Non-Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
Years ended March 31, 1999 and 2000
with Independent Auditors’ Report

Yodogawa Steel Works, Ltd.
Non-Consolidated Financial Statements
Years ended March 31, 1999 and 2000

Contents

Non-Consolidated Financial Statements
Independent Auditors’ Report on Non-Consolidated Financial Statements ..........................................................1
Non-Consolidated Balance Sheets.................................................................................................................................2
Non-Consolidated Statements of Income .....................................................................................................................4
Non-Consolidated Statements of Shareholders’ Equity.............................................................................................5
Notes to Non-Consolidated Financial Statements.......................................................................................................6

Independent Auditors’ Reporton Non-Consolidated Financial Statements
The Board of Directors and Shareholders
Yodogawa Steel Works, Ltd.

We have audited the non-consolidated balance sheets of Yodogawa Steel Works, Ltd. as of March 31, 1999
and 2000, and the related non-consolidated statements of income and shareholders’ equity for the years thenended, all expressed in yen. Our audits were made in accordance with auditing standards, procedures andpractices generally accepted and applied in Japan and, accordingly, included such tests of the accounting
records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying non-consolidated financial statements, expressed in yen, present fairly thefinancial position of Yodogawa Steel Works, Ltd. at March 31, 1999 and 2000, and the results of its
operations for the years then ended in conformity with accounting principles and practices generally
accepted in Japan applied on a consistent basis.
As described in Note 1 to the non-consolidated financial statements, Yodogawa Steel Works, Ltd. has
adopted a new accounting standard for tax-effect accounting in the preparation of its non-consolidated
financial statements for the year ended March 31, 2000.
The U.S. dollar amounts in the accompanying non-consolidated financial statements with respect to the year
ended March 31, 2000 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 describedin Note 2 to the non-consolidated financial statements.

Osaka, Japan
June 29, 2000

See Note 1 to the non-consolidated financial statements which explains the basis ofpreparation of the non-consolidated financial statements of Yodogawa Steel Works, Ltd.
under Japanese accounting principles and practices.

Yodogawa Steel Works, Ltd.
Non-Consolidated Balance Sheets
March 31, 1999 and 2000
Thousands of
U.S. dollars(Note 2)Millions of yen

AssetsCurrent assets:
Cash and cash equivalents
Short-term investments
Marketable securities (Note 3)
Notes and accounts receivable:
Subsidiaries and affiliates
Trade
Less allowance for doubtful receivables
Inventories (Note 4)
Deferred income taxes (Note 7)
Other current assets
Total current assets
Property, plant and equipment, at cost
(Note 5):Land
Buildings and structures
Machinery and equipment
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net
Investments and other assets:
Investments in securities
Investments in and advances to subsidiaries andaffiliates (Note 3)
Deferred income taxes (Note 7)
Other assets
Total investments and other assets

Total assets

See notes to non-consolidated financial statements.
2

1999

2000

2000

¥ 29,699
2,500
20,244¥ 25,157
2,000
20,729$ 236,995
18,841
195,280

20,544
20,514(196)
27,441–
2,832

19,341
22,041(153)
26,356327
4,241

182,204
207,640(1,441)
248,290
3,081
39,953

123,578

120,039

1,130,843

18,55237,78595,001
9,072(99,728)

18,49440,198
101,932
3,436(105,074)

174,225
378,691
960,264
32,369(989,864)

60,68258,986555,685

1,068

1,018

9,590

13,328–1,487

14,024
1,097
1,586

132,115
10,334
14,942

15,883

17,725

166,981¥200,143¥ 196,750$1,853,509

Millions of yen

Thousands of
U.S. dollars(Note 2)

1999

2000

2000

¥ 10,000¥ 10,000$

2,330
19,134
2,448
3,646
1,997
–
1,111

2,087
19,868
2,180
3,444
80
269
1,971

19,661
187,169
20,53732,445754
2,534
18,56840,66639,899375,874

15,0007,444
1,423

15,0007,582
1,454

141,30971,427
13,69823,86724,036

226,434

23,221–
23,4973,089
85,803–23,221
23,4973,250
82,847–
218,756
221,357
30,617780,471

Total shareholders’ equity

135,610

132,8151,251,201

Total liabilities and shareholders’ equity¥200,143¥196,750$1,853,509

Liabilities and shareholders’ equity
Current liabilities:
Short-term bank loans (Note 5)
Notes and accounts payable:
Subsidiaries and affiliates
Trade
Construction
Accrued expenses
Accrued income taxes (Note 7)
Reserve for losses on restructuring
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Note 5)
Retirement allowances (Note 8)
Guarantee deposits (Note 5)
Total long-term liabilities

94,206

Commitments and contingent liabilities (Note 11)
Shareholders’ equity (Note 6):
Common stock, ¥50 par value:
Authorized:
March 31, 1999 - 792,166,000 shares
March 31, 2000 - 781,945,000 shares
Issued:March 31, 1999 - 222,538,086 shares
March 31, 2000 - 212,317,086 shares
Additional paid-in capital
Legal reserve (Note 12)
Retained earnings (Note 12)

See notes to non-consolidated financial statements.
3

Yodogawa Steel Works, Ltd.
Non-Consolidated Statements of Income
Years ended March 31, 1999 and 2000
Thousands of
U.S. dollars(Note 2)Millions of yen
1999

2000

2000

¥121,274
98,447¥117,382
99,396$1,105,813
936,373

22,827

17,986

169,440

17,951

16,995160,104

4,876

991

9,336

1,430
(359)
9
(1,252)
488

1,186
(420)
2,330
(252)
162

11,173(3,957)
21,950(2,374)
1,526

(682)
–
–
59

(328)
(1,266)(269)
101(3,090)(11,927)(2,534)
952

4,569

2,235

21,055

Deferred

2,234
–

867
(37)

8,168
(349)

2,234

830

Net income¥ 2,335¥ 1,405

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 9)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gain on sales of marketable equity securities
Loss on revaluation of marketable equity securities
Gain on sales of property, plant and equipment
Loss on sales or disposal of property, plant andequipment
Loss on liquidation of a subsidiary
Provision for reserve for losses on restructuring
Other, net
Income before income taxes
Income taxes (Note 7):
Current¥10.26
7.00

13,236

U.S. dollars(Note 2)

Yen
Amounts per share:
Net income
Cash dividends

7,819
$

¥6.44
7.00

$0.06
0.07

See notes to non-consolidated financial statements.
4

Yodogawa Steel Works, Ltd.
Non-Consolidated Statements of Shareholders’ Equity
Years ended March 31, 1999 and 2000

Thousands of
U.S. dollars(Note 2)Millions of yen
1999

2000

2000

¥23,221¥23,221$218,756

Balance at beginning and end of the year

¥23,497¥23,497$221,357

Legal reserve
Balance at beginning of the year
Add:

¥ 2,921¥ 3,089$ 29,100

Common stock
Balance at beginning and end of the year
Additional paid-in capital

Transfer from retained earnings
Balance at end of the year
Retained earnings
Balance at beginning of the year
Add:
Net income
Cumulative adjustment arising from initialadoption of tax-effect accounting
Deduct:Cash dividends paid
Bonuses to directors and statutory auditors
Transfer to legal reserve
Retirement of treasury stock
Balance at end of the year

168

161

1,517

¥ 3,089¥ 3,250$ 30,617¥88,865¥85,803$808,318

2,335

1,405

13,236–

1,387

13,066

1,606
65
168
3,558

1,544
60
161
3,983

14,545565
1,517
37,522¥85,803¥82,847$780,471

See notes to non-consolidated financial statements.
5

Yodogawa Steel Works, Ltd.
Notes to Non-Consolidated Financial Statements
March 31, 2000

1. Summary of Significant Accounting Policies(a)Basis of Preparation
The accompanying non-consolidated financial statements of Yodogawa Steel Works, Ltd. (the“Company”) have been prepared in accordance with accounting principles and practices generally
accepted in Japan and have been compiled from those prepared by the Company as required under the
Securities and Exchange Law of Japan. Accordingly, the accompanying non-consolidated financial
statements are not intended to present the non-consolidated financial position and results ofoperations in accordance with accounting principles and practices generally accepted in countries andjurisdictions other than Japan.
In addition, the notes to the non-consolidated financial statements include information which is not
required under accounting principles generally accepted in Japan but is presented herein as additional
information.
Certain reclassifications of previously reported amounts have been made to the non-consolidated
financial statements for the year ended March 31, 1999 to conform them to the 2000 presentation.
Such reclassifications have had no effect on net income or shareholders’ equity.

(b)

Foreign Currency Translation
Current monetary assets denominated in foreign currencies are translated into yen at the rates of
exchange in effect at the balance sheet date. Other assets denominated in foreign currencies aretranslated at their historical rates. All revenues and expenses associated with foreign currencies aretranslated at the rates of exchange prevailing when such transactions were made. The resulting
exchange losses and gains are charged or credited to income.

(c)Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks withdrawable on demand, andshort-term investments which are readily convertible to cash subject to an insignificant risk of changes
in their value and which were purchased with an original maturity of three months or less.

6

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

1. Summary of Significant Accounting Policies (continued)(d)Marketable Securities and Investments in Securities
Marketable securities are stated at the lower of cost or market, cost being determined by the moving
average method.
Securities other than marketable securities are stated at cost determined by the moving average method.

(e)Inventories
Finished goods, work in process and raw materials are stated at cost principally determined by thelast-in, first-out method. Supplies are stated at cost determined by the first-in, first-out method.
Real estate held for sale is stated at cost determined by the specific identification method.

(f)

Property, Plant and Equipment and Depreciation
Property, plant and equipment is stated on the basis of cost.
Depreciation of property, plant and equipment is calculated by the declining-balance method over theuseful lives of the respective assets as prescribed by the Corporation Tax Law, except that thestraight-line method is applied to buildings (except for structures attached to the buildings) acquired
subsequent to April 1, 1998.
Effective April 1, 1998, the Company shortened the useful lives of buildings (except for the structuresattached to the buildings) in accordance with a recent revision to the Corporation Tax Law. The effectof this change in useful lives was to increase depreciation expense by ¥104 million and to decrease
operating income and income before income taxes by ¥104 million for the year ended March 31, 1999
from the amounts which would have been recorded if the useful lives applied in the previous year had
been followed.
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged toincome as incurred.

7

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

1. Summary of Significant Accounting Policies (continued)(g)Research and Development Expenses and Computer Software
Research and development expenses are charged to income as incurred.
Expenditures relating to the development of computer software intended for internal use are charged toincome when incurred, except if these are deemed to contribute to the generation of future income or
cost savings. Such expenditures are capitalized as assets and amortized by the straight-line method
over their estimated useful life, which is generally five years.

(h)Bond Issuance Expenses
Bond issuance expenses are charged to income as incurred.

(i)

LeasesThe Company leases certain equipment under noncancelable lease agreements referred to as financeleases. Finance leases other than those which transfer the ownership of the leased property to theCompany are accounted for as operating leases.

(j)

Income Taxes
Up to the fiscal year ended March 31, 1999, deferred income taxes were not provided for timing
differences in the recognition of income and expenses for financial and tax reporting purposes.
Effective April 1, 1999, the Company adopted accounting for the interperiod allocation of income taxes
in accordance with an amendment to the Securities and Exchange Law of Japan. The cumulative effectof this change in method of accounting is reported as “cumulative adjustment arising from initialadoption of tax-effect accounting” in the non-consolidated statements of shareholders’ equity for theyear ended March 31, 2000. The effect of this change was that deferred income taxes - current assets,deferred income taxes - non-current assets, and retained earnings at March 31, 2000 increased by ¥327
million ($3,081 thousand), ¥1,097 million ($10,334 thousand), and ¥2,374 million ($22,365 thousand),
respectively, and net income for the year then ended increased by ¥37 million ($349 thousand).

8

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

1. Summary of Significant Accounting Policies (continued)(k) Retirement Allowances and Pension Plans
Employees of the Company are covered by an employees’ retirement allowances plan and an
employees’ pension plan. The employees’ retirement allowances plan provides for a lump -sumpayment determined by reference to the basic salary, length of service and conditions under which thetermination occurs. The employees’ pension plan, which is a funded non-contributory plan, partiallycovers the benefits under the employees’ retirement allowances plan to employees who retire after
fifteen or more years of service.
Retirement allowances are stated at the amount which would be required to be paid if all employees
covered by the retirement allowances plan voluntarily terminated their employment at the balance sheet
date, less the assets of the pension fund.
The directors and statutory auditors of the Company are customarily entitled to lump -sum payments
under the unfunded retirement allowances plan. Retirement allowances for directors and statutory
auditors have been made at estimated amounts based on the Company’s internal rules.
(l)Amounts per Share
The computation of non-consolidated net income per share is based on the weighted average numberof shares of common stock outstanding during each year.
Cash dividends per share represent the cash dividends declared as applicable to the respective years.

2. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter ofarithmetic computation only, at the rate of ¥106.15 = U.S.$1.00, the approximate exchange rate prevailing on
March 31, 2000. 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.

9

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

3. Marketable Securities and Investments in Subsidiaries and Affiliates
Information with respect to the book and market value of the marketable securities included in current assets
and investments in subsidiaries and affiliates at March 31, 1999 is summarized as follows:
1999
Marketable securities:
Equity securities
Debt securities

Book valueMarket value¥¥

Other securities

17,995141566

36,695154
396

18,702

37,245

11,31013,12011,31013,120Investments in subsidiaries and affiliates:
Equity securities¥

30,012¥50,365The corresponding information at March 31, 2000 is disclosed on a consolidation basis. See Note 3 to theconsolidated financial statements.

4. Inventories
Inventories at March 31, 1999 and 2000 were as follows:

Millions of yen

Finished goods
Work in process
Raw materials and supplies
Real estate held for sale

Thousands of
U.S. dollars

1999

2000

2000

¥16,282
3,692
7,283
184

¥15,243
3,813
7,128
172

$143,599
35,921
67,1501,620¥27,441¥26,356$248,290

10

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

5. Short-Term Bank Loans, Long-Term Debt and Guarantee Deposits
Short-term bank loans represent overdrafts at annual interest rates of approximately 0.9% and 0.58% at
March 31, 1999 and 2000, respectively.
Long-term debt at March 31, 1999 and 2000 was as follows:
Thousands of
U.S. dollars

Millions of yen
1999
1.8% unsecured bonds, payable in yen,due 2003
2.0% unsecured bonds, payable in yen,due 2004
Unsecured loans from banks and an insurancecompany, due 2002, at
an interest rate of 1.72%

¥

¥

5,000

2000

¥

5,000

2000

$

47,103

5,000

5,000

47,103

5,000

5,000

47,10315,000¥15,000$141,309

The aggregate annual maturities of long-term debt subsequent to March 31, 2000 are summarized as follows:
Millionsof yenThousands of
U.S. dollars

¥

5,000
5,000
5,000

$

47,103
47,103
47,103¥15,000$141,309

Year ending March 31,
2002
2003
2004

The assets pledged as collateral for short-term bank loans at March 31, 1999 and 2000 were as follows:

Millions of yen

Property, plant and equipment,
at net book value

Thousands of
U.S. dollars

1999

2000

2000

¥26,527¥30,885$290,956

11

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

5. Short-Term Bank Loans, Long-Term Debt and Guarantee Deposits (continued)
Guarantee deposits consisted principally of guarantee deposits from tenants at annual interest rates from 1%
to 4%. The aggregate annual maturities of guarantee deposits subsequent to March 31, 2000 are
summarized as follows:
Millions ofyen

Thousands of
U.S. dollars

¥

3
3
3
3
3
1,439

$

28
28
28
28
28
13,558¥ 1,454$

13,698Year ending March 31,
2001
2002
2003
2004
2005
2006 and thereafter

6. Shareholders’ Equity
The Commercial Code provides that an amount equivalent to at least 10% of cash dividends and other cash
appropriations from retained earnings be transferred to the legal reserve until such reserve equals 25% ofcommon stock. The legal reserve may be used to reduce or eliminate a deficit or may be transferred tocommon stock through suitable shareholders’ and directors’ action, but is not available for the payment ofdividends.

7. Income Taxes
Income taxes applicable to the Company comprise corporation, enterprise and inhabitants’ taxes which, in theaggregate, resulted in statutory tax rates of approximately 47.4% for 1999 and 42.0% for 2000. The effective
tax rates reflected in the accompanying non-consolidated statements of income differ from the statutory tax
rates primarily due to the effect of timing differences in the recognition of certain income and expenses for tax
and financial reporting purposes and the effect of permanent non-deductible expenses.

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

7. Income Taxes (continued)
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March 31, 2000 as apercentage of income before income taxes is as follows:
Statutory tax rate
Non-deductible entertainment expenses
Non-taxable cash dividend income
Foreign tax credit
Per capita portion of inhabitants’ taxes
Other
Effective tax rate

42.0%
2.6
(6.0)
(3.2)
2.4
(0.7)
37.1%

Effective April 1, 1999, the Company commenced the interperiod allocation of income taxes. Deferredincome taxes reflect the tax effect of the temporary differences between the amounts of the assets andliabilities recorded for financial and tax reporting purposes. The significant components of the Company’sdeferred tax assets and liabilities as of March 31, 2000 are summarized as follows:
Millions ofyen

Thousands of
U.S. dollars¥1,426
452
159
123
113
114

$13,434
4,258
1,498
1,159
1,065
1,073

2,387

22,487

Deferred tax liabilities:
Reserve for deferred taxation on contributions for acquisition ofproperty

963

9,072

Total deferred tax liabilities

963

9,072

¥1,424$13,415

Deferred tax assets:
Retirement allowances for employees
Retirement allowances for directors and statutory auditors
Accrued bonuses
Allowances for doubtful receivables
Reserve for losses on restructuring
Other
Total deferred tax assets

Net deferred tax assets

13

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

8. Retirement Allowances and Pension Plans
The charges to income for retirement allowances and pension plans for the years ended March 31, 1999 and2000 were as follows:

Millions of yen

Provision for retirement allowances
Pension costs

Thousands of
U.S. dollars

1999

2000

2000

¥881
323

¥885
327

$8,337
3,081

The assets of the pension fund at March 31, 1999 and 2000 were as follows:

Millions of yen

Thousands of
U.S. dollars

1999

2000

2000

¥2,812¥2,919$27,499

9. Research and Development Expenses
Research and development expenses included in selling, general and administrative expenses for the years
ended March 31, 1999 and 2000 were as follows:

Millions of yen

Thousands of
U.S. dollars

1999

2000

2000

¥669

¥573

$5,39814

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

10. Leases
The following pro forma amounts present the acquisition costs, accumulated depreciation and net bookvalue of the leased property as of March 31, 1999 and 2000, which would have been reflected in the balance
sheets if finance leases other than those which transfer the ownership of the leased property to the Company(which are currently accounted for as operating leases) were capitalized:
Millions of yen
1999
Accumu -lated
Acquisi-t depreci-ati
ion costsonMachinery andequipme
nt

¥286

¥144

Net
book
value

¥142

2000
Accumu -lated
Acquisi-t depreci-ati
ion cost
on

¥297

¥166

Net
book
value

Thousands of U.S. dollars
2000
Accumu -latedNet
Acquisi-t depreci-ati
book
ion costs
on
value

¥131

$2,798$1,564$1,234

The related lease payments and depreciation expense for the years ended March 31, 1999 and 2000 were as
follows:

Millions of yen

Lease payments
Depreciation expense

Thousands of
U.S. dollars

1999

2000

2000

¥62
62

¥59
59

$556
556

Depreciation is calculated by the straight-line method over the respective lease terms.
Future minimum payments (including the interest portion thereon) subsequent to March 31, 2000 underfinance leases other than those which transfer the ownership of the leased property to the Company aresummarized as follows:
Millions ofyenYear ending March 31,
2001
2002 and thereafterThousands of
U.S. dollars

¥ 58
73

$ 546
689

¥131

$1,23415

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

11. Commitments and Contingent Liabilities
The Company enters into forward foreign currency exchange contracts, interest rate swap agreements, andother agreements to manage its risk exposure to fluctuations in foreign currency exchange rates and interest
rates. At March 31, 1999, no such contracts or agreements remained open.
The corresponding information at March 31, 2000 is disclosed on a consolidation basis. See Note 10 to theconsolidated financial statements.
At March 31, 2000, the Company had the following contingent liabilities:

As guarantor of housing loans of employees and indebtedness of a
subsidiary

Millions ofyen

Thousands of
U.S. dollars¥290$2,732

12. Subsequent Event
The following appropriations of retained earnings, which have not been reflected in the accompanying
non-consolidated financial statements for the year ended March 31, 2000, were approved at a shareholders’meeting held on June 29, 2000:

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

Millions ofyen

Thousands of
U.S. dollars

¥743
80
50

$7,000754
471

16