Profile

Financial Highlights

Paramount Bed Holdings Co., Ltd. is the holding company of

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries

a comprehensive medical group comprised of the core entity
Paramount Bed Co., Ltd.

Years ended March 31,

The Paramount Bed Group was established in 1947. ParamountFor the year

Bed Group started out as a manufacturer of hospital beds andNet sales
Operating income
Income before income taxes and minority interests
Net income

against the subsequent backdrop of demographic aging laterbranched out into senior care facilities and visiting nursing carewhile developing a diversity of products and services.
In recent years, the Group has been diversifying its operations

Thousands of
U.S. dollars

Millions of yen

2014

2013

2014

¥ 72,794
11,542
12,772
7,385¥ 66,717
11,23911,941
7,094$ 707,291
112,142
124,099
71,755¥122,303
82,571¥103,902
76,626$1,188,329
802,286

At year-end
Total assets
Total equity

in Japan and abroad centered on healthcare offerings such as
inspection and maintenance services for institutional bedding andwholesale 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 and augmenting enterprise value while contributing tosociety through the Paramount Bed Group business activities.
The Group consists of Paramount Bed Holdings and 10
consolidated subsidiaries, eight non-consolidated subsidiaries andtwo affiliated companies (as of March 31, 2014). In the fiscal year
ended March 2014, it had net sales of ¥72,794 million, operatingyen
Years ended March 31,

acquired a strong reputation, as reflected in its estimated domestic

2013¥ 241.01
227.1350.00¥ 231.54
230.9445.00

2014

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

$

2.34
2.21
0.49

Note: The U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥102.92 to U.S.$1, the approximate exchange rate at March 31, 2014.

Net sales

Operating income

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

100,000

15,00010,00080,000income of ¥11,542 million, and net income of ¥7,385 million.
Paramount Bed is Japan’s leading maker of medical beds and has

U.S. dollars

2014

66,717

72,79412,000

11,23911,5428,000

60,000

9,000

6,000

40,000

6,000

4,000

20,000

3,000

2,000

7,094

7,385

market share of approximately 70% in medical and senior housing
facilities and 60%* in home healthcare.

0

2013

2014

0

2013

0

2014

2013

2014

Total assets

Total equity

Basic net income per share(Millions of yen)

(Millions of yen)

(Yen)

150,000

100,000

300.00122,303
120,000

80,00076,626

82,571240.00231.54241.01103,902

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, 2014 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, 2014 and involve known and unknown risks and uncertainties.
Actual events and results may differ materially from those anticipated in these statements.

90,00060,000180.0060,00040,000120.0030,00020,000

60.00

0

2013

2014

0

2013

2014

0

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 14

2013

2014

1

Message from the Management

Special Topics

We create comfortable, healthy
environments through cutting-edge
technology with a human touch.

Initiatives for thePromising Asian Market
The Paramount Bed Group identifies Asia, where rapid growth is expected,
as one of its most promising markets. Within the region, our Singaporebased subsidiary Paramount Bed Asia Pacific Pte. Ltd. oversees Group
companies. From manufacturing and sales bases in Indonesia and China,
as well as sales bases in Thailand and India, we are developing businesses
that are expertly suited to each market’s needs. Paramount Bed Vietnam,
a manufacturing subsidiary, began operating in June 2014.

First of all, we thank our shareholders for their continuing support.
Let us look at the business conditions and the financial results of
Paramount Bed Holdings for the fiscal year ended March 2014.

Business Results for the Fiscal Year under Review
The Company’s consolidated net sales grew 9.1% year on year to ¥72,794 million, due to higher
domestic sales of products and maintenance services as well as a solid performance by the rental andwholesale business for nursing-care goods. Overseas product sales also contributed to sales growth.

The Market Environment in Asia

Operating income rose 2.7% to ¥11,542 million, while net income increased 4.1% to ¥7,385 million.

The number of hospital beds in Asia (excluding Japan) is about

The yen depreciated more than expected during the fiscal year, reducing income by making imported

8.4 million. Of these, 5.7 million beds are concentrated in China,

parts more expensive, but we succeeded in posting record-high sales and income.

with its population of more than 1.3 billion, followed by 1.7 million

Regarding the dividend payment for the fiscal year under review, the fiscal year-end dividend was

beds in India, with its population of more than 1.2 billion. South-

set at ¥25 per share. In combination with the interim disbursement of ¥25 per share, this brought theeast Asia and other parts of the continent have about 1 million

annual dividend to ¥50 per share.

hospital beds for a population of 1.5 billion, according to our

As for the dividend payment for the fiscal year ending March 2015, we plan to set the interim

estimates. However, healthcare systems cannot be described

disbursement at ¥25 per share and raise the year-end dividend to ¥35 per share, including ¥10 tocommemorate the 65th anniversary of the Company’s foundation, for an annual dividend of ¥60,

Kyosuke Kimura

ensuring that a good return to shareholders will remain our high priority.

President andChief Executive Officer

as adequate in most of these areas.
In line with economic development, an increasing number ofcountries are moving aggressively to provide healthcare and otherforms of social security. Indonesia, for example, has identified 11

Future Business Development

sectors of importance in its National Development Plan, with theStronger overseas operations and expansion of our domestic business fields are key elements inhealth sector as the third sector, after governance and education.

our future business development.

Accordingly, we expect the number of hospital beds to expand greatly.

In overseas business, to promote local-oriented sales activities and enhance our production

In recent years, many Asian countries have begun to introduce more highly efficient electric beds

system on a global basis, we established Paramount Bed Mexico S.A. de C.V., a sales company inthan before at acute care wards, centering intensive care units in university hospitals, hospitals thatCentral and South America, and Paramount Bed Vietnam Co., Ltd., a manufacturer of peripheral

receive foreign medical tourists in Thailand and elsewhere, and private hospitals for VIPs.

Exterior view of the new factoryin Vietnam

goods for medical beds. Paramount Bed Mexico began operating in January 2014 and Paramount
Bed Vietnam did so in June.
Domestically, we plan to expand into peripheral business by creating synergistic effects in thehealthcare field. We will do this by strengthening collaboration with our Group companies as wellas promoting the sales activities of Paramount Bed Co., Ltd., the Group’s core company.
Taking a long-term view, the Paramount Bed Group will devise a business strategy and promotebusiness diversification to boost its corporate value. In all our efforts, we look forward to the continued
understanding and cooperation of our shareholders.

2

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 14

3

The Year in Review

Another exciting, productive year for our Group.
APR 2013

Industry-academia joint research course with Chiba University
Beginning in April, Paramount Bed and Chiba University gave an industry-academia joint researchcourse on constructing a life care and support environment centered on intelligent beds. The course
name was “Nursing/Engineering Joint Research Course on Supporting the Elderly.” Researchers from theParamount Bed Group participated in the course along with four people from Chiba University: Facultyof Engineering Professor Kenzo Nonami (Chiba University Vice President, Robotics and Systems Control);School of Nursing Professor Harue Masaki (Dean, Adult and Gerontological Nursing); Faculty of Engineering Associate Professor Mihoko Otake (Service Engineering); and Faculty of Engineering Associate
Professor Yoshihiro Shimomura (Design Humanomics). Using our technology in rise-from-bed sensors
and sleep management systems, research is proceeding into ways of supporting the elderly in a very
aged society, as well as product development for that society.

4

5

6

2013

2013

2013

APR MAY JUN
JUN 2013

A subsidiary wasestablished in Mexico

7

JUL
2013

JUL 2013

AUG
2013

9

SEP
2013

JUL 2013

Paratechno expanded its maintenance business
Maintenance services for IABP devices begin
Paratechno Co., Ltd., which handles maintenance work for theParamount Bed Group, began doing maintenance of intra-aortic
blood pumping (IABP) devices in July 2013. IABP devices are
medical implements classified as artificial organs. They are usedin operating rooms and IC units to temporarily assist the heart’sfunctions. As part of its businessexpansion plan, Paratechno haslaunched an inspection service
for medical implements not madeby Paramount Bed. Last year,
Paratechno started doing periodic
inspections of medical ventilators.
It plans to expand the range of
maintenance work it does to offer
comprehensive support to medical
institutions.
IABP device undergoing inspection

4

8

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Sales of Stretch Series
mattresses began
JUL 2013

A subsidiary wasestablished in Vietnam

AUG 2013

JAN 2014

SLEEP SCAN sleep management system became eligible
for government subsidy

The home-care bed
Rakusho Z Series was launched.

SLEEP SCAN (NN-1300)

On August 1, the SLEEP SCAN sleep management system was chosen by the
Ministry of Land, Infrastructure, Transport and Tourism to be eligible for a buyer
subsidy aimed at preventing traffic accidents caused by fatigue. Transportation
businesses such as operators of buses, taxis, and trucks will receive a subsidy for
introducing SLEEP SCAN. The ministry established four product categories for
accident prevention, and SLEEP SCAN is eligible as an instrument for measuring
the state of a driver’s sleep during rest periods.
SLEEP SCAN does not attach directly to the body. It only needs to be placed
on top of a mattress to assess the user’s sleep quality. It senses the sleep/wakefulness rhythm and trend, making it easier to detect lifestyle problems, propose
countermeasures, and confirm their effectiveness. Data provided by SLEEP SCAN
can be used to improve drivers’ sleep habits and adjust their working hours,
which we expect will lead to fewer accidents.

10

11

12

2013

2013

2013

OCT NOV DEC

1

JAN
2014

OCT 2013

OCT 2013

Paratechno’s bedpan washer
was launched

The “Penguin Support”
body position changer
won the Good Design
Award

Paratechno Co., Ltd., which heads the Group’s
maintenance business, began marketing its
BPW-100 bedpan washer. This product, which
is used to wash
bedpans and othersoiled implements
in hospital cleaning
rooms, strengthens
our lineup of antiinfectious products.

DEC 2013

New TV commercials
startedThis new-series home-care bed for home use
has the conventional back-raise motion, and its
new lifting mechanism (not included in all models)
allows the entire bed to tilt, greatly reducing theexperience of friction and pressure when the user
rises. The Rakusho Z Series has won high praise forease of upper-body movement when the bed is in
its new back-raising position, for ease of risingfrom the bed, and forease of maintenance.

2

FEB
2014

3

MAR

Rakusho Z

2014

FEB 2014

The stacking-type
IV stand was launched
The leg portion of the new
IV stand (KC-509) is stackablefor compact storage. Becauseof this stacking feature, theKC-509 uses 54% less storage
space than Paramount Bed’s
conventional IV stand when
not in use. The space needed
to store five conventional
stands can now be used tostore 11 stands.

Bedpan washer (BPW-100)

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 14

IV stand (KC-509)

5

Financial Section

Management’s Discussion and Analysis

Management’s Discussion and Analysis

78Consolidated Balance Sheet
Consolidated Statement of Income

10

Consolidated Statement of Comprehensive Income

11

Business Results
Net Sales and Gross Profit

million. This was mainly due to the issuance of corporate bonds

Consolidated net sales increased 9.1% from the previous fiscal

with warrants in the second quarter of 2013. As a result, consolidated

year to ¥72,794 million. Growth was driven mainly by firm sales of

liabilities totaled ¥39,732 million at the end of fiscal year under

products and maintenance services to domestic institutions, as wellreview, up ¥12,455 million from a year earlier.

Consolidated long-term liabilities rose ¥10,828 million to ¥18,893

as sales of products and rental broking of nursing-care goods for

Consolidated Statement of Changes in Equity

12

Consolidated Statement of Cash Flows14

Notes to Consolidated Financial Statements

16

Independent Auditor’s Report

31

home use. In overseas operations, sales growth was centered in

Total Equity

parts of Asia where Paramount Bed’s sales bases were located.

Consolidated total equity grew ¥5,945 million to ¥82,571 million.

Consolidated gross profit grew 6.8% to ¥32,909 million. This

This was due to the increase in net income to ¥7,385 million, whichprimarily reflected higher sales and expanded production, which

outweighed a decrease in retained earnings accompanying

boosted productivity. However, cost of sales rose 11.1% to ¥39,885

dividend payments. The shareholders’ equity ratio was 67.5%.

million. As a result, the consolidated gross profit margin declined

Cash Flow

1.0 percentage point to 45.2%.

At the close of the fiscal year under review, consolidated cash andOperating Income

cash equivalents amounted to ¥21,313 million. During the fiscal

Consolidated operating income grew 2.7% from the previous fiscal

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

year to ¥11,542 million. However, selling, general and administrative
expenses increased 9.2% to ¥21,367 million. As a result, theCash Flows from Operating Activities

consolidated operating margin declined 0.9 percentage point

Net cash provided by operating activities amounted to ¥6,374

to 15.9%.

million. This reflected income before income taxes and minority
interests of ¥12,772 million, depreciation and amortization of

Net Income¥4,805 million, and an increase in payables of ¥1,953 million.

Consolidated net income grew 4.1% from the previous fiscal year

Cash outflows included an increase in notes and accounts

to ¥7,385 million. As a result, net income per share rose to ¥241.01,

receivable of ¥2,953 million, income tax payments of ¥7,569 million,

from ¥231.54 a year earlier. ROE was 9.3%.

and a decrease in long-term lease obligations of ¥1,542 million.

Financial Condition
AssetsCash Flows from Investing Activities

Consolidated liquid assets expanded ¥15,730 million from the end

was mainly due to purchases of marketable securities and invest-of the previous fiscal year to ¥68,470 million. This result mainly

ment securities of ¥12,041 million, time deposits of ¥3,020 million,

reflected higher sales, which were accompanied by increases inand purchases of property, plant and equipment of ¥1,733 million.

cash and cash equivalents as well as trade accounts receivable.

Cash inflows included ¥10,958 million from the sales of marketable

Net cash used in investing activities totaled ¥7,056 million. This

Consolidated fixed assets grew ¥2,670 million to ¥53,832 million.

securities and investment securities.

One reason for this was that subsidiary Paramount Care Service
Co., Ltd. expanded its main business (rental broking of nursing-care

Cash Flows from Financing Activities

goods), boosting its lease assets. In addition, Paramount Bed

Net cash provided by financing activities totaled ¥8,810 million.

purchased additional investment securities. As a result, consolidated

This mainly reflected a cash inflow of ¥10,050 million due tototal assets reached ¥122,302 million at the close of the fiscal year

the issuance of bonds with warrants in the second quarter of 2013.

ended March 2014, up ¥18,400 million from a year earlier.

Cash outflows included dividends paid of ¥1,532 million.

Liabilities
Consolidated total current liabilities were up ¥1,626 million fromthe end of the previous fiscal year to ¥20,839 million. This mainlyreflected an increase in trade accounts payable.

6

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 147

Consolidated Balance SheetParamount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
March 31, 2014

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

2014

2013

2014

2014

ASSETSLIABILITIES AND EQUITYCURRENT ASSETS:

CURRENT LIABILITIES:¥ 21,313¥ 13,060$ 207,086

Time deposits (Note 15)

6,629

3,609

64,407

Current portion of long-term bank loans (Notes 5 and 15)

Marketable securities (Notes 3 and 15)

3,509

4,045

34,095

Payables (Note 15):

Trade notes

5,196

5,321

50,490Trade accounts

19,422

16,253

188,708

580

43

1,804
(56)

Inventories (Note 4)

6,267

Lease receivables and investments in leases (Notes 13 and 15)

Cash and cash equivalents (Note 15)

Other
Allowance for doubtful accounts¥

Shortterm borrowings (Notes 5 and 15)

2014

2013

435

¥

216

28

$

4,230
271

Trade accounts

10,149

7,979

Other

2,443

2,535

23,732

Income taxes payable

2,376

3,460

23,0895,640

Accrued expenses

2,131

1,947

20,708968

17,528Current portion of long-term lease obligations (Notes 5, 13 and 15)

2,148

1,981

20,869

(61)

(548)

Other current liabilities

1,129

1,094

10,968

5,652

60,893

20,83919,212

202,477

Receivables (Note 15):

Unconsolidated subsidiaries and associated companies

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

Total current liabilities

98,610

2,437

2,287

23,679Deferred tax assets (Note 10)

959

1,046

9,322

Bonds with warrants (Notes 5, 6 and 15)

10,043

Prepaid expenses and other current assets

410

517

3,974

Long-term bank loans (Notes 5 and 15)444

68,47052,740665,274

Liability for retirement benefits (Note 7)

4,084

3,279

39,678Long-term lease obligations (Notes 5, 13 and 15)

3,598

3,665

34,958450

Total current assets
PROPERTY, PLANT AND EQUIPMENT:LONG-TERM LIABILITIES:
97,576
458

Land

8,692

8,677

84,457

Provision for environmental measures

46

46

4,317

Buildings and structures

27,014

26,336

262,477

Deferred tax liabilities (Note 10)

366

265

3,553

Machinery and equipment

7,512

7,057

72,988Other long-term liabilities

312

351

3,034

Furniture and fixtures

8,813

8,126

85,62918,893

8,064

183,566

4,166

4,136

40,47849,83649,806484,220

18

29

180

27,48521,656

267,051

(384)

(477)

(3,729)

621

766

6,035

434

Total long-term liabilities

Leased assets (Note 13)

251

361

2,443

Assets for rent (Note 13)

16,355

13,978

158,910

Construction in progress

101

191

978

68,73864,726

667,882

Common stock—authorized, 126,000,000 shares; issued, 30,828,587 shares in 2014
and 30,792,587 shares in 2013

(37,617)(34,805)(365,503)

Capital surplus

31,121

29,921

302,379

Stock acquisition rights

Total
Accumulated depreciation
Net property, plant and equipment

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 13, 16 and 17)
EQUITY (Notes 8, 9 and 20):

Retained earnings

INVESTMENTS AND OTHER ASSETS:

Treasury stock—at cost, 149,396 shares in 2014 and 188,384 shares in 201316,223

14,997

157,628

Investments in and advances to unconsolidated subsidiaries and associated companies

607

883

5,897

Goodwill

111

121

1,079

Life insurance fund

1,117

1,110

10,854Foreign currency translation adjustments

1,024

Deferred tax assets (Note 10)

863

334

8,383

Defined retirement benefit plans

(196)

4,336

3,862

42,132

Allowance for doubtful accounts

(60)

(66)

Allowance for investment loss (Note 15)(485)

Investment securities (Notes 3 and 15)

Other assets

Total investments and other assets
TOTAL

(583)

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

22,712

21,241

220,676¥122,303¥103,902$1,188,329

Total

82,5701

276

6

Total equity

82,571

76,626802,286¥122,303¥103,902$1,188,329

Minority interests(4,714)
TOTAL

9,948
(1,903)76,350802,280

See notes to consolidated financial statements.

8

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 149Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014

Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014

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

2014

2013

2014

NET SALES¥72,794¥66,717$707,291

NET INCOME BEFORE MINORITY INTERESTSCOST OF SALES

39,88535,907

387,538

OTHER COMPREHENSIVE INCOME (Note 18):

32,90930,810319,753

21,367

19,571

11,542

11,239Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 11 and 12)
Operating income

2014

2013

2014

¥7,398¥7,172$71,883

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

(145)

792

(1,410)207,611

Foreign currency translation adjustments

632

380

6,139

112,142

Total other comprehensive income

487

1,172

4,729

¥7,885¥8,344$76,612¥7,830¥8,248$76,078

55

96

534

OTHER INCOME (EXPENSES):COMPREHENSIVE INCOME

Interest and dividend income

482

348

4,686

Interest expense

(90)

(109)

(871)

Owners of the Company

Foreign exchange gain—net

238

308

2,310

Minority interests

Other—net

600

155

5,832

1,230

702

11,957

12,772

11,941

124,099

Current

5,532

5,155

53,751

Deferred

(158)

(386)

(1,535)

5,374

4,769

52,216

7,398

7,172

71,883

13

78

128

¥ 7,385¥ 7,094$ 71,755

Other income—net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

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

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

See notes to consolidated financial statements.

INCOME TAXES (Note 10):

Total income taxes
NET INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME
NET INCOME

Yen

U.S. Dollars

2014

2013

2014

Basic net income¥241.01¥231.54$2.34

Diluted net income

227.13230.94

2.21

Cash dividends applicable to the year

50.00

45.00

0.49

PER SHARE OF COMMON STOCK (Notes 2 and 19):

See notes to consolidated financial statements.

10

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 14

11

Consolidated Statement of Changes in Equity
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014

Thousands

BALANCE, APRIL 1, 2012

Millions of Yen

Number of
Shares ofCommonCommonStock
Stock Issued

CapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

30,679,387¥49,710¥63¥16,097¥4,040Thousands of U.S. Dollars (Note 1)

Treasury Stock
Treasury
Total
Treasury
Stock
Treasury
Stock(the Trust)
Stock
¥ (1)

¥ (10)¥ (11)

CapitalSurplus

Stock
Acquisition
RightsRetained
Earnings$40,182$483,924$284$210,419

Net income

7,094

Net income

71,755

Cash dividends, ¥50.00 per share(1,535)

Cash dividends, $0.49 per share(14,876)

Issuance of new shares—exercise of stock acquisition rights

113,200

96

Issuance of new shares—exercise of stock acquisition rights

96

Purchase of treasury stock

(16)

(518)

(534)

68

68

Disposal of treasury stock from the Trust
Net change in the year

(34)

BALANCE, MARCH 31, 2013

30,792,587

4,136

49,80629296

21,656

(17)

(460)

(477)

7,385

Cash dividends, ¥50.00 per share

Purchase of treasury stock

36,00030

Net change in the year

117

$40,478$484,220(25)¥49,836¥18

BALANCE, MARCH 31, 2013

¥27,485¥(41)¥(343)¥(384)

Millions of Yen

Accumulated Other Comprehensive Income
Unrealized
ForeignDefinedGain (Loss) on
Currency
Retirement
Available-forTranslation
Benefit Plans
sale Securities
Adjustments
BALANCE, APRIL 1, 2012

¥ (26)

¥

72

$180

$267,051

Accumulated Other Comprehensive Income
Unrealized
ForeignDefinedGain (Loss) on
Currency
Retirement
Available-for-sale Translation Benefit
Plans
Securities
Adjustments

117

(11)
¥4,166

Minority
Interests

Total

Total Equity$7,445$4,220$(3,729)¥200(14,876)(14,876)

Issuance of new shares—exercise of stock acquisition rights

592

592

Purchase of treasury stock

(229)

(229)

Disposal of treasury stock from the Trust

1,138

1,138

5,728

$(1,903)

2,311$6,035$9,948$(1,903)$802,280

7,094

BALANCE, MARCH 31, 2014

Cash dividends, ¥50.00 per share(1,535)(1,535)

See notes to consolidated financial statements.

Issuance of new shares—exercise of stock acquisition rights

192

192

Purchase of treasury stock

(534)

(534)

68

68

1,120

76

1,196

BALANCE, MARCH 31, 2013

766

434

76,350276

76,626

Net income

7,385

7,385

Cash dividends, ¥50.00 per share(1,531)(1,531)

Issuance of new shares—exercise of stock acquisition rights

60

60

Purchase of treasury stock

(24)

(24)

Disposal of treasury stock from the Trust

117

117

Change in scope of consolidation

(25)

(25)

(145)

590

¥(196)

238

BALANCE, MARCH 31, 2014

¥621

¥1,024¥(196)¥82,570

(275)
¥

1

(247)
(1,410)362$744,515

Cash dividends, $0.49 per share

Net change in the year792

$2,67971,755¥70,145

Net change in the year

Total Equity

71,755

7,094

Net change in the year

Minority
Interests

Total

Net income

Net income

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014$(397)$741,836

Change in scope of consolidation¥69,945

Disposal of treasury stock from the Trust$(3,332)

(104)

(24)

Disposal of treasury stock from the Trust

30,828,587

1,138

Thousands of U.S. Dollars (Note 1)(24)

BALANCE, MARCH 31, 2014

1,138
(247)

BALANCE, MARCH 31, 2014

Purchase of treasury stock

Net change in the year$(4,638)(229)

Disposal of treasury stock from the Trust

30

Change in scope of consolidation$(4,470)(229)(1,531)

Issuance of new shares—exercise of stock acquisition rights$(168)

296

Change in scope of consolidation

Net income

12

BALANCE, MARCH 31, 2013

Treasury Stock
Treasury
Total
Treasury
Stock (theTreasury
Stock
Trust)
Stock

CommonStock(247)(2,673)$6(362)$802,286(37)¥82,571

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1413

Consolidated Statement of Cash Flows
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014

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

2014

2013

2014

¥12,772¥11,941$124,099

OPERATING ACTIVITIES:

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

2014

2013

2014

FINANCING ACTIVITIES:

Income before income taxes and minority interests
Adjustments for:

Increase in short-term borrowings—net

220

43

2,134

Repayments of long-term bank loans

(157)

(61)

(1,524)

Income taxes—paid(7,569)(3,724)(73,543)

Proceeds from long-term bank loans

171

519

1,663

Depreciation and amortization

4,805

4,258

46,689Purchase of treasury stock

(24)

(534)

(229)

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

(900)

41

(8,749)Proceeds from issuance of bonds with warrants

10,050

Increase in allowance for investment loss

485

4,714

Dividends paid

(1,532)

Changes in assets and liabilities:

Other—net

Increase in receivables(2,953)(3,660)(28,694)

Increase in inventories

(389)

(295)

(3,776)

Net cash provided by (used in) financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

97,649(1,533)(14,889)

82

151

793

8,810

(1,415)85,597

115

79

1,120

8,243

(2,198)80,090

(121)

(29)

(1,171)

Increase in assets for rent

(2,309)(1,465)(22,438)

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARY, BEGINNING OF YEAR

Increase in payables

1,953

3,539

18,972

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

13,06015,258

126,895

Decrease in long-term lease obligations(1,542)(1,341)(14,984)

CASH AND CASH EQUIVALENTS, END OF YEAR

¥21,313¥13,060$207,086

2,142

201

20,808

Total adjustments(6,398)(2,475)(62,172)

Net cash provided by operating activities

6,374

9,466

61,927

Increase in time deposits(3,020)(3,609)(29,342)

Purchases of marketable securities(5,697)(4,995)(55,350)

Increase in lease receivables and investments in leases

Other—net

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

10

101

See notes to consolidated financial statements.

INVESTING ACTIVITIES:

Proceeds from sales of marketable securities

7,503

5,939

72,898Purchases of property, plant and equipment(1,733)(1,949)(16,835)

Purchases of intangible assets

(235)

(686)

(2,282)

Purchases of investment securities(6,344)(6,414)(61,643)

Proceeds from sales of investment securities

3,455

1,629

33,567Purchases of shares of subsidiaries and associated companies(595)

Other—net(390)

Net cash used in investing activities
FORWARD

14(5,778)(243)(3,789)(7,056)(10,328)(68,554)¥ (682)¥ (862)$ (6,627)

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1415Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014

1. BASIS OF PRESENTATION OF CONSOLIDATEDFINANCIAL STATEMENTS
The accompanying consolidated financial statements of
Paramount Bed Holdings Co., Ltd. (the “Company”) and its
consolidated subsidiaries have been prepared in accordance withthe provisions set forth in the Japanese Financial Instruments
and Exchange Act and its related accounting regulations and inaccordance with accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain respects as to theapplication and disclosure requirements of International Financial
Reporting Standards (“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 2013 consolidated financial statements to conform to theclassifications used in 2014.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which the Company isincorporated and operates. The translations of Japanese yenamounts into U.S. dollar amounts are included solely for theconvenience of readers outside Japan and have been madeat the rate of ¥102.92 to $1, the approximate rate of exchange
at March 31, 2014. 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, 2014, include the accounts of the Company and its 10
significant (nine in 2013) 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 Groupis also eliminated.
b. Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements—
In May 2006, the Accounting Standards Board of Japan (the“ASBJ”) issued ASBJ Practical Issues Task Force (“PITF”) No.
18, “Practical Solution on Unification of Accounting Policies

16

Applied to Foreign Subsidiaries for the Consolidated Financial
Statements.” PITF No. 18 prescribes that the accounting
policies and procedures applied to a parent company and its
subsidiaries for similar transactions and events under similar
circumstances should in principle be unified for the preparationof the consolidated financial statements. However, financial
statements prepared by foreign subsidiaries in accordance witheither IFRS or the generally accepted accounting principles in
the United States of America (“U.S. GAAP”) tentatively may be
used for the consolidation process, except for the following
items which should be adjusted in the consolidation process sothat net 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 directly recorded in equity; (3) expensing
capitalized development costs of R&D; (4) cancellation of thefair value model accounting for property, plant and equipment
and investment properties and incorporation of the cost modelaccounting; and (5) exclusion of minority interests from net
income, if contained in net income.
c. 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, certificate of deposits,commercial paper and bond funds, all of which mature or
become due within three months of the date of acquisition.
d. 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 mostrecent purchase price method.
e. Marketable and Investment Securities—Marketable
and investment securities are classified and accounted for,depending on management’s intent, as follows: (1) held-tomaturity debt securities, for which there is the positive intent
and ability to hold to maturity, are reported at amortized costand (2) available-for-sale securities, which are not classified as
the aforementioned securities, are reported at fair value, withunrealized gains and losses, net of applicable taxes, reported ina separate component of 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 Partnership (“LPS”) and similar
ventures (considered as securities under the Japanese Financial
Instruments and Exchange Act) are stated at the amountsof corresponding equity portion based on the most recent
available financial statements on the reporting date stipulated
in the contracts of the LPS and the ventures.

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

f. Property, Plant and Equipment—Property, plant andequipment are stated at cost. Depreciation of property, plantand equipment of the Company and its domestic consolidated
subsidiaries is computed by the declining-balance method
over the estimated useful lives of the assets, while the straightline method is applied to buildings acquired on or after April
1, 1998 and assets for rent of the consolidated domestic
subsidiaries and substantially all property, plant and equipmentof consolidated foreign subsidiaries. The range of useful lives
is principally three to 50 years for buildings and structures, fourto 11 years for machinery and equipment, two to 20 years forfurniture and fixtures, and three to eight years for assets for rent.
g. 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.
h. Amortization of Goodwill—The differences between thecost and underlying net equity of investments in consolidated
subsidiaries at acquisition are included in investments and otherassets and are amortized on a straight-line basis over five years.
i. 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 over the estimateduseful lives.
j. 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.
k. Allowance for Investment Loss—The allowance forinvestment loss is estimated for possible future loss fromnonmarketable investment securities considering theirfinancial conditions.
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 requiredby 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 anddefined benefit pension plans based on a point system. The
defined benefit pension plan provides for a lump-sum payment
to terminated employees. A premium severance may be paid to
employees terminating their employment.
A straight-line basis is used for the method of attributing
expected benefit to periods in determining defined benefit
obligation. The Company and certain domestic consolidated
subsidiaries, however, apply the simplified method. Past service
costs are amortized on a straight-line basis over a certain
period (10 years) within the average remaining service period.
Actuarial gains and losses are amortized on a straight-line basis
over a certain period (10 years) within the average remaining
service period.
In May 2012, the ASBJ issued ASBJ Statement No. 26,“Accounting Standard for Retirement Benefits” and ASBJ
Guidance No. 25, “Guidance on Accounting Standard for
Retirement Benefits,” which replaced the accounting standard
for retirement benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April 1,
2000, and the other related practical guidance, and were
followed by partial amendments from time to timethrough 2009.
(a) Under the revised accounting standard, actuarial gains andlosses and past service costs that are yet to be recognizedin profit or loss are recognized within equity (accumulated
other comprehensive income), after adjusting for tax effects,
and any resulting deficit or surplus is recognized as aliability (liability for retirement benefits) or asset (asset for
retirement benefits).
(b) The revised accounting standard does not change how
to recognize actuarial gains and losses and past service
costs in profit or loss. Those amounts are recognizedin profit or loss over a certain period no longer thanthe expected average remaining service period of theemployees. However, actuarial gains and losses and past
service costs that arose in the current period and have
not yet been recognized in profit or loss are included inother comprehensive income and actuarial gains andlosses and past service costs that were recognized inother comprehensive income in prior periods and thenrecognized in profit or loss in the current period shall betreated as reclassification adjustments.
(c) The revised accounting standard also made certain
amendments relating to the method of attributing expected
benefit to periods the discount rate and expected futuresalary increases.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1417Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014

This accounting standard and the guidance for (a) and(b) above are effective for the end of fiscal years beginningon or after April 1, 2013, and for (c) above is effective for the
beginning of fiscal years beginning on or after April 1, 2014,
or for the beginning of fiscal years beginning on or after April
1, 2015, subject to certain disclosure in March 2015, bothwith earlier application being permitted from the beginningof fiscal years beginning on or after April 1, 2013. However,no retrospective application of this accounting standard toconsolidated financial statements in prior periods is required.
The Company applied the revised accounting standard andguidance for retirement benefits for (a) and (b) above, effective
March 31, 2014. As a result, liability for retirement benefits of¥4,084 million ($39,678 thousand) was recorded as of March 31,
2014, and accumulated other comprehensive income for theyear ended March 31, 2014, decreased by ¥196 million ($1,903
thousand). Net assets per share decreased by ¥6.38 ($0.06) asof March 31, 2014.
o. Stock Options—ASBJ Statement No. 8, “Accounting Standard
for Stock Options” and related guidance are applicable to stock
options newly granted on and after May 1, 2006. This standard
requires companies to recognize compensation expense for
employee stock options based on the fair value at the date of
grant and over the vesting period as consideration for receiving
goods or services. The standard also requires companies toaccount for stock options granted to non-employees basedon the fair value of either the stock option or the goods orservices received. In the consolidated balance sheet, the stock
options are presented as stock acquisition rights as a separate
component of equity until exercised. The standard allows
unlisted companies to measure options at their intrinsic value if
they cannot reliably estimate fair value.
p. Research and Development Costs—Research anddevelopment costs are charged to income as incurred.
q. Leases—As a lessee, all finance lease transactions arecapitalized to recognize leased assets, assets for rent and leaseobligations in the balance sheet.
As a lessor, all finance leases that deem to transfer
ownership of the leased property to the lessee are recognized
as lease receivables, and all finance leases that deem not totransfer ownership of the leased property to the lessee arerecognized as investments in leases.
r. 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.

18

Deferred taxes are measured by applying currently enacted
income tax rates to the temporary differences.
s. Foreign Currency Transactions—All short-term andlong-term monetary receivables and payables denominatedin foreign currencies are translated into Japanese yen at
the exchange rates at the consolidated balance sheet date.
The foreign exchange gains and losses from translation arerecognized in the consolidated statement of income to theextent that they are not hedged by forward exchange contracts.
t. Foreign Currency Financial Statements—The balance
sheet accounts and revenue and expenses accounts of theconsolidated foreign subsidiaries are translated into Japanese
yen at the current exchange rate as of the consolidated balance
sheet date except for equity, which is translated at the historicalrate. Differences arising from such translation are shown as“Foreign currency translation adjustments” under accumulated
other comprehensive income in a separate componentof equity.
u. Derivatives and Hedging Activities—The Group uses
derivative financial instruments, such as foreign exchange
forward contracts to manage its exposures to 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
statements of income and (2) for derivatives used for hedging
purposes, if such derivatives qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, gains orlosses on derivatives are deferred until maturity of thehedged 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 and items
hedged.
v. Per Share Information—Basic net income per share iscomputed by dividing net income available 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

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

stock assumes full conversion of the outstanding convertible
notes and bonds at the beginning of the year (or at the timeof issuance) with an applicable adjustment for related interest
expense, net of tax, 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 theend of the year.
w. Trust-type Employee Stock Ownership Incentive Plan—
On September 18, 2012, the Company’s board of directors
approved the reintroduction of the “Trust-type Employee Stock
Ownership Incentive Plan” (the “Plan”) for the purpose ofproviding an incentive to enhance corporate value on a midand 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
to be 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 terminatesand gains on sale of the Company’s stock accumulated in the
Trust will be distributed as residual assets to eligible employees.
Additionally, as the Company grants a guarantee to the Truston the bank loans for purchasing the Company’s stock, theCompany is liable for repayment of such debt pursuant to theguarantee agreement. The guarantee agreement stipulates
that the Company guarantees repayment of debt at the endof the term of the Trust, which, in case, is equivalent toan accumulated loss on sale of stock due to a decline instock 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, as theTrust was established by the Company and its bank loans
to purchase the Company’s stock are guaranteed by theCompany. The number of treasury stock includes shares
held by the Trust. As of March 31, 2014 and 2013, the Trustholds 135,600 shares and 181,900 shares of the Company’s
stock, respectively.
x. Accounting Changes and Error Corrections—In December
2009, the ASBJ issued ASBJ Statement No. 24, “AccountingStandard for Accounting Changes and Error Corrections” andASBJ Guidance No. 24, “Guidance on Accounting Standard for
Accounting Changes and Error Corrections.”
Accounting treatments under this standard and guidance
are as follows:(1) Changes in Accounting Policies—When a new accounting
policy is applied following revision of an accounting
standard, the new policy is applied retrospectively
unless the revised accounting standard includes specifictransitional provisions, in which case the entity shall comply
with the specific transitional provisions.
(2) Changes in Presentation—When the presentation offinancial statements is changed, prior-period financial
statements are reclassified in accordance with the newpresentation.
(3) Changes in Accounting Estimates—A change in an
accounting estimate is accounted for in the period of
the change if the change affects that period only, and isaccounted for prospectively if the change affects both theperiod of the change and future periods.
(4) Corrections of Prior-Period Errors—When an error in priorperiod financial statements is discovered, those statements
are restated.
y. New Accounting Pronouncements
Accounting Standard for Retirement Benefits—On May
17, 2012, the ASBJ issued ASBJ Statement No. 26, “AccountingStandard for Retirement Benefits” and ASBJ Guidance No. 25,“Guidance on Accounting Standard for Retirement Benefits,”
which replaced the Accounting Standard for Retirement
Benefits that had been issued by the Business Accounting
Council in 1998 with an effective date of April 1, 2000 and theother related practical guidance, being followed by partial
amendments from time to time through 2009.
The revision mainly focused on the accounting treatment forunrecognized actuarial gains and losses and past service costs,
methods for calculating retirement benefit obligations andcurrent service costs, and the enhancement of disclosure.
The revised method for calculating retirement benefit
obligations and current service costs will be applied fromthe fiscal year beginning on April 1, 2014. Since the revised
accounting standard and the guidance specified tentative
treatments, the revision will not be applied retrospectively tothe consolidated financial statements in prior periods.
The effect of applying the revised accounting standard
and the guidance on the consolidated financial statements is
expected to be immaterial.
Practical Solution on Transactions of Delivering
the Company’s Own Stock to Employees etc.
through Trusts—On December 25, 2013, the ASBJ issued PITF
No. 30, “Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees etc. through Trusts”. ThisPITF is effective for the beginning of fiscal years beginning on
or after April 1, 2014, with earlier application permitted from the
beginning of fiscal years first ending after the date of issuance

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 14

19Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014of this PITF, and applied retrospectively.
In accordance with the PITF, upon, in case, transfer oftreasury stock to employee stockownership trust by theentity, any difference between the book value and fair valueof the treasury stock shall be recorded in capital surplus. At
year end, the entity shall record (1) the entity stock held byemployee stockownership trust as treasury stock in equity,(2) all other assets and liabilities of employee stockownershiptrust on a line-by-line basis, and (3) a liability/asset for the netof (i) any gain or loss on delivery of the stock by employee
stockownership trust to the employee stock ownershipassociation, (ii) dividends received from the entity for the stock
held by employee stockownership trust, and (iii) any expenses
relating to employee stockownership trust.
The Company expects to apply the PITF from the beginningof the fiscal year beginning on April 1, 2014. However, thePITF permits an entity to continue the accounting treatments
previously applied for agreements entered into before theeffective date of the PITF. As the relevant trust agreement has
been concluded before then, the same accounting treatment
will be applied as previously. Therefore, applying the PITF has
no effects in future applicable periods.

2014

312

¥ 297

Debt securities

Equity securities

5,256

346

39

5,563

Other

10,674662

117

11,21916684

Held-to-maturity

¥

700

¥

Debt securities
Other
Total

March 31, 2014

Unrealized Unrealized
Gains
Losses

Cost

Securities classified as:
Available-for-sale:
Equity securities$ 3,030$ 3,183

Debt securities

54,7871,155

419

55,523

Other

110,159

6,465

1,438

115,186

3,886

3

21

3,868

Held-to-maturity

6,197

March 31, 2014

Millions of Yen
Proceeds

Realized Gains

Debt securities¥ 1,207¥ 457

Debt securities

5,638

119

43

5,714

Other

11,338665

148

11,855

400

0

2

398

Thousands of
U.S. Dollars
15,071
8,751

2018

37

361

634

6,165

2019

32

310

349

3,389

163

1,582

¥ 5,746$ 55,827

¥ 340

¥ 26

1,056

26

¥ 50

¥ 1,396

¥ 52

¥ 50

Proceeds

Realized Gains$

2020 and
thereafter
Total

¥ 472

$ 4,588

No assets were pledged as collateral at March 31, 2014 and 2013.

Realized Losses

6. BONDS WITH WARRANTS
Bonds with warrants at March 31, 2014 consisted of the following:
Issuer/description

IssueddateMillionsof Yen

July
26,
2013

¥ 10,043

Thousands Couponof U.S.
rate (%)
Dollars

Secured/unsecured

Due

Unsecured

July
26,
2018

The Company

4. INVENTORIESInventories at March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2014

638

Millions of Yen

901

Other

Millions of Yen¥

Millions of Yen

Lease obligations

Thousands of
U.S. Dollars

3,285

$ 18

2

Long-term bank loans338$ 8,232¥

Annual maturities of long-term debt at March 31, 2014, for the
next five years and thereafter were as follows:2017$ 31,746¥ 328$ 136,851$ 20,869

$ 18

312

¥ 4,123

1,551

3,788

Available-for-sale:¥ 14,085¥ 2,148

20,014

Securities classified as:(21,140)

Long-term debt, less current
portion

271

Other

Fair Value

157,991(1,981)361$ 4,444

Cost

6,104

(2,176)37$ 11,732

Unrealized Unrealized
Gains
Losses

16,261¥ 28

Debt securities

97,695

Total
Less current portion

2015$ 34,095$157,628

55,8272016¥ 4,045

8,221

5,646

¥2

¥ 3,509¥ 14,997

5,746

97,576¥2

Available-for-sale:

10,055Long-term lease obligations$ 4,588390

17,491¥16,223

10,043

¥ 458

¥ 847

Debt securities

Total

472

Merchandise

2013

2014

¥ 2,909¥ 1,008$ 28,266

Finished products

1,316

3,087

12,790Raw materials

1,658

1,243

16,112Work in process

307

244

2,981

Supplies

77

70

744

¥ 6,267¥ 5,652$ 60,893

Total

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Yen bonds withwarrants due
2018
Total

¥ 10,043$ 97,576

0.00

		 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, 2014,
for the next five years were as follows:Year Ending March 31

Bonds with warrants
Millions of Yen

Thousands of U.S. Dollars

2015
2016

2,060

$ 16,604

42,805¥2014¥ 3,267

1,747$ 17,128

Thousands of
U.S. Dollars

2013

Bonds with warrants

Year Ending
March 31

1,300

4,517

Bank loans by the Trust, sixmonth Tokyo Inter Bank Offered
Rate (TIBOR) plus 0.45% anddue 2019

Realized Losses

Available-for-sale:

1,800

The costs and aggregate fair values of marketable andinvestment securities at March 31, 2014 and 2013, were as follows:20$¥ 1,709¥ 2,259

Held-to-maturity

16

March 31, 2014

4,405

¥

$

The information for available-for-sale securities which were soldduring the years ended March 31, 2014 and 2013, was as follows:998¥ 1,763

Equity securities

2014
Fair Value

Thousands of U.S. Dollars

Debt securities

March 31, 2014

605

Millions of Yen

Total

2014

Equity securities
Other

¥

Available-for-sale:Non-current:

Total

4

Short-term borrowings at March 31, 2014 and 2013, consisted ofbank overdrafts and trade receivables factoring. The weightedaverage interest rates applicable to the short-term borrowings
at March 31, 2014 and 2013, were 1.1% and 0.9%, respectively.
Long-term debt at March 31, 2014 and 2013, consisted of
the following:Thousands of U.S. Dollars

Current:
Commercial papers andmoney management funds¥

March 31, 2013

Thousands of
U.S. Dollars

2013

Fair Value

Available-for-sale:

Total

Marketable and investment securities as of March 31, 2014 and2013, consisted of the following:
Millions of Yen

Unrealized Unrealized
Gains
Losses

Cost

Securities classified as:

Other

3. MARKETABLE AND INVESTMENT SECURITIES

5. SHORT-TERM BORROWINGS AND LONGTERM DEBT

Millions of Yen
March 31, 2013

$ 97,576

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: ¥4,106 ($39.90) per share		Total issue value: ¥10,000 million ($97,163 thousand)		Percentage of warrants granted: 100%		Warrants exercise period: From August 9, 2013 to July 12, 2018

2017
2018
2019

¥ 10,000$ 97,163

Total¥ 10,000$ 97,163

7. RETIREMENT AND PENSION PLANS
Year ended March 31, 2014
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
terminating 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 for which it
is difficult to reasonably calculate the plan assets corresponding totheir 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 year ended
March 31, 2014, were as follows:
Millions of Yen
Balance at beginning of year

Thousands of U.S. Dollars¥ 3,793$ 36,851

Current service cost

309

3,006

Interest cost

49

477

Actuarial losses

17

167

Benefits paid

(68)

(664)

¥ 4,100$ 39,837

Balance at end of year

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1421Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014

(2) The changes in plan assets for the year ended March 31, 2014,
were as follows:
Millions of Yen
Balance at beginning of year

Thousands of U.S. Dollars
¥ 22

$ 218

Actuarial gains

0

1

Benefits paid

(6)

(60)

¥ 16

$ 159

Balance at end of year

(3) Reconciliation between the liability recorded in the consolidatedbalance sheet and the balances of defined benefit obligationand plan assets as of March 31, 2014, was as follows:
Millions of Yen
Funded defined benefit
obligation

Thousands of U.S. Dollars¥

16

Plan assets

(159)

(0)

(8)

4,084

Net liability arising fromdefined benefit obligation¥ 4,084
Millions of Yen

39,686$ 39,678
Thousands of U.S. Dollars¥ 4,084

Net liability arising fromdefined benefit obligation

151

(16)

Unfunded defined benefit
obligation

Liability for retirement
benefits$¥ 4,084$ 39,678$ 39,678(4) The components of net periodic benefit costs for the year
ended March 31, 2014, were as follows:

Discount rate

Millions of Yen
Plan assets¥ 309$ 3,006

49

477

DeficitThousands of U.S. Dollars

Recognized actuarial losses

36

346

Amortization of past service
cost

128

1,247

Others

42

403

¥ 564

$ 5,479

Net periodic benefit costs(5) Accumulated other comprehensive income on defined
retirement benefit plans as of March 31, 2014, was as follows:
Millions of Yen

Thousands of U.S.Dollars

Unrecognized past service cost

¥ 96

Unrecognized actuarial losses

208

2,021

¥ 304

$ 2,956

Total

0.0%

Defined contribution pension plans
The required contribution of the Company and certain consolidated
subsidiaries to the defined contribution pension plansamounted to ¥117 million ($1,134 thousand) for the year ended
March 31, 2014.
Multiemployer pension plan
The required contribution to the multiemployer pension plan
which is accounted for in the same way as the defined contribution
pension plan, amounted to ¥258 million ($2,508 thousand) as ofMarch 31, 2014.
(1) Funding status of the multiemployer pension plan as of March
31, 2013 is as follows:

Interest cost

Current service cost

0.6% to 1.5%

Expected rate of return on plan assets

Pension liabilities (actuarial
liability plus balance of
unamortized past service
cost)

Millions of Yen$ 935(6) Plan assets
a. Components of plan assets
Plan assets consisted of the following:

22b. 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.
(7) Assumptions used for the year ended March 31, 2014, were set
forth as follows:

Public and corporate debt securities

39.4%

Foreign securities

32.3

Loans receivable

15.3

Equity securities

7.7

Others5.3

Total

100.0%

Thousands of U.S. Dollars¥ 465,230$ 4,520,305

497,125

4,830,209¥ (31,895)$ (309,904)(2) Contributions by the Group as a percentage of total
contributions to the multiemployer pension plan
Information for the period of:Contribution percentage

March 1 to 31, 2014
1.4%

(3) Supplementary information
The deficit presented above is mainly due to the balance of
unamortized past service cost of ¥49,513 million ($481,087
thousand) and the surplus of ¥17,618 million ($171,183
thousand) for the year ended March 31, 2014.
Unamortized prior service cost represents present valueof special contributions, principal and interest of which areamortized using the straight-line method. The contribution rateborne by the employer is 1.55% and the remaining amortization
period is nine years and zero months as of April 1, 2013.
Year ended March 31, 2013
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

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

subsidiaries also maintain closed pension plans for the pension
beneficiaries. A premium severance may be paid to employees
terminating 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. The projected benefit obligationand plan assets of the Group as presented below do notinclude the projected benefit obligation and plan assets of thismultiemployer plan, for which required contributions to the planare expensed to retirement benefit costs as incurred.
Information concerning the multiemployer plan for which
required contributions are expensed to retirement benefit costs as
incurred is as follows:(1) Overall funded status

The components of net periodic benefit costs for the year
ended March 31, 2013, were as follows:
Millions of Yen
Service cost

¥ 286

Interest cost

54

Recognized actuarial loss

22

Amortization of prior service cost

123

Contribution paid to welfare annuity foundation

247

Contribution paid to defined contribution benefit plan

108

Other

24

Net periodic benefit costs¥ 864

Assumptions used for the year ended March 31, 2013, are set
forth as follows:
Method for allocating expected benefit obligation

Straight-line method

Discount rate

1.5%

Expected rate of return on plan assets

0.0%

March 31, 2012

Recognition period of actuarial gain/loss

10 years

Plan assets¥ 414,218

Amortization period of prior service cost

10 years

Projected benefit obligation(459,016)Net¥ (44,798)

Millions of Yen
Information as of (*1):Note:(*1) The amounts presented above are the latest information
available at the time of release of the accompanying
consolidated financial statements for the year ended March
31, 2013. The date of the information is a year before thefiscal year-end, which is March 31, 2012.
(2) Contributions by the Group as a percentage of total
contributions to the multiemployer plan
Information for the period of:Contribution percentage

March 1 to 31, 2013
1.4%

(3) Supplementary explanation
For the year ended March 31, 2013, the net balance presentedin (1) is mainly composed of unamortized prior service cost of¥38,603 million and pension shortfall carried forward of ¥3,216
million and pension shortfall for the year of ¥2,979 million.
Unamortized prior service cost represents present valueof special contributions. It is amortized through amortizationof principal and interest using the straight-line method. The
contribution rate borne by the employer is 1.55% and theremaining amortization period is six years and 10 months as ofMarch 31, 2012.
The liability for the Group’s employees’ retirement benefits at
March 31, 2013, consisted of the following:
Millions of Yen
Projected benefit obligation¥ 3,752

Fair value of plan assets(22)

Unrecognized actuarial loss

(226)

Unrecognized prior service cost
Liability for employees’ retirement benefits(225)¥ 3,279

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. For companies
that meet certain criteria, 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 ofincorporation. However, the Company cannot do so because it
does not meet all the above criteria.
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

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1423Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014(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 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 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. STOCK OPTIONSThe stock options outstanding as of March 31, 2014, are as follows:
Stock
Option2011
Stock
Options

Persons Granted

Numberof Options
GrantedDate of Exercise
Grant (*1)
Price

Exercise Period

Year Ended March 31, 2014
VestedMarch 31, 2013—Outstanding
VestedExercised(36,000)

Canceled
March 31, 2014—Outstanding

62,000Exercise price¥ 1,396($ 13.56)

Average stock price at exercise¥ 3,298($ 32.04)

Fair value price at grant date

¥ 298($ 2.90)

The Assumptions Used to Measure the Fair Value of the 2011
Stock Option
Estimate method: Black-Scholes option pricing model
Volatility of stock price: 34%
Estimated remaining outstanding period: Three and a half years
Estimated dividend: ¥ 30.00 per share
Risk free interest rate: 0.46%

10. INCOME TAXESThe Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in the aggregate,
resulted in a normal effective statutory tax rate of approximately
38.0% for the years ended March 31, 2014 and 2013.
The tax effects of significant temporary differences and tax loss
carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2014 and 2013, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

One director,
four executive
officers, and 15
employees
605 directors andemployees ofsubsidiaries

259,000
shares

October
1, 2011¥1,396($13.56)

From
October 1, 2011
toJuly 16, 2014

Note:(*1)	In connection with the exchange of shares transaction
approved at Paramount Bed’s shareholders’ meeting on June29, 2011, stock options issued by Paramount Bed before theshare exchange were cancelled as of October 1, 2011,
the effective date of the share exchanges and, in return,
the Company issued new options to holders of thecancelled options.
The stock option activity is as follows:

2014

2013

2014

Deferred tax assets:
Accrued bonuses

¥ 410

¥ 425

$ 3,988

79

83

769

Liability for employees’
retirement benefits

1,444

1,164

14,027Tax loss carryforwards

1,099

Liability for directors’ and audit& supervisory board members’
retirement benefits

596

10,680Allowance for investment loss

173

Gain on valuation related to an
exchange of shares transaction

244

244

2,371

Other

2,417

2,068

23,480Less valuation allowance(1,656)(1,034)(16,086)

4,210

3,546

40,909

Undistributed earnings ofsubsidiaries

361

287

3,512

Gain on revaluation of land of
subsidiary

30

23

287

211,700

Unrealized gain on available-forsale securities

299

379

2,905

Exercised(113,200)

1,739

16,549(500)

Loss on valuation related to an
exchange of shares transaction

1,703

Canceled

Year Ended March 31, 2013
VestedMarch 31, 2012—Outstanding
VestedMarch 31, 2013—Outstanding

98,000

Total

1,680

Deferred tax liabilities:

Other
Total
Net deferred tax assets

24

98,000

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

361

3

3,504

2,754

2,431

26,757¥ 1,456¥ 1,115$ 14,152

A reconciliation between the normal effective statutory tax rates
and the actual effective tax rates reflected in the accompanying
consolidated statement of income for the year ended March 31,
2014 with the corresponding figures for 2013, is as follows:
2014

2013

Normal effective statutory tax rate

38.0%

38.0%

Lower income tax rates applicable to income in certain foreign countries

(0.4)

(0.7)

Expenses not deductible for income tax purposes

1.2

0.5

Millions of Yen¥ 4

Due after one year

8

76

¥ 12

$ 120

Total

0.3

0.1

0.2

0.4

Gross receivables

Unrecognized deferred tax on unrealized intercompany profits

0.2

0.2

Unearned interest income

Change in valuation allowance for deferred tax assets

1.7

0.5

Lease receivables

0.9

0.9

42.1%

39.9%

The “Act on Partial Revision of the Income Tax Act, etc.” (Act No.
10 of 2014) was promulgated on March 31, 2014 and the special
reconstruction surtax will no longer be imposed from fiscal years
beginning on or after April 1, 2014. Accordingly, the statutory tax
rate used to calculate deferred tax assets and deferred tax liabilities
is changed from 38.0% to 35.6% for temporary differences which
are expected to reverse in the fiscal year beginning on April 1,
2014. The effect of this change is immaterial.

2014

Research and development costs charged to income were ¥1,257
million ($12,210 thousand) and ¥1,119 million for the years ended
March 31, 2014 and 2013, respectively.

2013
¥681

(34)

(55)

(336)

¥563

¥626

$5,4692014
Gross receivables
Unearned interest income
Investments in leases

2013

13. 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, 2014 and 2013, were ¥3,079
million ($29,915 thousand) and ¥2,710 million, respectively. Total
rental revenues, including lease income under finance leases, forthe years ended March 31, 2014 and 2013, were ¥11,696 million($113,641 thousand) and ¥9,626 million, respectively.
(1) The Group as Lessee
The minimum rental commitments under noncancelable
operating leases at March 31, 2014, were as follows:2014¥ 2,268¥ 1,923

(394)

(262)

(3,829)¥ 1,874¥ 1,661$ 18,210$ 22,039

Maturities of lease receivables for finance leases that deemto transfer ownership of the leased property to the lessee areas follows:
Millions of Yen

Thousands of U.S. Dollars

2015

¥ 160

2016

147

1,431

2017

132

1,287

$ 1,554

2018

82

799

2019

42

410

Total

Advertising costs are expenses incurred for a placement of an
advertisement in television, newspapers, magazines and others.
Advertising costs were ¥1,203 million ($11,686 thousand) and¥1,070 million for the years ended March 31, 2014 and 2013,
respectively.

$5,805

Thousands of
U.S. Dollars

Millions of Yen

2020 and thereafter

12. ADVERTISING COSTS

2014

¥597

The net investments in leases are summarized as follows:Year Ending March 31

11. RESEARCH AND DEVELOPMENT COSTS

Thousands of
U.S. Dollars

Millions of Yen

Inhabitants taxes

Actual effective tax rate

$ 44(2) The Group as Lessor
The net lease receivables are summarized as follows:

Undistributed earnings on subsidiaries

Other—net

Thousands of U.S. Dollars

Due within one year

34

324

¥ 597

$ 5,805

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

2015

¥ 609

$ 5,913

2016

515

5,003

2017

442

4,296

2018

316

3,073

2019

188

1,825

2020 and thereafter

198

1,929

¥ 2,268$ 22,039

Total

14. RELATED PARTY TRANSACTIONSThere are no related party transactions during the year ended
March 31, 2014.
During the year ended March 31, 2013, the Trust acquired theCompany’s stock from Fukuko Kimura, mother of Kyosuke Kimura,president and representative director of the Company, at the closing
price immediately before the transaction date through the Tokyo Stock
Exchange Trading Network System in the total amount of ¥441 million.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1425Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 201415. 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
Receivables such as trade notes and accounts receivable, leasereceivables and investments in leases are exposed to customer
credit risk. Trade receivables in foreign currencies arising frombusiness in foreign countries are exposed to the market risk offluctuation 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 arising from importing raw materials andothers are denominated in foreign currencies and are exposedto the market risk of fluctuation in foreign currency exchange
rates. Other accounts payable are due within one year.
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.
Borrowings are mainly associated with the introductionof the “Trust-type Employee Stock Ownership IncentivePlan” and due within five years from the balance sheet date.
Borrowings with variable interest rates are exposed to market
risk fluctuation of interest rates.
Derivatives are forward foreign currency contracts used
to hedge the market risk of fluctuation in foreign currency
exchange rates of trade receivables and payables in foreign
currencies. Please see Note 16 for more details about derivatives.
Bonds with warrants are used as funds for the purchaseof welfare equipment for rental business of the Group andinvestments in domestic and overseas manufacturing facilities.
The redemption date of the bonds is within five years after
March 31, 2014.
(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.

26

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 exchange risk andinterest rate risk)
Marketable and investment securities are managed bymonitoring market values and 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 theperson with defined authority.
Liquidity risk management (the risk that the Group cannot
meet its contractual obligations in full on their maturity
dates)The Company and its major subsidiaries manage
their liquidity risk by holding adequate volumes of liquid
assets, along with preparing and updating adequate cash
management plan on a monthly 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 in case different assumptions
are applied. The contract amounts regarding derivativetransactions described in Note 16 do not indicate market risk
related to derivative transactions.
(a) Fair value of financial instruments
Millions of Yen
March 31, 2014

Carrying
AmountFair Value¥ 21,313¥ 21,313

Time deposits

6,629

6,629

Receivables

27,00227,002

Lease receivables and investments inleases

2,437

2,753

Cash and cash equivalents

Unrealized
Gain (Loss)¥

316

Marketable and investment securities
Held-to-maturity debt securities
Available-for-sale securities

400

398

18,366

18,366

Total¥76,147¥76,461

Payables¥10,149¥10,149

Short-term borrowings

435

435

Long-term bank loans(including current portion)

472

460

Lease obligations(including current portion)

5,746

5,981

Bonds with warrants

(2)
¥

314

¥

12
(235)

10,043

10,825

(782)

Total

¥ 26,845¥ 27,850¥ (1,005)

Derivative transactions (*1)¥¥

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

13

13

Millions of Yen
March 31, 2013

Carrying
AmountFair Value

Cash and cash equivalents¥ 13,060¥ 13,060

Unrealized
Gain (Loss)

Time deposits

3,609

3,609

Receivables

22,585

22,585

Lease receivables and investments inleases

2,287

2,503

¥ 216

(16)

Marketable and investment securities
Held-to-maturity debt securities

700

684

17,387

17,387

Total¥ 59,628¥ 59,828

Payables¥ 10,514¥ 10,514

Available-for-sale securities¥ 200

Short-term borrowings

216

216

Long-term bank loans

458

436

¥ 22

Lease obligations(including current portion)

5,646

5,656

(10)
¥ 12

Total

¥ 16,834¥ 16,822

Derivative transactions (*1)

¥

¥

16

16

Thousands of U.S. Dollars
March 31, 2014

Carrying
AmountFair Value

Cash and cash equivalents$ 207,086$ 207,086

Unrealized
Gain/(Loss)

Time deposits

64,40764,407

Receivables

262,366

262,366

Lease receivables and investments inleases

23,67926,751$ 3,072

3,886

3,868

(18)

178,449

178,449

Marketable and investment securities
Held-to-maturity debt securities
Available-for-sale securities
Total$ 739,873$ 742,927

Payables$ 98,610$ 98,610$ 3,054

Thousands of
U.S. Dollars

Millions of Yen

Short-term borrowings

4,230

4,230

Long-term bank loans(including current portion)

4,588

4,474

Lease obligations(including current portion)

55,827

58,109(2,282)

Bonds with warrants

97,576105,179(7,603)Total$ 260,831$ 270,602$ (9,771)

Derivative transactions (*1)

$

$

123

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 were entered into.
Bonds with Warrants
The fair values of the bonds issued by the Company aremeasured by the market price.
Derivatives
Fair value information for derivatives is included in Note 16.
(b) Carrying amount of financial instruments whose fair value
cannot be reliably determined
2014

$

114

123

Note:
(*1) Receivables and payables arising from derivativetransactions are presented on a net basis and numbers inparenthesis 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 were entered into.

2013

2014

Unlisted equity securities that
do not have a quoted market
price in an active market¥ 1,431¥ 1,143$ 13,902

Investments in investment
partnership

170

170

1,652

Allowance for investment loss is provided for the unlisted equity
securities in the amount of ¥485 million ($4,714 thousand) andnil for the years ended March 31, 2014 and 2013, respectively.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1427

Notes to Consolidated Financial Statements
Paramount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014(5)	Maturity Analysis for Financial Assets and Securities with
Contractual Maturities
Millions of Yen
March 31, 2014

Cash and cash equivalents

Due after Due after
Due inYear Five Years Due after
One Year One
throughthrough
10 Yearsor Less Five
Years 10 Years
¥

6,629

Receivables

27,002670¥ 1,580

March 31, 2014

Held-to-maturity debt
securities

200

Debt securities

1,709

3,185

507

Other

3,270

2,606

851

¥ 39,439¥ 7,371¥ 1,745

March 31, 2013

¥ 200

Available-for-sale securities
with contractual maturities

Cash and cash equivalents

313
¥ 513

$ 1,544
64,407

Receivables

262,366
6,515$ 15,351$ 1,813

Marketable and investment
securities
Held-to-maturity debt
securities

1,943$ 1,943

4,929

3,038

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

16,60530,951

31,76625,3228,269$383,203$71,624$16,954

¥ 13

¥ 13

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One Year

¥ 211

¥ 121

¥ 16

¥ 16

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One YearMarch 31, 2014

Contract
AmountForeign currency forward contracts:
Buying U.S.$$ 2,458$ 1,423

$ 123

$ 123

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.

17. CONTINGENT LIABILITIESAt March 31, 2014, the Group had the following contingent
liabilities:
Millions of Yen

Thousands of
U.S. Dollars

Guarantees for employees’ housing loans

¥ 85

$ 824

Recourse obligation for the balance on thetransfers of payables in factoring transactions

1,634

15,872$ 4,981

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

18. COMPREHENSIVE INCOME

16. DERIVATIVESThe Group enters into foreign currency forward contracts to hedge
foreign exchange 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 is28

Reconciliation of the differences between basic and diluted net
income per share (“EPS”) for the years ended March 31, 2014 and2013, is as follows:
Millions ofYen

Thousandsof Shares

Net Income

WeightedAverage
Shares (*1)

Year Ended March 31, 2014

Basic EPS—Net income
available to commonshareholders¥ 7,385

30,641,779
1,826,595

Effect of dilutive securities—
Stock acquisition rights

46,028

Diluted EPS—Net income
for computation

Millions of Yen
2014

2013

2014

Unrealized gain (loss) on available-for-sale securities:
Gains arising during the year

¥ 730

¥ 1,223$ 7,097

Reclassification adjustments toprofit or loss

(955)

92

(9,287)

Amount before income tax effect

(225)

1,315

(2,190)

Income tax effect

80

(523)

780

¥ (145)¥ 792$ (1,410)

¥ 632

¥ 380

$ 6,139¥ 487¥ 1,172$ 4,729

Total
Foreign currency translation adjustments:
Adjustments arising during the year
Total other comprehensive income

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014(1) Type of shares to be acquired:

Common stock of the Company(2) Total number of shares to beacquired:

1,500,100 shares (maximum)(3) Total acquisition price of shares: ¥ 4,350,290,000 ($42,268,655) (maximum)(4) Acquisition period:¥ 241.01¥ 227.13

Millions ofYen

Thousandsof Shares

Yen

Net Income

WeightedAverage
Shares (*1)

¥ 7,094

30,635,890

From May 23, 2014 to June 30, 2014

$ 2.34$ 2.21
U.S. Dollars¥ 7,094

30,716,478

From May 23, 2014 to June 19, 2014(20 business days)(2) Acquisition price:¥ 2,900 ($28.18) per share(3) Total number of shares to beacquired:

1,500,000 shares(4) Date of public notice ofcommencement of the Tender May 23, 2014
Offer Bid:
July 11, 2014

3. Results of the Tender Offer¥ 231.54(1) Total number of tendered shares:

1,400,233 shares(2) Total number of shares acquired:

1,400,233 shares(3) Total acquisition price:¥ 4,060,675,700 ($39,454,680)¥ 230.94

Note:(*1)	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 for the years used for computation of thebasic and diluted EPS.

20. SUBSEQUENT EVENTSAppropriation of Retained Earnings
The following appropriation of retained earnings at March 31,
2014, was approved at the Company’s shareholders meeting heldon June 27, 2014:
Millions of
Yen
Year-end cash dividends, ¥25 ($0.24 ) per share (*1)

(1) Tender Offer period:(5) Settlement commencement
date:

EPS

80,588The components of other comprehensive income are as follows:
Thousands of
U.S. Dollars

EPS

32,514,402

Effect of dilutive securities—
Stock acquisition rights
Diluted EPS—Net income
for computation

U.S. Dollars¥ 7,385

Year Ended March 31, 2013

Basic EPS—Net income
available to commonshareholders

Yenof the Companies Act with replacement of terms pursuant toparagraph 3 of Article 165 of the Companies Act and the Company’s
Articles of Incorporation.
1. Details of the resolution by the board of directors’ meeting

2. Overview of the Tender Offer

Effect of dilutive securities—
Bonds with warrants

Thousands of U.S. Dollars

Due after Due after
Due inYear Five Years Due after
One Year One
throughthrough
10 Yearsor Less Five
Years 10 Years

Time deposits
Lease receivables andinvestments in leases¥ 146

Contract
AmountForeign currency forward contracts:
Buying U.S.$

Thousands of U.S. Dollars
March 31, 2014

¥ 253

Millions of Yen

Marketable and investment
securities

Total

Contract
AmountUnrealized
Due after Fair Value Gain (Loss)One YearContract
AmountForeign currency forward contracts:
Buying U.S.$¥ 187

19. NET INCOME PER SHARE

Millions of Yen

159

Time deposits
Lease receivables andinvestments in leases

executed by the relevant function under the approval of theperson with defined authority.
Derivative Transactions to Which Hedge Accounting Is Not
Applied¥ 767

Thousands of
U.S. Dollars$ 7,452

Note:(*1)	As the Company’s stock held by the Trust is stated as treasury
stock in the accompanying consolidated financial statements,
the dividends to the Trust of ¥3 million ($33 thousand) are
not included in the total amount of the year-end cash
dividends above.
Acquisition of Treasury Stocks by Means of Tender Offer
The board of directors of the Company made a resolution on
May 22, 2014 concerning acquisition of treasury stocks by meansof a Tender Offer in accordance with paragraph 1 of Article 156

21. 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
to bed business, for the years ended March 31, 2014 and 2013.

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1429Notes to Consolidated Financial Statements

Independent Auditor’s ReportParamount Bed Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2014(2) Information about Products and Services(6)	Information about Amortization of Goodwill andUnamortized Balance of Goodwill

Millions of Yen
2014

Millions of Yen

Products and Services
Ward
MedicalMattresses Equipment
Equipment

Beds
Sales toexternalcustomers¥ 34,808¥ 5,021¥ 4,464

Rental

Other

2014

Total

¥ 3,607 ¥ 14,136 ¥ 10,758 ¥ 72,794

Bed

Total

Amortization

¥ 73

¥ 73

Unamortized balance of goodwill

111

111

Millions of Yen
Millions of Yen

2013

2013

Bed

Products and Services
Ward
MedicalMattresses Equipment
Equipment

Beds
Sales toexternalcustomers¥ 32,355¥ 4,617¥ 4,455

RentalOther¥ 3,483 ¥ 13,063

Total

Products and Services

Sales toexternalcustomers

Other

Total
¥ 138

¥ 138

121

121

Thousands of U.S. Dollars
2014
Bed

2014
Ward
MedicalMattresses Equipment
Equipment

Unamortized balance of goodwill¥ 8,744 ¥ 66,717

Thousands of U.S. Dollars

Beds

Amortization

RentalTotal

Amortization

$ 712

$ 712

Unamortized balance of goodwill

1,079

1,079

Total

$338,207 $48,790 $ 43,375 $ 35,051 $137,338 $104,530 $707,291(3) Information about Geographical Areasa. SalesMillions of Yen
2014
Japan

Asia

¥ 67,336¥ 3,662

Middle East
¥ 222

Europe¥ 1,372

Other
¥ 202

Total
¥ 72,794

Millions of Yen
2013
Japan

Asia

¥ 62,513¥ 2,867

Middle East
¥ 99

Europe¥ 1,124

Other
¥ 114

Total
¥ 66,717

Thousands of U.S. Dollars
2014
Japan

Asia

$ 654,254$ 35,582

Middle East
$ 2,163

Europe

Other

Total

$ 13,329$ 1,963$ 707,291

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, 2014
and 2013.
(4) Information about Major Customers
In the years ended March 31, 2014 and 2013, there were
no individual customers for whom sales exceeded 10% ofconsolidated net sales.
(5) Information about Impairment Loss on Fixed Assets
In the years ended March 31, 2014 and 2013, there were no
impairment loss on fixed assets.

30

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 14

31

Global Network

Corporate/Share Information
As of March 31, 2014

8

14

7

11

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:¥4,166 million

Representatives:

Chairman: Kenji Kimura

1 2 3 4

Distribution by type of shareholder:

0.4%

24.1%

President and Chief Executive Officer: Kyosuke Kimura

30.4%

Paramount Bed Holdings Co., Ltd. is the holding company of a comprehensive medical

9%group comprised of the core entity Paramount Bed Co. Ltd., which engages in the5

manufacture and sale of beds, mattresses, and equipment for medical and nursing

6

care environments, and subsidiaries engaged in services such as the inspection and13

maintenance of Paramount Bed products and the leasing and wholesaling of assistive
products. Paramount Bed Holdings Co., Ltd. is responsible for the planning, drafting,and implementation of Group management strategies, auditing of group management,
and other tasks related to Group management control.

1 Paramount Bed Holdings Co., Ltd.

Number of Employees:

Manufacture and sales of medical and nursing-care equipment
2 Paramount Bed Co., Ltd.

2-14-5 Higashisuna, Koto-ku, Tokyo 136-8670, Japan
Inspection, maintenance, and leasing of beds and other products
3 Paratechno Co., Ltd.

5-28-3, Hongo, Bunkyo-ku, Tokyo 113-8415, Japan
Rental and wholesale business for nursing-care goods
4 Paramount Care Service Co., Ltd.

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

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

30,828,587

Sales companies

Number of Shareholders:

12,547924 Talomsin Building 5th Fl., Rama 3 Rd., Bangpongpang
Yannawa, Bangkok 10120, Thailand
11 Paramount Bed India Pvt. Ltd.

1002A&B, 10th Floor, Welldone Tech Park, Sector-48,
Sohna Road, Gurgaon-122002, India
12 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

32

24.1

Japanese security companies

0.4

7.0%

7.3%
55.0%

Principal Shareholders:

%

Name

CTOK Co., LTD.

500,000 or more

55.0

100,000 to 499,999

20.5

11.5

50,000 to 99,999

4.1

10,000 to 49,999

7.3

Number of shares held
(thousand)

%

3,521

LLAGE WOOD Co.

2,873

9.3

NIUVALLEY CAPITAL LLC

2,179

7.1

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

1,078

3.5

Rua Maestro Cardim 407, Salas 1009 E 1010, Liberdade
Cep: 01323-000 Sao Paulo-Sp-Brazil

Mizuho Bank, Ltd.

1,000

3.3

Kenji Kimura

912

3.0

Paramount Bed Co., Ltd. Middle East Office

Kyosuke Kimura

911

3.0

Dubai Airport Free Zone, 4WB, Room No. G38, P.O. Box 293552,
Dubai, U.A.E.

Michihide Kimura

910

3.0

Japan Trustee Services Bank, Ltd. (Trust Account)

844

2.7

Pa ra mo unt B ed Hol ding s Co. , Ltd. A NNUA L RE PORT 2 014

Japanese financial institutions

20.5%

3.9

Z.A. la Fosse Neuve, Route de Meslay 37210 Parcay-Meslay,
France

15.8

4.1%

1,212

8 Corona Medical S.A.S. France

30.4

Foreign Investors

4.9%
1.2%

Trust & Custody Services Bank, Ltd. (Pension Trust Account)

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

Other Japanese companies

Distribution by number of shares held:

Paramount Bed Do Brasil Ltda.

Representative office29.3

16 (non-consolidated)

Lot H-1, Long Duc Industrial Park, Long Duc Ward,Long Thanh Dist., Dong Nai Province, Vietnam
10 Paramount Bed (Thailand) Co.,Ltd.

Japanese individuals and others

2,404 (consolidated)

9 Paramount Bed Vietnam Co., Ltd.

Domestic

29.3%

15.8%

Business Lines:

1210

Corporate Name:

5,000 to 9,999

1.2

1,000 to 4,999

4.9

less than 1,000

7.0

Note: Shareholding ratios are calculated without including the total number of treasury stock shares (13,796 shares).

Consolidated subsidiaries
Non-Consolidated subsidiaries

Pa ra m ou nt B e d Hol d i ngs Co. , Ltd . A N N UA L RE PO RT 20 1433