Consolidated Financial Statements
Yodogawa Steel Works, Ltd.
and Consolidated Subsidiaries
March 31, 2016
with Independent Auditor’s Report

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Financial Statements
March 31, 2016

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

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

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2016

Millions of yen
2015
2016
AssetsCurrent assets:
Cash and deposits (Notes 5, 6 and 12)
Marketable securities (Notes 5, 6 and 7)
Notes and accounts receivable (Note 6):
Unconsolidated subsidiaries and affiliates(Note 23)
Trade
Less allowance for doubtful receivables
Inventories (Note 8)
Deferred income taxes (Note 15)
Other current assets (Note 5)
Total current assets

Property, plant and equipment:
Land (Notes 9, 18 and 24)
Buildings and structures (Notes 9 and 24)
Machinery, equipment and vehicles (Note 9)
Leased assets (Note 20)
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net (Note 25)

Investments and other assets:
Investments in securities (Notes 6, 7 and 12)
Investments in unconsolidated subsidiaries andaffiliates (Note 25)
Goodwill (Notes 9 and 25)
Deferred income taxes (Note 15)
Intangible assets
Other assets (Note 12)
Total investments and other assets

Total assets (Note 25)

2

Thousands of
U.S. dollars(Note 4)2016

¥ 35,176505¥ 46,503
100$ 412,700
887

14,644
26,595(189)
32,706381
5,626
115,444

14,191
23,489(112)
25,189546
7,647
117,553

125,941
208,457(994)
223,545
4,846
67,864
1,043,246

18,97958,925
147,823
1,644
537(168,739)
59,16918,38558,637
141,798
1,500
659(170,341)
50,638163,161
520,385
1,258,413
13,312
5,848(1,511,722)
449,397

37,011

29,918265,513

4,875
198
699
1,145
1,530
45,458

4,879
14
782
1,274
802
37,66943,300124
6,940
11,306
7,118
334,301¥ 220,071¥ 205,860$ 1,826,944

Millions of yen
2015
2016
Liabilities and net assets
Current liabilities:
Current portion of finance lease obligations(Note 10)Notes and accounts payable (Note 6):
Unconsolidated subsidiaries and affiliates
Trade
Construction
Short-term loans (Note 10)
Accrued expenses
Income tax payable (Note 15)
Provision for bonuses to employees
Other current liabilities (Note 12)
Total current liabilities
Long-term liabilities:
Liability for retirement benefits (Note 14)
Provision for retirement benefits for directors andaudit & supervisory board members
Guarantee deposits (Note 10)
Finance lease obligations, less current portion(Note 10)Deferred income taxes (Note 15)
Deferred income taxes on land revaluation reserve(Note 15)
Other long-term liabilities
Total long-term liabilities
Contingent liabilities (Note 13)
Net assets:
Shareholders’ equity (Note 17):
Common stock:
Authorized: 753,814,067 shares in 2015 and
143,000,000 shares in 2016
Issued:179,186,153 shares in 2015 and35,837,230 shares in 2016
Capital surplus
Retained earnings (Note 26)
Treasury stock, at cost – 24,475,276 shares in2015 and 5,363,079 shares in 2016
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on securities (Note 7)
Land revaluation reserve (Note 18)
Translation adjustments
Retirement benefit liability adjustments(Note 14)
Total accumulated other comprehensive income
Stock acquisition rights (Note 17)
Non-controlling interests
Total net assets
Total liabilities and net assets

¥

182

¥

173

Thousands of
U.S. dollars(Note 4)
2016

$

1,535

450
17,450
1,665
7,104
2,382
1,161
829
2,589
33,812302
16,072
1,654
7,153
2,236
1,758
939
2,809
33,096

2,680
142,634
14,67963,481
19,844
15,602
8,333
24,929293,717

9,642

10,63894,409

93
3,005

112
3,068

994
27,228

1,193
4,899

931
2,673

8,262
23,722853
1,674
21,359856
1,087
19,365

7,597
9,647
171,859

23,221
21,21094,90823,221
21,43290,590206,079
190,203
803,958(9,186)130,153(10,399)
124,844(92,288)
1,107,952

14,15010,7561,627
1,860

95,456
14,43916,507(1,938)12,305
178
16,072
153,399¥ 205,860(17,199)
109,203
1,579
142,634
1,361,368$ 1,826,944

1,615
2,554
(1,260)17,059166
17,522
164,900¥ 220,071

See accompanying notes to consolidated financial statements.
3

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Operations
Year ended March 31, 2016

Net sales (Notes 23, 24 and 25)
Cost of sales (Notes 8 and 24)
Gross profit
Selling, general and administrative expenses(Notes 17, 19 and 24)
Operating income (Note 25)
Other income (expenses):
Interest and dividend income
Interest expense
Dividend income of life insurance
Foreign exchange gain (loss), net
Amortization of negative goodwill (Note 25)
Equity in earnings of an affiliate
Gain on revaluation of derivatives
Gain on sales of investments in securities, net(Note 7)
Expenses related to employees seconded tooverseas unconsolidated subsidiaries
Loss on sales or disposal of property, plant andequipment, net
Loss on impairment of investments in securities(Note 7)
Loss on impairment of fixed assets(Note 9)Gain on recognition of negative goodwill(Note 25)
Gain on insurance claim
Other, net (Note 7)
Profit (loss) before income taxes
Income taxes (Note 15):
Current
DeferredProfit (loss)
Profit (loss) attributable to:Non-controlling interests
Owners of parent

Millions of yen
2015
2016
¥ 175,890¥ 159,214
134,978
154,782
21,10824,236¥

Thousands of
U.S. dollars(Note 4)2016
$ 1,412,975
1,197,888
215,087

17,6803,428

16,934
7,302

150,284
64,803

971
(158)
95
1,460
7
377
23

1,031
(215)
93
(612)
–
337
32

9,150
(1,908)825(5,431)
–
2,991
284

1,091

497

4,411

(256)

(255)

(2,263)

(83)

(77)

(683)

(133)

(1,828)(16,223)(588)(6,603)(58,600)

47
12
133
6,426

–
1
193
(104)

–
9
1,712
(923)

2,599
583
3,182
3,244

2,941
(333)
2,608
(2,712)

26,100(2,955)23,145(24,068)

627
2,617

59
¥ (2,771)

524(24,592)$

See accompanying notes to consolidated financial statements.
4

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year ended March 31, 2016

Millions of yen
2016
2015
Profit (loss)
Other comprehensive income (loss) (Note 16):
Unrealized holding gain (loss) on securities
Unrealized gain from hedging instruments
Land revaluation reserve
Translation adjustments
Retirement benefit liability adjustments
Share of other comprehensive income (loss) of
an affiliate accounted for by the equity
methodTotal other comprehensive income (loss)
Comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests

Thousands of
U.S. dollars(Note 4)2016

¥ 3,244¥ (2,712)$ (24,068)

5,207
0
64
2,589
162

(3,422)–(4)(1,120)(752)(30,369)–(35)(9,940)(6,674)70
8,092¥ 11,336(10)(5,308)¥ (8,020)(89)(47,107)$ (71,175)¥ 9,802
1,534¥ (7,530)(490)$ (66,826)(4,349)See accompanying notes to consolidated financial statements.
5

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets
Year ended March 31, 2016
Millions of yen

Balance at April 1, 2014
Cash dividends
Profit attributable to owners ofparent for the year
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stockReversal of land revaluation
reserve
Other change
Balance at April 1, 2015
Cash dividends
Loss attributable to owners ofparent for the year
Acquisition of treasury stock
Disposition of treasury stock
Increase due to change inownership interest resulting
from capital increase of aconsolidated subsidiary
Increase due to change inownership interest resulting
from acquisition of investments
in a consolidated subsidiary
Reversal of land revaluation
reserve
Other changes
Balance at March 31, 2016

Number ofshares issued
184,186,153–

Common stock¥ 23,221–

Capital surplus¥ 23,460–

Retained earnings¥ 93,846(1,571)

Treasury stock,at cost¥ (10,104)–

Total shareholders’equity¥ 130,423(1,571)–––(5,000,000)

–
–
–
–

–
–
(5)
(2,245)

2,617
–
–
–

–
(1,348)
21
2,245

2,617
(1,348)16–––
179,186,153–––¥ 23,221–––¥ 21,210–

16–¥ 94,908(1,542)––(9,186)–16–¥ 130,153(1,542)

–
–
–

–
–
–

–
–
(8)

(2,771)–––(1,238)25(2,771)(1,238)
17

–

–

198

–

–

198

–

–

32

–

–

32

–
(143,348,923)
35,837,230––¥ 23,221––¥ 21,432(5)–¥ 90,590––¥ (10,399)(5)–¥ 124,844¥

Millions of yen

Balance at April 1, 2014
Cash dividends
Profit attributable to owners ofparent for the year
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stockReversal of land revaluation
reserve
Other changes
Balance at April 1, 2015
Cash dividends
Loss attributable to owners ofparent for the year
Acquisition of treasury stock
Disposition of treasury stock
Increase due to change inownership interest resulting
from capital increase of aconsolidated subsidiary
Increase due to change inownership interest resulting
from acquisition of investments
in a consolidated subsidiary
Reversal of land revaluation
reserve
Other changes
Balance at March 31, 2016

Unrealized
holding gain
on securities¥ 8,923–

Total
Unrealized
Retirement accumulated
Land
Stock
gain (loss)
benefitotherfrom hedging revaluation Translation
liability comprehensive acquisition
adjustments adjustments
reserverightsinstruments
income¥ (0)¥ 1,545¥ 933¥ (1,511)¥ 9,890
¥ 156
–
–
–
–
–
–

Noncontrollinginterests¥ 16,064–

Total net
assets¥ 156,533(1,571)

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–
–
–

2,617
(1,348)
16
–

–
5,227
¥ 14,150
–

–
0
¥–
–

–
70
¥ 1,615––
1,621¥ 2,554––251¥ (1,260)
–

–
7,169
¥ 17,059
–

–
10
¥ 166
–

–
1,458
¥ 17,522
–

16
8,637
¥ 164,900(1,542)

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

(2,771)(1,238)
17

–

–

–

–

–

–

–

–

198

–

–

–

–

–

–

–

–

32

–
(3,394)¥ 10,756

–
–
¥–

–
12
¥ 1,627–(694)¥ 1,860–(678)¥ (1,938)–(4,754)¥ 12,305

–
12
¥178

–
(1,450)¥ 16,072(5)(6,192)¥ 153,399

6

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Net Assets (continued)
Year ended March 31, 2016
Thousands of U.S. dollars (Note 4)

Balance at April 1, 2015
Cash dividends
Loss attributable to owners ofparent for the year
Acquisition of treasury stock
Disposition of treasury stock
Increase due to change inownership interest resulting
from capital increase of aconsolidated subsidiary
Increase due to change inownership interest resulting
from acquisition of investments
in a consolidated subsidiary
Reversal of land revaluation
reserve
Other changes
Balance at March 31, 2016

Balance at April 1, 2015
Cash dividends
Loss attributable to owners ofparent for the year
Acquisition of treasury stock
Disposition of treasury stock
Increase due to change inownership interest resulting from
capital increase of a consolidated
subsidiary
Increase due to change inownership interest resulting fromacquisition of investments in aconsolidated subsidiary
Reversal of land revaluation
reserve
Other changes
Balance at March 31, 2016

Common stock$ 206,079–

Capital surplus$ 188,232–

Retained earnings$ 842,279(13,685)

Treasury stock,at cost$ (81,523)–

Total shareholders’equity$ 1,155,067(13,685)

–
–
–

–
–
(71)

(24,592)–––(10,987)
222(24,592)(10,987)
151

–

1,758

–

–

1,758

–

284

–

–

284

–
–
$ 206,079––$ 190,203(44)–$ 803,958––$ (92,288)(44)–$ 1,107,952

Unrealized
holding gain
on securities$125,577–

Thousands of U.S. dollars (Note 4)
Unrealized
Total
Retirement accumulated
gain (loss)
Land
Stock
Nonbenefit
from
other
revaluation Translation
liability comprehensive acquisition controlling
hedging
adjustments adjustment
reserverightsinterests
instruments
income$ –$ 14,332$ 22,666 $ (11,182)$ 151,393$ 1,473$ 155,503
–
–
–
–
–
–
–

Total net
assets$ 1,463,436(13,685)

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

–
–
–

(24,592)(10,987)
151

–

–

–

–

–

–

–

–

1,758

–

–

–

–

–

–

–

–

284

–
(30,121)$ 95,456

–
–
$ –

–
107
$14,439–(6,159)$ 16,507–(6,017)$ (17,199)–(42,190)$ 109,203–
106$ 1,579–(12,869)$ 142,634(44)(54,953)$1,361,368

See accompanying notes to consolidated financial statements.
7

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year ended March 31, 2016
Thousands of
U.S. dollars(Note 4)2016

Millions of yen
2015
2016
Cash flows from operating activities:
Profit (loss) before income taxes
Adjustments for:
Depreciation and amortization
Amortization of goodwill
Amortization of negative goodwill
Equity in earnings of an affiliate
Increase in liability for retirement benefits
Increase in provision for retirement benefits for
directors and audit & supervisory board
members(Decrease) increase in provision for bonuses to
employees
Decrease in allowance for doubtful receivables
Interest and dividend income
Interest expense
Insurance income
Gain on recognition of negative goodwill
Gain on revaluation of derivatives
Gain on sales of investments in securities, net
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(Increase) decrease in inventories
Decrease in notes and accounts payable
Other, net
Subtotal
Insurance dividends and claims received
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 6,426
5,155

¥

(104)

$

(923)
38,268
195

–

4,312
22

(7)
(377)
182

–

–

(337)
83

(2,991)
737

20

19

168

(73)
(59)
(971)
158
(107)
(47)
(23)
(1,091)
133

109
(77)
(1,031)
215
(94)

967
(683)
(9,150)
1,908
(834)

–

–

(32)
(497)
1,828

(284)
(4,411)
16,223

83
588

77
6,603

683
58,600(576)(1,814)(1,652)
(325)
5,623
107
1,025
(153)
(3,774)¥ 2,828

3,472
6,783
(1,417)933
20,867
94
1,079
(213)
(2,422)¥ 19,405

30,81360,197(12,575)
8,280
185,188
834
9,576(1,890)(21,495)$ 172,213

8

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows (continued)
Year ended March 31, 2016
Thousands of
U.S. dollars(Note 4)2016

Millions of yen
2016
2015
Cash flows from investing activities:
Investments in time deposits
Proceeds from time deposits
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant andequipment
Purchases of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Payment for loans receivableCollection of loans receivable
Other
Net cash used in investing activities
Cash flows from financing activities:
Net increase in short-term bank loans
Proceeds from sales of treasury stock
Purchases of treasury stock
Cash dividends paid to owners of parent
Proceeds from stock issuances to non-controllinginterests
Cash dividends paid to non-controlling interests
Repayment of lease obligations
Purchases of investments in a subsidiary not
resulting in change in scope of consolidation
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of theyear
Cash and cash equivalents at the end of the year
(Note 5)

¥ (1,847)
3,881(5,458)¥ (11,041)
2,721
300
(2,810)$ (97,985)
24,148
2,662(24,938)

3
(112)
(27)
2,235
(175)
241
(97)
(1,356)11(194)(1,526)
2,188
(112)
184
0
(10,279)

98(1,722)(13,543)
19,418
(994)
1,633
0
(91,223)5,353
0(1,200)(1,582)431
1(1,235)(1,556)

3,825
9(10,960)(13,809)

401
(615)
(163)

–

(721)
(177)

–
(6,399)(1,571)

–
2,194

(8)
(3,265)(71)(28,976)

252
3,918

(269)
5,592

(2,387)49,62731,28035,198

312,372¥ 35,198¥ 40,790$ 361,999–

See accompanying notes to consolidated financial statements.
9

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2016
1.

Summary of Significant Accounting Policies(a) Basis of preparation
Yodogawa Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintaintheir books of account and records in accordance with accounting principles generally
accepted in Japan, and its overseas subsidiaries maintain their books of account inconformity with those of their respective countries of domicile.
The accompanying consolidated financial statements of the Company and its
consolidated subsidiaries (collectively, the “Group”) are prepared on the basis ofaccounting principles generally accepted in Japan, which are different in certain respects
as to the application and disclosure requirements of International Financial ReportingStandards, and have been compiled from the consolidated financial statements preparedby 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.
(b) Basis of consolidation
The accompanying consolidated financial statements include the accounts of theCompany and all subsidiaries over which substantial control is exerted through either
majority ownership of voting stock and/or by other means.
All significant
intercompany balances and transactions have been eliminated in consolidation.
An investment in one affiliate (a company over which the Company has the ability to
exercise significant influence) is stated at cost plus equity in its undistributed earnings orundisposed loss. Consolidated net income or loss includes the Company’s equity in thecurrent net income or loss of this company after the elimination of unrealizedintercompany profits.
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if
applicable. The difference between the cost of investments in subsidiaries and theequity in their net assets at their respective dates of acquisition is amortized over a
period of 5 years on a straight-line basis.

10

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

1.

Summary of Significant Accounting Policies (continued)(b) Basis of consolidation (continued)
The financial statements of certain consolidated subsidiaries whose fiscal year end is
December 31 have been included in consolidation on the basis of a full fiscal year after
making the necessary adjustments for significant transactions during the period fromtheir fiscal year end to the Company’s balance sheet date.
(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen
at the rates of exchange in effect at the balance sheet date. Other assets and liabilities
denominated in foreign currencies are translated at their historical rates. All revenues
and expenses associated with foreign currencies are translated at the rates of exchange
prevailing when such transactions were made. The resulting exchange gain or loss iscredited or charged to profit or loss.
The balance sheet accounts of the overseas consolidated subsidiaries (except for net
assets excluding non-controlling interests) are translated into yen at the rate of exchange
in effect at the balance sheet date. The components of net assets excluding
non-controlling interests are translated at their respective historical rates of exchange.
Revenue and expense accounts are translated into yen at the average rate of exchange in
effect during the year.
Differences arising from translation are reflected in “Translation adjustments” and“Non-controlling interests” in the accompanying consolidated balance sheets andstatements of changes in net assets.
(d) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits with banks withdrawable on
demand, and short-term investments which are readily convertible into cash subject toan insignificant risk of any changes in their value and which were purchased with an
original maturity of three months or less.

11

Yodogawa Steel Works, Ltd. and Consolidated Subsidiaries
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, included directly in net assets. Non-marketable securities classified as othersecurities are carried at cost. Cost of securities sold is determined principally by themoving average method.
(f) Derivatives
Derivatives are measured at fair value.
(g) Inventories
Inventories of the Company and its domestic consolidated subsidiaries are principallystated at the lower of cost or net selling value, cost being determined by the averagemethod. Inventories of overseas consolidated subsidiaries are stated at the lower ofcost or net selling value, cost being determined by the moving average method.
(h) Property, plant and equipment and depreciation (except for leased assets)
Depreciation of property, plant and equipment at the Company and its domestic
consolidated subsidiaries is calculated by the declining-balance method over theestimated useful lives of the respective assets, except that the straight-line method isapplied to buildings (other than structures attached to the buildings) acquired on or after
April 1, 1998.
Depreciation of property, plant and equipment at overseas consolidated subsidiaries iscalculated by the straight-line method.
The useful lives adopted for calculating depreciation are principally as follows:
Buildings and structures
Machinery, equipment and vehicles

3 to 60 years
3 to 36 years

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

1.

Summary of Significant Accounting Policies (continued)(i) Intangible assets (except for leased assets)
Amortization of intangible assets is calculated by the straight-line method over theestimated useful lives of the respective assets.
Expenditures related to computer software development for internal use are expensed as
incurred, unless these 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 of 5 years.
(j) Research and development costs
Research and development costs are expensed as incurred.
(k) Leases
Leased assets under finance lease transactions that transfer ownership to the lessee aredepreciated by the same method used for owned fixed assets.
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.
(l) Allowance for doubtful receivables
The Group provides an allowance for doubtful receivables at an amount calculated
based on their historical experience of bad debts on ordinary receivables plus anadditional estimate of probable specific bad debts from customers experiencing financial
difficulties.
(m) Provision for bonuses to employees
The Company and its domestic consolidated subsidiaries provide for payments ofbonuses to employees based on the estimated amount to be paid to employees after thebalance sheet date, which is attributable to the current fiscal year. There are nobonuses to employees at overseas consolidated subsidiaries to be provided.

13

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

1.

Summary of Significant Accounting Policies (continued)(n) Provision for retirement benefits for directors and audit & supervisory board
members
The directors and audit & supervisory board members of the Company’s domestic
consolidated subsidiaries have customarily been entitled to lump-sum payments under
the unfunded retirement benefit plans. Provision for retirement benefits for these
directors and audit & supervisory board members have been provided at an estimatedamount based on each consolidated subsidiary’s internal rules.
(o) Retirement benefits
In calculating the retirement benefit obligation, the benefit formula basis is applied forthe attribution of expected retirement benefits to each period up to the end of the current
year.
Prior service cost is being amortized as incurred by the straight-line method over a
period of principally 10 years, which is within the estimated average remaining years ofservice of the eligible employees.
Actuarial gain or loss is amortized in the year following the year in which the gain orloss is recognized by the straight-line method over a period of principally 10 years,
which is within the estimated average remaining years of service of the eligible
employees.
Certain consolidated subsidiaries calculate liability for retirement benefits andretirement benefit expenses for the defined benefit corporate pension plans and theretirement lump-sum plans based on the amount which would be payable at the year end
if all eligible employees terminated their services voluntarily (“simplified method”).
(p) 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.
(q) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive ofconsumption taxes. Consumption taxes and local consumption taxes paid not offset byconsumption taxes and local consumption taxes received in accordance with
Consumption Tax Act of Japan are expensed when incurred.

14

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

1.

Summary of Significant Accounting Policies (continued)(r) Recognition of revenues and costs of construction contracts
Revenues and costs of construction contracts of which the percentage of completion canbe reliably estimated, are recognized by the percentage-of-completion method. The
percentage of completion is calculated at the cost incurred as a percentage of theestimated total cost. The completed-contract method continues to be adopted forcontracts for which the percentage of completion cannot be reliably estimated.
(s) 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 or payable hedged
by forward foreign exchange contracts which meet certain conditions are translated at
the corresponding foreign exchange contract rates (“Allocation method”). The
evaluation of effectiveness of such forward foreign exchange contracts is omitted
because significant terms of the hedging instruments and underlying hedged items are
the same and the Company and certain consolidated subsidiaries assumes thatmovements of cash flows are completely offset.
(t) Accounting standards issued but not yet effective
Implementation Guidance on Recoverability of Deferred Tax Assets
On March 28, 2016, the Accounting Standards Board of Japan (“ASBJ”) issued“Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No.26), which basically transferred the accounting guidance included in theJapanese Institute of Certified Public Accountants Audit Committee Report No.66“Audit Treatment on Determining the Recoverability of Deferred Tax Assets” (JICPA
Report No.66) to the ASBJ. The ASBJ basically continues to apply the framework of
the JICPA Report No.66, whereby companies are categorized into five categories anddeferred tax assets are calculated based on each of these categories. However, the
ASBJ conducted a necessary review regarding the partial accounting treatments for the
categorizing criteria and recoverability of deferred tax assets and established theguidance in applying “Accounting Standard for Tax Effect Accounting” (BusinessAccounting Council of Japan), regarding the recoverability for deferred tax assets.

15

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

1.

Summary of Significant Accounting Policies (continued)(t) Accounting standards issued but not yet effective (continued)
Implementation Guidance on Recoverability of Deferred Tax Assets (continued)
Accordingly, the following accounting treatments will be changed:(*1) Accounting treatment for entities that are not included in any of the fivecategories(*2) Criteria for classifying entities that have generated stable income for the past
three years and the current year classified as “Category 2” or which haveexperienced significant fluctuations of taxable income, however, with nosignificant net operating tax loss carryforwards for the past three years or thecurrent year classified as “Category 3” entities(*3) Recoverability of deferred tax assets for unscheduled deductible temporary
differences of “Category 2” entities(*4) Reasonable estimable period of future taxable income before adjustments of
temporary differences for “Category 3” entities(*5) Accounting treatment for recoverability of deferred tax assets at “Category 4”
entities with significant net operating tax loss carryforwards or that have hadsignificant net operating tax loss carryforwards expire in the past three years
or the current year or are expected to expire, which, are classified as“Category 2” or “Category 3” entities due to meeting certain conditions
The Company expects to adopt the revised implementation guidance from the beginningof the year ending March 31, 2017.
The Company is currently evaluating the effect of adopting the revised accounting
guidance on the consolidated financial statements.

16

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

2.

Change in Accounting Policies

Accounting Standards for Business Combinations
The Company and its domestic subsidiaries adopted “Revised Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21 of September 13, 2013), “Revised
Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No.22 ofSeptember 13, 2013), “Revised Accounting Standard for Business Divestitures” (ASBJ
Statement No.7 of September 13, 2013) and other standards. These revised accounting
standards are applied from the fiscal year ended March 31, 2016. Accordingly, differences
resulting from changes in ownership interest in a subsidiary when control over the subsidiary
is retained by the parent are recognized under capital surplus, and acquisition-related costs
are recorded as expenses for the period in which they arise. Effective for businesscombinations conducted on or after the beginning of the year ended March 31, 2016, anychanges in the allocation of the acquisition price arising from the finalization of theprovisional accounting treatment are reflected in the consolidated financial statements for theyear in which the business combination occurs. In addition, the presentation method of
profit (loss) attributable to owners of parent was amended, and “minority interests” werechanged to “non-controlling interests.” Reclassifications were made to the previous year’s
consolidated financial statements to reflect these changes in presentation.
From April 1, 2015, these revised standards are applied prospectively in accordance with thetransitional treatment provided in Article 58 – 2 (4) of ASBJ Statement No.21, Article 44 – 5(4) of ASBJ Statement No.22 and Article 57 – 4 (4) of ASBJ Statement No.7.
Effective from the year ended March 31, 2016, in the consolidated statement of cash flows,
cash flows related to the acquisition or sale of shares of subsidiaries not resulting in a change
in the scope of consolidation are classified into “cash flows from financing activities,” while
cash flows related to expenses arising from the acquisition of shares of subsidiaries resulting
in a change in the scope of consolidation or expenses arising from the acquisition or sale ofshares of subsidiaries not resulting in a change in the scope of consolidation are classified
into “cash flows from operating activities.”
As a result of this change, loss before income taxes for the year ended March 31, 2016 andcapital surplus as of March 31, 2016 increased by ¥231 million ($2,050 thousand). Also,
basic loss attributable to owners of parent for the year ended March 31, 2016 increased by¥7.51 ($0.07).

17

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

3.

Change in Accounting Estimates

Effective from the year ended March 31, 2016, Yodogawa Shengyu Steel, Ltd. (“YSS”), a
consolidated subsidiary in China, changed the estimated economic useful lives of mainmachinery, equipment and buildings following a review of its mid-term business plan. As aresult, YSS determined that it is appropriate to use the useful lives for machinery andequipment based on the expected sales mix included in the new business plan. In addition,
it is also appropriate to use useful lives based on the original utilization period for buildings
because the concerns about a defect caused by ground conditions have been resolved. As aresult of this change, operating income increased by ¥384 million ($3,408 thousand) and loss
before income taxes decreased by the same amount for the year ended March 31, 2016.

4.

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 ¥112.68 = U.S.$1.00,
the approximate exchange rate prevailing on March 31, 2016. 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.

5.

Cash and Cash Equivalents

A reconciliation of cash and deposits shown in the accompanying consolidated balance sheet
as of March 31, 2015 and 2016 to cash and cash equivalents shown in the accompanying
consolidated statement of cash flows for the years ended March 31, 2015 and 2016 ispresented as follows:

Cash and deposits
Investment trust beneficiary securities
included in “Marketable securities”
Trust beneficiary rights included in “Other
current assets”
Time deposits with a maturity of more than
three months
Cash and cash equivalents

Millions of yen
2015
2016
¥ 35,176¥ 46,503

Thousands of
U.S. dollars
2016$ 412,700

204

–

–

–

500

4,437

(182)
¥ 35,198(6,213)¥ 40,790(55,138)$ 361,999

18

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

6.

Financial Instruments

Overview(a) Policy for financial instruments
In consideration of plans for capital investment, the Group primarily utilizes its own
funds. In case its own funds are insufficient, the Group raises funds by bankborrowings or bond issuances. The Group manages temporary cash surpluses throughlow-risk financial assets. The Group uses derivatives for the purpose of reducing risk
and does not enter into derivatives for speculative purposes.
(b) Types of financial instruments and related risk
Trade receivables, notes and accounts receivables, are exposed to credit risk ofcustomers. In addition, the Group is exposed to foreign currency exchange risk arisingfrom trade receivables denominated in foreign currencies.
Investments in securities and marketable securities are exposed to volatility risk ofmarket price. The former is composed mainly of the shares of common stock of thecompanies with which the Group has business relationships, held-to-maturity debt
securities and hybrid financial instruments containing embedded derivatives. The
latter is composed mainly of commercial paper and negotiable certificates of deposits.
Trade payables, notes and accounts payable, have payment due dates within six months.
The Group is exposed to foreign currency exchange risk arising from trade payables
denominated in foreign currencies.
Regarding derivatives, the Group enters into forward foreign exchange contracts to
reduce the foreign currency exchange risk arising from trade receivables, trade payables
and loans receivables denominated in foreign currencies for the purpose of efficient risk
management.
Information regarding the hedging instruments and hedged items, the hedging policy
and the method of the evaluation of the effectiveness of hedging is addressed in Note
1(s).

19

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

6.

Financial Instruments (continued)

Overview (continued)(c) Risk management for financial instruments
For trade receivables, each related division monitors the credit worthiness of their main
customers periodically, and monitors due dates and outstanding balances by customer.
In addition, the Company and its domestic consolidated subsidiaries are making efforts
to identify at an early point and mitigate risks of bad debts from customers who havefinancial difficulties. The overseas consolidated subsidiaries request customers to
issue non-cancelable letters of credit to hedge credit risk.
The Group only acquires held-to-maturity debt securities and commercial paper issuedby companies with high credit ratings or sound credit profiles. Accordingly, the Group
believes that the credit risk deriving from such securities is insignificant. The Groupalso believes that the credit risk of derivatives is insignificant as the Group enters into
derivative transactions only with financial institutions with high credit ratings.
For trade receivables and trade payables denominated in foreign currencies, the Group
enters into forward foreign exchange contracts to hedge the risks arising fromfluctuations in foreign exchanges rates.
For marketable securities and investments in securities, the Group periodically reviews
the fair value of such financial instruments and the financial position of the issuers. In
addition, the Group continuously evaluates whether or not securities other than thoseclassified as held-to-maturity debt securities should be maintained taking into accounttheir fair value and relationships with the issuers.
The Group enters into derivative transactions based on internal regulations andestablishes the reporting and approval system which set forth the purpose, contents,
counterparties, holding risk, maximum upper limit of loss amount and risk amounts.
Based on a report from each division, the Group prepares and updates its cash flowplans on a timely basis and maintains sufficient solvency to manage liquidity risk. In
order to provide for unexpected cash requirements, the Company has entered into theline-of-credit agreements with certain financial institutions and its overseas consolidated
subsidiaries are able to obtain credit limit of short-term borrowings from certain
financial institutions.

20

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

6.

Financial Instruments (continued)

Overview (continued)(d) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market prices, if
available. When there are no quoted market prices available, fair value is reasonably
estimated. Since various assumptions and factors are reflected in estimating the fairvalue, different assumptions and factors could result in different fair value.
(e) Concentration of credit risk
There is no credit risk for the year ended March 31, 2016.
Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet, estimated fairvalue and unrealized gain as of March 31, 2015 and 2016 are shown in the following table.
The following table does not include financial instruments for which it is extremely difficult
to determine the fair value.

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

Carrying value

Millions of yen
2015
Estimated
fair value

Difference¥ 35,176¥ 35,176¥ –14,644
26,595

14,644
26,595––36,271¥ 112,686

36,348¥ 112,763

77
¥ 77

¥

¥

Liabilities:
Notes and accounts payable:
Unconsolidated subsidiaries andaffiliates
Trade
Total liabilities

450
17,450¥ 17,900

450
17,450¥ 17,900

¥ –
–
¥ –

Derivatives*

¥

¥

¥ –

(539)

(539)

21

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)

Assets:Cash and deposits
Notes and accounts receivable:
Unconsolidated subsidiaries andaffiliates
Trade
Marketable securities and investments insecurities
Total assets
Liabilities:
Notes and accounts payable:
Unconsolidated subsidiaries andaffiliates
Trade
Total liabilities

Carrying value

Millions of yen
2016
Estimated
fair value

Difference¥ 46,503¥ 46,503¥

14,191
23,48914,191
23,489––29,667¥ 113,850

29,774¥ 113,957

107
¥ 107

¥

¥

–

302
16,072¥ 16,374

302
16,072¥ 16,374

¥ –
–
¥ –

–

–

–

Derivatives (*)

Thousands of U.S. dollars
2016
Estimated
Difference
Carrying value
fair value
Assets:Cash and deposits
Notes and accounts receivable
Unconsolidated subsidiaries andaffiliates
Trade
Marketable securities and investments insecurities
Total assets
Liabilities:
Notes and accounts payable
Unconsolidated subsidiaries andaffiliates
Trade
Total liabilities
Derivatives (*)$ 412,700$ 412,700

125,941
208,457

125,941
208,457––

263,285$1,010,383

264,235$1,011,333

950
$ 950

$

$

$

2,680
142,634$ 145,314

2,680
142,634$ 145,314

–

–

$

$

–

–
–
–
–

(*) The value of assets and liabilities arising from derivative transactions is shown at net
value, and with the amount in parentheses representing net liability position.
22

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
Calculation method of estimated fair value of financial instruments is as follows:
Cash and deposits, notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates thefair value.
Marketable securities and investments in securities
The fair value of equity securities is based on quoted market prices. The fair value of debt
securities is based on either quoted market prices or the prices provided by the financial
institutions. For information on securities classified by holding purpose, please refer toNote 7.
Notes and accounts payable
Since this item is settled in a short period of time, its carrying value approximates the fairvalue.
Derivative transactions
Please refer to Note 21.
The carrying value of financial instruments without determinable market value as of March
31, 2015 and 2016 is presented as follows:

Unlisted stocks
Investment in limited liability
partnership
Preferred stocks
Total

Millions of yen
2015
2016
¥ 470
¥ 244
114
661
¥ 1,245

59
48
¥ 351

Thousands of
U.S. dollars
2016$ 2,165524
426$ 3,115

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

23

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
The redemption schedule for monetary assets and investments by maturity dates as of March
31, 2015 and 2016 is as follows:

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

¥

–
–

Due after ten
years¥ 35,129
41,239

¥ –
–

–
–

10
–

58
500

–
1,500

300
¥ 76,668

–
¥ 10

200
¥ 758

–
¥ 1,500

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

Millions of yen
2015
Due after one Due after five
year throughyears throughfive years
ten years

Millions of yen
2016
Due after one Due after five
year throughyears throughfive years
ten years¥ 46,440
37,680

¥ –
–

100
–
–
¥ 84,220

¥

¥

–
–

Due after ten
years

–
–

¥–
–

10
–

1,040
1,500

–
–

–
¥10

–
¥ 2,540–¥–

24

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

6.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
Thousands of U.S. dollars
2016

Deposits
Notes and accounts receivable
Marketable securities andinvestments in securities
Held-to-maturity debt securities
National and local
government bonds
Corporate bonds
Other securities with maturities
Bonds
Total

7.

Due in one
year or lessDue after one
year throughfive years$412,141
334,398

$ –
–

887
–
–
$747,426

Due after five
years throughten years$

Due after ten
years

–
–

$–
–

89
–

9,230
13,312

–
–

–
$ 89

–
$ 22,542–$–

Securities

Marketable securities classified as held-to-maturity debt securities as of March 31, 2015 and2016 are summarized as follows:

Carrying
value
Securities whose estimated fair value exceeds
their carrying value:
National and local government bonds
Corporate bonds
Securities whose estimated fair value does notexceed their carrying value:
Corporate bonds
Total

¥

68
448

Millions of yen
2015
Estimated
fair value
Difference

¥

70
525

¥ 2
77

516

595

79

1,446
¥ 1,9621,444¥ 2,039

(2)
¥ 77

25

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

7.

Securities (continued)

Securities whose estimated fair value
exceeds their carrying value:
National and local government bonds
Corporate bonds
Securities whose estimated fair value
does not exceed their carrying value:
National and local government bonds
Corporate bonds
Total

Carrying
value

Millions of yen
2016
Estimated
fair value

Difference¥1,058452¥ 1,068
559

¥ 10
107

1,510

1,627

117

110
488
598
¥2,108100
488
588¥ 2,215

(10)
–
(10)
¥ 107

Thousands of U.S. dollars

Securities whose estimated fair value
exceeds their carrying value:
National and local government bonds
Corporate bonds
Securities whose estimated fair value
does not exceed their carrying value:
National and local government bonds
Corporate bonds
Total

Carrying
value

2016
Estimated
fair value$ 9,390
4,011
13,401$ 9,478
4,961
14,439

$

976
4,331
5,307
$ 18,708

887
4,331
5,218
$ 19,657

(89)
–
(89)
$ 949

Difference

88
950
1,038

Hybrid financial instruments containing an embedded derivative that cannot be separated arestated at fair value in corporate bonds whose estimated fair value does not exceed theircarrying value in the above table and the resulting gains or losses are included in other, net
as a part of other income (expense) in the consolidated statement of operations.

26

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

7.

Securities (continued)

Other securities with determinable market value as of March 31, 2015 and 2016 aresummarized as follows:

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

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

Carrying
value

Millions of yen
2015
Acquisition
costs

Difference¥ 31,662
1,006
119
32,787¥ 11,319
1,001
97
12,417¥ 20,343
5
22
20,370

1,318
204
1,522
¥ 34,309

1,474
204
1,678
¥ 14,095

(156)
–
(156)
¥ 20,214

Carrying
value

Millions of yen
2016
Acquisition
costs

Difference¥ 23,610
402
120
24,132¥ 8,525
400
97
9,022

¥ 15,0852
23
15,110

3,328
99
3,427
¥ 27,559

3,465
101
3,566
¥ 12,588

(137)
(2)
(139)
¥ 14,971

27

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

7.

Securities (continued)
Thousands of U.S. dollars
2016
Acquisition
costs
Difference
Carrying value

Securities whose carrying value exceeds
their acquisition costs:
Equity securities
Corporate bonds
Other
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Corporate bonds
Total$ 209,531
3,568
1,064
214,163$ 75,656
3,550
861
80,067$ 133,875
18
203
134,096

29,535879
30,414$ 244,577

30,751897
31,648$ 111,715(1,216)(18)(1,234)$ 132,862

Because no quoted market price is available and it is extremely difficult to estimate thecorresponding future cash flow, unlisted stocks of ¥1,245 million and ¥351 million ($3,115
thousand) as of March 31, 2015 and 2016, respectively, are not included in the above table.
Sales of corporate bonds classified as held-to-maturity debt securities for the year ended
March 31, 2016 are summarized as follows:
Millions of
yen
Sales
Cost of securities soldNet gain¥ 1,505
1,496
9

Thousands of
U.S. dollars
2016$ 13,357
13,27780

The reason for the sales was due to the exercise of the early redemption option by the issuer.
Sales of securities classified as other securities for the years ended March 31, 2015 and 2016
are summarized as follows:
Millions of yen
2015
2016
Sales
Aggregate gain

¥ 1,876
1,106

¥ 636
484

Thousands of
U.S. dollars
2016$ 5,644
4,295

The Group recorded loss on impairment of investments in securities with determinable
market value of ¥1,181 million ($10,481 thousand) for the years ended 2016. Loss on
impairment is recorded at the amount deemed necessary on securities whose fair value has
declined by 50% on more, or whose fair value has declined by 30% on more, but less than
50%, if the decline is deemed to be irrecoverable considering the movements of individual
stock prices and recoverability.
28

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

8.

Inventories

The following is a summary of inventories as of March 31, 2015 and 2016:

Millions of yen
2016
2015
¥ 14,278¥ 12,175
4,278
3,296
9,718
14,150¥ 32,706¥ 25,189

Merchandises and finished goods
Work in process
Raw materials and supplies

Thousands of
U.S. dollars
2016$ 108,050
29,251
86,244$ 223,545

Gain on reversal of devaluation of inventories is included in cost of sales of ¥93 million and¥135 million ($1,198 thousand) for the years ended March 31, 2015 and 2016, respectively.

9.

Loss on Impairment of Fixed Assets

The Group recognized loss on impairment of fixed assets for the years ended March 31,
2015 and 2016 as follows:

Location
Nishiwaki City,
Hyogo Prefecture

Use
Golf course

Miyazaki City,
Idle assets
Miyazaki Prefecture
Suzuka City,
Idle assets
Nagano Prefecture
Manufacturing
China Anhuifacilities
China Anhui–
Ikoma City,
Idle assets
Nara Prefecture
Thailand
Manufacturing
Chon Buri
facilities
Total

Classification
Land, buildings,
structures,
machinery,equipment andvehiclesLand
Land
Machinery andequipment
Goodwill
Land
Machinery andequipment

Thousands of
U.S. dollars
2016

Millions of yen
2015
2016

¥ 511

¥

600

$ 5,325

7

18

160

0

0

0

–

5,809

51,553

–

162

1,438

–

14

124

70
¥ 588

–

–

¥ 6,603$58,600

29

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

9.

Loss on Impairment of Fixed Assets (continued)

The Group mainly groups fixed assets by managerial accounting segment, each of which
continuously records cash receipts and payments.
Consequently, the Group has written down the carrying values of the golf course and its
asset group whose operating income has been continuously negative to their respective net
recoverable values, and has recorded a related loss on impairment of fixed assets of ¥511
million for the year ended March 31, 2015, which consisted of land of ¥379 million, building
and structures of ¥100 million, machinery, equipment and vehicles of ¥21 million and othersof ¥11 million.
In addition, the Group has written down the carrying values of manufacturing facilities of
YSS and the golf course and its asset group of Yodokokohatsu Co., Ltd. whose operating
incomes have been continuously negative to their respective net recoverable values, and hasrecorded a related loss on impairment of fixed assets of ¥6,409 million ($56,878 thousand)for the year ended March 31, 2016, which consisted of machinery and equipment of ¥5,809
million ($51,553 thousand) for the manufacturing facilities of YSS and land of ¥442 million($3,923 thousand), building and structures of ¥123 million ($1,092 thousand), machinery,equipment and vehicles of ¥22 million ($195 thousand) and others of ¥13 million ($115
thousand). Also, the Group recorded loss on impairment of goodwill for YSS of ¥162
million ($1,438 thousand) for the year ended March 31, 2016.
The Group has written down the carrying values of the idle assets of land owned by theGroup, which are not expected to be utilized in the future, to their respective net recoverable
values, and has recorded a related loss on impairment of ¥7 million and ¥32 million ($284
thousand) for the years ended March 31, 2015 and 2016, respectively.
The recoverable amounts of machinery and equipment and goodwill in China Anhui aremeasured at the value in use based on estimated future cash flows discounted at the rate of
11%. Value in use is measured as the sum of anticipated future cash flows discounted byweighted average costs of capital of 11%.
The impairment loss on machinery and equipment resulting from the decision to dispose of a
portion of a production line was measured at estimated net selling value in the amount of ¥70
million for the year ended March 31, 2015.
The recoverable amounts of assets other than machinery, equipment and goodwill aremeasured at estimated net selling value based on appraisals conducted by real estateappraisers and the values assessed for property tax purposes.

30

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

10. Short-Term Bank Loans, Guarantee Deposits and Finance Lease Obligations
The average annual interest rates on short-term loans were 1.34% and 1.55% as of March 31,
2015 and 2016.
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 an average annual interest rate of 0.79% at March 31, 2015 and 2016.
Interest-free deposits and interest-bearing deposits as of March 31, 2015 and 2016 are as
follows:

Interest-free deposits
Interest-bearing deposits

Millions of yen
2015
2016
¥ 2,177¥ 2,196828
872¥ 3,005¥ 3,068

Thousands of
U.S. dollars
2016$ 19,489
7,739$ 27,228

The average annual interest rate on financial lease obligations was 4.48% as of March 31,
2015 and 2016.
The aggregate annual maturities of finance lease obligations subsequent to March 31, 2016
are summarized as follows:
Millions ofyenYear ending March 31,
2017
2018
2019
2020
2021

Thousands of
U.S. dollars
2016
¥ 173
$ 1,535
179
1,588
744
6,603
6
53
2
18
¥ 1,104$ 9,79731

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

11. Line-of-credit Agreements
In order to achieve more efficient and flexible financing, the Company has concluded
line-of-credit agreements with certain financial institutions. The status of these lines ofcredit as of March 31, 2015 and 2016 is as follows:

Millions of yen
2016
2015
Lines of credit
Credit utilized
Available credit¥19,450–¥19,450¥18,950–¥18,950

Thousands of
U.S. dollars
2016$168,175–$168,175

12. Pledged Assets
Assets pledged as collateral for indebtedness as of March 31, 2016 are summarized asfollows:
Millions ofyenCash and deposits
Investments in securities
Other assets

¥ 60
17
134
¥ 211

Thousands of
U.S. dollars
2016
$ 533
151
1,189
$ 1,873

Indebtedness secured by these assets as collateral was ¥51 million ($453 thousand), a
component of other current liabilities at March 31, 2016.

13. Contingent Liabilities
The Company was contingently liable for guarantees of borrowings from financial
institutions and others of unconsolidated subsidiaries in the aggregate amounts of ¥101
million ($896 thousand) as of March 31, 2016.
In addition, the Company repaired machinery supplied to a customer located in Africa due toa product defect, damages during the shipment and other reasons. The Company wascontingently liable for additional repair costs in the amount of approximately ¥300 million($2,662 thousand), as of March 31, 2016. The total amount to be paid by the Company will
depend on future negotiations with the manufacturer of the machinery.

32

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

14. Retirement Benefits Plans
The Company and its domestic consolidated subsidiaries have two types of defined benefit
retirement plans: a defined benefit pension plan and a lump sum payment plan. Moreover,certain overseas consolidated subsidiaries have a defined benefit pension plan and defined
contribution plans. Furthermore, the Company has adopted a retirement benefit trust.
Certain consolidated domestic subsidiaries are accounted for using “simplified method” forcalculating liability for retirement benefits and retirement benefit expenses.
The changes in the retirement benefit obligation for the years ended March 31, 2015 and2016 are as follows:

2015

2016

Thousands of
U.S. dollars
2016¥ 14,415
625
189
210
(987)
311

¥ 14,763
728
191
1,099
(983)
(143)

$ 131,017
6,461
1,695
9,753
(8,724)(1,269)¥ 14,763¥ 15,655$ 138,933

Millions of yen
Retirement benefit obligation at
the beginning of year
Service cost (*)
Interest cost
Actuarial differences
Retirement benefit paid
Prior service cost
Retirement benefit obligation at
the end of year(*) Retirement benefit expenses for certain consolidated subsidiaries, whose benefit
obligation is calculated by the simplified method, have been included in service cost.

33

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

14. Retirement Benefits Plans (continued)
The changes in plan assets at fair value for the years ended March 31, 2015 and 2016 are as
follows:

2015

2016

Thousands of
U.S. dollars
2016¥ 4,800
88
355
368
(539)
49

¥ 5,121
93
(269)
554
(468)
(14)

$ 45,447
825(2,387)
4,917(4,153)(125)¥ 5,121¥ 5,017$ 44,524

Millions of yen
Plan assets at fair value at the
beginning of year
Expected return on plan assets
Actuarial differences
Contributions by the employers
Retirement benefit paid
Other (*)
Plan assets at fair value at theend of year(*) “Other” mainly consists of the effect of foreign currency exchange translation
adjustments on pension plan assets at fair value attributable to an overseas subsidiaryand the difference of actual and expected returns on plan assets at fair value from theretirement benefit plans of consolidated subsidiaries to which the simplified method
applied.
The following table sets forth the funded status of the plans and the amounts recognized in
the consolidated balance sheets as of March 31, 2015 and 2016 for the Company’s and theconsolidated subsidiaries’ defined benefit plans:

Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit
obligation
Liability for retirement benefits in the
consolidated balance sheet, net
Liability for retirement benefits
Liability for retirement benefits in the
consolidated balance sheet, net

Millions of yen
2015
2016
¥ 14,743¥ 15,634(5,121)(5,017)
9,622
10,617

Thousands of
U.S. dollars
2016$ 138,747(44,524)
94,223

20

21

186

9,642

10,63894,409

9,642

10,63894,409¥ 9,642¥ 10,638$ 94,409

Note: The above includes retirement benefit plans calculated under the simplified method.
34

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

14. Retirement Benefits Plans (continued)
The components of retirement benefit expenses for the years ended March 31, 2015 and2016 are as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Amortization of prior service cost
Retirement benefit expenses

Millions of yen
2016
2015
¥ 625
¥ 724
189
191
(88)
(93)
311
310
(1)
(2)
¥1,035¥1,131Thousands of
U.S. dollars
2016$ 6,425
1,695
(825)
2,751
(9)
$10,037

The components of retirement benefit liability adjustments recognized in othercomprehensive income (before tax effect) for the years ended March 31, 2015 and 2016 are
as follows:

Prior service cost
Actuarial differences
Total

Millions of yen
2016
2015
¥
2
¥
1
(402)
1,027
¥ (400)¥ 1,028

Thousands of
U.S. dollars
2016
$
9
9,114
$ 9,123

The components of retirement benefit liability adjustments recognized in accumulated othercomprehensive income (before tax effect) as of March 31, 2015 and 2016 are as follows:

Unrecognized prior service cost
Unrecognized actuarial differences
Total

Millions of yen
2015
2016
¥
(9)
¥
(8)
2,121
3,148
¥ 2,112¥ 3,140

Thousands of
U.S. dollars
2016
$
(71)
27,938$ 27,867

35

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

14. Retirement Benefits Plans (continued)
The fair value of plan assets, by major category, as a percentage of total plan assets as ofMarch 31, 2015 and 2016 is as follows:

Bonds
StocksGeneral account at insurance companies
Other
Total

2015
27%
45
15
13
100%

2016
28%
41
16
15
100%

Note: 15% and 14% of the total plan assets are held in a retirement benefit trust for defined
benefit pension plan and a lump sum payment plan as of March 31, 2015 and 2016,
respectively.
The expected long-term rate of return on plan assets is determined as a result ofconsideration of both the portfolio allocation of plan assets at present and in the future andlong-term expected rate of return from multiple plan assets at present and in the future.
The assumptions used in the actuarial calculation for the above defined benefit pension plans
for the years ended March 31, 2015 and 2016 are as follows:

Discount rates
Expected long-term rate of return on plan assets(weighted average)
Expected rate of future salary increase(weighted average)

2015

2016

1.3%

0.5%

2.0%

2.0%

0.6%

0.6%

The contributions paid by consolidated subsidiaries to the defined contribution pension plansamounted to ¥41 million and ¥49 million ($435 thousand) for the years ended March 31,
2015 and 2016, respectively.

36

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

15. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprise
corporation, enterprise and inhabitants’ taxes which, in the aggregate, resulted in statutory
tax rates of approximately 35.5% and 32.1% for the years ended March 31, 2015 and 2016,
respectively.
A reconciliation of the statutory tax rate and the effective tax rate for the year ended March
31, 2015 as a percentage of profit before income taxes and non-controlling interests is asfollows:

Statutory tax rate
Permanently non-deductible expenses
Per capita portion of inhabitants’ taxes
Differences in tax rates applicable to the overseas
consolidated subsidiaries
Cash dividends received from the overseas
consolidated subsidiary
Adjustments of accounting standards applied by
the overseas consolidated subsidiary
Foreign tax credit
Tax loss carryforwards of consolidated
subsidiaries
Increase in valuation allowance
Permanently non-taxable income
Tax credit for research and development costs
Equity in earnings of an affiliate
Decrease in deferred tax assets resulting fromchange in the statutory tax rate applicable to thefiscal years beginning on or after April 1, 2014
Other
Effective tax rate

2015
35.5 %
0.6
0.9
(9.1)
0.2
0.1
2.0
24.0
(2.1)
(1.6)
(0.4)
(1.9)

0.2
1.1
49.5 %A reconciliation of the statutory tax rate and the effective tax rate for the year ended March
31, 2016 was omitted because the Company recorded loss before income taxes.

37

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

15. Income Taxes (continued)
The significant components of the deferred tax assets and liabilities of the Group as ofMarch 31, 2015 and 2016 are summarized as follows:
Millions of yen
2016
2015
Deferred tax assets:
Accrued enterprise taxes
Provision for bonuses to employees
Loss on impairment of investments insecurities and golf-club memberships
Loss on devaluation of inventories
Allowance for doubtful receivables
Liability for retirement benefits
Tax loss carryforwards
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 consolidated
subsidiaryLand revaluation reserve
Unrealized holding gain on securities
Deferred gain on property for tax purpose
Reserve for special depreciation
Other
Total deferred tax liabilities
Net deferred tax liabilities
Note:

¥

70
272

¥

Thousands of
U.S. dollars
2016

120
289

$ 1,065
2,565

687
230
59
2,657
626
368
914
5,883
(2,453)
3,430

2,905
185
34
2,877
803
517
945
8,675
(4,882)
3,793

25,781
1,642
302
25,532
7,126
4,588
8,387
76,988(43,326)
33,662(160)(853)(6,107)
(559)
(423)
0
(8,102)¥ (4,672)

(126)
(856)
(4,227)
(443)
(342)
0
(5,994)¥ (2,201)(1,118)(7,597)(37,513)(3,932)(3,035)0(53,195)$ (19,533)

Net deferred tax liabilities as of March 31, 2015 and 2016 are reflected in thefollowing accounts in the consolidated balance sheet:
Millions of yen
2015
2016

Current assets
Investments and other assets
Long-term liabilities – Deferred income taxes– Deferred income taxes
on land revaluation
reserve¥381
699(4,899)(853)¥

Thousands of
U.S. dollars
2016

546
782
(2,673)$ 4,846
6,940(23,722)(856)(7,597)38

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

15. Income Taxes (continued)
The “Act for Partial Amendment for the Income Tax Act, etc.” (Act No.15 of 2016) and the“Act for Partial Amendment of the Local Tax Act, etc.” (Act No.13 of 2016) were enacted in
the Japanese Diet session on March 29, 2016. The effective statutory tax rate that was used
to calculate deferred tax assets and deferred tax liabilities for the fiscal year has beenchanged from 32.1% to 30.8% for the temporary differences expected to be realized or
settled from April 1, 2016 to March 31, 2018, and to 30.6% for those for which temporary
differences are expected to be realized or settled on or after April 1, 2018.
As a result, deferred tax assets (after deducting deferred tax liabilities), deferred tax
liabilities (after deducting deferred tax assets), retirement benefit liability adjustments andincome taxes-deferred decreased by ¥42 million ($373 thousand), ¥131 million ($1,163
thousand), ¥33 million ($293 thousand) and ¥86 million ($763 thousand), respectively, andnet unrealized gain on other securities increased by ¥208 million ($1,846 thousand). In
addition, deferred income taxes for land revaluation decreased by ¥12 million ($106
thousand), and land revaluation difference increased by same ammount as of and for the year
ended March 31, 2016.

39

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

16. Other Comprehensive Income
Reclassification adjustments and tax effects of other comprehensive income (loss) for theyears ended March 31, 2015 and 2016 are summarized as follows:

Unrealized holding gain (loss) securities:
Amount arising during the year
Reclassification adjustments
Before tax effectTax effectUnrealized holding gain (loss) on
securities
Unrealized gain from hedging instruments:
Amount arising during the year
Reclassification adjustments
Before tax effectTax effectUnrealized gain from hedging instruments
Land revaluation reserve:
Tax effectLand revaluation reserve
Translation adjustments:
Amount arising during the year
Translation adjustments
Retirement benefit liability adjustments:
Amount arising during the year
Reclassification adjustments
Before tax effectTax effect
Retirement benefit liability adjustments
Share of other comprehensive income (loss)of an affiliate accounted for by the equity
method:Amount arising during the year
Share of other comprehensive income(loss) of an affiliate accounted for by theequity method
Total other comprehensive income (loss)

Millions of yen
2015
2016

Thousands of
U.S. dollars
2016¥ 8,126(1,091)
7,035(1,828)¥ (6,363)
1,061(5,302)
1,880$ (56,470)
9,416(47,054)
16,685

5,207(3,422)(30,369)

0
–
0
(0)
0

–
–
–
–
–

–
–
–
–
–

64
64

(4)
(4)

(35)
(35)

2,589
2,589

(1,120)(1,120)(9,940)(9,940)

145
255
400
(238)
162

(1,183)155(1,028)276(752)(10,499)
1,376(9,123)
2,449(6,674)

70

(10)

(89)

70
¥ 8,092(10)¥ (5,308)(89)$ (47,107)40

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

17. Shareholders’ Equity
The Companies Act of Japan (the “Act”) provides that an amount equal to 10% of theamount to be disbursed as distributions of capital surplus (other than the capital reserve) andretained earnings (other than the legal reserve) be transferred to the capital reserve and thelegal reserve, respectively, until the sum of the capital reserve and the legal reserve equals
25% of the capital stock account. Such distributions can be made at any time by resolutionof the shareholders, or by the Board of Directors if certain conditions are met.
The capital reserve of the Company amounted to ¥58,050 million ($515,176 thousand) as ofMarch 31, 2015 and 2016.
The legal reserve of the Company was nil as of March 31, 2015 and 2016.
Stock options
The Company has stock option plans. The following stock option plans for certain
directors and executive officers of the Company were approved at annual general meetingsof the shareholders for the 2004 and the 2005 plans in accordance with the former
Commercial Code of Japan and meetings of the Board of Directors for the 2006 plan throughto the 2015 plan in accordance with the Act.
Stock option expenses, included in selling, general and administrative expenses, charged to
profit or loss for the years ended March 31, 2015 and 2016 amounted to ¥26 million and ¥29
million ($257 thousand), respectively.

41

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

17. Shareholders’ Equity (continued)
The stock option plans of the Company as of March 31 2016 are summarized as follows:

Individuals covered by theplanClass and number of
options granted
Grant date
Vesting conditions

Vesting period for services
received

Exercisable period

The 2004 plan

The 2005 plan

The 2006 plan

5 Directors
10 Executive officers(other than directors
who concurrently
serve as executive
officers
Common stock 16,200
sharesJuly 12, 2004
(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2023 if the
grantee does not
resign from theCompany until
June 29, 2023.
From July 12, 2004 to
the date of the annual
general meeting of
the shareholders forthe fiscal year ended
March 31, 2005
From July 13, 2004 toJune 29, 2024

6 Directors
9 Executive officers(other than directors
who concurrently
serve as executive
officers
Common stock 12,400
sharesJuly 14, 2005
(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2024 if the
grantee does not
resign from theCompany until
June 29, 2024.
From July 14, 2005 to
the date of the annual
general meeting of
the shareholders forthe fiscal year ended
March 31, 2006
From July 15, 2005 toJune 29, 2025

5 Directors
8 Executive officers(other than directors
who concurrently
serve as executive
officers
Common stock 10,600
sharesJuly 31, 2006
(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2025 if the
grantee does not
resign from theCompany until
June 29, 2025.
From July 31, 2006 to
the date of the annual
general meeting of
the shareholders forthe fiscal year ended
March 31, 2007
From August 31, 2006
to June 29, 2026

42

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

17. Shareholders’ Equity (continued)

Individuals covered by theplanClass and number of
options granted
Grant date
Vesting conditions

Vesting period for services
received

Exercisable period

The 2007 plan

The 2008 plan

The 2009 plan

4 Directors
8 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 8,600
sharesAugust 1, 2007
(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2026 if the
grantee does not
resign from theCompany until
June 29, 2026.
From August 1, 2007
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2008
From August 2, 2007
to June 29, 2027

4 Directors
7 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 12,000
sharesJuly 30, 2008
(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2027 if the
grantee does not
resign from theCompany until
June 29, 2027.
From August 1, 2008
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2009
From July 31, 2008
to June 29, 2028

5 Directors
7 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 13,800
sharesJuly 30, 2009(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2028 if the
grantee does not
resign from theCompany until
June 29, 2028.
From August 1, 2009
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2010
From July 31, 2009
to June 29, 2029

43

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

17. Shareholders’ Equity (continued)

Individuals covered by theplanClass and number of
options granted
Grant date
Vesting conditions

Vesting period for services
received

Exercisable period

The 2010 plan

The 2011 plan

The 2012 plan

5 Directors
7 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 20,400
sharesJuly 29, 2010(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2029 if the
grantee does not
resign from theCompany until
June 29, 2029.
From July 29, 2010 tothe date of the annual
general meeting of
the shareholders forthe fiscal year ended
March 31, 2011

5 Directors
6 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 19,600
sharesAugust 1, 2011(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2030 if the
grantee does not
resign from theCompany until
June 29, 2030.
From August 2, 2011
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2012
From August 2, 2011
to June 29, 2031

5 Directors
9 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 15,400
sharesAugust 1, 2012(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2031 if the
grantee does not
resign from theCompany until
June 29, 2031.
From August 2, 2012
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2013
From August 2, 2012
to June 29, 2032

From July 30, 2010
to June 29, 2030

44

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

17. Shareholders’ Equity (continued)

Individuals covered by
the plan

Class and number of
options granted
Grant date
Vesting conditions

Vesting period forservices received

Exercisable period

The 2013 plan

The 2014 plan

The 2015 Plan

5 Directors
9 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 14,400
sharesJanuary 31, 2014(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2032 if the
grantee does not
resign from theCompany until
June 29, 2032.
From July 29, 2013
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2014
From February 1, 2014
to June 29, 2033

5 Directors
8 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 14,400
sharesJuly 31, 2014(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2033 if the
grantee does not
resign from theCompany until
June 29, 2033.
From August 1, 2014
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2015
From August 1, 2014
to June 29, 2034

4 Directors
7 Executive officers(other than directors
who concurrently
serve as executive
officers)
Common stock 14,200
sharesJuly 30, 2015(1) In the event a
grantee resigns
from both
positions of
director andexecutive officer,
the options are
exercisable fromthe day following
their resignation.
(2) Regardless of (1)above, a grantee
can exercise theoptions from June30, 2034 if the
grantee does not
resign from theCompany until
June 29, 2034.
From July 30, 2015
to the date of theannual general
meeting of theshareholders for the
fiscal year ended
March 31, 2016
From July 31, 2015 toJune 29, 2035

The number of common stock for stock options in the description outlined above wasadjusted due to the consolidation of five shares into one share on October 1, 2015.

45

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

17. Shareholders’ Equity (continued)
Stock option activity under the stock option plans referred above is summarized as follows:
The 2004
plan

The 2005
plan

The 2006
plan

The 2007
plan

The 2008
plan

The 2009
plan

The 2010
plan

The 2011
plan

The 2012
plan

The 2013
plan

The 2014
plan

3,000

2,400

3,800

3,800

5,600

8,400

10,200

10,20014,20013,40014,000

–

–

–

–

–

–

–

–

–

–

–

–

14,200The 2015
plan

Number of stock
options which are
not yet vested:
Outstanding at
April 1, 2015
GrantedForfeited

–

–

–

–

–

–

–

–

–

–

–

–

Vested

600

400

400

400

600

1,800

2,400

2,000

2,600

2,200

2,200

–

2,400

2,000

3,400

3,400

5,000

6,600

7,800

8,200

11,600

11,20011,80014,200–

Outstanding at
March 31, 2016
Number of stock
options which havealready been
vested:Outstanding at
–

–

400

800

1,200

3,200

5,200

4,200

1,200

1,000

–

VestedApril 1, 2015

600

400

400

400

600

1,800

2,400

2,000

2,600

2,200

2,200

–

Exercised

600

400

800

800

600

2,000

3,200

2,600

–

–

–

–

Forfeited

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

400

1,200

3,000

4,400

3,600

3,800

3,200

2,200

–

Outstanding at
March 31, 2016

The unit price of the stock options for the stock option plans of the Company during the year
ended March 31, 2016 is summarized as follows:

Exercise priceThe 2004
plan

The 2005
plan

The 2006
plan

The 2007
plan

The 2008
plan

Yen
The 2009 The 2010
plan
plan

The 2011
plan

The 2012
plan

The 2013
plan

The 2014
plan

The 2015
plan

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

¥

1

1

1

1

1

1

¥

1

1

1

1

1

1

Weighted averagefair value perstock at theexercise date

2,088

2,088

2,264

2,264

2,440

2,366

2,361

2,196

–

–

–

–

–

–

2,390

2,730

2,080

1,825

1,400

1,200

1,020

1,875

1,865

2,025

The 2004
plan

The 2005
plan

The 2006
plan

The 2007
plan

The 2008
plan

U.S. dollars
The 2009 The 2010
plan
plan

The 2011
plan

The 2012
plan

The 2013
plan

The 2014
plan

The 2015
plan

$ 0

$ 0

$ 0

$ 0

$ 0

$ 0

$ 0

$

0

$ 0

$ 0

$ 0

$ 0

19

19

20

20

22

21

21

19

–

–

–

–

–

–

21

24

18

16

12

11

9

17

17

18

Fair value of stock
options as of the
grant date

Exercise price
Weighted averagefair value perstock at theexercise date
Fair value of stock
options as of the
grant date46

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

17. Shareholders’ Equity (continued)
The above tables present the stock options plans that existed during the year ended March 31,
2016. The number of stock options was converted to the number of shares to be issued
upon the exercise of the stock options.
The number of stock and the fair value in the above tables were adjusted due to theconsolidation of five shares into one share on October 1, 2015.
Valuation method for estimating fair value was the Black-Scholes model. The major
assumptions used are as follows:
Note
(a)

Major assumptions
Expected volatility
Expected holding period
Expected dividend
Risk-free rate

(b)
(c)

The 2015 plan
25.601%
10 years¥10 per share
0.407%(a) Expected volatility was computed by the closing stock price of the Company in the last
trading day of each month during the period from July 2005 to June 2015.
(b) The expected dividend was calculated at the actual amounts paid for the year ended
March 31, 2015.
(c) The risk-free rate was determined based on Japanese government bonds whose
redemption period corresponds to the expected holding period described above.
Because it is difficult to reasonably estimate the number of stock options that will be
forfeited, the estimation reflects only the actual number of forfeited stock options.
Common stock and treasury stock
Movements in common stock and treasury stock during the years ended March 31, 2015 and2016 are summarized as follows:

Common stock (*1)
Treasury stock (*2)

April 1, 2014
184,186,153
26,530,317

Common stock (*3)
Treasury stock (*4)

April 1, 2015
179,186,153
24,475,276

Number of shares
2015
Increase
Decrease–
5,000,000
2,992,959
5,048,000
Number of shares
2016
Increase
Decrease–
143,348,923
1,290,437
20,402,634

March 31, 2015
179,186,153
24,475,276

March 31, 2016
35,837,230
5,363,079
47

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

17. Shareholders’ Equity (continued)(*1) The decrease in the number of shares of common stock of 5,000,000 shares was due tothe retirement of treasury stock.
(*2) The increase in the number of shares of treasury stock consists of 2,661,000 shares due
to purchase of shares based on the resolution of the Board of Directors meeting, 13,981
shares due to the purchase of fractional shares of less than one voting unit, 223,406
shares attributable to the Company acquired by its affiliates under the equity method,
and 94,572 shares due to the repurchase of shares held by lost shareholders.
The decrease in the number of shares of treasury stock consists of 5,000,000 shares due
to retirement of treasury stock and 48,000 shares due to the exercise of stock options.
(*3) The decrease in the number of common stock of 143,348,923 shares was due to theconsolidation of five shares into one share on October 1, 2015.
(*4) The increase in the number of shares of treasury consists of 1,272,741 shares due topurchase of shares based on the resolution of the Board of Directors meeting, 14,138
shares due to the purchase of fractional shares of less than one voting unit and 3,534
shares attributable to the Company acquired by its affiliate under the equity method.
The decrease in the number of shares of treasury stock consists of 20,364,401 shares dueto the consolidation of shares, 37,400 shares due to the exercise of stock option rights
and 946 shares due to the sales of fractional shares less than one voting unit toshareholders at their request.

18. Land Revaluation
As of 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 as of March 31, 2000 and 2002 was less than thecorresponding carrying value by the following amounts as of March 31, 2015 and 2016:

Land revalued as of March 31, 2000
Land revalued as of March 31, 2002

Millions of yen
2016
2015
¥ (328)¥ (331)(653)(656)¥ (981)¥ (987)

Thousands of
U.S. dollars
2016$ (2,937)(5,822)$ (8,759)
48

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

18. Land Revaluation (continued)
A certain portion of land revalued as of March 31, 2000 and 2002 is related to real estate forinvestment, rental and idle properties as of March 31, 2015 in the amounts of ¥12 millionand ¥280 million, respectively.
A certain portion of land revalued as of March 31, 2000 and 2002 is related to real estate forinvestment, rental and idle properties as of March 31, 2016 in the amounts of ¥13 million($115 thousand) and ¥289 million ($2,565 thousand), respectively.

19. Research and Development Costs
Research and development costs included in selling, general and administrative expenses
totaled ¥568 million and ¥560 million ($4,970 thousand) for the years ended March 31, 2015
and 2016, respectively.

20. Leases(a) Finance leases
The Group leases mainly machinery, vehicles and others (machinery and equipment) as
leased assets under finance lease transactions which transfer ownership to the Group andmainly, information processing systems (equipment) as leased assets under finance leasetransactions which do not transfer ownership to the Group.
The depreciation method for leased assets is provided in Note 1.
Accounting Policies (k) Leases.

Summary of Significant(b) Operating leases
Future minimum lease receipts subsequent to March 31, 2016 under non-cancelable
operating leases are as follows:

Years ending March 31,
20172018 and thereafter

Millions of yen
¥ 17
102
¥ 119

Thousands of
U.S. dollars
$ 151
905
$1,05649

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

21. Derivatives
The outstanding currency-related derivative positions not designed as hedging instruments asof March 31, 2015 are as follows:
Millions of yen
2015

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

Contract value(notional principal
amount)¥2,674

Contract value
over one year¥

Estimated
fair value

1,733

¥

Unrealized loss

(539)

¥ (539)Fair value is based on the prices obtained from financial institutions.
The outstanding currency-related derivatives positions designated as hedging instruments asof March 31, 2015 and 2016 are as follows:
Millions of yen
2015

Method ofhedge accounting
Allocation method forforward foreignexchange contracts
Allocation method forforward foreignexchange contracts

Hedge transactions
and major hedged items
Forward foreign exchange contracts:
Selling USD, Accounts receivable
Forward foreign exchange contracts:
Buying USD, Accounts payable

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

Estimated
fair value

¥ 154

¥ –

(*)

¥ 135

¥–

(*)

Millions of yen
2016

Method ofhedge accounting
Allocation method forforward foreignexchange contracts

Hedge transactions
and major hedged items

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

Estimated
fair value

Forward foreign exchange contracts:
Selling USD, Accounts receivable

¥ 114

¥ –

(*)

Thousands of U.S. dollars
2016

Method ofhedge accounting
Allocation method forforward foreignexchange contracts

Hedge transactions
and major hedged items

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

Estimated
fair value

Forward foreign exchange contracts:
Selling USD, Accounts receivable$ 1,012$–(*)(*) The fair value of forward foreign exchange contracts that qualify for allocation method
is included in the carrying value of hedged accounts receivable.
50

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

22. Amounts per Share
Amounts per share as of March 31, 2015 and 2016 and for the years then ended are as
follows:
2015¥ 4,757.67

2016¥ 4,500.51

U.S. dollars
2016$ 39.94

83.65
83.36
50.00

(90.14)–5.00(0.80)–
0.44

Yen
Net assets
Profit (loss) attributableto owners of parent:
Basic
DilutedCash dividends

Amounts per share of net assets are computed based on the number of shares of common
stock outstanding at the year end.
Basic profit (loss) attributable to owners of parent per share is computed based on the profit(loss) available for distribution to shareholders of common stock of parent and theweighted-average number of shares of common stock outstanding during the year. Diluted
profit attributable to owners of parent per share is computed based on the profit available for
distribution to the shareholders and the weighted-average number of 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 acquisition rights.
Diluted earnings attributable to owners of parent per share for the year ended March 31,
2016 was not presented since the Company recorded loss.
Five shares of common stock were consolidated into one share on October 1, 2015.
However, profit (loss) attributable to owners of parent per share and diluted profit
attributable to owners of parent per share, net assets per share and cash dividends per share
have been computed as if the consolidation of shares was executed on April 1, 2014.
The average number of shares of common stock used to compute basic profit (loss)
attributable to owners of parent per share for the years ended March 31, 2015 and 2016 were
31,287 thousand and 30,746 thousand, respectively. The number of shares of common
stock with dilutive potential for the years ended March 31, 2015 and 2016 were 107
thousand and 109 thousand, respectively.
Cash dividends per share represent the cash dividends proposed by the Board of Directors asapplicable to the respective years together with the interim cash dividends paid.

51

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

23. Transactions with Related Parties
Transactions and balances with related parties as of and for the years ended March 31, 2015
and 2016 are summarized as follows:
Transactions
Name ofaffiliated company

Type of transaction
Sales

Millions of yen
2015
2016
¥ 32,900¥ 31,989

Thousands of
U.S. dollars
2016$ 283,892

Balances
Sadoshima
Corporation

Thousands of
U.S. dollars
2016

Millions of yen
2015
2016

Account nameNotes and accounts
receivable¥12,713¥12,727$112,948

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

24. Investment, Rental and Idle Properties
The Company and certain consolidated subsidiaries own office buildings, land, and parking
lots as rental properties and idle properties mainly in Osaka Prefecture, other domestic areas
and Taiwan. Certain portions of real estate, such as office buildings are used by theCompany and certain consolidated subsidiaries.
The carrying value in the consolidated balance sheet as of March 31, 2015 and 2016 and thecorresponding fair value of rental properties and idle properties and real estate including
certain portions used as rental property are as follows:

2014
Rental properties and idle
properties
Real estate including certain
portions used as rental
property

Millions of yen
Carrying value
Net change
2015

Fair value
2015¥ 4,523¥ 94¥ 4,617¥ 9,078

4,689

(61)

4,628

11,59952

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

24. Investment, Rental and Idle Properties (continued)

2015
Rental properties and idle
properties
Real estate including certain
portions used as rental
property

Fair value
2016¥ 4,617¥ (145)¥ 4,472¥ 9,259

4,628

204

4,832

11,803Thousands of U.S. dollars
Carrying value
Net change
2016

Fair value
2016

2015
Rental properties and idle
properties
Real estate including certain
portions used as rental
property

Millions of yen
Carrying value
Net change
2016$ 40,974$(1,286)$ 39,688$ 82,171

41,072

1,810

42,882

104,748

The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss.
The components of net change in carrying value for the year ended March 31, 2015 included
increases mainly due to translation adjustments in the amount of ¥114 million andreclassification from real estate for sales purpose to investment asset in the amount of ¥45
million and decreases mainly due to depreciation of buildings in the amount of ¥133 million.
The components of net change in carrying value for the year ended March 31, 2016 included
increases mainly due to purchase of buildings in the amount of ¥274 million (¥2,432
thousand) and decreases mainly due to depreciation of buildings in the amount of ¥131
million ($1,163 thousand) and translation adjustments in the amount of ¥47 million ($417
thousand).
Fair value of domestic rental properties are principally measured based on the real-estateappraisal assessed by the external real-estate appraiser. However, unless the appraisal orindicators that are regarded to reflect the fair value of the properties appropriately change
significantly since the date of acquisition or the date of the latest appraisal, the Company andcertain domestic consolidated subsidiaries measure the fair value of the properties based onsuch appraisal or indicators obtained previously and adjusted as appropriately.

53

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

24. Investment, Rental and Idle Properties (continued)
Fair value of rental properties in Taiwan is measured based on the property prices announced
by the government.
Revenues, costs and expenses relevant to investment, rental, idle properties and real estateincluding certain portions used as result property for the years ended March 31, 2015 and2016 are as follows:
Millions of yen
2015
Rental revenues¥ 760

Rental costs¥ 529

Difference¥ 231

Other gain, net on
sales and others¥ 8Millions of yen
2016
Rental revenues¥ 1,019

Rental costs¥ 742

Difference¥ 277

Other loss, net on sales
and others¥ 38

Thousands of U.S. dollars
2016
Rental revenues

Rental costs

Difference

Other loss, net on sales
and others$ 9,043$ 6,585$ 2,458$ 337

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

54

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

25. Segment Information(a) Outline of segment information
The reportable segments of the Group are components for which discrete financial
information is available, and whose operating results are regularly reviewed by the
Board of Directors of the Company in order to make decisions about resource allocationand to assess business performance.
The Group’s business units are divided by the similarity of the products or services soldby each business unit. Each business unit develops its own strategies and operates its
businesses independently. Therefore, the Group consists four reportable segments
based on business units: “Steel Sheet Segment,” “Roll Segment,” “Grating Segment”
and “Real Estate Segment.”
The “Steel Sheet Segment” engages in the manufacture and sale of cold rolled steel,polished hoop steel, hot dip galvanizing steel sheets, painted hot dip galvanizing steel
sheets, various steel sheets, other construction materials, and exterior products andothers and in designing and engineering of construction work. The “Roll Segment”
engages in the manufacture and sale of rolls for iron, steel and non-ferrous products andothers. The “Grating Segment” engages in the manufacture and sales of gratings.
The “Real Estate Segment” engages in the sale, purchase and lease of real estate such asbuildings, car parking lots.
(b) Calculation methods used for net sales, income or loss, assets and other items ofeach reportable segment
The accounting policies of the segments are the same as those described in the summaryof significant accounting policies in Note 1. In addition, segment income is adjusted tobe consistent with operating income in the consolidated statement of operations.

55

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

25. Segment Information (continued)(c) Information on net sales, income or loss, assets and other items of each reportablesegment
Information by reportable segment for the years ended March 31, 2015 and 2016 aresummarized as follows:
Millions of yen
Year ended March 31, 2015
Reportable Segments
Steel Sheet

Roll

Adjustments
andGrating

Real Estate

Segment

Segment Segment

Segment

Sub-Total

Other (*1)

¥ 163,174¥ 3,477¥ 3,511¥ 906¥ 171,068¥ 4,822¥ 175,890 ¥

–

–

–

443

443

2,555

2,998

¥ 163,174¥ 3,477¥ 3,511¥ 1,349¥ 171,511¥ 7,377

Total

eliminations

Consolidated

Net sales:
Sales to third parties–¥ 175,890(2,998)–¥ 178,888 ¥ (2,998)¥ 175,890

Inter-segment sales
and transfers
Total
Segment income¥

Segment assets¥ 140,062

3,450¥ 3,496¥20¥ 4,059¥87¥ 8,301¥519¥ 155,918

¥

4,076

¥ 10,041¥

495¥ 165,959 ¥ 54,112 (*4)¥

4,571 ¥ (1,143) (*2)

¥ 220,071

¥

3,428

¥

¥

¥

¥

¥

¥

¥

¥

Other items:
Depreciation andamortization

4,397

240

73

62

4,772

331

5,103

¥

52

5,155

Investment in an
affiliate accounted
for by the equity
method

3,581

–

341

2

3,924

–

3,924

–

3,924

2,561

83

182

97

2,923

1,100

4,023

10 (*5)

4,033

Increase in property,
plant andequipment andintangible assets

56

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

25. Segment Information (continued)c) Information on net sales, income or loss, assets and other items of each reportablesegment (continued)
Millions of yen
Year ended March 31, 2016
Reportable Segments

andGrating

Real Estate

Segment

Segment Segment

Segment

Sub-Total

Other (*1)

Total¥147,758¥ 3,475¥ 3,550¥ 1,128¥155,911¥ 3,303¥ 159,214

¥

¥

¥

¥

Steel Sheet

Roll

Adjustments
eliminations

Consolidated

Net sales:
Sales to third parties–¥ 159,214

Inter-segment sales
–

–

¥ 443

¥

443

¥ 2,498¥

2,941¥ (2,941)

¥

Total

¥147,758¥ 3,475¥ 3,550¥ 1,571¥156,354¥ 5,801¥ 162,155¥ (2,941)¥ 159,214

Segment income¥ 7,181

¥ 266

¥

76

¥ 721

¥ 8,244

¥ 232

¥

8,476

¥ (1,174) (*2)¥

Segment assets¥124,778¥ 3,094¥ 3,622¥ 8,369¥139,863¥ 8,934¥ 148,797¥ 57,063 (*4)

¥ 205,860¥ 3,586

¥ 175

¥

¥

69

¥ 3,920

¥ 346

¥

¥

¥

3,836

–

363

3

4,202

–

4,202

–

4,202

2,163

76

33

338

2,610

218

2,828

8 (*5)

2,836

and transfers

–

–

7,302

Other items:
Depreciation andamortization

90

4,266

46

4,312

Investment in an
affiliate accounted
for by the equity
methodIncrease in property,
plant andequipment andintangible assets

57

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

25. Segment Information (continued)c) Information on net sales, income or loss, assets and other items of each reportablesegment (continued)
Thousands of U.S. dollars
Year ended March 31, 2016
Reportable Segments
Steel Sheet

Roll

Adjustments
andGrating

Real Estate

Segment

Segment Segment

Segment

Sub-Total

Other (*1)

$1,311,306$30,840$31,505$ 10,011$1,383,662$ 29,313$ 1,412,975 $

$

$

$

Total

eliminations

Consolidated–$1,412,975

Net sales:
Sales to third parties
Inter-segment sales––$ 3,931$

3,931$ 22,169$

Total$1,311,306$30,840$31,505$ 13,942$1,387,593$ 51,482$ 1,439,075 $ (26,100)$1,412,975

Segment income$

63,729$ 2,361$674$ 6,399$

73,163$ 2,059$$

Segment assets$1,107,366$27,459$32,144$ 74,272$1,241,241$ 79,286$ 1,320,527 $ 506,417 (*4)

$1,826,944$

31,825$ 1,553$$$

34,789$ 3,070$$

34,043

–

3,221

27

37,291

19,196

674

293

3,000

23,163and transfers–

26,100 $ (26,100)$

75,222 $ (10,419) (*2)–

64,803

Other items:
Depreciation andamortization

799

612

37,859 $409

38,268–37,291–37,291

1,935

25,09871 (*5)25,169Investment in an
affiliate accounted
for by the equity
methodIncrease in property,
plant andequipment andintangible assets

58

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

25. Segment Information (continued)c) Information on net sales, income or loss, assets and other items of each reportablesegment (continued)(*1) The “Other” segment consists of business segments not classified into theaforementioned reportable segments, including transportation and warehousebusiness, golf courses, plant machines, supply of electric power (solar power
generation) and other.
(*2) The adjustments and eliminations of segment income or loss include corporate
expenses, which cannot be allocated to specific segments of ¥1,169 million and¥1,177 million ($10,446 thousand) and intersegment profit eliminations of ¥26
million and ¥5 million ($44 thousand) for the years ended March 31, 2015 and2016.
(*3) Segment income or loss is reconciled to operating income on the consolidated
statement of operations.
(*4) The adjustments and eliminations of segment assets include corporate assets of theCompany of ¥54,409 million and ¥57,381 million ($509,239 thousand) andeliminations of intersegment transaction of ¥297 million and ¥318 million ($2,822
thousand) for the years ended March 31, 2015 and 2016.
(*5) The adjustments and eliminations of increase in property, plant and equipment andintangible assets are due to the increase in tools, furniture and fixtures in corporate
assets not allocated to the reportable segment of ¥10 million and ¥8 million ($71
thousand) for the years ended March 31, 2015 and 2016.
As described in Note 3. Change in Accounting Estimates, effective for the year ended
March 31, 2016, YSS, a consolidated subsidiary in China, changed the estimated useful
lives of main machinery, equipment and buildings. As a result of this change, segment
income attributable to the Steel Sheet Segment increased by ¥384 million ($3,408
thousand) for the year ended March 31, 2016.

59

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

25. Segment Information (continued)
Net sales categorized by country and region based on locations of customers within theGroup for the years ended March 31, 2015 and 2016 are summarized as follows:

Taiwan¥ 25,033

Millions of yen
2015
USA¥ 19,208

Other¥ 24,951

Total¥ 175,890

Japan¥ 100,214

Taiwan¥ 23,202

Millions of yen
2016
USA¥ 13,567

Other¥ 22,231

Total¥ 159,214Japan$ 889,368

Thousands of U.S. dollars
2016
TaiwanUSA
Other$ 205,911$ 120,403$ 197,293

Total$ 1,412,975

Japan¥ 106,698

Property, plant and equipment, net, categorized by geographical area as of March 31, 2015
and 2016 are summarized as follows:Japan¥ 33,351

Japan¥ 32,138

Taiwan¥ 11,495

Millions of yen
2015
China
¥ 10,854

Other¥ 3,469

Total¥ 59,169

Taiwan¥ 11,198

Millions of yen
2016
China
¥ 4,428

Other¥ 2,874

Total¥ 50,638

Other$ 25,506

Total$ 449,397

Thousands of U.S. dollars

Japan$ 285,215

Taiwan$ 99,379

2016
China
$ 39,297

60

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

25. Segment Information (continued)
Net sales to major customers for the years ended March 31, 2015 and 2016 are as follows:

Millions of yen
2015
2016

Customer nameSadoshima
Corporation¥ 32,900¥ 31,989

Thousands of
U.S. dollars
2016$ 283,892

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

Loss on impairment of fixed assets by reportable segment for the years ended March 31,
2015 and 2016 is summarized as follows:

Steel Sheet
Segment
Loss on impairment of
fixed assets¥ 70

Steel Sheet
Segment
Loss on impairment of
fixed assets¥5,971

Steel Sheet
Segment
Loss on impairment of
fixed assets$52,991

Millions of yen
Year ended March 31, 2015
Reportable Segments
Roll
Grating
Real Estate
Other
Segment Segment
Segment
¥–

¥–

¥–

¥ 511

Millions of yen
Year ended March 31, 2016
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
¥–

¥–

¥–

¥ 600

Thousands of U.S. dollars
Year ended March 31, 2016
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other
$–

$–

$–

$ 5,325

Adjustments andeliminations

Total

¥7

¥588

Adjustments andeliminations

Total

¥ 32

¥ 6,603

Adjustments andeliminations

Total

$ 284

$58,600

61

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

25. Segment Information (continued)
The amortization and balance of negative goodwill by reportable segment as of and for theyear ended March 31, 2015 related to business combinations prior to April 1, 2010 are
summarized as follows:

Amortization
Balance at the year end

Steel Sheet
Segment¥5¥–

Millions of yen
Year ended March 31, 2015
Reportable Segments
Roll
Grating
Real Estate
Other
Segment Segment
Segment
¥–
¥0
¥–
¥1
¥–
¥–
¥–
¥–

Adjustments andeliminations
¥1
¥–

Total
¥7
¥–

The amortization and balance of goodwill by reportable segment as of and for the years
ended March 31, 2015 and 2016 is summarized as follows:

Balance at the year end

Amortization
Balance at the year end

Amortization
Balance at the year end

Steel Sheet
Segment¥ 198

Millions of yen
Year ended March 31, 2015
Reportable Segments
Roll
Grating
Real Estate
Other
Segment Segment
Segment
¥–
¥–
¥–
¥–

Adjustments andeliminations
¥–

Total
¥198

Steel Sheet
Segment¥ 22¥ 14

Millions of yen
Year ended March 31, 2016
Reportable Segments
Roll
Grating
Real Estate
Other
Segment Segment
Segment
¥–
¥–
¥–
¥–
¥–
¥–
¥–
¥–

Adjustments andeliminations
¥–
¥–

Total
¥ 22
¥ 14

Steel Sheet
Segment

Thousands of U.S. dollars
Year ended March 31, 2016
Reportable Segments
Roll
Grating
Real Estate
Segment Segment
Segment
Other

Adjustments andeliminations

Total

$–
$–

$195
$124

$195
$124

$–
$–

$–
$–

$–
$–

$–
$–

Goodwill was recognized as a result of capital increase of consolidated subsidiary in
November 2017 and March 2015.
Loss on impairment of goodwill of ¥162 million ($1,438 thousand) has been recorded in the
consolidated statement of operations for the year ended March 31, 2016.
62

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

25. Segment Information (continued)
Gain on recognition of negative goodwill by reportable segment for the year ended March 31,
2015 is summarized as follows:
Millions of yen
Year ended March 31, 2015
Reportable Segments
Steel Sheet
Roll
Grating
Real Estate
Segment Segment Segment
Segment
Other
Gain on recognitionof negative goodwill

¥ 32

¥–

¥1

¥–

¥6

Adjustments andeliminations

Total

¥8

¥ 47

Gain on recognition of negative goodwill was recognized as a result of acquisition oftreasury stock by a consolidated subsidiary.

26. Subsequent Event
The following distribution of retained earnings of the Company, which has not beenreflected in the accompanying consolidated financial statements for the year ended March 31,
2016 was approved at a meeting of the Board of Directors held on May 10, 2016.

Cash dividends of ¥25 ($0.22) per share

Millions of yen¥ 768

Thousands of
U.S. dollars$ 6,81663