Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
Years ended March 31, 2008 and 2009
with Report of Independent Auditors

Yodogawa Steel Works, Ltd.
Consolidated Financial Statements
Years ended March 31, 2008 and 2009

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

Consolidated Financial Statements
Consolidated Balance Sheets............................................................................................... 2
Consolidated Statements of Income .................................................................................... 4
Consolidated Statements of Changes in Net Assets............................................................ 5
Consolidated Statements of Cash Flows ............................................................................. 7
Notes to Consolidated Financial Statements ....................................................................... 9Report of Independent Auditors
The Board of Directors
Yodogawa Steel Works, Ltd.

We have audited the accompanying consolidated balance sheets of Yodogawa Steel Works,
Ltd. and consolidated subsidiaries as of March 31, 2008 and 2009, and the related
consolidated statements of income, changes in net assets, and cash flows for the years thenended, all expressed in yen. These financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Yodogawa Steel Works, Ltd. andconsolidated subsidiaries at March 31, 2008 and 2009, and the consolidated results of theiroperations and their cash flows for the years then ended in conformity with accounting
principles generally accepted in Japan.
Supplemental Information
As described in Note 2(2), effective the year ended March 31, 2009, the Company anddomestic consolidated subsidiaries have applied the “Accounting Standard for
Measurement of Inventories.”
As described in Note 21(1), the Company has received advance notice from the Japan Fair
Trade Commission, directing the Company to cease and desist from violating the
Antimonopoly Law and to pay penalties for alleged violations of the Law.
The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2009 are presented solely for convenience. Our audit
also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 3.

Osaka, Japan
June 26, 20091

Yodogawa Steel Works, Ltd.
Consolidated Balance Sheets
March 31, 2008 and 2009

Millions of yen
2009
2008
AssetsCurrent assets:
Cash and deposits (Note 4)
Marketable securities (Note 5)
Notes and accounts receivable:
Unconsolidated subsidiaries and affiliates(Note 19)
Trade
Less allowance for doubtful receivables
Inventories (Note 6)
Deferred income taxes (Note 11)
Other current assets
Total current assets

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

Investments and other assets:
Investments in securities (Notes 5 and 9)
Investments in and advances to unconsolidated
subsidiaries and affiliates
Deferred income taxes (Note 11)
Other assets
Total investments and other assets

Total assets

2¥ 13,058
4,721¥

14,026
10,356

Thousands of
U.S. dollars(Note 3)
2009$

142,787
105,426

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

8,255
22,948(183)
31,2702,406
3,964
93,042

84,037
233,615(1,863)
318,335
24,49440,354
947,185

18,79951,617

18,88550,417

192,253513,255

128,170–979(142,500)
57,065

123,71215
1,850(141,840)
53,0391,259,411
153
18,833(1,443,958)
539,947

36,116

24,718

251,634

4,390
790
2,756
44,052

4,095
1,068
2,908
32,78941,688
10,872
29,604
333,798¥ 206,860¥ 178,870$ 1,820,930

Thousands of
U.S. dollars(Note 3)2009

Millions of yen
2009
2008
Liabilities and net assets
Current liabilities:
Short-term bank loans (Note 8)
Current portion of finance lease obligations
Notes and accounts payable:
Unconsolidated subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes (Note 11)
Other current liabilities (Note 9)
Total current liabilities
Long-term liabilities:
Accrued retirement benefits for employees(Note 10)
Accrued retirement benefits for directors andcorporate auditors
Guarantee deposits (Note 8)
Finance lease obligations, less current portion
Negative goodwill
Deferred income taxes (Note 11)
Deferred income taxes on land revaluation reserve(Note 11)
Other long-term liabilities
Total long-term liabilities

¥

702
–

¥

–
3

$

–
31

1,316
18,343
1,582
3,931
2,130
3,521
31,525532
13,548
1,268
3,220
1,827
1,335
21,733

5,416
137,921
12,90832,78018,59913,591
221,246

7,455

7,190

73,196

69
3,878
–
122
4,425

74
3,782
9
106
320

753
38,501
92
1,079
3,258

1,105
192
17,2461,025
22
12,52810,434
224
127,537

23,221
23,776
94,43723,221
23,764
93,061

236,394
241,922
947,379(7,431)
134,003(7,429)132,617(75,629)
1,350,066

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

2,567
1,334
(4,547)(646)
74
12,564
144,609¥ 178,870

26,133
13,580(46,289)(6,576)753
127,904
1,472,147$ 1,820,930

Contingent liabilities (Note 16)
Net assets:
Shareholders’ equity (Note 12):
Common stock:
Authorized: 753,814,067 shares in 2008 and2009
Issued: 184,186,153 shares in 2008 and 2009
Capital surplus
Retained earnings (Note 21(2))
Treasury stock, at cost – 18,473,745 shares in2008 and 18,475,222 shares in 2009
Total shareholders’ equity
Valuation and translation adjustments:
Unrealized holding gain on securities (Note 5)
Land revaluation reserve (Note 13)
Translation adjustments
Total valuation and translation adjustments
Stock acquisition rights
Minority interests
Total net assets
Total liabilities and net assets

See accompanying notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd.
Consolidated Statements of Income
Years ended March 31, 2008 and 2009

Millions of yen
2008
2009
Net sales (Note 19)
Cost of sales
Gross profit
Selling, general and administrative expenses(Note 14)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of an affiliate
Foreign exchange gains
Gain on sales of investments in securities
Loss on impairment of investments insecurities (Note 5)
Loss on sales or disposal of property, plantand equipment, net
Loss on impairment of fixed assets(Note 7)
Gain on execution of an option on equity
securities
Loss on devaluation of derivatives
Reversal of allowance for doubtfulreceivables
Loss on discontinued products
Other, net
Income before income taxes and minority
interests
Income taxes (Note 11):
Current
DeferredIncome before minority interests
Minority interests
Net income

Thousands of
U.S. dollars(Note 3)2009

¥ 207,398
179,150
28,248¥ 194,601
173,468
21,133$ 1,981,075
1,765,937
215,138

16,992
11,25615,994
5,139

162,82252,316

1,012
(101)
432
88
313

1,100
(94)
177
268
2

11,198
(957)
1,802
2,728
20

(569)

(2,459)(25,033)

(407)

(123)

(1,252)

(6)

(214)

(2,179)

780
(271)

–
(41)

–
(417)

35
(217)
(44)

150
–
76

1,527
–
774

12,301

3,981

40,527

3,748
65
3,813
8,488

3,602
(1,934)
1,668
2,313

36,669(19,689)
16,98023,547(1,434)¥ 7,054

(893)
1,420

(9,091)
14,456¥$

See accompanying notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd.
Consolidated Statements of Changes in Net Assets
Years ended March 31, 2008 and 2009
Millions of yen

Balance at March
31, 2007
Cash dividends
Bonuses todirectors andcorporate
auditors of an
overseassubsidiary
Bonuses to
employees of an
overseassubsidiary
Net income
Acquisition oftreasury stock
Disposition oftreasury stockReversal of land
revaluation
reserve
Other changes
Balance at March
31, 2008
Effect of changes
in accounting
policies applied
to an overseas
subsidiary
Cash dividends
Bonuses todirectors andcorporate
auditors of an
overseassubsidiary
Bonuses to
employees of an
overseassubsidiary
Net income
Acquisition oftreasury stock
Disposition oftreasury stockReversal of land
revaluation
reserve
Other changes
Balance at March
31, 2009

Translation
adjustments

Totalvaluationandtranslation
adjustments

StockacquisitionrightsMinority
interests

Total net
assetsNumber ofshares issued

Commonstock

CapitalsurplusRetainedearnings

Treasurystock, at
cost

Total
shareholders’equityUnrealized
holding
gain onsecurities

184,186,153–¥ 23,221–¥ 23,547–¥ 89,393(2,190)¥ (6,235)–¥ 129,926(2,190)¥ 17,036–¥ 1,642–¥ (1,068)–¥ 17,610–¥ 25–¥ 16,436–¥ 163,997(2,190)

–

–

–

(10)

–

(10)

–

–

–

–

–

–

(10)

–
–

–
–

–
–

(30)
7,054

–
–

(30)
7,054

–
–

–
–

–
–

–
–

–
–

–
–

(30)
7,054

–

–

–

–

(2,185)(2,185)

–

–

–

–

–

–

(2,185)

–

–

229

–

989

1,218

–

–

–

–

–

–

1,218

–
–

–
–

–
–

220
–

–
–

220
–

–
(8,356)

–
(220)

–
(502)

–
(9,078)

–
24

–
(931)

220
(9,985)

184,186,153

23,221

23,776

94,437(7,431)

134,003

8,680

1,422

(1,570)8,532

49

15,505

158,089

–
–

–
–

–
–

(36)
(2,817)––(36)(2,817)

–
–

–
–

–
–

–
–

–
–

–
–

(36)
(2,817)

–

–

–

(6)

–

(6)

–

–

–

–

–

–

(6)

–
–

–
–

–
–

(19)
1,420

–
–

(19)
1,420

–
–

–
–

–
–

–
–

–
–

–
–

(19)
1,420

–

–

–

–

(32)

(32)

–

–

–

–

–

–

(32)

–

–

(12)

–

34

22

–

–

–

–

–

–

22

–
–

–
–

–
–

82
–

–
–

82
–

–
(6,113)–(88)–(2,977)–(9,178)–25–(2,941)

82(12,094)

184,186,153¥ 23,221¥ 23,764¥ 93,061¥ (7,429)¥ 132,617¥ 2,567¥ 1,334¥ (4,547)

(646)

¥ 74

¥ 12,564¥ 144,609

Land
revaluation
reserve¥5

Yodogawa Steel Works, Ltd.
Consolidated Statements of Changes in Net Assets (continued)
Years ended March 31, 2008 and 2009
Thousands of U.S. dollars (Note 3)

Balance at March
31, 2008
Effect of changes
in accounting
policies applied
to an overseas
subsidiary
Cash dividends
Bonuses todirectors andcorporate
auditors of an
overseassubsidiary
Bonuses to
employees of an
overseassubsidiary
Net income
Acquisition oftreasury stock
Disposition oftreasury stockReversal of land
revaluation
reserve
Other changes
Balance at March
31, 2009

Translation
adjustments

Totalvaluationandtranslation
adjustments

StockacquisitionrightsMinority
interests

Total net
assetsCommonstock

CapitalsurplusRetainedearnings

Treasurystock, at
cost

Total
shareholders’equityUnrealized
holding
gain onsecurities$ 236,394$ 242,044$ 961,387$ (75,649)$ 1,364,176$ 88,364$ 14,476$ (15,983)$ 86,857$ 499$ 157,844$ 1,609,376

–
–

–
–

(366)
(28,678)

–
–

(366)
(28,678)

–
–

–
–

–
–

–
–

–
–

–
–

(366)
(28,678)

–

–

(61)

–

(61)

–

–

–

–

–

–

(61)

–
–

–
–

(193)
14,456––(193)
14,456

–
–

–
–

–
–

–
–

–
–

–
–

(193)
14,456

–

–

–

(326)

(326)

–

–

–

–

–

–

(326)

–

(122)

–

346

224

–

–

–

–

–

–

224

–
–

–
–

834
–

–
–

834
–

–
(62,231)

–
(896)

–
(30,306)–(93,433)–
254–(29,940)

834(123,119)$ 236,394$ 241,922$ 947,379$ (75,629)$ 1,350,066$ 26,133$ 13,580$ (46,289)$ (6,576)$ 753$ 127,904$ 1,472,147

Land
revaluation
reserveSee accompanying notes to consolidated financial statements.
6

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows
Years ended March 31, 2008 and 2009

Millions of yen
2008
2009
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Amortization of negative goodwill
Equity in earnings of an affiliate(Decrease) increase in accrued retirement benefits
Increase (decrease) in accrued bonuses
Decrease in allowance for doubtful receivables
Interest and dividend income
Interest expense
Gain on sales of investments in securities
Loss on impairment of investments in securities
Loss on sales or disposal of property, plant andequipment, net
Loss on impairment of fixed assets(Increase) decrease in notes and accounts
receivable
Decrease in inventories
Increase (decrease) in notes and accounts payable
Bonuses to directors, corporate auditors andemployees of an overseas subsidiary
Gain on execution of an option on equity
securities
Loss on devaluation of derivatives
Loss on discontinued products
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 12,301¥

3,981

Thousands of
U.S. dollars(Note 3)
2009$

40,527

5,981
(19)
(432)
(220)
16
(50)
(1,012)
101
(313)
569

6,215
(28)
(177)
219
(268)
(147)
(1,100)
94
(2)
2,459

63,270(285)(1,802)2,229(2,728)(1,496)(11,198)957(20)
25,033

407
6

123
214

1,252
2,179

(3,152)
1,178
81

16,43848(5,250)167,342489(53,446)

(40)

(25)

(255)

(780)
271
217
519
15,6291,082(103)(4,339)¥ 12,269–
41–(2,710)20,125
1,151(93)(3,663)¥ 17,520–
417–(27,588)
204,877
11,717(947)(37,290)$ 178,357

7

Yodogawa Steel Works, Ltd.
Consolidated Statements of Cash Flows (continued)
Years ended March 31, 2008 and 2009

Millions of yen
2009
2008
Cash flows from investing activities:
Investments in time deposits with a maturity ofmore than three months
Proceeds from time deposits with a maturity ofmore than three months
Purchases of marketable securities
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant andequipment
Purchases of intangible fixed assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Proceeds from sale of a hotel business (Note 4)
Execution of loans receivableCollection of loans receivable
Proceeds from execution of an option on securities
Other
Net cash used in investing activities
Cash flows from financing activities:
Decrease in short-term bank loans
Decrease in secured deposits
Proceeds from sales of treasury stock
Purchases of treasury stock
Cash dividends paid to the Company’s
shareholders
Cash dividends paid to shareholders of minority
interests of consolidated subsidiaries
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
(Note 4)

¥

(204)

¥

(839)

Thousands of
U.S. dollars(Note 3)
2009$

(8,541)362(2,689)1,407(3,314)

639
(202)
1,523
(5,201)

6,505(2,056)
15,504(52,947)574(47)(4,289)
4,422
300
(282)
350
780
–
(2,630)185(22)(1,324)
375
–
(588)
646
–
9
(4,799)

1,883
(224)
(13,479)
3,818–(5,986)
6,576–
92(48,855)(309)(7,747)
1,219(2,182)

(654)
–
22
(29)

(6,658)
–
224
(295)

(2,204)(2,836)(28,871)(1,743)–(12,966)(993)(3)(4,493)(10,109)(31)(45,740)

(22)

(523)

(5,324)(3,349)20,2007,705
16,85178,438
171,547¥ 16,851¥ 24,556$ 249,985

See accompanying notes to consolidated financial statements.
8

Yodogawa Steel Works, Ltd.
Notes to Consolidated Financial Statements
March 31, 20091.

Summary of Significant Accounting Policies(a) Basis of preparation
Yodogawa Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintaintheir books of account and records in accordance with accounting principles generally
accepted in Japan, and its overseas subsidiaries maintain their books of account inconformity with those of their respective countries of domicile.
The accompanying consolidated financial statements of the Company and consolidated
subsidiaries are prepared on the basis of accounting principles generally accepted inJapan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and have been compiled
from the consolidated financial statements prepared by the Company as required by the
Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain
reclassifications and rearrangements have been made to the consolidated financial
statements issued domestically in order to present them in a format which is morefamiliar to readers outside Japan.
Certain reclassifications of previously reported amounts have been made to conformthe consolidated financial statements for the year ended March 31, 2008 to the 2009presentation. Such reclassifications had no effect on consolidated net assets and net
income.
(b) Basis of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and all subsidiaries over which substantial control is exerted through either
majority ownership of voting stock and/or by other means. All significant
intercompany balances and transactions have been eliminated in consolidation.
An investment in one affiliate (a company over which the Company has the ability to
exercise significant influence) is stated at cost plus equity in its undistributed earnings
or undisposed loss. Consolidated net income includes the Company’s equity in thecurrent net income or loss of this company after the elimination of unrealizedintercompany profits.

9

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

1.

Summary of Significant Accounting Policies (continued)(b) Basis of consolidation (continued)
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if
applicable. The difference, not significant in amount, between the cost of investments
in subsidiaries and the equity in their net assets at their respective dates of acquisition
is charged to income as incurred or amortized over a period of 5 years on a straight-line
basis.
The financial statements of one consolidated subsidiary whose fiscal year end is
December 31 have been included in consolidation on the basis of a full fiscal year after
making the appropriate adjustments for significant transactions during the period fromits fiscal year end to the Company’s balance sheet date.
(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into
yen at the rates of exchange in effect at the balance sheet date. Other assets andliabilities denominated in foreign currencies are translated at their historical rates. Allrevenues and expenses associated with foreign currencies are translated at the rates of
exchange prevailing when such transactions were made. The resulting exchange gainor loss is credited or charged to income.
The balance sheet accounts of the overseas consolidated subsidiary (except for net
assets excluding minority interests) are translated into yen at the rate of exchange in
effect at the balance sheet date. The components of net assets excluding minority
interests are translated at their respective historical rates of exchange. Revenue andexpense accounts are translated into yen at the average rate of exchange in effectduring the year.
Translation adjustments have been presented as a component of net assets in theaccompanying consolidated financial statements.
(d) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks withdrawable
on demand, and short-term investments which are readily convertible into cash subject
to an insignificant risk of any changes in their value and which were purchased with an
original maturity of three months or less.

10

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

1.

Summary of Significant Accounting Policies (continued)(e) Securities
The accounting standard for financial instruments requires that securities other thanthose of subsidiaries and affiliates be classified into three categories: trading securities,
held-to-maturity debt securities or other securities. Under this standard, trading
securities are carried at fair value and gain or loss, both realized and unrealized, iscredited or charged to income. Held-to-maturity debt securities are carried atamortized cost. Marketable securities classified as other securities are carried at fairvalue with any changes in unrealized holding gain or loss, net of the applicable income
taxes, reported as a separate component of net assets. Non-marketable securities
classified as other securities are carried at cost. Cost of securities sold is determinedprincipally by the moving average method.
(f) Derivatives
Derivatives are measured at fair value.
(g) Inventories
Inventories of the Company and its domestic consolidated subsidiaries are principallystated at the lower of cost or net selling value, cost being determined by the averagemethod. Inventories of the overseas consolidated subsidiary are stated at the lower ofcost or net selling value, cost being determined by the moving average method.
(h) Property, plant and equipment and depreciation (except for leased assets)
Depreciation of property, plant and equipment is calculated by the declining-balancemethod over the estimated useful lives of the respective assets, except that thestraight-line method is applied to buildings (other than structures attached to thebuildings) acquired on or after April 1, 1998.
Depreciation of property, plant and equipment at the overseas consolidated subsidiaryis calculated by the straight-line method.
The useful lives adopted for calculating depreciation are principally as follows:
Buildings and structures
Machinery, equipment and vehicles

3 to 60 years
3 to 36 years

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

11

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

1.

Summary of Significant Accounting Policies (continued)(h) Property, plant and equipment and depreciation (except for leased assets)(continued)
Supplementary Information
After the revision of the Corporation Tax Law, effective the year ended March 31,
2009, the Company and its domestic subsidiaries reviewed the estimated useful lives ofcertain machinery and changed them. As a result, operating income decreased by¥304 million ($3,095 thousand) and income before income taxes and minority interests
decreased by ¥312 million ($3,176 thousand) for the year ended March 31, 2009 fromthe corresponding amounts which would have been recorded under the method appliedin the previous year.
After the revision of the Corporation Tax Law, effective the year ended March 31,
2008, tangible fixed assets acquired on or prior to March 31, 2007 are to be depreciatedbased on the difference between the equivalent of 5% of acquisition cost andmemorandum value over a period of 5 years once they have been fully depreciated to
the limits of their respective depreciable amounts. As a result of this change,
operating income decreased by ¥548 million and income before income taxes andminority interests decreased by ¥555 million for the year ended March 31, 2008 fromthe corresponding amounts which would have been recorded under the method appliedin the previous year.
(i) Intangible assets and amortization (except for leased assets)
Intangible assets are stated on the basis of cost. Amortization is calculated by thestraight-line method over the estimated useful lives of the respective assets.
(j) Research and development costs and computer software
Research and development costs are charged to income as incurred.
Expenditures relating to the development of computer software intended for internal
use are charged to income when incurred, unless these are deemed to contribute to thegeneration of future income or cost savings. Such expenditures are capitalized asassets and amortized by the straight-line method over their estimated useful life of 5
years.

12

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

1.

Summary of Significant Accounting Policies (continued)(k) Leases
Leased assets under finance lease transactions which do not transfer ownership of theleased assets to the lessee are depreciated to a residual value of zero by the straight-line
method using the contract term as the useful life. Among the finance leasetransactions which do not transfer ownership of the leased assets to the lessees, thosethat started on or before March 31, 2008 are accounted for in the same manner as
operating leases.
(l) Allowance for doubtful receivables
The Company and its consolidated subsidiaries provide an allowance for doubtfulreceivables at an amount calculated based on their historical experience of bad debts on
ordinary receivables plus an additional estimate of probable specific bad debts from
customers experiencing financial difficulties.
(m) Income taxes
Deferred income taxes are provided for temporary differences between the balances ofassets and liabilities for financial reporting purposes and the corresponding balances
for tax reporting purposes.
(n) Retirement benefits
Employees of the Company and its consolidated subsidiaries are covered by
employees’ retirement benefit and employees’ pension plans. The employees’
retirement benefit plans provide for a lump-sum payment determined by reference totheir basic salary, length of service and conditions under which termination occurs.
Accrued retirement benefits for employees are provided principally at an amountcalculated based on the retirement benefit obligation less the fair value of the pension
plan assets as adjusted for unrecognized actuarial gain or loss and unrecognized priorservice cost. The retirement benefit obligation is attributed to each period by thestraight-line method over the estimated remaining years of service of the eligible
employees.
Actuarial gain or loss is amortized in the year following the year in which the gain orloss is recognized principally by the straight-line method over a period of 10 years,
which is within the estimated average remaining years of service of the eligible
employees.

13

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

1.

Summary of Significant Accounting Policies (continued)(n) Retirement benefits (continued)
Prior service cost is being amortized as incurred by the straight-line method over a
period of 15 years, which is within the estimated average remaining years of service ofthe eligible employees.
The directors and corporate auditors of the Company’s domestic consolidated
subsidiaries have customarily been entitled to lump-sum payments under the unfunded
retirement benefit plans. The provision for retirement benefits for directors andcorporate auditors has been made at an estimated amount based on the Company’s oreach consolidated subsidiary’s internal rules.
(o) Hedge accounting
Gain or loss on derivatives designated as hedging instruments is deferred until the loss
or gain on the underlying hedged items is recognized. Receivables hedged byforward foreign exchange contracts which meet certain conditions are translated at thecorresponding foreign exchange contract rates.

2.

Changes in Accounting Policies(1) Depreciation of tangible fixed assets
Effective the year ended March 31, 2008, the Company and its domestic consolidated
subsidiaries have changed their method of accounting for depreciation based on anamendment to the Corporation Tax Law of Japan. Tangible fixed assets acquired on
or after April 1, 2007 are to be depreciated based on a nil salvage value. As a result,operating income decreased by ¥51 million and income before income taxes andminority interests decreased by ¥53 million for the year ended March 31, 2008 fromthe corresponding amounts which would have been recorded under the method appliedin the previous year.

14

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

2.

Changes in Accounting Policies (continued)(2) Measurement of inventories
Previously, the cost method based on the average method was principally adopted formeasuring inventories held for sale in the ordinary course of business. Effective theyear ended March 31, 2009, the “Accounting Standard for Measurement of
Inventories” (ASBJ Statement No.9) has been applied, and now these inventories are
principally measured by the lower of cost or net selling value, cost being determined by
the average method. As a result, operating income decreased by ¥4,292 million($43,693 thousand) and income before income taxes and minority interests decreasedby ¥4,325 million ($44,029 thousand) for the year ended March 31, 2009 from thecorresponding amounts which would have been recorded under the method applied in
the previous year.
(3) Leases
Previously, finance lease transactions which do not transfer ownership of leased assets
were accounted for as the accounting treatment for operating lease transactions.
However, effective the year ended March 31, 2009, the Company applied “AccountingStandard for Lease Transactions” (ASBJ Statement No.13) and “Guidance on
Accounting Standard for Lease Transactions” (ASBJ Guidance No.16). Under theseaccounting standards, transactions are accounted for in the same manner as ordinary
sale and purchase transactions.
There was no effect of this change on operating income and income before income
taxes and minority interests.
(4) Accounting policies applied to an overseas subsidiary
Effective the year ended March 31, 2009, “Practical Solution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial
Statements” (ASBJ PITF No.18) has been applied. As a result, operating income
decreased by ¥7 million ($71 thousand) and income before income taxes and minority
interests decreased by ¥0 million ($0 thousand) for the year ended March 31, 2009
from the corresponding amounts which would have been recorded under the method
applied in the previous year.

15

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

3.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan and has been made at the rate of ¥98.23 = U.S.$1.00,
the approximate exchange rate prevailing on March 31, 2009. The translation should not
be construed as a representation that yen have been, could have been, or could in the future
be, converted into U.S. dollars at the above or any other rate.

4.

Cash and Cash Equivalents

A reconciliation of cash and deposits shown in the accompanying consolidated balance
sheets to cash and cash equivalents shown in the accompanying consolidated statements ofcash flows at March 31, 2008 and 2009 is presented as follows:
Millions of yen
2008
2009
Cash and deposits
Investment trust funds
Beneficiary interests in trusts and other
Time deposits with a maturity of morethan three months
Cash and cash equivalents

Thousands of
U.S. dollars
2009¥ 13,058
3,199
1,000

¥ 14,026
10,1361,000$ 142,787
103,187
10,180(406)¥ 16,851(606)¥ 24,556(6,169)$ 249,985

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

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

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

16

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

5.

Securities

Marketable securities classified as held-to-maturity debt securities at March 31, 2008 and2009 are summarized as follows:

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

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

¥

270
1,298
1,568

2008
Millions of yen
Estimated fair
value

¥

272
1,302
1,574

10
4,395
250
4,655
¥ 6,223

10
4,171
249
4,430
¥ 6,004

Carrying
value

2009
Millions of yen
Estimated fair
value

¥

270
1,499
1,769

20
6,401
10
6,431
¥ 8,200

¥

272
1,499
1,771

10
5,254
10
5,274
¥ 7,045

Unrealized
gain (loss)

¥

¥

2
4
6

(0)
(224)
(1)
(225)
(219)

Unrealized
gain (loss)

¥

2
0
2

(10)
(1,147)(0)(1,157)¥ (1,155)

17

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

5.

Securities (continued)
2009
Thousands of U.S. dollars
Carrying
Estimated fair Unrealized
value
value
gain (loss)

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

$ 2,749
15,26018,009$ 2,769
15,26018,029

$

20
0
20

204
65,163102
65,469$ 83,478

102
53,486102
53,690$ 71,719(102)(11,677)(0)(11,779)$ (11,759)

Other securities with determinable market value at March 31, 2008 and 2009 aresummarized as follows:

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

Acquisition
costs

2008
Millions of yen
Carrying
value

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

4,533¥ 17,161

3,967¥ 31,290(566)¥ 14,12918

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

5.

Securities (continued)
2009
Millions of yen
Carrying
value

Unrealized
gain (loss)

6,551
490
7,041

¥ 11,764
493
12,257¥ 5,213
3
5,216

7,348
98
7,446
¥ 14,487

6,433
87
6,520
¥ 18,777

(915)
(11)
(926)
¥ 4,290

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

¥

2009
Thousands of U.S. dollars
Acquisition
Carrying
Unrealized
costs
value
gain (loss)
Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Corporate bonds
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Other
Total

$ 66,690
4,988
71,678$ 119,759
5,019
124,778$ 53,06931
53,10074,804998
75,802$ 147,480

65,489886
66,375$ 191,153(9,315)(112)(9,427)$ 43,673

Sales of securities classified as other securities for the years ended March 31, 2008 and2009 are summarized as follows:

Sales
Aggregate gain
Aggregate loss

Millions of yen
2008
2009
¥
204
¥ 1,018
159
4
(0)
(0)

Thousands of
U.S. dollars
2009$ 10,363
41(0)
19

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

5.

Securities (continued)

The carrying value of securities without determinable market value at March 31, 2008 and2009 were as follows:

Millions of yen
2008
2009
Held-to-maturity debt securities:
Interest-bearing financial bonds
Other securities:
Non-marketable equity securities
Money trusts
Investment in a limited liability
partnership
Negotiable certificates of deposit
Preferred subscription certificates¥Thousands of
U.S. dollars
2009–¥ 1,437$ 14,629

608
1,202

378
2,702

3,848
27,508

414
–
1,100

480
2,000
1,100

4,886
20,36011,198The Company recorded losses on impairment of investments in securities of ¥569 millionand ¥2,459 million ($25,033 thousand) for the years ended March 31, 2008 and 2009,
respectively.
The redemption schedule for other securities with maturities and held-to-maturity debt
securities at March 31, 2009 was summarized as follows:

Due in one
year or lessGovernment bonds
Corporate bonds
Other
Total

¥

¥

210
3,500
4,565
8,275

Due in one
year or lessGovernment bonds
Corporate bonds
Other
Total

$

2,138
35,63046,473$ 84,241

Millions of yen
Due after one Due after five
year through years throughfive years
ten years
¥

¥

80
200
–
280

¥

¥

–
100
–
100

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

$

814
2,036
–
2,850

$

–
1,018
–
$ 1,018

Due after ten
years
¥

¥

–
4,500
–
4,500

Due after ten
years
$

–
45,811–$ 45,811
20

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

6.

Inventories

The following is a summary of inventories at March 31, 2008 and 2009:

Finished goods
Work in process
Raw materials and supplies

7.

Millions of yen
2009
2008
¥ 12,908¥ 13,183
4,758
4,608
13,47916,930¥ 34,596¥ 31,270

Thousands of
U.S. dollars
2009$ 134,206
46,910137,219$ 318,335

Loss on Impairment of Fixed Assets

The Company and its consolidated subsidiaries recognized loss on impairment of fixed
assets for the years ended March 31, 2008 and 2009 as follows:

LocationMiyazaki City,
Miyazaki Prefecture
Kure City,
Hiroshima Prefecture
Kamakura City,
Kanagawa Prefecture
Nishiwaki City,
Hyogo Prefecture
Village of Hakuba,
Nagano Prefecture
Yaizu City,
Shizuoka Prefecture
Total

Use
Hotel

Classification
Other

Millions of yen
2008
2009
¥6

Idle assets
Idle assets
Golf course
Idle assets
Idle assets¥–

Thousands of
U.S. dollars
2009
$

–

Land
–

76

774

–

1

10

–

76

774

–

2

20

–
¥6

59
¥ 214

601
$ 2,179Land
Buildings andstructures
Land
Land, buildings
and structures,and other

The Company and its consolidated subsidiaries group fixed assets by management segment,each of which continuously records cash receipts and payments. They group idle assets
which are not utilized in their operations on an individual asset basis.

21

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

7.

Loss on Impairment of Fixed Assets (continued)

Consequently, the Company and its consolidated subsidiaries have written down the
carrying value of the hotel group fixed assets for the year ended March 31, 2008 and thegolf courses group fixed assets for the year ended March 31, 2009 to their net recoverable
value due to a significant decline in their fair value, and have recorded related losses on
impairment of fixed assets of ¥6 million and ¥76 million ($774 thousand) for the years
ended March 31, 2008 and 2009, respectively. The loss on impairment of fixed assets
consisted of other of ¥6 million for the year ended March 31, 2008, and buildings andstructures of ¥73 million ($743 thousand), machinery, equipment and vehicles of ¥1 million($10 thousand), and other of ¥2 million ($21 thousand) for the year ended March 31, 2009.
The recoverable amounts of these assets are measured at estimated selling value which ismeasured at net realizable value based on appraisals conducted by real estate appraisers.
In addition, the Company and its consolidated subsidiaries have written down the carrying
value of the idle assets owned by the Company and its consolidated subsidiaries for theyear ended March 31, 2009, which are not expected to be utilized in the future, to theirrespective net recoverable value, and have recorded a related loss on impairment of fixed
assets of ¥138 million ($1,405 thousand) for the year ended March 31, 2009. This loss on
impairment of fixed assets consisted of land of ¥137 million ($1,395 thousand) and other of¥1 million ($10 thousand). The recoverable amounts of these assets are measured at
estimated selling value, at a valuation assessed for property tax purposes or at thecomparable published land prices.

8.

Short-Term Bank Loans and Guarantee Deposits

Short-term bank loans represented overdrafts at an average annual interest rate of
approximately 2.39% at March 31, 2008. Short-term bank loans were nil at March 31,
2009.
Guarantee deposits consisted of interest-free deposits, most of which were golf-clubmembership deposits, and interest-bearing deposits, which were principally deposits from
customers at average annual interest rates of 0.90% and 0.86% at March 31, 2008 and 2009,
respectively.

22

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

8.

Short-Term Bank Loans and Guarantee Deposits (continued)

Interest-free deposits and interest-bearing deposits at March 31, 2008 and 2009 were as
follows:

Interest-free deposits
Interest-bearing deposits

Millions of yen
2009
2008
¥ 3,224¥ 3,081654
701¥ 3,878¥ 3,782

Thousands of
U.S. dollars
2009$ 31,365
7,136$ 38,501

In order to achieve more efficient and flexible financing, the Company has concluded
line-of-credit agreements with certain financial institutions. The status of these lines ofcredit at March 31, 2008 and 2009 was as follows:

Lines of credit
Credit utilized
Available credit

9.

Millions of yen
2008
2009
¥ 21,400¥ 21,400––¥ 21,400¥ 21,400

Thousands of
U.S. dollars
2009$ 217,856–$ 217,856

Pledged Assets

Assets pledged as collateral for indebtedness at March 31, 2008 and 2009 are summarized
as follows:

Millions of yen
2008
2009
Land
Buildings and structures
Machinery, equipment and vehicles
Investments in securities

¥

41
2,561
1,990
69
¥ 4,661

¥

¥

–
–
–
86
86

Thousands of
U.S. dollars
2009
$

$

–
–
–
875
875

Indebtedness secured by these assets as collateral was nil at March 31, 2008. At March 31,
2009, indebtedness secured by these assets as collateral was ¥53 million ($540 thousand), a
component of other current liabilities.

23

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

10. Retirement Benefits
The funded and accrued status of the employees’ defined benefit pension plans of theCompany and its consolidated subsidiaries, and the amounts recognized in theaccompanying consolidated balance sheets at March 31, 2008 and 2009 are summarized asfollows:

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial loss
Net retirement benefit obligation
Prepaid pension costAccrued retirement benefits

Millions of yen
2008
2009
¥ (13,967)¥ (13,647)
5,634
4,249
(8,333)(9,398)
1,773
3,171(6,560)(6,227)895963¥ (7,455)¥ (7,190)

Thousands of
U.S. dollars
2009$ (138,929)
43,256(95,673)
32,281(63,392)
9,804$ (73,196)

As permitted under the accounting standards for retirement benefits, certain domestic
consolidated subsidiaries calculate accrued retirement benefits for their employees bysimplified methods.
The components of retirement benefit expenses for the years ended March 31, 2008 and2009 are outlined as follows:

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

Millions of yen
2009
2008
¥
740
¥
746
331
335
(223)
(127)
14
194
7
–
¥
869
¥ 1,148

Thousands of
U.S. dollars
2009
$
7,595
3,410
(1,293)
1,975–$ 11,687

The retirement benefit expenses of certain domestic consolidated subsidiaries which were
calculated by simplified methods have been included in service cost in the above table.
The assumptions used in accounting for the above benefit plans for the years ended March
31, 2008 and 2009 were as follows:

Discount rates
Expected rates of return on plan assets

2008

2009

Principally 2.5%
Principally 3.2%

Principally 2.0%
Principally 2.4%24

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

11. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries
comprise corporation, enterprise and inhabitants’ taxes which, in the aggregate, resulted ina statutory tax rate of approximately 40.5% for the years ended March 31, 2008 and 2009.
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March
31, 2008 as a percentage of income before income taxes and minority interests is asfollows:
2008
Statutory tax rate
Investment tax credits
Permanently non-deductible expenses
Per capita portion of inhabitants’ taxes
Difference in tax rates applicable to the overseas
consolidated subsidiary
Cash dividends received from the overseas
consolidated subsidiaryTax exemption of the overseas consolidated subsidiary
Equity in earnings of an affiliate
Tax loss carryforwards of a consolidated subsidiary
Valuation allowance
Permanently non-taxable income
Reversal of land revaluation reserve
Other
Effective tax rate

40.5%
(0.3)
0.4
0.4
(4.1)
2.4
(0.5)
(1.5)
(2.0)
7.0
(1.0)
(10.1)(0.2)
31.0%

A reconciliation of the statutory tax rate and the effective tax rate for the year ended March
31, 2009 was omitted because the difference between these rates was less than 5% of thestatutory tax rate.

25

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

11. Income Taxes (continued)
The significant components of the deferred tax assets and liabilities of the Company and its
consolidated subsidiaries at March 31, 2008 and 2009 are summarized as follows:
Millions of yen
2008
2009
Deferred tax assets:
Accrued retirement benefits
Allowance for doubtful receivables
Accrued bonuses
Valuation loss on inventories
Foreign tax credits
Loss on guarantee resulting fromliquidation of an overseas affiliate
Tax loss carryforwards
Loss on impairment of investments insecurities and golf-club memberships
Loss on impairment of fixed assets
Other
Gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Dividends from an overseas subsidiary
Unrealized holding gain on securities
Land revaluation reserve
Reserve for deferred taxation oncontributions for acquisition of property
Other
Total deferred tax liabilities
Net deferred tax (liabilities) assets

Thousands of
U.S. dollars
2009¥ 2,533
131
444
179
111

¥ 2,448
70
335
2,148
–

$ 24,921
713
3,410
21,867
–

–
955

385
955

3,919
9,722

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

963
150
835
8,289
(2,585)
5,704

9,804
1,527
8,501
84,384(26,316)
58,068(76)(5,379)(1,105)(160)(1,369)(1,025)(1,629)(13,937)(10,434)(934)–(7,494)¥ (3,466)

(887)
(134)
(3,575)¥ 2,129(9,030)(1,364)(36,394)$ 21,674

12. Shareholders’ Equity
The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of theamount to be disbursed as distributions of capital surplus (other than the capital reserve)
and retained earnings (other than the legal reserve) be transferred to the capital reserve andthe legal reserve, respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the capital stock account. Such distributions can be made at any time byresolution of the shareholders, or by the Board of Directors if certain conditions are met.
The Company’s legal reserve was nil at March 31, 2009 and 2008.
26

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

12. Shareholders’ Equity (continued)
Stock options
Stock option expenses charged to income for the years ended March 31, 2008 and 2009amounted to ¥23 million and ¥24 million ($244 thousand), respectively.
In accordance with the former Commercial Code of Japan (“the Code”), a stock option planfor certain directors and executive officers of the Company was approved at the annual
general meeting of the shareholders held on June 29, 2004. Under the terms of this plan,
up to 81,000 shares of common stock were granted at ¥1 ($0.01) per share. The options
became exercisable on July 13, 2004 and are scheduled to expire on June 29, 2024.
In accordance with the Code, a stock option plan for certain directors and executive officersof the Company was approved at the annual general meeting of the shareholders held on
June 29, 2005. Under the terms of this plan, up to 62,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options became exercisable on July 15, 2005 and arescheduled to expire on June 29, 2025.
In accordance with the Code, a stock option plan for certain directors and executive officersof the Company was approved at the annual general meeting of the shareholders held on
June 29, 2006. Under the terms of this plan, up to 53,000 shares of common stock were
granted at ¥1 ($0.01) per share. The options became exercisable on August 1, 2006 andare scheduled to expire on June 29, 2026.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 17, 2007.
Under the terms of this plan, up to 43,000 shares of common stock were granted at ¥1($0.01) per share. The options became exercisable on August 2, 2007 and are scheduled
to expire on June 29, 2027.
In accordance with the Law, a stock option plan for certain directors and executive officersof the Company was approved at a meeting of the Board of Directors held on July 15, 2008.
Under the terms of this plan, up to 60,000 shares of common stock were granted at ¥1($0.01) per share. The options became exercisable on July 31, 2008 and are scheduled to
expire on June 29, 2028.

27

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

12. Shareholders’ Equity (continued)
Treasury stock
Movements in treasury stock during the years ended March 31, 2008 and 2009 aresummarized as follows:

Treasury stock

March 31, 2007
16,655

Treasury stock

March 31, 2008
18,473Thousands of Shares
2008
Increase
Decrease
3,856
2,038
Thousands of Shares
2009
Increase
Decrease
70
68

March 31, 2008
18,473

March 31, 2009
18,475

13. Land Revaluation
At March 31, 2000 and 2002, certain consolidated subsidiaries and an affiliate revalued
their land held for business use in accordance with the “Law on Land Revaluation.”
Differences on land revaluation have been accounted for as land revaluation reserve under
net assets and are stated at the Company’s share of the net amount of the relevant tax effect.
The method followed for land revaluation was determined in accordance with the“Enforcement Act Concerning Land Revaluation.”
The fair value of the land revalued at March 31, 2000 and 2002 was less than thecorresponding carrying value by the following amounts at March 31, 2008 and 2009:

Millions of yen
2008
2009
Land revalued at March 31, 2000
Land revalued at March 31, 2002

¥

(199)
(992)
¥ (1,191)¥ (179)(747)¥ (926)

Thousands of
U.S. dollars
2009$ (1,822)(7,605)$ (9,427)

14. Research and Development Costs
Research and development costs included in selling, general and administrative expenses
totaled ¥515 million and ¥562 million ($5,721 thousand) for the years ended March 31,
2008 and 2009, respectively.

28

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

15. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciationand net book value of the leased assets at March 31, 2008 and 2009, which would havebeen reflected in the accompanying consolidated balance sheets if finance leases other thanthose which transfer the ownership of the leased assets to the Company and its consolidated
subsidiaries (currently accounted for as operating leases) were capitalized:
Millions of yen
2009
2008
Acquisition Accumulated Net book Acquisition Accumulated Net bookdepreciation
value
costs
depreciation
value
costs
Machinery,equipment
and vehicles

¥

413

¥

265

¥ 148

¥ 278

¥ 205

¥ 73

Thousands of U.S dollars
2009
Acquisition Accumulated Net bookcosts
depreciation
value
Machinery,equipment andvehicles$ 2,830$ 2,087$ 743

The related lease payments and depreciation for the years ended March 31, 2008 and 2009were as follows:
Millions of yen
2008
2009
Lease payments
Depreciation

¥ 86
86

¥ 75
75

Thousands of
U.S. dollars
2009
$ 764
764

Depreciation is calculated by the straight-line method over the respective lease terms
assuming a nil residual value.
No loss on impairment has been recorded on leased assets for the years ended March 31,
2008 and 2009.

29

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

15. Leases (continued)
The related future minimum lease payments (including the interest portion thereon)
subsequent to March 31, 2009 under finance leases other than those which transfer theownership of the leased assets to the Company and its consolidated subsidiaries are
summarized as follows:Year ending March 31,
20102011 and thereafter

Millions of yen
¥ 45
28
¥ 73

Thousands of
U.S. dollars
$ 458
285
$ 743

16. Contingent Liabilities
At March 31, 2009, the Company and its consolidated subsidiaries had the following
contingent liabilities:

Guarantee of bank loan of an overseas
unconsolidated subsidiary

Millions of yen

Thousands of
U.S. dollars

¥ 25

$ 255

17. Derivatives
The Company and its consolidated subsidiaries enter into various transactions involving
derivatives in order to manage the risk arising from adverse fluctuation in foreign currency
exchange rates, interest rates and share prices. Compound financial instruments that
contain embedded derivatives are also utilized by the Company and its consolidated
subsidiaries in order to manage surplus funds. Derivatives positions involve the credit riskthat the counterparties may default on their obligations and the market risk that loss may
incur resulting from fluctuation in foreign currency exchange markets and others. The
Company and its consolidated subsidiaries select only financial institutions with high credit
ratings as counterparties in order to minimize their credit risk. The Company and its
consolidated subsidiaries enter into foreign currency forward exchange contracts only forhedging purposes and do not enter into derivatives transactions whose fluctuation in fairvalue is material and which could thus impact their operations significantly. In addition,
though compound financial instruments are subject to market risk where the value of those
instruments decreases due to fluctuation, credit risk is deemed to be low as the Company
and its consolidated subsidiaries do not anticipate nonperformance by any of thecounterparties, all of whom are financial institutions with high credit ratings.

30

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

17. Derivatives (continued)
The Company and its consolidated subsidiaries have established policies for approving andreporting the purpose, nature, counterparty, inherent risk, limit on loss and the level of riskof each transaction. Under these policies governing derivatives, trading is not entered into
for speculative purposes.
At March 31, 2008 and 2009, all open derivatives positions qualified for the application ofdeferral hedge accounting and, thus, disclosure of fair value information has been omitted.
Disclosure of fair value information on compound financial instruments, which can not be
declassified and fair value of embedded derivatives can not be determined, has been
omitted and fair value of compound financial instruments as a whole has been included infair value information on marketable securities classified as held-to-maturity debt securities
presented in Note 5.

18. Amounts per Share
Amounts per share at March 31, 2008 and 2009 and for the years then ended were as
follows:
Yen
Net assets
Net income:
Basic
DilutedCash dividends

2008¥ 860.00

2009¥ 796.39

41.98
41.93
17.00

8.57
8.56
10.00

U.S. dollars
2009$ 8.11
0.09
0.09
0.10

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

31

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

19. Transactions with Related Parties
Effective the year ended March 31, 2009, the Company has adopted a new accounting
standard, “Accounting Standard for Related Party Disclosures” (ASBJ Statement No.11)
and “Guidance on Accounting Standard for Related Party Disclosures” (ASBJ Guidance No.
13). There was no change to the scope of disclosures as a result of the adoption of thisaccounting standard.
Transactions and balances with related parties as of and for the years ended March 31, 2008
and 2009 were summarized as follows:
Transactions
Name ofaffiliatedcompany

Type of transaction

Millions of yen
2008
2009

Thousands of
U.S. dollars
2009

Sales

¥ 34,752$ 332,933¥ 32,704

Balances
Sadoshima
Corporation
Account nameNotes and accounts
receivable

Millions of yen
2008
2009

Thousands of
U.S. dollars
2009¥ 11,822$ 78,449¥ 7,706

The Company owns 50.0% of the voting rights of Sadoshima Corporation a steel productwholesaler for the Company whose board members are the same as that of the Company.

20. Segment Information
The Company and its consolidated subsidiaries are primarily engaged in the manufactureand sale of a variety of steel products such as steel sheets, construction materials,
prefabricated structures, home furnishings, and steel rolls and gratings. The Company
also engages in other activities such as real estate rental and engineering projects.
The business and geographical segments of the Company and its consolidated subsidiaries
for the years ended March 31, 2008 and 2009 are outlined as follows:32

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

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

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

Eliminations andgeneralcorporate
assetsConsolidated

Steel sheet
products

Electric
furnaceproducts

Other

Total

¥ 187,191¥ 12,630¥ 7,577¥ 207,398¥–¥ 207,398

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

5,818
13,395
12,070¥ 1,325

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

5,047

436

404

5,887

114

6,001

–
1,731

–
312

6
755

6
2,798

–
203

6
3,001

Eliminations andgeneralcorporate
assetsConsolidated

Millions of yen
Year ended March 31, 2009

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

Steel sheet
products

Electric
furnaceproducts

Other

Total

¥ 175,563¥ 12,469¥ 6,569¥ 194,601¥–¥ 194,601

1
175,564
170,977¥ 4,587–
12,46911,849¥ 620

4,378
10,947
10,165¥ 782

4,379
198,980
192,991¥ 5,989(4,379)(4,379)(3,529)¥ (850)–
194,601
189,462¥ 5,139¥ 100,802¥ 9,874¥17,019¥ 127,695¥ 51,175¥ 178,870

5,145

624

359

6,128

107

6,235

135
2,957

–
766

76
148

211
3,871

3
35

214
3,906

33

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

20. Segment Information (continued)
Business Segments (continued)
Thousands of U.S. dollars
Year ended March 31, 2009

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

Eliminations andgeneralcorporate
assetsConsolidated$$ 1,981,075

Steel sheet
products

Electric
furnaceproducts

Other

Total

$1,787,264$126,937$ 66,874$1,981,075

10
1,787,274
1,740,578$ 46,696–
126,937
120,625$ 6,31244,569111,443
103,482$ 7,961

44,579(44,579)–
2,025,654(44,579) 1,981,075
1,964,685(35,926) 1,928,759$ 60,969 $ (8,653) $ 52,316$1,026,183$100,519$ 173,257$1,299,959$ 520,971$1,820,930

52,377

6,352

3,655

62,384

1,089

63,473

1,374
30,103

–
7,798

774
1,507

2,148
39,408

31
356

2,179
39,764–

As described in Note 2(1), effective the year ended March 31, 2008, the Company and its
domestic consolidated subsidiaries have changed their method of accounting fordepreciation based on an amendment to the Corporation Tax Law of Japan. Tangible
fixed assets acquired on or after April 1, 2007 are to be depreciated based on a nil salvage
value. As a result, operating expenses in the steel sheet products segment, the electric
furnace products segment and the other segment for the year ended March 31, 2008
increased by ¥39 million, ¥8 million and ¥4 million, respectively, and operating income
decreased by the same amounts from the corresponding amounts which would have beenrecorded under the method applied in the previous year.
As described in Note 1(h), effective the year ended March 31, 2008, tangible fixed assets
acquired on or prior to March 31, 2007 have been depreciated based on the difference
between the equivalent of 5% of acquisition cost and memorandum value over a period of 5
years once they have been fully depreciated to the limits of their respective depreciable
amounts. As a result, operating expenses in the steel sheet products segment, the electric
furnace products segment and the other segment for the year ended March 31, 2008
increased by ¥433 million, ¥87 million and ¥29 million, respectively, and operating income
decreased by the same amounts from the corresponding amounts which would have beenrecorded under the method applied in the previous year.

34

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

20. Segment Information (continued)
Business Segments (continued)
As described in Note 2(2), previously, the cost method based on the average method wasprincipally adopted for measuring inventories held for sale in the ordinary course ofbusiness.
Effective the year ended March 31, 2009, “Accounting Standard for
Measurement of Inventories” (ASBJ Statement No.9) has been applied, and now theseinventories are principally measured by the lower of cost or net selling value, cost being
determined by the average method. As a result, operating expenses in the steel sheet
products segment and the electric furnace products segment for the year ended March 31,
2009 increased by ¥4,195 million ($42,706 thousand) and ¥97 million ($987 thousand),
respectively, and operating income decreased by the same amounts from the corresponding
amounts which would have been recorded under the method applied in the previous year.
As described in Note 2(4), effective the year ended March 31, 2009, “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated
Financial Statements” (ASBJ PITF No.18) has been applied. As a result, operating
expenses in the steel sheet products segment for the year ended March 31, 2009 increasedby ¥7 million ($71 thousand) and operating income decreased by the same amounts fromthe corresponding amounts which would have been recorded under the method applied in
the previous year.
As described in Note 1(h), the Company and its domestic subsidiaries had reviewed theestimated useful lives of certain machinery and changed them after a revision of the
Corporation Tax Law, which was effective the year ended March 31, 2009. As a result,operating expenses in the steel sheet products segment, the electric furnace products
segment and the other segment for the year ended March 31, 2009 increased by ¥284
million ($2,891 thousand), ¥19 million ($194 thousand) and ¥1 million ($10 thousand),
respectively, and operating income decreased by the same amounts from the corresponding
amounts which would have been recorded under the method applied in the previous year.

35

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

20. Segment Information (continued)
Geographical Segments

Japan
I. Sales and operating
income:Sales to third parties
Intersegment sales
and transfers
Net sales
Operating expenses
Operating income
II. Total assets¥ 131,775¥ 75,623¥ 207,398

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

Japan
I. Sales and operating
income:Sales to third parties
Intersegment sales
and transfers
Net sales
Operating expenses
Operating income
II. Total assets¥–¥ 207,398

16
207,414
195,256¥ 12,158

¥

(16)
(16)
886
(902)

–
207,398
196,142¥ 11,256¥ 160,183¥ 46,677¥ 206,860

Millions of yen
Year ended March 31, 2009
Eliminations
and general
corporate
assetsAsia
Total
Consolidated¥ 125,501¥ 69,100¥ 194,601

15
125,516
122,164
¥
3,352

512
69,612
66,976¥ 2,636¥ 112,100¥ 25,745

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

Millions of yen
Year ended March 31, 2008
Eliminations
and general
corporate
assets
Total
Consolidated
Asia

¥

–

¥ 194,601

527
195,128
189,140
¥
5,988

¥

(527)
(527)
322
(849)

–
194,601
189,462¥
5,139¥ 137,845¥ 41,025¥ 178,870

Thousands of U.S. dollars
Year ended March 31, 2009
Eliminations
and general
corporate
assetsAsia
Total
Consolidated$ 1,277,624$ 703,451$ 1,981,075$–$ 1,981,075

153
1,277,777
1,243,653$ 34,124

5,212
708,663
681,828$ 26,835

5,365
1,986,440
1,925,481$ 60,959(5,365)(5,365)
3,278$ (8,643)–
1,981,075
1,928,759$
52,316$ 1,141,199$ 262,089$ 1,403,288$ 417,642$ 1,820,930

36

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

20. Segment Information (continued)
Geographical Segments (continued)
The principal country in the Asia segment is Taiwan.
As described in Note 2(1), effective the year ended March 31, 2008, the Company and its
domestic consolidated subsidiaries have changed their method of accounting fordepreciation based on an amendment to the Corporation Tax Law of Japan. Tangible
fixed assets acquired on or after April 1, 2007 are to be depreciated based on a nil salvage
value. As a result, operating expenses in the Japan segment for the year ended March 31,
2008 increased by ¥51 million and operating income decreased by the same amount fromthe corresponding amounts which would have been recorded under the method applied in
the previous year.
As described in Note 1(h), effective the year ended March 31, 2008, tangible fixed assets
acquired on or prior to March 31, 2007 have been depreciated based on the difference
between the equivalent of 5% of acquisition cost and memorandum value over a period of 5
years once they have been fully depreciated to the limits of their respective depreciable
amounts. As a result, operating expenses in the Japan segment for the year ended March
31, 2008 increased by ¥548 million and operating income decreased by the same amountfrom the corresponding amounts which would have been recorded under the method
applied in the previous year.
As described in Note 2(2), previously, the cost method based on the average method wasprincipally adopted for measuring inventories held for sale in the ordinary course ofbusiness.
Effective the year ended March 31, 2009, “Accounting Standard for
Measurement of Inventories” (ASBJ Statement No.9) has been applied, and now theseinventories are principally measured by the lower of cost or net selling value, cost being
determined by the average method. As a result, operating expenses in the Japan segment
for the year ended March 31, 2009 increased by ¥4,292 million ($43,693 thousand) andoperating income decreased by the same amount from the corresponding amounts which
would have been recorded under the method applied in the previous year.
As described in Note 2(4), effective the year ended March 31, 2009, “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated
Financial Statements” (ASBJ PITF No.18) has been applied. As a result, operating
expenses in the Asia segment for the year ended March 31, 2009 increased by ¥7 million($71 thousand) and operating income decreased by the same amount from thecorresponding amounts which would have been recorded under the method applied in theprevious year.

37

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

20. Segment Information (continued)
Geographical Segments (continued)
As described in Note 1(h), the Company and its domestic subsidiaries had reviewed theestimated useful lives of certain machinery and changed them after the revision of the
Corporation Tax Law, which was effective the year ended March 31, 2009. As a result,operating expenses in the Japan segment for the year ended March 31, 2009 increased by¥304 million ($3,095 thousand) and operating income decreased by the same amount fromthe corresponding amounts which would have been recorded under the method applied in
the previous year.
Overseas Sales
Overseas sales, which include export sales of the Company and its domestic consolidated
subsidiaries and sales (other than exports to Japan) of the overseas consolidated subsidiary,
for the years ended March 31, 2008 and 2009 are summarized as follows:

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

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

Overseas sales
Consolidated net sales

Millions of yen
Year ended March 31, 2008
Asia
Other
Total
¥ 56,812¥ 32,938¥ 89,750
207,398
27.4%

15.9%
43.3%
Millions of yen
Year ended March 31, 2009
Other
Total
Asia
¥ 52,043¥ 32,852¥ 84,895
194,601
26.7%

16.9%
43.6%
Thousands of U.S. dollars
Year ended March 31, 2009
Asia
Other
Total
$529,807$334,440$ 864,247
1,981,075

38

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

21. Subsequent Events(1) On January 24, 2008, the Japan Fair Trade Commission (“JFTC”) began aninvestigation on alleged price cartel activity involving galvanized steel coils andpainted steel coils between the Company and certain other participants. On
November 11, 2008, the JFTC charged the Company with violating the Antimonopoly
Law (the “Law”) by unfairly restricting sales transactions. On December 8, 2008, theTokyo District Public Prosecutors Office opened proceedings against the Company
based on the accusation filed by the JFTC.
On June 24, 2009, the Company received advance notice from the JFTC, directing theCompany to cease and desist from violating the Law, specifically Article 3 (prohibitionof unfair restriction of transactions), and to pay penalties of ¥3,675 million ($37,412
thousand) for past alleged violations of the Law with regard to hot-dip galvanized steel
sheets and coils (including pre-painted products), for common sales transactions
involving general-purpose products and made-to-order products for manufacturers oflight-weight ceiling foundation materials and building materials.
(2) The following distribution of retained earnings of the Company, which has not beenreflected in the accompanying consolidated financial statements for the year ended
March 31, 2009, was approved at a meeting of the Board of Directors held on May 15,
2009:Cash dividends of ¥4 ($0.04) per share

Millions of yen¥ 667

Thousands of
U.S. dollars$ 6,79039