ANNUAL REPORT 2017 Paramount Bed Holdings Co., Ltd.

Profile

Paramount Bed Holdings Co., Ltd. is the holding company
of a comprehensive medical group comprised of the core
entity Paramount Bed Co., Ltd.
The Paramount Bed Group was established in 1947. The
Group started out as a manufacturer of hospital beds and,against the subsequent backdrop of demographic aging,later branched out into senior care facilities and visiting
nursing care while developing a diversity of products
and services.
In recent years, the Paramount Bed Group has been
diversifying its operations in Japan and abroad
centered on healthcare offerings such as inspection
and maintenance services for institutional bedding
and wholesale rental operations for assistive products.
Going forward, in keeping with the corporate motto of“As human, for human,” the Group remains committed
to creating and increasing customer satisfaction andaugmenting enterprise value while contributing tosociety through the Group’s business activities.
The Group consists of Paramount Bed Holdings and sevenconsolidated subsidiaries, eight non-consolidated subsidiaries and two affiliated companies (as of March 31, 2017).
In the fiscal year ended March 2017, it had net sales of¥73,199 million, operating income of ¥11,015 million, andnet income attributable to owners of the parent of ¥9,035
million. Paramount Bed is Japan’s leading maker of medical beds and has acquired a strong reputation, as reflected
in its estimated domestic market share of approximately
70% in medical and senior housing facilities and 60%
in home healthcare.

Disclaimer Regarding Forward-Looking Statements
The information contained in this annual report is given for the sole purpose of providing information regarding the business performance of Paramount Bed Holdings Co., Ltd.
during the fiscal year ended March 31, 2017 and is not intended to solicit investment in any securities issued by the Company. Any statements with respect to Paramount Bed’s current
plans, strategies, and forecasts are forward-looking statements based upon information available as of March 31, 2017 and involve known and unknown risks and uncertainties.
Actual events and results may differ materially from those anticipated in these statements.

Financial Highlights

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2017

2016

2017

¥ 73,199
11,015
11,243
9,035¥ 74,089
9,660
9,735
6,388

$ 652,454
98,184
100,21480,530¥128,962
88,391¥126,280
85,224$1,149,500
787,873

For the year
Net sales
Operating income
Income before income taxes
Net income attributable to owners of the parent
At year-end
Total assets
Total equity

Yen
Years ended March 31,

U.S. dollars

2017

2016

¥ 320.14
294.6890.00¥ 221.76
204.4870.00

2017

Per share
Basic net income
Diluted net income
Cash dividends applicable to the year

$

2.85
2.63
0.80

Note: The U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥112.19 to U.S.$1, the approximate exchange rate at March 31, 2017.

Net sales

Operating income

Net income attributableto owners of the parent(Millions of yen)

(Millions of yen)

(Millions of yen)

100,000

15,00015,00080,00072,79475,27074,08973,19912,000

11,542

11,015
10,03860,00012,000

9,660

9,000

9,035

9,000

7,385
40,000

6,000

6,000

20,000

3,000

3,000

0

2014

2015

2016

2017

0

2014

2015

2016

0

2017

2014

7,265

2015

6,388

2016

Total assets

Total equity

Basic net income per share(Millions of yen)

(Millions of yen)

(Yen)

150,000

100,000

122,303

125,509126,280

128,962400

82,571

85,391

85,22488,391

120,000

80,000320

90,00060,000240

60,00040,000160

30,00020,000

80

0

2014

2015

2016

2017

0

2017

2014

2015

2016

2017

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

0320.14241.01244.032014

2015

221.76

2016

2017

1

Message from the Management

We create comfortable,
healthy environments throughcutting-edge technology witha human touch.
First of all, we thank our shareholders for their continuing
support. Let us look at the business conditions and thefinancial results of Paramount Bed Holdings for the
fiscal year ended March 2017.

Kyosuke Kimura
President andChief Executive Officer

Business Results for the Fiscal Year under Review

Future Business Development

The Company’s consolidated net sales were ¥73,199 million

The Paramount Bed Group announced the medium-term(down 1.2% compared with the previous year). Aside from sales

business plan, or the 2020 Plan, which runs for five years fromto facilities for the elderly, the maintenance business and the rental

April 2016 to March 2021. The major targets of this plan are ¥100

wholesale business for assistive products were solid, while sales

billion in consolidated net sales and ¥14 billion in consolidated

to medical facilities in Japan were down.

operating income in the fiscal year ending March 2021. The key

Regarding profits, operating income was ¥11,015 million

policies of the plan are to (1) maintain/expand existing business(up 14.0%), and net income attributable to owners of the parent

areas, (2) to accelerate overseas business expansion, and (3) towas ¥9,035 million (up 41.4%) due primarily to cost reductions

strengthen R&D and create business models serving as “buds”

in production and to the effects of a decrease in prices of itemsof new growth. These activities aim to drive sustainableprocured from overseas because of the yen’s appreciation.

development and to boost corporate value.

For dividend payments for the fiscal year under review, a ¥10

In overseas business, we are focusing in particular on Asia andper share commemorative dividend celebrating Paramount Bed’s

Central and South America. We plan to build assembly plants during

70th anniversary was added to the year-end dividend of ¥40 per

the fiscal year ending March 2018 in Mexico and India, where weshare for a total of ¥50 per share. As a result, including the interim

already have sales hubs. Through local production, we aim to

dividend of ¥40 per share, the annual dividend was ¥90 per share.

minimize the burden of customs duties and further increase sales.

For the dividend payment for the fiscal year ending March

For new business models, we will strive to further popularize

2018, we plan to set both the interim dividend and the year-end

our Smart Bed SystemTM, which enables the integrated manage-

dividend at ¥45 per share from the standpoint of stable, ongoing

ment of a variety of biological information in addition to measur-

returns, for an annual dividend of ¥90 per share. We are wholly

ing a patient’s heart rate and respiration rate in real time fromcommitted to providing the best profit returns to shareholders

the bed without the need to wear a device. By introducing thisgoing forward.

system, customers can expect to save on labor and to increase
accuracy, among other benefits, amid concerns over further
staff shortages at medical and nursing facilities.
We aim to drive steady growth in the Japanese and overseas
markets by strengthening ties between Group companies. In all
our efforts, we look forward to the continued understanding andcooperation of our shareholders.

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Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

Special Feature

Peace of mind and kindness
from the comfort of a bed.
Getting morefrom the bedside.
Development
built on care.

The Smart Bed SystemTM, a comprehensive

Integrates patient information on bedside terminals

information system for bedside care, wasData from sensors, such as sleep, waking, respiration rate andheart rate, is aggregated and displayed on the terminal.

developed with three concepts in mind:“comfortable recuperation of patients,”

Integrated
patient
information“peace of mind for people supporting

Remotereal-time
information

patients, such as family members andothers,” and “safer and more reassuring
care from medical and nursing staff.” A
range of data that includes the sleeping
condition and vital signs of the patient in
Displays and verifies patient
information at the staff station

bed is collected and integrated and that
information can be shared at any timewith family and medical and nursing staff.
The Smart Bed System helps create anenvironment where the patient is closely
cared for from his or her bedside using

Smart
Bed System™
ServerData from bedside terminals is
displayed and verified on terminals
at the staff station. This means apatient’s condition can be understoodin real time to ensure they are being
cared for in the best possible way.

state-of-the-art technology.

Connects information
with the electronic healthrecord system and devices
The system connects with otherdevices, including the electronic
health record system, measuring instruments and mobile
terminals. Information can beshared with all staff to realize
safe, reassuring care.

Nurse callserverElectronic medical
chart server
Staff station access

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

Mobile access3

The Year in Review

Another exciting, productive year for our GroupMAY 2016

AUG 2016

1

Announced medium-termbusiness plan, the 2020 Plan
The medium-term business plan will run
for five years from April 2016 to March 2021.
The aims are to drive steady and ongoinggrowth and to boost corporate value,with financial targets set at ¥100 billion inconsolidated net sales and ¥14 billion inconsolidated operating income in thefiscal year ending March 2021.

Key Policiesof the2020 Plan

Exhibited at Annual
Conference of The Japan
Academy of Nursing
Administration and
Policies

Maintain/
expand existing
business areas

2

3

Accelerate
overseas businessexpansion

Createnew businessmodels

4

5

6

2016

2016

2016

APR MAY JUN

7

JUL
2016

SEP 2016

Won a Good DesignAward for the Metis
PRO Series

AUG

APR 2016

JUN 2016

Exhibited at Barrier Free 2016 (Osaka)

Started sales of robotic nursing-careequipment ROBOHELPER SASUKEJUL 2016

8

2016

SEP
2016

JUL 2016

JUL 2016

Exhibited at
International Modern
Hospital Show 2016

JUL 2016

Started sales of the KS-098AG swing arm
assist bar for medical and nursing facilities

Expanded lineup of Metis PRO Series
beds for medical facilities

This increases safety and convenience for both those in
bed and staff through the introduction of a one-touchsystem for attaching it to a bed as well as changes tothe shape of the arm and the operating lever.

Models with aluminum and wooden headboards
were added to the range. The beds will be recommended for special rooms for use by VIPs.

Established ashowroom at theParamount B
Bed
Takamatsu
Sales Office

Metis PRO Series (wooden headboard)
Suggested retail price: ¥890,000 (excluding tax)

Swing arm assistance bar (KS(KS-098AG)
G)¥52,000 (excluding
Suggested retail price: ¥52,0
cluding tax)

4

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Pa ra mo unt B ed Hol
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ings Co. , Ltd
Ltd.. A NNUAN N UA L RE PORTP O RT 2 017
0 17

OCT 2016

Launched the INTIME 1000 Seriesof electric beds for general households
Launched electric beds for generalhouseholds with exceptional design—Can be transformed for nursing care when required—
The INTIME 1000 Series of electric beds for general households, boasting
exceptional design, was launched on October 13. There are 486 different
models in this lineup. People can choose from a range of design variations,
including the shape of the headboard and the color to match a room decor andindividual tastes. The INTIME 1000 Series incorporates technologies amassedby the Group in the medical care field. The beds include a reclining mechanismthat places a minimal load on the back and abdomen, making it useful for
medical beds, and a memory setting feature so people can restore a preferred
position. These and other inventive features ensure a comfortable time in bed,
especially for reading or watching videos.

10

11

12

2016

2016

2016

OCT NOV DEC

1

JAN
2017

INTIME1000 Series
Suggested retail price:from ¥145,000 (tax exempt)

FEB 2017

Expanded lineup of Metis PRO
Series beds for medical facilities

2

FEB
2017

3

MAR
2017

DEC 2016

MAR 2017

Launched the Fieldo Projection
Systems for rehabilitation

Introduced a new TV commercial for the INTIME 1000 Series—Promoted an electric bed with exceptional design that canalso be transformed for nursing—DEC 2016

The new TV commercial Ima Yagate-hen (lit. “For now and the future”) was first broadcast
in March. It promotes the INTIME 1000 Series of electric beds for general households withexceptional design that can also be transformed for nursing when required. The commercial
shows a husband and wife with their daughter purchasing one of the beds and receiving it attheir home. The catchphrase of the commercial translates as “the bed I want for now and thefuture.” The INTIME 1000 provides ongoing gentle support as an electric bed that enriches
one’s lifestyle and as a nursing bed when required.

Won a 2016 Annual Grand
Prize from TV Tokyo’s WBS
Our Stretch Glide Rescue pressure-reduction
mattress, which allows patients to be transported while lying on the mattress in caseof an emergency, was awarded the 2016
Annual Grand Prize from the economic news
TV program World Business Satellite (WBS),
which is televised through TV Tokyo, in asection marking new trends.

Stretch-Glide type R
Suggested retail price: open

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5

Financial Section

Management’s Discussion and Analysis

7

Consolidated Balance Sheet

8

Consolidated Statement of Income

10

Consolidated Statement of Comprehensive Income

11

Consolidated Statement of Changes in Equity

12

Consolidated Statement of Cash Flows14

Notes to Consolidated Financial Statements

16

Independent Auditor’s Report30

6Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

Management’s Discussion and Analysis

a reflection of decreases in short-term borrowings and income

Business Results
Net Sales and Gross Profit

taxes payable.

Consolidated net sales declined 1.2 % from the previous fiscal

Consolidated long-term liabilities rose ¥1,247 million to ¥22,063

year to ¥73,199 million. This result primarily reflected a decrease

million. This was due primarily to increases in lease obligations andin sales of products in Japan due to the impact of revisions

deferred tax liabilities.

to medical fees and nursing care compensation, despite solid

As a result, consolidated liabilities totaled ¥40,570 million at

performance in the rental wholesale business for assistive products

the end of fiscal year under review, down ¥484 million from ain Japan as well.

year earlier.

Consolidated gross profit was up 6.5% from the previous
fiscal year to ¥33,636 million. This was primarily due to the fact

Total Equity

that the cost of sales dropped 6.9% from the previous fiscal year

Consolidated total net assets grew ¥3,167 million from the end ofto ¥39,563 million. As a result, the consolidated gross profit margin

the previous fiscal year to ¥88,391 million. This primarily reflected

increased 3.4 percentage point to 46.0%.

an increase in retained earnings from the recording of net income
attributable to owners of the parent. The shareholders’ equity
ratio was 68.5%.

Operating income
Consolidated operating income was up 14.0% from the previous
fiscal year to ¥11,015 million. This result primarily reflected the fact

Cash Flowthat while selling, general and administrative expenses increased

At the close of the fiscal year under review, consolidated cash and3.1% to ¥22,621 million, gross profit increased 6.5% to ¥33,636

cash equivalents amounted to ¥27,644 million. During the fiscal

million. As a result, the consolidated operating margin grew

year, cash flows and the factors behind them were as follows.

2.0 percentage point to 15.0%.

Cash Flows from Operating Activities
Net income attributable to owners of the parent

Net cash provided by operating activities amounted to ¥12,019

Consolidated net income attributable to owners of the parent was

million. This primarily reflected increases such as ¥11,243 million

up 41.4% from the previous fiscal year to ¥9,035 million.

in income before income taxes, ¥5,179 million in depreciation andAs a result, net income attributable to owners of the parent peramortization, and ¥279 million in liability for retirement benefits,

share increased to ¥320.14, from ¥221.76 a year earlier. Return on

and also because of decreases such as ¥3,589 million in income

equity (ROE) was 10.4%.

taxes paid and ¥1,545 million in long-term lease obligations.

Financial Condition
AssetsCash Flows from Investing Activities

Consolidated current assets expanded ¥2,095 million from theresult was mainly due to decreases such as ¥3,428 million inend of the previous fiscal year to ¥73,085 million. This primarily

purchases of marketable securities and investment securities,

reflected an increase in cash and deposits.

¥780 million in purchases of property, plant and equipment,

Net cash used in investing activities totaled ¥937 million. This

Consolidated noncurrent assets expanded ¥586 million toand ¥1,885 million in payments for sales of shares of subsidiaries¥55,877 million. This was primarily due to an increase in rental

resulting in a change in scope of consolidation, and also because

assets for the rental wholesale business for assistive products,of increases such as ¥3,964 million in sales of marketablea core business of a subsidiary, Paramount Care Service Co., Ltd.

securities and investment securities.

As a result, consolidated total assets reached ¥128,962 million
at the close of the fiscal year ended March 2017, up ¥2,682 million

Cash Flows from Financing Activities

from a year earlier.

Net cash used in financing activities was ¥5,642 million. This was
mainly a reflection of decreases such as ¥3,331 million in purchasesof treasury stock and ¥2,134 million in dividends paid.

Liabilities
Consolidated current liabilities were down ¥1,732 million from theend of the previous fiscal year to ¥18,508 million. This was mainly

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

7

Consolidated Balance SheetParamount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

ASSETS
CURRENT ASSETS:¥ 27,644¥ 22,616$ 246,406

Time deposits (Note 13)

Cash and cash equivalents (Note 13)

7,192

7,169

64,102Marketable securities (Notes 3 and 13)

5,197

5,829

46,325

Receivables (Note 13):
Trade notes

4,024

4,801

35,871

Trade accounts

18,26318,071

162,790

Unconsolidated subsidiaries and associated companies

636

442

5,672

Other

1,114

1,386

9,925

(45)

(58)

(397)

Inventories (Note 4)

Allowance for doubtful accounts

6,060

7,270

54,012

Lease receivables and investments in leases (Notes 12 and 13)

17,497

1,963

2,278

Deferred tax assets (Note 10)

757

756

6,743

Prepaid expenses and other current assets

280

429

2,496

73,08570,989651,442

Land

8,650

8,717

77,104

Buildings and structures

27,25727,457

242,953

Machinery and equipment

7,376

7,577

65,738

Furniture and fixtures

8,876

8,767

79,116

Total current assets
PROPERTY, PLANT AND EQUIPMENT:

Leased assets (Note 12)

110

120

977

Assets for rent (Note 12)22,85819,244

203,747

Construction in progress

126

74

1,127

Total

75,253

71,956

670,762(44,756)(41,897)(398,930)

30,49730,059271,832

Investment securities (Notes 3 and 13)

15,037

14,972

134,032

Investments in and advances to unconsolidated subsidiaries and associated companies

2,232

2,114

19,897

Accumulated depreciation
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:

Goodwill

22

35

197

Life insurance fund

1,043

1,044

9,300

Deferred tax assets (Note 10)

2,043

1,992

18,207

Other assets

5,057

5,166

45,074

(54)

(91)

(481)

25,38025,232

226,226¥128,962¥126,280$1,149,500

Allowance for doubtful accounts
Total investments and other assets
TOTAL
See notes to consolidated financial statements.

8

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term borrowings (Notes 5 and 13)¥

Current portion of long-term bank loans (Notes 5 and 13)

613
34

Payables (Note 13):
Trade accounts¥ 10,493

10,866

111

73

987

2,136

2,086

19,044

714

1,782

6,363

Accrued expenses

2,034

2,069

18,126

Current portion of long-term lease obligations (Notes 5, 12 and 13)

1,889

1,577

16,835

Other current liabilities

1,131

1,140

10,08718,50820,240164,968

10,013

10,02389,246

Liability for retirement benefits (Note 7)

5,565

5,321

49,602Long-term lease obligations (Notes 5, 12 and 13)

4,034

3,378

35,961

Unconsolidated subsidiaries and associated companies
Other
Income taxes payable

Total current liabilities$

93,526

LONG-TERM LIABILITIES:
Bonds with warrants (Notes 5, 6 and 13)
Long-term bank loans (Notes 5 and 13)

76

Provision for environmental measures
Deferred tax liabilities (Note 10)
Other long-term liabilities
Total long-term liabilities

42

42

374

2,081

1,640

18,549

328

336

2,927

22,063

20,816

196,659

4,207

4,207

37,503

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 12, 14 and 15)
EQUITY (Notes 8 and 19):
Common stock—authorized, 126,000,000 shares; issued,
30,877,487 shares in 2017 and 2016
Capital surplus

49,87749,877444,579

Retained earnings

44,451

37,553396,213

Treasury stock—at cost, 3,263,161 shares in 2017 and 2,403,177 shares in 2016

(10,730)(7,501)(95,646)

542

317

4,835

Foreign currency translation adjustments

568

1,344

5,064

Defined retirement benefit plans

(525)

(574)

(4,681)

Total

88,39085,223787,867

1

1

6

Total equity

88,391

85,224

787,873¥128,962¥126,280$1,149,500

Accumulated other comprehensive income:Unrealized gain on available-for-sale securities

Noncontrolling interests
TOTAL

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

9Consolidated Statement of Income
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

NET SALES¥73,199¥74,089$652,454

COST OF SALES

39,56342,496352,637

33,636

31,593299,817

22,621

21,933201,633

11,015

9,660

98,184

Interest and dividend income

311

396

2,773

Interest expense

(34)

(46)

(304)

(143)

(387)

Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 11)
Operating income
OTHER INCOME (EXPENSES):

Foreign exchange loss—net(1,275)

Loss on sales of investments in subsidiaries and associated companies(1,142)Other—net

1,236

112

11,019

228

75

2,030

11,243

9,735

100,214

Current

1,900

2,882

16,937

Deferred

308

465

2,746

2,208

3,347

19,683

9,035

6,388

80,531Other income—net
INCOME BEFORE INCOME TAXES(10,183)

INCOME TAXES (Note 10):

Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

0

0

1

¥ 9,035¥ 6,388$ 80,530

Yen

U.S. Dollars

2017

2016

2017

Basic net income¥320.14¥221.76$2.85

Diluted net income

294.68204.48

2.63

Cash dividends applicable to the year

90.00

70.00

0.80

PER SHARE OF COMMON STOCK (Notes 2 and 17):

See notes to consolidated financial statements.

10

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

Consolidated Statement of Comprehensive Income
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

¥9,035¥6,388$80,531

Unrealized gain (loss) on available-for-sale securities

225

(762)

2,006

Foreign currency translation adjustments

(775)

(243)

(6,916)

Defined retirement benefit plans

49

(344)

440

Total other comprehensive loss

(501)

(1,349)(4,470)¥8,533¥5,039$76,061¥8,533¥5,039$76,060

001

NET INCOME
OTHER COMPREHENSIVE INCOME (Note 16):COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
See notes to consolidated financial statements.

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

11Consolidated Statement of Changes in Equity
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

Thousands

BALANCE, APRIL 1, 2015

Millions of Yen

Number of
Shares ofCommonStock Issued

CommonStock30,877,487¥4,207

CapitalSurplusRetained
Earnings¥49,877

Treasury
Stock¥33,195¥ (4,108)

Net income attributable to owners of the parent

6,388

Cash dividends, ¥70.00 per share(2,030)Purchase of treasury stock

Treasury Stock
Treasury
Stock(the Trust)¥(216)(3,291)

Disposal of treasury stock from the Trust

Total
TreasuryStock¥ (4,324)(3,291)
114

114

(102)

(7,501)

Net change in the year
BALANCE, APRIL 1, 2016

30,877,487

4,207

49,87737,553(7,399)Net income attributable to owners of the parent

9,035

Cash dividends, ¥75.00 per share(2,137)Purchase of treasury stock(3,331)

Disposal of treasury stock from the Trust(3,331)
102

102

Net change in the year
BALANCE, MARCH 31, 201730,877,487¥4,207¥49,877¥44,451¥(10,730)¥(10,730)

Millions of Yen

Accumulated Other Comprehensive Income
Foreign
Unrealized Gain
DefinedCurrency
on Available-forRetirement
Translation
sale Securities
Benefit Plans
Adjustments
BALANCE, APRIL 1, 2015

¥1,078¥1,587¥(230)

Total¥85,390

Noncontrolling
Interests

Total Equity¥1¥85,391

Net income attributable to owners of the parent

6,388

6,388

Cash dividends, ¥70.00 per share(2,030)(2,030)Purchase of treasury stock(3,291)(3,291)

Disposal of treasury stock from the Trust

114

114

Net change in the year

(761)

(243)

(344)

(1,348)0(1,348)BALANCE, APRIL 1, 2016

317

1,344

(574)

85,223

1

85,224

Net income attributable to owners of the parent

9,035

9,035

Cash dividends, ¥75.00 per share(2,137)(2,137)Purchase of treasury stock(3,331)(3,331)

Disposal of treasury stock from the Trust

102

102

Net change in the year

225

(776)

49

(502)

0

(502)

BALANCE, MARCH 31, 2017

¥ 542

¥ 568

¥(525)¥88,390¥1¥88,391

12

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

Thousands of U.S. Dollars (Note 1)

CommonStock
BALANCE, APRIL 1, 2016

$37,503

CapitalSurplus$444,579

Retained
Earnings$334,725

Net income attributable to owners of the parent

80,530Cash dividends, $0.67 per share(19,042)

Purchase of treasury stock

Treasury
Stock

Treasury Stock
Treasury Stock
Total(the Trust) Treasury Stock$(65,952)$(909)(29,694)$(66,861)(29,694)

Disposal of treasury stock from the Trust

909

909

Net change in the year
BALANCE, MARCH 31, 2017$37,503$444,579$396,213$(95,646)$(95,646)

Thousands of U.S. Dollars (Note 1)

Accumulated Other Comprehensive Income
Foreign
Unrealized Gain
DefinedCurrency
on Available-for- Translation
Retirement
sale Securities Adjustments Benefit Plans
BALANCE, APRIL 1, 2016

$2,829$11,980$(5,121)

Total

Noncontrolling
Interests

Total Equity$6$759,640$759,634

Net income attributable to owners of the parent

80,530Cash dividends, $0.67 per share(19,042)(19,042)

Purchase of treasury stock(29,694)(29,694)909

909

Disposal of treasury stock from the Trust

80,530Net change in the year

2,006

(6,916)440(4,470)0(4,470)

BALANCE, MARCH 31, 2017

$4,835$ 5,064$(4,681)$787,867$6$787,873

See notes to consolidated financial statements.

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

13

Consolidated Statement of Cash Flows
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

¥11,243¥9,735$100,214OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes—paid(3,589)(3,864)(31,991)

Depreciation and amortization

5,179

4,960

46,161(Gain) loss on sales and redemption of investment securities-net

(597)

95

(5,323)

Loss on sales of investments in subsidiaries and associated companies

1,142

10,183

Changes in assets and liabilities:
Decrease (increase) in receivables

109

(104)

968

Decrease in inventories

825

87

7,355

Decrease in lease receivables and investments in leases

354

291

3,157

(2,104)(1,883)(18,756)

71

521

629

(1,545)(1,412)(13,770)

931

1,231

8,310

776

(78)

6,923

12,0199,657

107,137

(22)

(19)

(200)

Purchases of marketable securities(1,000)(1,100)(8,913)

Proceeds from sales of marketable securities

1,926

2,705

17,163Purchases of property, plant and equipment

(780)

(916)

(6,948)Purchases of intangible assets

(386)

(204)

(3,441)

Increase in assets for rent
Increase in payables
Decrease in long-term lease obligations
Other—net
Total adjustments
Net cash provided by operating activities

INVESTING ACTIVITIES:
Increase in time deposits

Purchases of investment securities(2,429)(3,986)(21,650)

Proceeds from sales of investment securities

2,039

1,477

18,174

Payments for sales of shares of subsidiaries resulting in change in scope of consolidation (Note 18)(1,885)

Proceeds from distribution of investment in partnerships, etc.

1,315

765

11,720

Other—net

285

(759)

2,544

(937)

(2,037)(8,350)¥11,082¥ 7,619$ 98,787

Net cash used in investing activities
FORWARD

14

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017(16,799)

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

FINANCING ACTIVITIES:
Decrease in short-term borrowings—net

(76)

(8)

(681)

Repayments of long-term bank loans

(22)

(170)

(199)

Purchase of treasury stock(3,331)(3,291)(29,694)

Dividends paid

(2,134)(2,028)(19,016)

(79)

4

(699)

Other—net(5,642)(5,493)(50,289)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

Net cash used in financing activities

(412)

37

(3,676)NET INCREASE IN CASH AND CASH EQUIVALENTS

5,028

2,163

44,822

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

22,616

20,453

201,584

CASH AND CASH EQUIVALENTS, END OF YEAR

¥27,644¥22,616$246,406

See notes to consolidated financial statements.

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

15

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of ParamountBed Holdings Co., Ltd. (the “Company”) and its consolidated
subsidiaries have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments and Exchange
Act and its related accounting regulations and in accordance withaccounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to the applicationand disclosure requirements of International Financial ReportingStandards (“IFRS”).
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in
the 2016 consolidated financial statements to conform to theclassifications used in 2017.
The consolidated financial statements are stated in Japanese yen,
the currency of the country in which the Company is incorporated
and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers
outside Japan and have been made at the rate of ¥112.19 to $1, theapproximate rate of exchange at March 31, 2017. Such translations
should not be construed as representations that the Japanese
yen amounts could be converted into U.S. dollars at that or any
other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements as ofMarch 31, 2017, include the accounts of the Company and its
seven significant (10 in 2016) subsidiaries (together, the “Group”).
Under the control concept, those companies in which theCompany, directly or indirectly, is able to exercise control over
operations are fully consolidated.
Investments in the remaining unconsolidated subsidiaries
and associated companies are stated at cost. If the equity
method of accounting had been applied to the investments inthese companies, the effect on the accompanying consolidated
financial statements would not be material.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Group isalso eliminated.
b. Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements—
Under Accounting Standards Board of Japan (“ASBJ”) Practical
Issues Task Force (“PITF”) No. 18, “Practical Solution on Unification

16of Accounting Policies Applied to Foreign Subsidiaries for theConsolidated Financial Statements,” the accounting policies andprocedures applied to a parent company and its subsidiaries
for similar transactions and events under similar circumstances
should in principle be unified for the preparation of theconsolidated financial statements. However, financial statements
prepared by foreign subsidiaries in accordance with either IFRS
or generally accepted accounting principles in the United Statesof America (Financial Accounting Standards Board AccountingStandards Codification— “FASB ASC”) tentatively may be used
for the consolidation process, except for the following items
which should be adjusted in the consolidation process so thatnet income is accounted for in accordance with Japanese GAAP,
unless they are not material: (1) amortization of goodwill; (2)scheduled amortization of actuarial gain or loss of pensions
that has been recorded in equity through other comprehensive
income; (3) expensing capitalized development costs of R&D;
and (4) cancellation of the fair value model accounting forproperty, plant and equipment and investment properties andincorporation of the cost model accounting.
c. Business Combinations—Business combinations areaccounted for using the purchase method. Acquisition-related
costs, such as advisory fees or professional fees, are accounted
for as expenses in the periods in which the costs are incurred. If
the initial accounting for a business combination is incompleteby the end of the reporting period in which the businesscombination occurs, an acquirer shall report in its financial
statements provisional amounts for the items for which theaccounting is incomplete. During the measurement period,
which shall not exceed one year from the acquisition, theacquirer shall retrospectively adjust the provisional amounts
recognized at the acquisition date to reflect new information
obtained about facts and circumstances that existed as of theacquisition date and that would have affected the measurementof the amounts recognized as of that date. Such adjustments
shall be recognized as if the accounting for the businesscombination had been completed at the acquisition date. The
acquirer recognizes any bargain purchase gain in profit orloss immediately on the acquisition date after reassessing andconfirming that all of the assets acquired and all of the liabilities
assumed have been identified after a review of the procedures
used in the purchase price allocation. A parent’s ownershipinterest in a subsidiary might change if the parent purchases orsells ownership interests in its subsidiary. The carrying amountof noncontrolling interest is adjusted to reflect the change inthe parent’s ownership interest in its subsidiary while the parent
retains its controlling interest in its subsidiary. Any difference
between the fair value of the consideration received or paid and

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

the amount by which the noncontrolling interest is adjusted isaccounted for as capital surplus as long as the parent retains
control over its subsidiary.
d. Cash Equivalents—Cash equivalents are short-term
investments that are readily convertible into cash and that are
exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit,
commercial paper and bond funds, all of which mature or
become due within three months of the date of acquisition.
e. Inventories—Inventories are stated at the lower of cost,
determined principally by the average cost method, or net selling
value, except for supplies which are stated by the most recent
purchase price method.
f. Marketable and Investment Securities—Marketable andinvestment securities are classified and accounted for, dependingon management’s intent, as follows: (1) held-to-maturity debt
securities, for which there is the positive intent and ability to holdto maturity, are reported at amortized cost and (2) available-forsale securities, which are not classified as the aforementioned
securities, are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported in a separate componentof equity.
Nonmarketable available-for-sale securities are stated atcost determined by the moving-average method. For otherthan-temporary declines in fair value, investment securities are
reduced to net realizable value by a charge to income.
Investments in Limited Partnerships (“LPS”) and similar
ventures (considered as securities under the Japanese Financial
Instruments and Exchange Act) are stated at the amounts of thecorresponding equity portion based on the most recent available
financial statements on the reporting date stipulated in thecontracts of the LPS and the ventures.
g. Property, Plant and Equipment—Property, plant andequipment are stated at cost. Depreciation of property, plantand equipment of the Company and its consolidated domestic
subsidiaries is computed by the declining-balance method basedon the estimated useful lives of the assets, while the straight-line
method is applied to buildings (excluding building improvements)
acquired on or after April 1, 1998, building improvements andstructures acquired on or after April 1, 2016 by the Company andits consolidated domestic subsidiaries and assets for rent of theconsolidated domestic subsidiaries and substantially all property,
plant and equipment of consolidated foreign subsidiaries. The
range of useful lives is principally from three to 50 years forbuildings and structures, from four to 11 years for machinery andequipment, from two to 20 years for furniture and fixtures, andfrom three to eight years for assets for rent.

Pursuant to an amendment to the Corporate Tax Act, theCompany adopted ASBJ PITF No. 32 “Practical Solution on a
Change in Depreciation Method due to Tax Reform 2016” andchanged the depreciation method for building improvements
and structures acquired on or after April 1, 2016, from thedeclining-balance method to the straight-line method. The effectof this change on profit or loss for the year ended March 31, 2017,
was immaterial.
h. Long-lived Assets—The Group reviews its long-lived assets
for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may
not be recoverable. An impairment loss would be recognized
if the carrying amount of an asset or asset group exceeds thesum of the undiscounted future cash flows expected to result
from the continued use and eventual disposition of the asset
or asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash
flows from the continued use and eventual disposition of theasset or the net selling price at disposition.
i. Amortization of Goodwill—The differences between thecost and underlying net equity of investments in consolidated
subsidiaries at acquisition are amortized on a straight-line basis
over five years.
j. Other Assets—Intangible assets are carried at cost lessaccumulated amortization, which is calculated by the straightline method. Software development costs for internal use areamortized by the straight-line method based on the estimateduseful lives.
k. Allowance for Doubtful Accounts—The allowance for
doubtful accounts is estimated based on the Group’s past credit
loss experience and an evaluation of potential losses in thereceivables outstanding.
l. Bonuses to Directors—Bonuses to directors are accrued at the
year-end to which such bonuses are attributable.
m. Provision for Environmental Measures—The Groupestimates a provision for future losses resulting from thetreatment of Polychlorinated Biphenyl (“PCB”) wastes required by
the law concerning “Special Measures for Promotion of Proper
Treatment of PCB Wastes.”n. Retirement and Pension Plans—The Company and certain
consolidated subsidiaries have defined contribution and defined
benefit pension plans based on a point system. The defined
benefit pension plan provides for a lump-sum payment toterminated employees. A premium severance may be paid to
employees upon termination of their employment.
The Company accounts for the liability for retirement benefits
based on the projected benefit obligations and plan assets at

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

17

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

the balance sheet date. The projected benefit obligations are
attributed to periods on a benefit formula basis. The Company
and certain consolidated domestic subsidiaries, however, apply
the simplified method. Actuarial gains and losses that are yet
to be recognized in profit or loss are recognized within equity(accumulated other comprehensive income), after adjusting fortax effects and are recognized in profit or loss over 10 years, nolonger than the expected average remaining service period of
the employees.
o. Research and Development Costs—Research anddevelopment costs are charged to income as incurred.
p. Leases—As a lessee, finance lease transactions are capitalized
to recognize leased assets, assets for rent and lease obligationsin the balance sheet.
As a lessor, finance leases that deem to transfer ownershipof the leased property to the lessee are recognized as leasereceivables, and finance leases that deem not to transfer
ownership of the leased property to the lessee are recognized as
investments in leases.
q. Income Taxes—The provision for income taxes is computed
based on the pretax income included in the consolidated
statement of income. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted
income tax rates to the temporary differences.
The Company applied ASBJ Guidance No. 26, “Guidanceon Recoverability of Deferred Tax Assets,” effective April 1, 2016.
There was no impact from this for the year ended March 31, 2017.
r. Foreign Currency Transactions—All short-term and long-termmonetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange
rates at the consolidated balance sheet date. The foreignexchange gains and losses from translation are recognized in the
consolidated statement of income to the extent that they are nothedged by forward exchange contracts.
s. Foreign Currency Financial Statements—The balance sheet
accounts and revenue and expense accounts of the consolidated
foreign subsidiaries are translated into Japanese yen at thecurrent exchange rate as of the consolidated balance sheet
date except for equity, which is translated at the historical rate.
Differences arising from such translation are shown as “Foreign
currency translation adjustments” under accumulated othercomprehensive income in a separate component of equity.
t. Derivatives and Hedging Activities—The Group uses
derivative financial instruments, such as foreign currency
exchange forward contracts, to manage its exposures to18

fluctuations in foreign exchange rates. The Group does not enter
into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted
for as follows: (1) all derivatives are recognized as either assets
or liabilities and measured at fair value, and gains or losses
on derivative transactions are recognized in the consolidated
statement of income and (2) for derivatives used for hedging
purposes, if such derivatives qualify for hedge accounting
because of a high correlation and effectiveness between thehedging instruments and the hedged items, gains or losses onderivatives are deferred until maturity of the hedged transactions.
The foreign currency forward contracts which qualify forhedge accounting employed to hedge foreign exchange
exposures for import purchases are translated at the foreignexchange rate stipulated in the contract.
The Group evaluates hedge effectiveness semiannually bycomparing total cash flow of hedging instruments anditems hedged.
u. Per Share Information—Basic net income per share iscomputed by dividing net income attributable to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock splits.
Diluted net income per share reflects the potential dilutionthat could occur if securities were exercised or converted into
common stock. Diluted net income per share of common stock
assumes full conversion of the outstanding convertible notes andbonds at the beginning of the year (or at the time of issuance)with an applicable adjustment for related interest expense, net oftax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying
consolidated statement of income are dividends applicable to
the respective years, including dividends to be paid after the endof the year.
v. Employee Stock Ownership Plan—On September 18, 2012,
the Company’s Board of Directors approved the introduction of
the “Trust-type Employee Stock Ownership Incentive Plan” (the“Plan”) for the purpose of providing an incentive to enhance
corporate value on a mid- and long-term basis.
According to the Plan, the “Paramount Bed Group
Employee Stock Ownership Plan Exclusive Trust Account”(the “Trust”) acquired 204,700 shares of the Company’s stock
for a corresponding number of shares which are expected tobe acquired by the “Paramount Bed Group Employee Stock
Ownership Association” (the “Stock Ownership Association”)
during the four years subsequent to October 2012. Subsequently,
the Trust transfers the Company’s stock to the Stock Ownership
Association by the time the Trust terminates and gains on sale of

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

the Company’s stock accumulated in the Trust will be distributed
as residual assets to eligible employees. Additionally, as theCompany grants a guarantee to the Trust on the bank loans
for purchasing the Company’s stock, the Company is liable forrepayment of such debt pursuant to the guarantee agreement.
The guarantee agreement stipulates that the Company
guarantees repayment of debt at the end of the term of the Trust,which, in such a case, is equivalent to an accumulated loss onsale of stock due to a decline in stock price.
Assets, liabilities, profits and losses in the accompanying
consolidated financial statements include those of the Trust,
including the Company’s stock held by the Trust.
The Company applied “Practical Solution on Transactions ofDelivering the Company’s Own Stock to Employees etc. throughTrusts” (ASBJ PITF No. 30, issued on March 26, 2015) which was
effective for the beginning of annual periods beginning on orafter April 1, 2014.
w. Accounting Changes and Error Corrections—Under ASBJ
Statement No. 24, “Accounting Standard for Accounting Changes
and Error Corrections” and ASBJ Guidance No. 24, “Guidanceon Accounting Standard for Accounting Changes and Error
Corrections,” accounting treatments are required as follows: (1)Changes in Accounting Policies—When a new accounting policy
is applied following revision of an accounting standard, the newpolicy is applied retrospectively unless the revised accounting
standard includes specific transitional provisions, in which casethe entity shall comply with the specific transitional provisions.
(2) Changes in Presentation—When the presentation of financial
statements is changed, prior-period financial statements arereclassified in accordance with the new presentation. (3) Changes
in Accounting Estimates—A change in an accounting estimate isaccounted for in the period of the change if the change affects
that period only, and is accounted for prospectively if the change
affects both the period of the change and future periods. (4)Corrections of Prior-Period Errors—When an error in prior-period
financial statements is discovered, those statements are restated.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2017 and2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017
$

Current:
Debt securities¥

601¥ 1,133

4,596

4,696

40,966¥ 5,197¥ 5,829$ 46,325

Equity securities¥ 1,155¥ 1,530$ 10,296

Debt securities

4,300

3,652

38,326

Other

9,582

9,790

85,410¥ 15,037¥ 14,972$ 134,032

Other
Total

5,359

Non-current:

Total

The costs and aggregate fair values of marketable andinvestment securities at March 31, 2017 and 2016, were as follows:
Millions of Yen
March 31, 2017

Cost

Unrealized Unrealized
Gains
LossesFair Value

Securities classified as:
Available-for-sale:
Equity securities

524

¥ 452

Debt securities

¥

4,605

187

¥ 91

4,701

Other

13,977700

499

14,178200

1

Held-to-maturity

¥

976

201

Millions of Yen
March 31, 2016

Cost

Unrealized Unrealized
Gains
LossesFair Value

Securities classified as:
Available-for-sale:
Equity securities

523

¥ 361

Debt securities

4,444

237

97

4,584

Other

14,545626

685

14,486200

2

Held-to-maturity

¥

¥

1

¥

883

202

Thousands of U.S. Dollars
March 31, 2017

Cost

Unrealized Unrealized
Gains
LossesFair Value

Securities classified as:
Available-for-sale:
Equity securities$ 4,669$ 4,028

Debt securities

41,054

1,662

Other

124,583

6,239

1,783

11

Held-to-maturity

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017$ 8,697$814

41,902

4,446

126,376
1,794

19

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

The information for available-for-sale securities which were soldduring the years ended March 31, 2017 and 2016, was as follows:
March 31, 2017

Millions of Yen
Proceeds

Realized Gains

Realized Losses

Available-for-sale:
Equity securities¥ 399

Debt securities

110

31

Other

615

42

¥ 1,124

¥ 674

Total

¥ 601

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2016, consisted of bankoverdrafts and trade receivables factoring. The weighted-averageinterest rate applicable to the short-term borrowings at March 31,
2016, was 0.9%. There were no short-term borrowings outstandingat March 31, 2017.
Long-term debt at March 31, 2017 and 2016, consisted of
the following:

March 31, 2016
Equity securities

March 31, 2017

2017

¥ 102

¥ 21

912

47

¥ 64

¥ 1,014

¥ 68

¥ 64

Other
Total

Thousands of
U.S. Dollars

Millions of Yen

Available-for-sale:

Realized Gains¥

Bonds with warrants

Thousands of U.S. Dollars
Proceeds

Realized Losses

2016

Bank loans by the Trust, sixmonth Tokyo Inter Bank Offered
Rate (TIBOR) plus 0.45% anddue 2019110¥ 10,013

10,023

5,923

4,955

52,796

15,93615,088142,042

Long-term lease obligations
Total

Available-for-sale:2017

Less current portion$ 89,246(1,889)(1,611)(16,835)¥ 14,047¥ 13,477$ 125,207

Equity securities$ 3,553$ 5,358

Debt securities

981

276

Long-term debt, less current portion

5,486

377

$ 10,020$ 6,011

Annual maturities of long-term debt at March 31, 2017, for the
next five years and thereafter were as follows:

Other
Total

Impairment loss was recorded for the year ended March 31, 2017
in the amount of ¥119 million ($1,058 thousand) on unlisted equity
securities and for the year ended March 31, 2016 in the amount of¥136 million on investment trusts.

4. INVENTORIESInventories at March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2017
Finished products

2016¥ 2,9992017¥ 3,930$ 26,730

Merchandise

1,455

1,467

12,963

Raw materials

1,304

1,558

11,623Work in process

225

238

2,008

Supplies
Total

77

77

688

¥ 6,060¥ 7,270$ 54,012

Year Ending March 31

Lease obligations
Millions of Yen

Thousands of U.S. Dollars

2018¥ 1,889

2019

1,582

$ 16,835
14,102

2020

1,175

10,469

2021

759

6,765

2022

464

4,140

2023 and thereafter
Total

54

484

¥ 5,923$ 52,795

No assets were pledged as collateral for short-term borrowings
and long-term debt at March 31, 2017 and 2016.

6. BONDS WITH WARRANTS
Bonds with warrants at March 31, 2017, consisted of the following:
Issuer/description

IssueddateMillionsof YenThousands Couponof U.S.
rate (%)
Dollars

Secured/unsecured

Due

July
26,
2013

¥ 10,013$ 89,246

Unsecured

July
26,
2018

¥ 10,013$ 89,246

The Company
Yen bonds withwarrants due
2018
Total

0.00

Notes:(*1) Details of the above bonds with warrants are as follows:
Type of shares: Common stock
Issue value of warrants: No consideration
Issue price of shares: ¥4,100.2 ($36.55) per share
Total issue value: ¥10,000 million ($89,135 thousand)
Percentage of warrants granted: 100%
Warrants exercise period: From August 9, 2013 to July 12, 201820

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

The warrants are exercised in exchange for the bonds andthe payment amount upon exercise is equivalent to the face
amount of bonds. Issue price of shares is subject to adjustment
related to stock splits and certain other events.
(*2) Annual maturities of bonds with warrants at March 31, 2017,
for the next five years were as follows:Year Ending March 31

Bonds with warrants
Millions of Yen

Thousands of U.S. Dollars

2018
2019

¥ 10,000$ 89,135¥ 10,000$ 89,135

2020
2021

(2) The changes in plan assets for the years ended March 31, 2017and 2016, were as follows:

2017
Balance at beginning of year

2016
¥ 11

Actuarial losses

0

0

0

Benefits paid

(3)

(4)

(30)

¥4

¥ 7

$ 34

Balance at end of year

Thousands of
U.S. Dollars

Millions of Yen
2017
Balance at beginning of year

2016

2017

¥ 5,328¥ 4,547$ 47,491

Current service cost

358

334

3,195

Interest cost

19

47

172

Actuarial losses

11

525

91

Benefits paid

(111)

(112)

(992)

Other
Balance at end of year

(36)

(13)

(321)

¥ 5,569¥ 5,328$ 49,636

Thousands of
U.S. Dollars

Millions of Yen
2017

The Company and certain consolidated subsidiaries have defined
contribution and defined benefit pension plans based on a point
system. The defined benefit pension plan provides for a lump-sum
payment to terminated employees. Points are granted based on
the participating employees’ pay, years of service, position andcertain other factors. The Company and certain consolidated
subsidiaries also maintain closed pension plans for the pension
beneficiaries. A premium severance may be paid to employees
upon termination of their employment.
In addition to the plans above, the Company and certain
consolidated subsidiaries participate in the Tokyo Pharmaceutical
Welfare Annuity Foundation, a multiemployer pension plan for
employees in the same industry. Among those, plans underwhich it is impossible to reasonably calculate the plan assets
corresponding to their contributions are accounted for in the same
way as defined contribution pension plans.
Defined benefit pension plans(1) The changes in defined benefit obligation for the years ended
March 31, 2017 and 2016, were as follows:$ 64(3) Reconciliation between the liability recorded in the consolidatedbalance sheet and the balances of defined benefit obligationand plan assets as of March 31, 2017 and 2016, was as follows:

Funded defined benefit
obligation

7. RETIREMENT AND PENSION PLANS

2017

¥7

2022
Total

Thousands of
U.S. Dollars

Millions of Yen

¥

2016
4

¥

2017
7

$

32

Plan assets

(4)

(7)

(34)

Total

(0)

(0)

(2)

Unfunded defined benefit
obligation

5,565

5,321

49,604

Net liability arising fromdefined benefit obligation¥ 5,565¥ 5,321$ 49,602
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Liability for retirement benefits¥ 5,565¥ 5,321$ 49,602

Net liability arising fromdefined benefit obligation¥ 5,565¥ 5,321$ 49,602(4) The components of net periodic benefit costs for the years
ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Service cost

¥ 358

¥ 334

Interest cost

19

47

172

Recognized actuarial losses

82

29

730

OthersNet periodic benefit costs$ 3,195

7

17

59

¥ 466

¥ 427

$ 4,156(5) Amounts recognized in comprehensive income (before income
tax effect) in respect of defined retirement benefit plans for theyears ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Actuarial losses (gains)¥ 72¥ (492)

$ 639

Total

¥ 72

¥ (492)$ 639

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

21

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

(6) Amounts recognized in accumulated other comprehensive
income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2017 and 2016, wereas follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Unrecognized actuarial losses

¥ 753

¥ 825

$ 6,712

Total

¥ 753

¥ 825

$ 6,712(7) Plan assets
a. Components of plan assets
Plan assets as of March 31, 2017 and 2016, consisted of
the following:
2017

2016

33.7%

34.9%
33.7

Loans receivable

15.3

15.3

Equity securities

7.8

8.6

Others

7.0

7.5

Total

100.0%

100.0%

b. Method of determining the expected rate of return onplan assets
The expected rate of return on plan assets is determinedconsidering the long-term rates of return which are
expected currently and in the future from the various
components of the plan assets.
(8) Assumptions used for the years ended March 31, 2017 and2016, are set forth as follows:
2017

2016

0.0% to 0.2%

0.0% to 0.2%

0.0%

0.0%

Points by
Points byservice period service period
and position and position

Defined contribution pension plans
The required contribution of the Company and certain consolidated
subsidiaries to the defined contribution pension plans amounted to¥132 million ($1,173 thousand) and ¥125 million for the years ended
March 31, 2017 and 2016, respectively.
Multiemployer pension plan
The required contribution to the multiemployer pension
plan, which is accounted for in the same way as the defined
contribution pension plans, amounted to ¥250 million ($2,224
thousand) and ¥264 million for the years ended March 31, 2017and 2016, respectively.

22

As of March
31, 2015

As of March
31, 2016

Plan assets¥ 531,917¥ 571,380$ 4,741,214

538,161

561,736

4,796,866(Deficit) surplus¥ (6,244)

9,644$ (55,652)

Contribution percentage

36.2

Expected future salary increases

As of March
31, 2016
Total amount of actuarial
liability in pension financing andminimum actuarial reserve

Information for the period ofForeign securities

Expected rate of return on plan assets

Thousands of
U.S. Dollars

Millions of Yen¥(2) Contributions by the Group as a percentage of total
contributions to the multiemployer pension plan

Public and corporate debt securities

Discount rate(1) Funding status of the multiemployer pension plan as of March
31, 2016 and 2015, was as follows:

March 1 to 31, 2017

March 1 to 31, 2016

1.6%

1.5%

(3) Supplementary information
The (deficit) surplus presented above is mainly due to thebalance of unamortized past service cost of ¥34,541 million($307,876 thousand) and ¥40,107 million, the (deficit) surplus of¥(21,455) million ($(191,236) thousand) and ¥14,311 million andthe general reserve of ¥49,752 million ($443,459 thousand) and¥35,441 million as of March 31, 2016 and 2015, respectively.
Unamortized past service cost represents the present valueof special contributions, principal and interest, which areamortized using the straight-line method. The contribution rateborne by the employer is 1.55% and the remaining amortization
period is six years and zero months as of March 31, 2016.

8. EQUITY
Japanese companies are subject to the Companies Act of Japan (the“Companies Act”). The significant provisions in the Companies Act that
affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders’ meeting.
Additionally, for companies that meet certain criteria
including (1) having a Board of Directors, (2) having
independent auditors, (3) having an Audit & Supervisory Board,and (4) the term of service of the directors being prescribed as
one year rather than the normal two-year term by its articles
of incorporation, the Board of Directors may declare dividends(except for dividends-in-kind) at any time during the fiscal year
if the company has prescribed so in its articles of incorporation.
With respect to the third condition above, the Board of
Directors of companies with (a) board committees (namely,
appointment committee, compensation committee andaudit committee) or (b) an audit and supervisory committee(as implemented under the Companies Act effective May 1,2015) may also declare dividends at any time because such

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

companies, by nature, meet the criteria under theCompanies Act.
The Company is organized as a company with an audit andsupervisory committee.
The Company meets all the above criteria and, accordingly,
the Board of Directors may declare dividends (except for
dividends-in-kind) at any time during the fiscal year.
The Companies Act permits companies to distributedividends-in-kind (non-cash assets) to shareholders subject to acertain limitation and additional requirements.
Semiannual interim dividends may also be paid once a
year upon resolution by the Board of Directors if the articles
of incorporation of the company so stipulate. The Companies
Act provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation
is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must
be maintained at no less than ¥3 million.
b. Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Companies Act requires that an amount equal to 10%
of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital(a component of capital surplus), depending on the equity
account charged upon the payment of such dividends until
the aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies
Act, the total amount of additional paid-in capital and legal
reserve may be reversed without limitation. The Companies
Act also provides that common stock, legal reserve, additional
paid-in capital, other capital surplus and retained earnings canbe transferred among the accounts within equity under certain
conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolutionof the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution
to the shareholders which is determined by a specific formula.
Under the Companies Act, stock acquisition rights arepresented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury
stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

9. EMPLOYEE STOCK OWNERSHIP PLAN
The Trust held the following amounts of treasury stock which isincluded in the consolidated balance sheet at March 31, 2016.
Millions of Yen
2016
Treasury stock¥(shares)102(40,300)

There was no balance of treasury stock held by the Trust at March
31, 2017 since all treasury stock held by the Trust was sold during
the year ended March 31, 2017.

10. INCOME TAXESThe Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in the aggregate,
resulted in normal effective statutory tax rates of approximately
30.9% and 32.3% for the years ended March 31, 2017 and 2016,
respectively.
The tax effects of significant temporary differences and tax loss
carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2017 and 2016, are as follows:
Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Deferred tax assets:
Accrued bonuses
Liability for directors’ and audit
and supervisory board members’
retirement benefits
Liability for employees’
retirement benefits

¥ 374

350

$ 3,329

67

67

602

1,712

1,627

15,255

Tax loss carryforwards

1,153

Gain on valuation related to an
exchange of shares transaction

208

Other
Less valuation allowance
Total

¥

210

1,858

2,513

2,823

22,401(340)(1,675)(3,035)

4,534

4,555

40,410

385

470

3,428

Deferred tax liabilities:
Undistributed earnings ofsubsidiaries
Gain on revaluation of land of
subsidiary27

Unrealized gain on available-forsale securities

207

121

1,846

Loss on valuation related to an
exchange of shares transaction

1,408

1,446

12,553

Other
Total
Net deferred tax assets

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

1,815

1,382

16,182

3,815

3,446

34,009¥ 718¥ 1,109$ 6,40123

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

A reconciliation between the normal effective statutory tax rate
and the actual effective tax rate reflected in the accompanying
consolidated statement of income for the year ended March 31,2017 is as follows:

2017
Gross receivables

Normal effective statutory tax rate

30.9%

Unearned interest income

Expenses not deductible for income tax purposes

0.7

Lease receivables

Inhabitants taxes

0.4

Lower income tax rates applicable to income incertain foreign countries(1.1)

Undistributed earnings on subsidiaries(0.8)

Change in valuation allowance for deferred
tax assets(10.1)

Other—net(0.4)

Actual effective tax rate

19.6%

2017

¥ 515

(3)

(19)

(23)

¥ 335

¥ 496

$ 2,989$ 3,012

Thousands of
U.S. Dollars

Millions of Yen
2017
Gross receivables
Unearned interest income
Investments in leases

12. LEASESThe Group, as a lessee, leases certain servers and personal
computers for internal use (machinery and equipment), as well as
certain welfare equipment for rental business (assets for rent). As alessor, the Group leases certain beds and other welfare equipment
to its customers.
Total rental expenses, including lease payments under financeleases, for the years ended March 31, 2017 and 2016, were ¥3,175
million ($28,296 thousand) and ¥3,010 million, respectively. Total
rental revenues, including lease income under finance leases, forthe years ended March 31, 2017 and 2016, were ¥16,667 million($148,560 thousand) and ¥15,230 million, respectively.
(1) The Group as Lessee
The minimum rental commitments under noncancelable
operating leases at March 31, 2017, were as follows:
Thousands of U.S. Dollars

Due within one year

¥ 66

$ 589

Due after one year

662

5,899

¥ 728

$ 6,488

Disclosure of minimum rental commitments under
noncancelable operating leases at March 31, 2016 was omitted
since the amounts were immaterial.

2016

2017

¥ 2,090¥ 2,194

(462)

(412)

$ 18,628(4,120)¥ 1,628¥ 1,782$ 14,508

Maturities of lease receivables for finance leases that deemto transfer ownership of the leased property to the lessee areas follows:Year Ending March 31

Research and development costs charged to income were ¥1,600
million ($14,262 thousand) and ¥1,386 million for the years ended
March 31, 2017 and 2016, respectively.

Total

2016

¥ 338

The net investments in leases are summarized as follows:

11. RESEARCH AND DEVELOPMENT COSTS

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

2017

The reconciliation for the year ended March 31, 2016 is omitted
since the difference between the tax rates is 5% or less of thenormal effective statutory tax rate.

24(2) The Group as Lessor
The net lease receivables are summarized as follows:

Millions of Yen

Thousands of U.S. Dollars

2018

¥ 114

2019

82

731

2020

61

548

2021

43

386

2022

15

137

2023 and thereafter

23

197

¥ 338

$ 3,012

Total$ 1,013

Maturities of investments in leases for finance leases thatdeem not to transfer ownership of the leased property to thelessee are as follows:Year Ending March 31

Millions of Yen

Thousands of U.S. Dollars

2018

¥ 660

2019

513

4,571

2020

393

3,505

2021

297

2,647

2022

163

1,454

2023 and thereafter

64

569

¥ 2,090$ 18,628

Total$ 5,882

13. FINANCIAL INSTRUMENTS AND RELATEDDISCLOSURES(1) Group Policy for Financial Instruments
The Group uses its own funds and procures funds by issuanceof bonds for operating capital and capital investments
necessary to conduct its business activities. Cash surpluses,
if any, are mainly invested in financial instruments such as
deposits and marketable securities. It is the Group’s policy not
to use derivatives for speculative purposes.
(2) Nature and Extent of Risks Arising from Financial
Instruments
Foreign currency deposits included in cash and cash equivalent

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

are exposed to the market risk of fluctuation in foreign currency
exchange rates.
Receivables such as trade notes and accounts receivable,lease receivables and investments in leases are exposed tocustomer credit risk. Trade receivables in foreign currencies
from business in foreign countries are exposed to the market
risk of fluctuation in foreign currency exchange rates.
Marketable and investment securities are exposed to the riskof market price fluctuations and business risk of the investees.
Trade accounts payable are due within one year. Certain
trade accounts payable from importing raw materials andothers are denominated in foreign currencies and exposed tothe market risk of fluctuation in foreign currency
exchange rates.
Lease obligations are mainly intended to finance purchasesof assets for rent and capital investments and are due within six
years from the balance sheet date.
Derivatives are forward foreign currency contracts to hedge
the market risk of fluctuation in foreign currency exchange ratesof trade receivables and payables in foreign currencies. Please
see Note 14 for more details about derivatives.
Bonds with warrants are used as funds for the purchase of
welfare equipment for the rental business of the Group andinvestments in domestic and overseas manufacturing facilities.
The redemption date of the bonds is within two years after
March 31, 2017.
(3) Risk Management for Financial Instruments
Credit risk management (counterparty default risk)
The Group manages its credit risk from trade receivables on thebasis of internal credit limit guidelines, which include controls on
payment terms and balances of each customer and monitoring ofmajor customers’ credit condition on a regular basis so that it can
reduce its risk by early identification of a possible default caused byfinancial difficulties of customers.
With respect to derivatives, because the counterparties arelimited to highly rated financial institutions, the Group does not
anticipate any losses arising from credit risk.
Market risk management (foreign currency exchange
rate risk and interest rate risk)
Marketable and investment securities are managed bymonitoring market values and the financial position of issuers on aregular basis.
The execution and control of derivatives are made inaccordance with internal guidelines which regulate theauthorization of derivative transactions. Each transaction is
executed by the relevant function under the approval of the personwith defined authority.
Liquidity risk management (the risk that the Group

cannot meet its contractual obligations in full on theirmaturity dates)
The Company and its major subsidiaries manage their liquidity
risk by holding adequate volumes of liquid assets, along withpreparing and updating an adequate cash management plan on amonthly basis.
(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on the market
price or the reasonably calculated values with certain
assumptions in case no market prices exist. The reasonably
calculated values may fluctuate if different assumptions areapplied. The contract amounts regarding derivative transactions
described in Note 14 do not indicate market risk related toderivative transactions.
(a) Fair value of financial instruments
Millions of Yen
March 31, 2017

Carrying
AmountFair Value

Cash and cash equivalents¥ 27,644¥ 27,644

Unrealized
Gain (Loss)

Time deposits

7,192

7,192

Receivables

24,03724,037

Lease receivables and investments
in leases

1,963

2,326

¥ 363

1

Marketable and investment securities
Held-to-maturity debt securities

200

201

19,85519,855

Total¥ 80,891¥ 81,255

Payables¥ 10,603¥ 10,603

5,923

6,140

Available-for-sale securities

Lease obligations(including current portion)
Bonds with warrants

¥ 364

¥ 217

10,013

11,437

1,425

Total

¥ 26,539¥ 28,181¥ 1,642

Derivative transactions

¥

¥

0

0

Millions of Yen
March 31, 2016

Carrying
AmountFair Value

Cash and cash equivalents¥ 22,616¥ 22,616

Unrealized
Gain (Loss)

Time deposits

7,169

7,169

Receivables

24,70024,700

Lease receivables and investments
in leases

2,278

2,610

¥ 332

2

Marketable and investment securities
Held-to-maturity debt securities

200

202

19,954

19,954

Total¥ 76,917¥ 77,251

Payables¥ 10,939¥ 10,939

Short-term borrowings

613

613

Long-term bank loans(including current portion)

110

111

Available-for-sale securities

¥ 334

¥

1

Lease obligations(including current portion)

4,955

5,133

Bonds with warrants

10,023

11,200

1,177

Total

¥ 26,640¥ 27,996¥ 1,356

Derivative transactions *¥¥Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

(94)

¥ 178

(94)

25

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017

Thousands of U.S. Dollars
March 31, 2017

Carrying
AmountFair Value

Cash and cash equivalents$ 246,406$ 246,406

Unrealized
Gain (Loss)

Time deposits

64,10264,102

Receivables

214,258

214,258

Lease receivables and investments
in leases

17,497

20,733$ 3,236

1,783

1,794

11

measured at the market price.
Derivatives
Fair value information for derivatives is included in Note 14.
(b) Carrying amount of financial instruments whose fair value
cannot be reliably determined2017

Held-to-maturity debt securities

176,975

176,975

Total

Available-for-sale securities$ 721,021$ 724,268

Payables$ 94,513$ 94,513$ 3,247

Lease obligations(including current portion)

52,79554,730$ 1,935

Bonds with warrants

89,246

101,943

12,697

Total$ 236,555$ 251,187$ 14,632

Derivative transactions

$

$

1

2016

2017

Unlisted equity securities that
do not have a quoted market
price in an active market¥ 707¥ 1,017$ 6,303

Investments in investment
partnership

170

170

1,515

Other investments

406

406

3,620

(5) Maturity Analysis for Financial Assets and Securities with
Contractual Maturities

1

Note:
* Receivables and payables from derivative transactions
are presented on a net basis and numbers in parentheses
denote net payables.
Cash and Cash Equivalents, Time Deposits, and Receivables
The carrying values approximate fair value because of theirshort maturities.
Lease Receivables and Investments in Leases
The fair values are measured at the amount calculated bydiscounting the sum of principal and interest after reflecting
their collectability by the rate which would be applied if asimilar new lease transaction was entered into.
Marketable and Investment Securities
The fair values are measured at the quoted market priceof the stock exchange and at the quoted price obtained
from the counterparty financial institutions. For certain
debt securities, fair values are measured at the amountcalculated by discounting the expected redemption value
by the yield rate which would be expected if similar new
debt securities were acquired. Fair value information onmarketable and investment securities by classification is
included in Note 3.
Payables and Short-Term Borrowings
The carrying values approximate fair value because of theirshort maturities.
Long-Term Bank Loans (including current portion) andLease Obligations (including current portion)
The fair values are measured at the amount calculated bydiscounting the sum of principal and interest by the rate
which would be applied if a similar new borrowing or leasetransaction was entered into.
Bonds with Warrants
The fair values of the bonds issued by the Company are

26

Thousands of
U.S. Dollars

Millions of Yen

Marketable and investment securities

Millions of Yen
March 31, 2017

Cash and cash equivalents

Due in1 Year or
Less

Due after
5 Years
through
10 Years¥ 1,252¥

Due after
10 Years¥ 6,776

Time deposits

7,192

Receivables

24,038

Lease receivables andinvestments in leases

Due after
1 Yearthrough
5 Years643

68

Marketable and investment
securities
Held-to-maturity debt
securities

200

Available-for-sale securities
with contractual maturities
Debt securities
Other
Total

601

2,002

491

9,704

2,879

942

¥ 966
394

¥ 48,954¥ 6,333¥ 1,501¥ 1,360

Thousands of U.S. Dollars
March 31, 2017

Cash and cash equivalents

Due in1 Year or
Less

Due after
5 Years
through
10 Years

Due after
10 Years$ 60,399

Time deposits

64,102

Receivables

214,258

Lease receivables andinvestments in leases

Due after
1 Yearthrough
5 Years

5,730$ 11,163$

604

Marketable and investment
securities
Held-to-maturity debt
securities

1,783

Available-for-sale securities
with contractual maturities
Debt securities

5,359

17,839

4,379

Other

86,497

25,665

8,398

3,510

$ 436,345$ 56,450$ 13,381$ 12,127

Total

Please see Note 5 for annual maturities of long-term debt
including obligations under finance leases.

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017$ 8,617

14. DERIVATIVES

15. CONTINGENT LIABILITIESThe Group enters into foreign currency forward contracts to hedge
foreign currency exchange rate risk associated with certain assets
and liabilities denominated in foreign currencies.
All derivative transactions are entered into to hedge foreign
currency exposures incorporated within the Group’s business.
Accordingly, market risk in these derivatives is offset by opposite
movements in the value of hedged assets or liabilities.
Because the counterparties to these derivatives are limited tohighly rated financial institutions, the Group does not anticipate
any losses arising from credit risk.
The execution and control of derivatives are made inaccordance with internal guidelines which regulate theauthorization of derivative transactions. Each transaction is
executed by the relevant function under the approval of theperson with defined authority.
Derivative Transactions to Which Hedge Accounting Is
Not Applied

At March 31, 2017, the Group had the following
contingent liabilities:

March 31, 2017

Foreign currency forward contracts:
Buying U.S.$

¥ 243

¥0

¥0

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One YearContract
AmountForeign currency forward contracts:¥ 485

Buying CNY

4,839

¥ 364

Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

¥ (1,395)$ 11,490

Unrealized gain (loss) on available-for-sale securities:
Gains (losses) arising during
the year¥ 1,289

Reclassification adjustments toprofit or loss

(977)

291

(8,712)

Amount before income tax effect312(1,104)

2,778

Income tax effect

(87)

342

(772)

Adjustments arising during the year

¥ 225

¥

(762)

$ 2,006¥ (226)¥(243)$ (2,015)

Reclassification adjustments toprofit or loss

¥ (14)¥ (14)

(80)

(80)

(550)

(4,901)¥ (775)¥(243)$ (6,916)

¥

¥

(521)

$

Defined retirement benefit plans:
Reclassification adjustments toprofit or loss

(10)

(91)

81

29

Amount before income tax effect

71

(492)

638

Income tax effect

(22)

148

(198)

49

¥ (344)$¥ (501)¥ (1,349)$ (4,470)

Total

Buying U.S.$

521

The components of other comprehensive income (loss) for theyears ended March 31, 2017 and 2016, were as follows:

Adjustments arising during the year

Millions of Yen
March 31, 2016$

58

16. OTHER COMPREHENSIVE INCOME (LOSS)

Total
¥ 364

¥

Foreign currency translation adjustments:

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One YearContract
AmountThousands of
U.S. Dollars

Guarantees for employees’ housing loans

Total
Millions of Yen

Millions of Yen

Total other comprehensive
income (loss)

¥

729

440

Thousands of U.S. Dollars
March 31, 2017

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One YearContract
AmountForeign currency forward contracts:
Buying U.S.$$ 3,245$ 2,169$1$1

The fair value of derivative transactions is measured at the quoted
price obtained from the counterparty financial institutions.
The contract amounts of derivatives which are shown in theabove table do not represent the amounts exchanged by theparties and do not measure the Group’s exposure to credit ormarket risk.
At March 31, 2016, cash and cash equivalents and investment
securities were pledged as collateral for derivative transactionsin the amount of ¥211 million and ¥235 million, respectively. No
assets were pledged for derivative transactions at March 31, 2017.

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

27

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 201717. NET INCOME PER SHARE

18. SUPPLEMENTARY CASH FLOW INFORMATION

Reconciliation of the differences between basic and diluted net
income per share (“EPS”) for the years ended March 31, 2017 and2016, is as follows:Year Ended March 31, 2017

Basic EPS—Net income
available to commonshareholders

Millions ofYen

Thousandsof Shares

Net Income
Attributableto Ownersof the Parent

WeightedAverage
Shares *¥ 9,035

28,220,639

Effect of dilutive securities—
Bonds with warrants
Diluted EPS—Net income
for computation

Year Ended March 31, 2016

Basic EPS—Net income
available to commonshareholders

U.S. Dollars

EPS

Millions ofYen¥ 320.14$ 2.852,438,905¥ 9,035

30,659,544¥ 294.68

Millions ofYen

Thousandsof Shares

Yen

Net Income
Attributableto Ownersof the Parent

WeightedAverage
Shares *¥ 6,388

28,805,006$ 2.63¥ 2,551
155

1,384

Current liabilities(1,009)(8,997)

Non-current liabilities

(97)

(865)

Foreign currency translation adjustments(550)(4,901)

Loss on sales of shares

92

820

(1,142)(10,183)

Consideration for sales of shares
EPS$ 22,742

Non-current assets

Adjustments due to exclusion from consolidation
U.S. Dollars

Cash and cash equivalents
Net payments for sales of shares

00(1,885)(16,799)¥ (1,885)$ (16,799)¥ 221.76

2,435,460¥ 6,388

31,240,466¥ 204.48

Note:* As the Company’s stock held by the Trust is stated as treasury
stock in the accompanying consolidated financial statements,
the number of shares of such stock is not included in thenumber of shares of common stock and the weighted-average
number of shares used for computation of the basic anddiluted EPS. The weighted-average number of shares of suchstock was 16,962 shares and 63,069 shares for the years ended
March 31, 2017 and 2016, respectively. There was no balanceof treasury stock held by the Trust at March 31, 2017 since
all treasury stock held by the Trust was sold during the year
ended March 31, 2017.

28

Current assets

Thousands of
U.S. Dollars

19. SUBSEQUENT EVENTS

Effect of dilutive securities—
Bonds with warrants
Diluted EPS—Net income
for computation

Yen

Corona Medical S.A.S. France, a former consolidated subsidiaryhas been excluded from the scope of consolidation due to salesof its shares during the year ended March 31, 2017. Assets andliabilities of Corona Medical S.A.S. France, consideration and net
payments for sales of the subsidiary shares at the time of the sale
are as follows:

Appropriation of Retained Earnings
The following appropriation of retained earnings at March 31,
2017, was approved at the Company’s shareholders meeting heldon June 29, 2017:
Millions of
Yen
Year-end cash dividends, ¥50 ($0.45) per share¥ 1,381

Thousands of
U.S. Dollars$ 12,307

20.SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment
Information Disclosures” and ASBJ Guidance No. 20, “Guidanceon Accounting Standard for Segment Information Disclosures,” anentity is required to report financial and descriptive information
about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet
specified criteria. Operating segments are components of an entity
about which separate financial information is available and suchinformation is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing
performance. Generally, segment information is required to bereported on the same basis as is used internally for evaluating
operating segment performance and deciding how to allocate
resources to operating segments.
(1) Description of Reportable Segment
The Group has only one reportable segment, which is related tothe bed business, for the years ended March 31, 2017 and 2016.

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

(2) Information about Products and Services
Millions of Yen
2017
Products and Services

Sales toexternalcustomers

Beds

Ward
MedicalMattresses Equipment
Equipment¥ 27,961¥ 4,450¥ 4,059

Other

RentalTotal(5) Information about Impairment Loss on Fixed Assets
In the years ended March 31, 2017 and 2016, there was no
impairment loss on fixed assets.
(6) Information about Amortization of Goodwill and
Balance of Goodwill

2017
Millions of Yen
2016

Thousands of
U.S. Dollars

Millions of Yen¥ 3,697 ¥ 17,410 ¥ 15,622 ¥ 73,199

2016

2017

Amortization of goodwill

¥ 13

¥ 23

$ 116

Balance of goodwill

22

35

196

Products and Services

Sales toexternalcustomers

Beds

Ward
MedicalMattresses Equipment
Equipment¥ 29,291¥ 4,534¥ 3,885

Other

RentalTotal¥ 3,260 ¥ 18,886 ¥ 14,233 ¥ 74,089

Thousands of U.S. Dollars
2017
Products and Services
Beds
Sales toexternalcustomers

Ward
MedicalMattresses Equipment
Equipment$249,232 $39,665

Other

RentalTotal$36,181 $32,950 $155,184 $139,242 $652,454(3) Information about Geographical Areasa. SalesMillions of Yen
2017
Japan

Asia

¥ 66,059¥ 5,752

Middle East

Europe

¥ 380

¥ 778

Other
¥ 230

Total
¥ 73,199

Millions of Yen
2016
Japan

Asia

¥ 66,908¥ 4,996

Middle East
¥ 490

Europe¥ 1,345

Other
¥ 350

Total
¥ 74,089

Thousands of U.S. Dollars
2017
Japan

Asia

$ 588,813$ 51,273

Middle East
$ 3,382

Europe$ 6,935

Other

Total

$ 2,051$ 652,454

Note: Sales are classified by country or region based on thelocation of customers.
b. Property, plant and equipment
The Group operates mainly in Japan and total tangible
fixed assets in foreign countries were less than 10% ofconsolidated tangible fixed assets as of March 31, 2017and 2016.
(4) Information about Major Customer
In the years ended March 31, 2017 and 2016, there were
no individual customers for whom sales exceeded 10% ofconsolidated net sales.

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

29

Independent Auditor’s Report30

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

Corporate GovernanceFundamental Approach to Corporate Governance
Maintaining a sound framework for corporate governance is required to increase corporate value and fulfill corporate citizenshipobligations by managing operations properly and ensuring that all activities are transparent and in compliance with laws and regulations. The Paramount Bed Group will continue to position measures to strengthen corporate governance as one of its highest priorities and take actions as needed to improve governance according to the fundamental policies stated below.

1. Respect for the rights of shareholders and ensure equality for all shareholders
2. Suitable collaboration with shareholders and all other stakeholders to reflect
their interests
3. Proper disclosure of corporate information to maintain transparency
4. Ensure the effectiveness of the Board of Director’s oversight of business
operations by using independent external directors to receive objective advice
and reflect the opinions of all stakeholders
5. Constructive dialogues with shareholders based on investment policies that areconsistent with the medium-to long-term shareholders benefits

Corporate Governance Flowchart
Shareholders meeting
Election/Terminations

Election/Terminations

Election/Terminations
Reports/
Statement of Opinion

Audits/Supervision

Board of Directors(includes external directors)

Election/
Terminations

Board of Corporate Auditors(includes external auditors)

Election/Terminations
Delegation of Core Business
Operations

Instructions/
reports

Reports Cooperation

Representative Director
Cooperation

Executive Officers(includes Senior
Executive Officer)

Reports

Executive Committee(centralized decisions forbusiness operations)
Directors andExecutive Officers

Instructions/
reports

Financial audits

Reports

Internal Auditing
Department
Business
operations

Independent Auditor

Reports

Departments Involved

Coopwith Internal Controls
erationTraining
Auditsand guidanceBusiness units and group companies

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

31

Global Network

13

7

10

1 2 3 4
11

9

8
5
6
12

1 Paramount Bed Holdings Co., Ltd.

8 Paramount Bed Vietnam Co., Ltd.

DOMESTIC
MANUFACTURE AND SALES OF MEDICAL AND NURSING-CARE EQUIPMENT
2 Paramount Bed Co., Ltd.

Lot H-1, Long Duc Industrial Park, Long Duc Ward,Long Thanh Dist., Dong Nai Province, Vietnam

2-14-5, Higashisuna, Koto-ku, Tokyo 136-8670, JapanSALES COMPANIESINSPECTION, MAINTENANCE AND LEASING OF BEDS AND OTHER PRODUCTS
3 Paratechno Co., Ltd.

5-28-3, Hongo, Bunkyo-ku, Tokyo 113-8415, JapanRENTAL WHOLESALE BUSINESS FOR ASSISTIVE PRODUCTS
4 Paramount Care Service Co., Ltd.

2-14-5, Higashisuna, Koto-ku, Tokyo 136-0074, Japan

9 Paramount Bed (Thailand) Co., Ltd.

924 Talomsin Building 5th Fl., Rama 3 Rd., Bangpongpang
Yannawa, Bangkok 10120, Thailand
10 Paramount Bed India Pvt. Ltd.

1002A&B, 10th Floor, Welldone Tech Park, Sector-48,
Sohna Road, Gurgaon-122002, India
11 Paramount Bed Mexico S.A. de C.V.

OVERSEAS
REGIONAL OVERSIGHT COMPANY

Paramount Bed Asia Pacific Pte. Ltd.
1 Raffles Place #19-01,
One Raffles Place, Office Tower One, Singapore 048616
MANUFACTURING COMPANIES
6 PT. Paramount Bed Indonesia

MM2100 Industrial Town, Block M-1-1 Export Processing Zone,
Cikarang Barat Bekasi 17520, Jawa Barat, Indonesia
7 Paramount Bed (China) Co., Ltd.

Florencia No. 57, Piso 3 Col. Juarez Del. Cuauhtemoc CP 06600,
Mexico D.F. Mexico
12 Paramount Bed do Brasil Ltda.

Rua Maestro Cardim 407, Salas 1009 E 1010, Liberdade
Cep: 01323-000, Sao Paulo, SP, Brazil
REPRESENTATIVE OFFICEPARAMOUNT BED Middle East OfficeDubai Airport Free Zone 4WA, G10,
P.O. Box 293552, Dubai, U.A.E.

A-105 (Xin Mei Road) Wuxi National Hi and New Tech Industrial
Development Zone, Wuxi, Jiangsu, 214028, China
Consolidated subsidiaryNon-consolidated subsidiary32

Pa ra mo unt B ed Ho l dings Co. , Ltd. A NNUA L RE PORT 2 017

Corporate/Share Information
As of March 31, 2017

Corporate Name:

Paramount Bed Holdings Co., Ltd.

Head Office:2-14-5, Higashisuna, Koto-ku, Tokyo 136-8671, JapanTel:+81-3-3648-1100

Established:

October 1982

Capital:¥4,207 million

Representatives:

Chairman: Kenji Kimura

Website Information
SearchPARAMOUNT BED HOLDINGS IR

Please see thematerials on
the Company’s
website formore detailed
information.

President and Chief Executive Officer: Kyosuke Kimura
Business Lines:

http://www.paramountbed-hd.co.jp/en/

Paramount Bed Holdings Co., Ltd. is the holding company of a comprehensive medicalgroup comprised of the core entity Paramount Bed Co., Ltd. which engages in theDistribution by Type of Shareholder:manufacture and sales of beds, mattresses, and equipment for medical and nursing

10.6%

care environments, and subsidiaries engaged in services such as the inspection and

0.5%

maintenance of Paramount Bed products and rental wholesale of assistive products.
Paramount Bed Holdings Co., Ltd. is responsible for the planning, drafting,

24.7%

and implementation of the Group management strategies, auditing of the Group

18.8%

management, and other tasks related to the Group management control.

22.7%
Number of Employees:

22.7%

22 (non-consolidated)
2,685 (consolidated)%

Number of Shares Authorized: 126,000,000
Number of Shares Issued:
Number of Shareholders:

30,877,487
9,192

Principal Shareholders:Japanese individuals and others

24.7

Other Japanese companies

22.7

Foreign investors

22.7

Japanese financial institutions

18.8

Japanese securities companies

0.5

Treasury stock

10.6

Distribution by Number of Shares Held:

Number of shares held
(thousand)%

CTOK Co., LTD.

2,821

10.2

LLAGE WOOD Co.

2,073

7.5

NIU VALLEY CAPITAL LLC

1,379

5.0

The Master Trust Bank of Japan, Ltd. (Trust Account)

1,069

3.9

Kenji Kimura

912

3.3

Kyosuke Kimura

911

3.3

Michihide Kimura

911

3.3

500,000 or more

60.6

Tomohiko Kimura

820

3.0

100,000 to 499,999

17.3

50,000 to 99,999

5.1

Name

Japan Trustee Services Bank, Ltd. (Trust Accounts 9)

765

2.8

State Street Bank and Trust Company

754

2.7

Note 1. The Company owns 3,263,161 shares as treasury stock, but it should be noted that the voting rights ratio is
calculated by excluding treasury stock.

3.4%
1.2%
5.1%

4.8%

7.6%

17.3%

60.6%

%

10,000 to 49,999

7.6

5,000 to 9,999

1.2

1,000 to 4,999

3.4

Less than 1,000

4.8

Pa ra mo unt Bed Holdings Co. , Ltd. A NNUA L RE PORT 2 017

33