2013 - Outstanding ··························································

Price information:
Exercise price ·························································································
Average price at exercise date ································································
Fair value at the grant date ·····································································(*)

279,000(137,000)(3,000)139,000
U.S. dollars(Note 1)

Yen

¥
¥
¥

46
173
15

$
$
$

0.49
1.84
0.16

As of September 30, 2011, all of the above stock options were vested.

22. COST OF SALES
The ending balance of inventories is measured at the lower of cost or market value. Losses on valuationof inventories included in cost of sales for the years ended March 31, 2013 and 2012 were ¥195 million ($2,072
thousand) and ¥5,443 million, respectively.
23. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The major components of “Selling, general and administrative expenses” for the years ended March 31,
2013 and 2012 were as follows.

51

Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013

Advertising····································································
Salaries··········································································
Rent expenses································································
Depreciation··································································
Point card-related promotion·········································
Others············································································
Total ··············································································

¥

¥

2012

30,829100,81062,624
20,55759,271
110,498
384,589¥¥

29,33990,351
56,18919,75580,833
98,405374,872$$

327,792
1,071,873
665,862
218,575
630,207
1,174,885
4,089,194

24. OTHER INCOME (EXPENSES)“Others, net” in “Other income (expenses)” in the consolidated statements of income for the years ended
March 31, 2013 and 2012 included the following.
Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013

Surrender value of insurance·········································
Penalty income from breach of leasehold contracts ······
Gain on sales of investment securities ··························
Rent expenses································································
Loss on disposal of non-current assets··························
Loss on valuation of investment securities ···················
Provision for loss on liquidation of subsidiaries ···········
Loss on disaster·····························································
Others, net ·····································································
Total ··············································································

52

¥

¥

64
(995)
(303)
(969)
(558)
6,647
3,886

2012

¥

¥

77
36
28
(855)
(147)
(4)
(20)
7,371
6,486

$

$

678
(10,582)(3,224)(10,305)(5,927)70,68041,32025. OTHER COMPREHENSIVE INCOME
Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive
income in the current or previous periods and tax effects for each component of other comprehensive income
were as follows.
Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013

Valuation difference on available-for-sale securities:
Amount arising during the year ·································
Reclassification adjustments······································
Valuation difference on available-for-sale securities
before related tax effect········································
Related tax effect ·······················································
Valuation difference on available-for-sale securities,
net of taxes ···························································
Deferred gains and losses on derivatives under hedge
accounting:Amount arising during the year ·································
Reclassification adjustments······································
Deferred gains and losses on derivatives underhedge accounting before related tax effect ···········
Related tax effect ·······················································
Deferred gains and losses on derivatives underhedge accounting, net of taxes ·····························
Foreign currency translation adjustments:
Amount arising during the year ·································
Reclassification adjustments······································
Foreign currency translation adjustments before
related tax effect ···················································
Related tax effect ·······················································
Foreign currency translation adjustments, net oftaxes ·····································································
Share of other comprehensive income of associates
accounted for using equity method:Amount arising during the year ·································
Reclassification adjustments······································
Share of other comprehensive income of associates
accounted for using equity method··························
Total other comprehensive income ··································

¥

¥

2012

555
969

¥

102
(18)

$

5,895
10,305

1,524(1,075)84(115)

16,200(11,431)

449

(31)

4,769

(34)
-

34
-

(360)
-

(34)
-

34
-

(360)
-

(34)

34

(360)

(107)
-

-

(1,131)
-

(107)
-

-

(1,131)
-

(107)

-

(1,131)

5
-

-

52
-

5
313

3

52
3,330

¥

$

26. SEGMENT INFORMATION
Segment Information for the Year Ended March 31, 2013-

Segment Information

The Company and its consolidated subsidiaries have been primarily engaged in the sales of home electricalappliances and home information appliances, which constitute a single segment. Therefore, disclosures related
to segment information have been omitted.

53-Supplemental Information on Reportable Segment
Information about products and services for the years ended March 31, 2013 and 2012 were as follows.
Millions of yen
2013
Home
information
appliancesHome electricalappliances

Sales to external customers······¥

976,731¥$ 10,385,231¥

213,335

Thousands of U.S. dollars (Note 1)
2013
Home
information
appliances
Other productsHome electricalappliances

Sales to external customers······

511,423

Other products$

5,437,778$

2,268,315

Total¥ 1,701,489

Total$ 18,091,324

Millions of yen
2012
Home
information
appliancesHome electricalappliances

Sales to external customers······¥

1,162,164¥

524,979

Other products¥

148,311

Total¥ 1,835,454

Information about geographic area for the year ended March 31, 2013 has not been disclosed because sales
to domestic customers and total property and equipment located in Japan accounted for more than 90% ofconsolidated sales and total property and equipment, respectively. Information about geographic area for theyear ended March 31, 2012 has not been disclosed because neither were there any sales to external customers inoverseas markets nor property and equipment located overseas.
Information about major customers has not been disclosed since no single customer accounted for morethan 10% of consolidated sales.
-

Information about Impairment Loss on Long-Lived Assets in Reportable Segment

The Company and its consolidated subsidiaries have been primarily engaged in the sales of home electricalappliances and home information appliances, which constitute a single segment. Therefore, information on
impairment loss on long-lived assets has been omitted.
-

Information about Amortization and Unamortized Balances of Goodwill by Reportable Segment

For the years ended and as of March 31, 2013 and 2012, amortization and unamortized balance of goodwill
resulting from business combinations were as follows.

54

Sales of home electrical appliancesand home information appliances
retail businessThousands of U.S.
dollars (Note 1)

Millions of yen

2013
Amortization of goodwill··················
Ending balance··································

¥
¥

2012
1,106
8,573

¥
¥

2013
231
1,397

$
$

11,755
91,159For the years ended and as of March 31, 2013 and 2012, amortization and unamortized balance of negative
goodwill resulting from business combinations occurring before April 1, 2010 were as follows.
Sales of home electrical appliancesand home information appliances
retail businessThousands of U.S.
dollars (Note 1)

Millions of yen

2013
Amortization of negative goodwill ···Ending balance··································

2012

¥
¥

142
-

¥
¥

2013
225
142

$
$

1,505
-

27. RELATED PARTIES
Significant balances with related parties as of March 31, 2013 and 2012 and related transactions for theyears ended March 31, 2013 and 2012 were as follows.

Thousands of
U.S. dollars(Note 1)
2013

Millions of yen
2013
2012

Balances of the Company:
Tecc Planning Co., Ltd., 100% directly owned by Noboru
Yamada, representative director, chairman, and his
relatives:
Prepaid expense (prepaid rent) ···········································
Guarantee deposits (due within one year) ··························
Guarantee deposits ·····························································

¥

79
146
2,928

¥

77
146
3,060

$

841
1,557
31,136

Puinpul Co., Ltd., subsidiary of Tecc Planning Co., Ltd.:
Accounts payable ·······························································

9

2

100

Principal transactions of the Company:
Tecc Planning Co., Ltd., 100% directly owned by Noboru
Yamada, representative director, chairman, and his
relatives:
Payment of company house rent and lease and guarantee
deposit···········································································
Sales of inventories ····························································

914
13

887
16

9,719
137

Puinpul Co., Ltd., subsidiary of Tecc Planning Co., Ltd.:Sales of inventories ····························································
Purchases of inventories ·····················································

48

15
11

512

55

28. SUBSEQUENT EVENTS(1) Closure of the stores
1) Yamada Denki (Nanjing) Co., Ltd. store
The Company resolved to close the “Yamada Denki Nanjing store (China)”, a store of Yamada Denki(Nanjing) Co., Ltd., a non-consolidated subsidiary, at the meeting of the Board of Directors held on April 22,
2013.
(a) Reason for the closure
Principally due to sluggish sales(b) Store summary(i) Name(ii) Location(iii) Floor space

Yamada Denki Nanjing store (China)
38 Hongwu Road, Baixia District, Nanjing, People’s Republic of China
16,000m2(c) Closure dateJune 15, 2013
2) Yamada Denki (Tianjin) Co., Ltd. store
The Company resolved to close the “Yamada Denki Tianjin store (China)”, a store of Yamada Denki (Tianjin)
Co., Ltd., a non-consolidated subsidiary, at the meeting of the Board of Directors held on June 10, 2013.
(a) Reason for the closure
Principally due to sluggish sales(b) Store summary(i) Name(ii) Location(iii) Floor space

Yamada Denki Tianjin store (China)
219 Nanjing Road, Heping District, Tianjin, People’s Republic of China
15,000m2(c) Closure dateJune 30, 2013
3) Impact on consolidated business performance
As a result of the stores’ closure, “Income before income taxes and minority interests” for the year ended
March 31 ,2014 is expected to decrease by 11,023 million ($117,200 thousand).
(2) Issuance of subscription rights to shares (stock options)
At the meeting of the Board of Directors held on June 27, 2013, the Company resolved to issue subscription
rights to shares as stock-based compensation stock options for directors of the Company in accordance with theprovisions of Articles 236, 238 and 240 of the Companies Act. Subscription rights to shares were allocated on
July 12, 2013 as described below.
56

(a) Number of subscription rights to shares
4,831 units (The number of shares per one subscription right to shares shall be 10 shares.)(b) Type of shares to be issued upon exercise of subscription rights to shares
Common stock of the Company(c) Number of shares to be issued upon exercise of subscription rights to shares
48,310 shares(d) Subscription amount payable when exercising the granted subscription rights to shares¥1 per share(e) Exercise period of subscription rights to shares
From July 13, 2013 to July 12, 2043
(f) Conditions for exercise of subscription rights to shares(i)

If the situation arises within the period stated in the above (e) where the holder of subscription
rights to shares loses his/her position with the Company or a subsidiary of the Company as director,
audit & supervisory board member, executive officer or employee, the subscription rights to sharescan be exercised in lump-sum only during a period of 10 days beginning on the date immediately
following the date of above-mentioned loss of position (if the 10th day is on a holiday, theimmediately following business day will be deemed the final valid day).
(ii) If a holder of subscription rights to shares dies, the heir of such person can exercise such
subscription rights to shares in lump-sum only.
(g) Matters regarding transfer of subscription rights to shares
An acquisition of the subscription rights to shares by transfer shall require approval by a resolution of theBoard of Directors of the Company.
(3) Stock Split and Change of the number of Share Trading Unit
At the meeting of the Board of Directors held on August 12, 2013, the Company resolved to implement a
stock split and change the number of its share trading unit as described below.
(a) Stock split and change of the number of share trading unit
In accordance with the “Action Plan for Consolidating Trading Units” announced on November 27, 2007
by all of the stock exchanges in Japan, the Company will conduct a 1:10 stock split of its common stockand change of the number of its share trading unit from 10 shares to 100 shares.
There will be no actual change in investment units by a result of this stock split and change of thenumber of share trading unit.
(b) Stock split(i)

Method of stock split
Shares of common stock held by shareholders listed or recorded in the final shareholder registry as
of September 30, 2013 will be split at a ratio of 10 to one.
57

(ii) Increase in shares resulting from the stock split
The number of shares shall be increased by multiplying by 9 the final total number of issued
shares as of September 30, 2013. The total number of issued shares after the stock split shall be as
follows if calculated on the basis of the total number of issued shares as of August 12, 2013.
Shares issued prior to the stock split
96,648,974 shares (as of August 12, 2013)
Increase resulting from the stock split
869,840,766 shares
Shares issued after the stock split
966,489,740 shares
Total of shares authorized for issue after the
2,000,000,000 sharesstock split
Note: The above total number of issued shares may increase due to the exercise ofsubscription rights to shares.
(iii) Schedule of stock split
Public notice date of the record date
Record date
Effective date

To be decided
Monday, September 30, 2013
Tuesday, October 1, 2013(iv) Adjustment of conversion price and exercise price per share upon exercise of subscription rights tosharesIn line with the above-mentioned stock split, the following adjustments will be made from October
1, 2013.
Conversion price after
adjustment

Conversion price before
adjustment

Euro yen zero coupon¥1,375.00¥13,750.40
convertible bonds due 2015
Euro yen zero coupon convertible bonds due 2015 were issued based on a resolution made by
the Board of Directors of the Company on February 26, 2008.
Exercise price after
adjustment

Exercise price before
adjustment

1st stock-based compensation¥1¥1
stock options
The 1st stock-based compensation stock options were issued based on a resolution approvedat the General Meeting of Shareholders held on June 27, 2013.
(v) Effect on per share information
If the above-described stock split had occurred at the beginning of the previous fiscal year, pershare information (basic net income per share and diluted net income per share) for the fiscal years
ended March 31, 2012 and 2013 would have been as described below.
Yen
2013

Amounts per share of common stock:
Basic net income
Diluted net income

2012

U.S. dollars(Note 1)2013$
¥ 61.84
0.25
23.56
–
–
–
Note: Diluted net income per share for the fiscal years ended March 31, 2012 and 2013 is
not presented because the Company had no share with dilutive effects.

58¥

(c) Change of the number of share trading unit(i)

The number of share trading unit to change
At the same time of the implementation of the stock split, the number of share trading unit will bechanged from 10 shares to 100 shares.

(ii) Timing of change
Effective date: October 1, 2013
(4) Appropriations of Retained Earnings
The following appropriations of retained earnings were approved at the General Meeting of Shareholders
held on June 27, 2013.

Millionsof yenYear-end cash dividends, ¥60 ($0.64) per share·······························******

59

¥

5,653

Thousands of
U.S. dollars(Note 1)$

60,102

60