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annual report
2001[ For the 12 manths ended Octber 31,2001 ]p1-30 06.6.14 0:00 PM ページ 2

Financial Highlights■ Non-Consolidated Financial Highlights
Millions of yen

PercentchangeThousands of
U.S. dollars

2000

2001

(2000/2001)

2001¥ 61,030¥ 64,295+5.4$ 526,580

Operating income

3,105

2,771

-10.7

22,697

Net income

1,455

518

-64.4

4,247

Total shareholders' equity

30,92631,034+0.3

254,172

Total assets

102,921

105,423+2.4

863,418

PercentchangeThousands of
U.S. dollars

Rental revenues and sales of goods

yen

Per share of common stock
Net income

48.66

17.14

-64.8

$ 0.14

Cash dividends

18.00

18.00

00.0

0.15

Note: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥ 122=US $1,
the approximate exchange rate on October 31, 2001.

C O N T E N T S

Net Income(Millions of yen)

2,000

Financial Highlights ………………………………2
A Message from President …………………………3
Mission Statement

1,500

Total Assets(Millions of yen)

120,000………………………………4
1,000

100,000

Topics 2000-2001…………………………………637 th Business Period Financial Review ………………8
Consolidated Balance Sheet ………………………10
Consolidated Statement of Income …………………12
Consolidated Statement of Cash Flows………………13
Consolidated Statement of Shareholders' Equity ……14500

80,00060,000

0
97

98

99

Total Shareholder’s Equity

00

01(Millions of yen)

40,00020,000
0
97

98

99

00

01

Notes To Consolidated Financial Statements …………15
Cash Flow

Non-consolidated Financial Position Cover …………21
Non-consolidated Balance Sheets …………………22
Non-consolidated Statement of Income ……………24
Non-consolidated Statement of Shareholders' Equity …25
Notes To Non-consolidated Financial Statements ……26
Independent Auditors' Report ……………………29
Corporate Data …………………………………30

12,00010,000
8,000
6,000
4,000
2,000
0
97

2 Annual Report 2002

(Millions of yen)

98

99

00

01

p1-30 06.6.14 0:00 PM ページ 3

A Message from President

Kanchu Kanamoto
President

Kanamoto Continues to Evolve Amidst of a Severe Competitive Environment.
Once again I would like to express my appreciation for youramount of time that enables a firm to recover its invested capital.

exceptional support of Kanamoto Company, Ltd.

This is the ability, so to speak, to position “invested capital

2001 was the start of the 21st century and a year that baderecovery skills” as the immutable factor. There is no lack of

farewell to the mechanisms and frameworks that comprised the

choices for trends, on the other hand, including reduction in theonce familiar state of affairs. In an economic environment where

public works that formed a pillar of the construction market,

companies are unable to peer very far into the future, Kanamoto

structural reforms in the construction industry that uses rented

successfully achieved growth in both revenue and ordinary

construction equipment, and market entry by newcomers related

income in its main business of construction equipment rentals forto equipment manufacturers. Naturally Kanamoto Company will

the 37th Business Period that ended in October 2001 on both a

respond accordingly and achieve positive results. For in the midst

consolidated and unconsolidated basis.

of these trends, it seems firms must ascertain carefully whether

This was the result of the continuing and unwavering support oftheir ability to change the immutable is really only lying dormant

all of our stakeholders, for which we are immensely grateful.

and waiting to be used.

Recalling and looking back over the recent business environment

For Kanamoto Company, a pioneer in the construction equipment

brings to mind a certain expression, “fueki ryuko sono moto itsu

rental industry and a company that is rated the industry leader innari (immutability and trends spring from the same root).” This isboth name and fact, I am convinced that expanding the shape ofa haiku principle of the poet Basho. “Immutability” refers to an

our own business can make a significant contribution to theunchanging law or truth that transcends an era, while “trends”

revival of Japan’s construction industry.

are externals that vary with the age and the environment.

For our 38th Business Period (fiscal year ending October 2002),

Although these are conflicting concepts, taken together they

we are not being fruitlessly buffeted between hopes and fears bymake the point that the tendency to seek what is fresh and to

macro trends, but aggressively working to strengthen ourchange is in fact an unvarying and essential quality, and thatmanagement capabilities as our top priority.

immutability and trends have a single origin. We may interpret thisAt the same time, we will establish low-cost operating techniques

to mean that immutability is not eternal but is something that may

throughout the entire company and equip Kanamoto Company

reflect certain aspects of an age and change in appearancewith the competitive ability to be a winner in today’s toughaccording to the trends. I sense that the immutability and trends

competitive environment.

argument of this Edo period principle has an uncanny resonancewith the circumstances surrounding today’s businesses.

We will continue to concentrate on the venture business support

Standards and arrangements that were thought to be permanently

activities that we have been conducting in order to discoverunchangeable may be altered overnight, a fact that corresponds

leading future businesses. Among the investments that Kanamoto

precisely to a change in quality of immutability because of recent

has made to-date, a number of promising investments including

trends.

microturbine electrical generators and VoIP (Internet telephone)

The source of profitability in the construction equipment rental

technology have begun to produce positive results.

business is the ability to minutely analyze the market, build an

We look forward to receiving your future redoubled support andoptimal portfolio of rental assets and execute in the shortest

good wishes.

Annual Report 2002 3

p1-30 06.6.14 0:00 PM ページ 4

Mission Statement

The Key to Business is Rationalization and Integrated Capabilities.
Reliable Solutions Leading to a New Era
Kanamoto has always sought innovation and change. We view never-ending challenges, including the expansion of our main
business and the development of new markets, the development of strategically located branches and adjustment of theconstruction industry’s posture of reliance on public works investment, as our primary obligation for increasing customer
satisfaction. In a tough new era, the solution demanded the most by today’s business environment is “rationalization” thatcan deliver multifaceted services, beginning with construction equipment rentals. To respond to these expectations,
Kanamoto will boldly and steadily continue to evolve in the future, working with all of our stakeholders to lead the way to thenext generation.

Mission of a Leading Company
Kanamoto was a pioneer in the construction equipment rental business. We remain the leading company in the industry as
we continually achieve the industry’s top performance. Our organization is second to none in terms of a full line-up of topquality rental assets, total asset management utilizing the most advanced on-line computer network and a complete
maintenance system. During 2001 as well, Kanamoto firmly maintained the growth in operating results achieved in prior years
and was successful in attaining the top market share. This performance was entirely due to the unwavering support
Kanamoto received from firms in the construction industry.
As our most important management issues for the future, Kanamoto will move forward by zealously focusing on providing its
services to more customers and contributing to the revitalization of the construction industry.

Formation of a “Kanamoto Alliance and Associates” Company GroupIn order to provide a higher dimension of customer satisfaction and efficiently utilize Kanamoto’s rental assets, Kanamoto hasentered into alliances with other leading companies in the industry, centering on the western area of Japan. In addition to ouralliance with Komatsu Group, the alliance group is comprised of firms in Kyushu, Okinawa and Shikoku. This alliance grouphas further strengthened the foundations of Kanamoto’s business operations.
In its venture support activities as well, Kanamoto has diversified its investment targets into sectors that show promise forthe future including energy and IT. These firms are counted among the hottest new stocks and are generating attentiongrabbing performance.
Kanamoto is firm in its conviction that the Kanamoto alliance and associates group will enable Kanamoto to create new
solutions to offer to its customers.

Management in an Era of Global Standards
From the standpoint of providing the advantages of business rationalization to our customers, at Kanamoto we are
aggressively promoting internal management efficiency improvements.
Kanamoto first listed it stock on the Sapporo Stock Exchange in 1991. We followed this by listing our shares on the Second
Section of the Tokyo Stock Exchange in 1996, and in 1998 saw our shares elevated to the First Section of the Tokyo Stock
Exchange, the most rapid such listing in the history of the Exchange. This record is the result of Kanamoto’s incessant efforts
to increase management efficiency improvement and optimize its business investment.
While Kanamoto was among the first companies in Japan to adopt management evaluations such as ROE (return on equity)
as financial indicators that conform to global standards, we are also striving to achieve growth in EBITDA (earnings before
interest, taxes, depreciation and amortization) as the most important indicator for the equipment rental business, which is a
“stock” business.

4 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 5

Information Products DivisionMarket Development Division
Construction Equipment Rental Division
Vigorously promotes construction company asset
reductions and the strengthening of operating
efficiency by enabling construction companies toobtain the right equipment at the right time and in
the right quantity.

Meets users’ needs by proposing andsupplying the most up-to-date models
of various computers and related
peripheral equipment.

Proposes integrated solutions
to Kanamoto’s customers, bycentralizing the know-how of
Kanamoto’s broad businesssectors. A new businessdivision organized in 2001.

Venture Business Support Activity
Invests in promising venturecompanies, with the objective of
locating and supporting firms that willbe the next-generation leadingbusinesses. Achieving steady results.

Alliance Strategy
Through its alliances with construction
equipment rental companies that have strong
ties with their local communities, Kanamotocan respond rapidly and accurately to orders
received anywhere in Japan.

Steel Sales Division
Develops its business as a distributor
centered on Hokkaido, handling a variety ofsteel materials and general steel products.

Annual Report 2002 5

p1-30 06.6.14 0:00 PM ページ 6

Topics 2000-2001

Kanamoto Shikoku Co., Ltd.
Kanamoto Shikoku Co., Ltd. began operations in June 2001 in thecity of Takamatsu, Kagawa Prefecture. Kanamoto established thisnew company through collaborative financing with Tadano, Ltd.,
Japan’s largest manufacturer of construction cranes. The
company’s objectives are to have five or six branches in 10 years,
a 20% share of the market for construction equipment rental in
Shikoku.

Kanchu Kanamoto (left), President of Kanamoto andKanamoto Shikoku Co., Ltd., and Sakae Tadano (right),
President of Tadano, Ltd. (right)

Opening of Kanamoto’s Hassamu Megastation
Kanamoto group consolidated its main businesses in one location when it
opened Kanamoto Hassamu Megastation, a large-scale multi-use marketingbranch in the Hassamu area of Sapporo, Hokkaido in November 2001.
Occupying an extensive site covering 32,456m2, Hassamu Megastation is the
new home of the Sapporo office of Kanamoto’s Steel Sales Division and the
Sapporo sales office of Assist Co., Ltd. The new Sapporo Equipment Centerfor the Construction Equipment Rental Division and the SRG Kanamoto Co.,
Ltd. Sapporo sales office were also newly constructed at the site. By

Microturbine electrical generator exhibited at Japan
Expo in Fukushima 2001 (center)

centralizing four business divisions that operated independently in the past,
Kanamoto will be able to provide services that ensure greater customer
satisfaction.

Kanamoto exhibits a methane gas-powered MTG electrical generation
system at Japan Expo in Fukushima 2001
The exposition Japan Expo in Fukushima 2001 was held from July 7 to September
30, 2001 in Sukagawa, Fukushima Prefecture with a theme of environmental
preservation. For its pavilion at the fair, Kajima Corporation adopted a power generating facility based on a high-temperature
methane gas fermentation processing system. The system utilized a microturbine electrical generator from U.S. manufacturer
Capstone Corporation, for which Kanamoto is the rental and sales representative in Japan. The generator supplied part of theillumination for the pavilion by generating electricity using a microturbine generator fueled by methane gas produced frombiodegradable garbage collected on the exhibition grounds.

Kanamoto participating in AssetLine, the world’s
biggest auction site for used construction equipment
AssetLine Holdings Ltd., which has developed the world’s
biggest Internet-based auction business for used construction
equipment, began Japanese operations after establishing
AssetLine Corporation in June 2001. Kanamoto Company andNichimen Corporation, the general trading company, areinvestors in AssetLine Corporation, which is responsible forthe group’s headquarters functions, and are also participatingin Asset Corporation’s business as strategic business partners.

AssetLine’s website. About 10,000 companies from around theworld are registered as buyers and sellers and are able toconfirm photographs and detailed data on approximately 30
separate products

6 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 7

During 2001 Kanamoto offered a variety of products for auctions held in March, June, and September and successfully
concluded 99 sales. In addition to cooperating with AssetLine Corporation to establish the inspection categories for auction
products, 15 maintenance staff from Kanamoto who hold special class construction equipment maintenance technician
qualifications, the most advanced maintenance engineer qualification, have been formally certified as AssetLine inspectors
and provide product inspections upon request from AssetLine Corporation.

Br a n c h Netwo rk
Our Growing Branch Network
Hokkaido

HonshuTotal

As of October 31, 2001

As of October 31, 2001

As of October 31, 2001

Construction Equipment Rental Operations

54

72

126

Steel Sales

3

0

3

Number of Branches

Computer and Peripheral Equipment Rental Operations

0

1

1

Total

57

73

130

Construction Equipment Rental Division
Steel Sales Division
Computer and Peripheral Equipment Rental DivisionMarket Development Division
Kanamoto Alliance Group Firms (8 companies)
Assist Co., Ltd. (9 offices)
Engaged in the rental of safety products such as signals or signs for the construction industry.

SRG Kanamoto Co., Ltd. (2 branches)
A joint venture between Kanamoto and SRG Takamiya Co., Ltd. that provides rentals of
temporary scaffolding.

Kanatech Co., Ltd. (13 branches)
Designs, manufactures and sells modular housing units for construction use.

Kanamoto Shikoku Co., Ltd.
A construction equipment rental company established as a joint venture between
Kanamoto and Tadano, Ltd.

Kyushu Kensan Group (8 branches, 4 group companies)
Construction equipment rental company headquartered in Fukuoka Prefecture.

Daiichi Machine Industries Co., Ltd. (7 branches)
Construction equipment rental company headquartered in Kagoshima Prefecture.

Taniguchi Co., Ltd. (3 branches)
Developing a construction equipment rental business in the area around Otaru, Hokkaido.

Machida Kikou Co., Ltd. (13 branches)
Construction equipment rental company headquartered in Okinawa Prefecture

Annual Report 2002 7

p1-30 06.6.14 0:00 PM ページ 8

Report of Operating Results for the 37 th Business Period

1. Summary of Fiscal Year Operating Results (Fiscal year ended October 2001)
External Environment

greater emphasis on sales in the Sapporo metropolitan area,

The condition of Japan’s economy grew more serious throughout

which accounts for a large portion of sales in the Hokkaido region.

the business period, as shown by the negative outlook at all firms■ Information Products Divisionin the Bank of Japan’s Diffusion Index (DI). The business

The Information Products Division achieved an 11.0% increase insentiment of firms continued to deteriorate, as demonstrated

rental revenues as the result of steady orders for investment inparticularly by the most recent business outlook survey, which

new model workstations, which rose 14.2%, and an 8.7%

showed the worst business conditions outlook since the survey

increase in sales revenue from higher demand for wireless LAN

was begun.

equipment.

In the construction industry, the principal customer for
Kanamoto’s construction equipment rental business, public

Business Conditions at Consolidated Subsidiaries

spending in the central government’s initial FY2001 budget was

Taniguchi Co., Ltd. is building a solid market share in themaintained at ¥7.25 trillion. Nevertheless, as a result of fears that

Shiribeshi region of Hokkaido. The company increased botha public spending increase could not be expected in the second

revenue and profits during the business period and continued tosupplementary budget because of financial reform measuresachieve steady growth.

announced by Prime Minister Koizumi’s administration and a tightAssist Co., Ltd. (Hokkaido) increased the number of its branches

lid on local government spending budgets, the number of orders

from four to nine in order to expand its sales area to all ofnationwide for public construction fell after May. Added to the

Hokkaido. As a result, the company had higher sales but lower

rapid slowdown in private capital investment throughout Japan,

profits because of a larger burden for capital equipment.

with the exception of the Tokyo metropolitan area, Japan’s

SRG Kanamoto Co., Ltd., which closed its books on its second

business environment was exceedingly severe.

fiscal year since being established, was within the range ofrevenue and earnings projected in its initial business plan. The

Company Operating Results (Unconsolidated)

firm was able to steadily improve its operating results despite

Kanamoto Company’s total revenues for the fiscal year werecompetition from other companies in the same business.

¥64,295 million (an increase of 5.4% compared to the prior fiscal

Although this was the first fiscal year for external sales byyear), and ordinary income was ¥3,294 million (up 23.5%).

Kanatech Co., Ltd., the company posted good operating results

Revenues for each operating division are discussed below.

that exceeded the objectives set in its initial business plan.

■ Construction Equipment Rental Division

Providence Brewery Co., Ltd. moved to reform its profit structure

Although excess competition intensified among companies in thethrough actions such as consigning management of its restaurant

construction equipment rental industry as public spending slowed,

business to an outside firm. Revenue and profit declined,

demand for construction equipment rentals remained strong as

however, because of a brief shutdown for remodeling and theconstruction companies sought to control capital spending. At

effect of cool summer weather on sales.(See Table 1)

Kanamoto, total rental revenues for the Construction Equipment
Rental Division rose 3.8% compared to the prior fiscal year as theConsolidated Operating Results for the Fiscal Year Ended October 2001

result of a reorganization of the sales team to cover regional

During the current accounting period, the Company charged tomarkets, establishment of small local offices to provide close

income an extraordinary loss for the full amount of ¥1,982 million

customer contact and efforts to expand the Company’s marketingfor a one-time valuation difference for a change in accounting

area. Sales of construction equipment increased 9.6% over the

standards based on the introduction of accounting for post-

prior year, as a result of a transition to low-exhaust emissions

employment benefits.

equipment owned by the Company (rental assets) and aggressive

As a result of the above activities, the Company had total

sales of used equipment. Both activities were part of as anrevenues of ¥67,346 million, an increase of 8.6% over the prior

Ecology-oriented Project at the new Used Products Sales Division,

fiscal year. Ordinary income was ¥3,257 million (up 27.8%) andwhich Kanamoto Company established during the fiscal year.

net income for the period was ¥472 million (down 65.3%).

Revenue for the division as a whole was up 5.2%. By region,

8 Annual Report 2002

rental revenue rose 4.0% in Hokkaido as a result of increasing the

Other Business Operating Results

number of small-scale branches, while sales were flat in the

The effect of Japan’s economic recession has reduced the number

Tohoku Region as a cycle of public spending ended. Salesof promising investment targets for the Company’s venture businessincreased 7.3% in the Kanto & Shinetsu Region as both public

support activities. Support such as new capital investment provided

spending and private demand were strong. In the Kinki & Chubu

by the Company declined as a result, totaling ¥35 million for the

Region, sales grew by 10.7% as the Company’s alliance strategy

fiscal year.

in western Japan proved successful. During the fiscal year the

The number of inquiries for rentals and purchases of the Capstone

Company established nine new branches, including four new

micro-turbine electrical generators increased as the result of offering

branches in Hokkaido Region, one branch in the Tohoku Region,

Active Power Corp.’s specifications and cogeneration systems, andtwo branches in the Kanto & Shinetsu Region and two branches

the start of unit deliveries. The delivery of units to the Shin Akabirain the Kinki & Chubu Region.

Mine owned by Sumitomo Coal Mining Co., Ltd. in particular, which■ Steel Sales Division

is the first “multi-pack” micro-turbine system to be installed in

Sales were up 5.4% compared to the prior year as the result ofJapan, is expected to produce more business in the future.

p1-30 06.6.14 0:00 PM ページ 9od

2. Outlook for the Next Fiscal Year (Business Period Ending October 2002)
Business Environmenta large (total area 32,456m2) multi-use facility located in Sapporo,

The details of the Koizumi administration’s reform concepts,

Hokkaido. In addition to housing the Sapporo sales office of thewhich were announced in the phrase “structural reform with noCompany’s Steel Sales Division and the Sapporo Equipment

sanctuaries,” are gradually becoming clearer. Sectors being

Center for the Construction Equipment Rental Division, theemphasized are IT, urban renewal, the environment, the aging of

Sapporo sales offices of Assist Co., Ltd and SRG Kanamoto andJapan’s population and shrinking youth population, education,

the Company’s parts center are also located at the facility.

science and technology and regional revitalization. The strength ofKanamoto plans to use the facility to conduct sales operation forvarious forces arrayed against reforms is also strong, however,

the group as a whole. For the Steel Sales Division in particular, theand it is impossible to predict how public sentiment will change

facility consolidates and centralizes the three sales offices forwhen the pain accompanying the progress of the reforms

Sapporo, Muroran and Tomakomai in Sapporo, where thebecomes evident. It will be difficult to avoid reductions in public

metropolitan and surrounding areas account for the bulk ofspending, however, and the construction industry and related

demand for steel in Hokkaido. The Company intends to use theindustries are projected to be greatly effected. The Koizumi

facility to engage in strong sales linked with construction

administration has also made a public promise to quickly dispose

equipment rentals.

of the non-performing loan problems at Japan’s financial
institutions, a large proportion of which are loans to general

With regard to the Company’s consolidated subsidiaries as well,construction companies and real estate-related businesses. This

there are many alliance partners for the company’s mainmeans detailed attention to credit management will be vitally

operations in the construction equipment rental business.

important, because the clean-up of loans to firms that cannot

Kanamoto plans to further create alliances and unify operations, in

reduce their liabilities through rationalization of operations can beorder to improve operating efficiency.

expected to proceed quickly.
In order to reduce their assets and maintain earnings, construction

In addition to the products it already handles, the Company’s

firms facing this type of situation will undoubtedly utilize

Information Products Division will newly commercialize andconstruction equipment rentals even more than they have in themarket KISARA, the VoIP Internet telephone product developed

past. This means the rental industry still has substantial room forby Soft Front Inc., a company with strong ties to Kanamoto

growth. Nevertheless, the severity of the competition tothrough the Company’s venture business support activities. In

determine the survivors in the construction equipment rental

other areas, Kanamoto will continue its efforts to expand sales ofindustry is growing more intense. Maintaining future growth will

Capstone Corporation’s micro-turbine electrical generators.

require appropriate management efforts and solid financial
strength.

Projected Consolidated Operating Results for the Fiscal Year Ending October 2002

Although public spending will be curtailed, urban renewal has

During the current business period the Company nearly

been cited by the Koizumi administration as one sector forcompleted its shift to low-gas emissions equipment. As a result,emphasis. For Kanamoto Company this means that growth in the

the Company anticipates that revenues will decline because thisTokyo metropolitan area will be a critically important future issue.

will sharply reduce sales of used equipment. Total revenues forthe next fiscal year are projected to be ¥65,500 million, 2.7%

Company Response (Including Consolidated Subsidiaries)

lower than in the fiscal year ended on October 31, 2001.

Kanamoto will focus on maintaining the profitability of its

Furthermore, from a long-term perspective the Company projects

construction equipment rental business, which is the Company’s

a higher level of depreciation expense as a result of its aggressive

primary business, and will seek to strengthen the division’s

introduction of rental assets, and forecasts ordinary income will

marketing. The Company will simultaneously proceed tobe ¥1,530 million (53.0% lower than in the prior fiscal year).

rationalize its operations and equipment in order to enhance its

Because it will not incur the extraordinary loss that accompanied

low-cost operations. Priority for opening new branch offices will

the change to accounting for post-employment benefits, however,be placed on the Tokyo metropolitan area.

the Company projects net income for the coming fiscal year will

On November 1, 2001, Kanamoto opened its Hassamu Megastation,be ¥700 million, 48.3% higher than in the fiscal year just ended.

■ Ta b l e 1 :C on sol i d a t e d Co mp a nies
President

Head office location

Business

Equity capital

Percent of capital
funded by Kanamoto

SRG Kanamoto Co., Ltd.

Kanchu Kanamoto

Sapporo, Hokkaido

Rental of temporary
construction materials¥30.0 million

60.0%

Taniguchi Co., Ltd.

Nobuaki Taniguchi

Otaru, Hokkaido

Rental of machines forconstruction use¥50.0 million

50.0%

Assist Co., Ltd.

Nobuaki Taniguchi

Otaru, Hokkaido

Rental of safety products
for construction use¥36.0 million

50.0%

Providence BreweryCo., Ltd.

Kanchu Kanamoto

Muroran, Hokkaido

Production and sale ofregional beers¥153.5 million

48.8%

Kanatech Co., Ltd.

Kanchu Kanamoto

Sapporo, Hokkaido

Manufacture and sale of modular
housing units for temporary use¥20.0 million

100.0%

Annual Report 2002 9

p1-30 06.6.14 0:00 PM ページ 10

Consolidated Balance Sheet■ ASSETS
Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

2001

2001

¥ 16,422¥ 15,991$ 130,969

757

120

981

23,33225,808211,366

Inventories

826

1,118

9,151

Deferred income taxes (Note 8)

103

230

1,885

Other current assets

4,127

3,283

26,891Less : Allowance for doubtful accounts

(174)

(325)

(2,661)45,39346,225378,582

Rental equipment

58,85656,322

461,275

Building and structures

14,337

14,883

121,889

Machinery and equipment

4,936

4,949

40,536(49,289)(46,639)(381,972)

28,84029,515

241,728

24,182

24,397

199,810

339

59

483

53,361

53,971

442,021

Investments in affiliates (Note 3)

86

204

1,671

Investments in securities (Note 3)

2,874

3,585

29,365

Deferred income taxes (Note 8)

485

1,567

12,834

Other assets

1,443

1,534

12,562Less : Allowance for doubtful accounts

(230)

(447)

(3,660)Total investments and other assets

4,658

6,443

52,772¥ 103,412¥ 106,639$ 873,375

As of October 31, 2000 and 2001

Current assets :Cash and cash equivalents
Short-term investments (Note 3)
Notes and accounts receivable, trade

Total current assets

Property and equipment :Less : Accumulated depreciation

Land
Construction in progress
Total property and equipment

Investments and other assets :10 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 11■ LIABILITIES AND SHAREHOLDERS’ EQUITY
Thousands of
U.S. dollars (Note 1)

Millions of yen
As of October 31, 2000 and 2001 (Unaudited)

2000

2001

2001

Current liabilities :Short-term bank loans (Note 4)¥ 4,727¥ 510$ 4,177

Current portion of long-term debt (Note 4)

14,477

15,240124,813

Notes and accounts payable, trade

11,696

12,620103,363

Accrued income taxes

204

1,319

10,806

Accrued bonuses for employees

503

595

4,871

Other current liabilities

1,341

1,643

13,455

Total current liabilities

32,94831,927

261,485

38,36840,043327,950-

2,009

16,452Other liabilities

1,247

1,750

14,338

Total non-current liabilities

39,61543,802358,740

68

67

545

Issued:2001–30,253,241shares

-

8,597

70,407

2000–30,229,241shares

8,591

-

-

Additional paid-in capital

9,715

9,720

79,610Retained earnings

12,484

12,396

101,523

Net unrealized gain on other securities,net of taxes(Note 3)

-

141

1,151

Treasury stock

(9)

(11)

(86)

30,78130,843

252,605¥ 103,412¥ 106,639$ 873,375

Non-current liabilities :Long-term debt (Note 4)
Accrued pension and severance costs (Note 5)

Minority interests

Contingent liabilities (Note 6)

Shareholders' equity :Common stock :Authorized–66,000,000 shares

Total shareholders’ equity

Annual Report 2002 11

p1-30 06.6.14 0:00 PM ページ 12

Consolidated Statement of Income

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

2001

2001

Rental revenues¥ 40,377¥ 41,839$ 342,667

Cost of rentals

29,40831,190255,445

Sales of goods

21,62025,507208,901

Cost of sales

17,427

19,986

163,687

Gross profit

15,162

16,170132,436

Selling, general and administrative expenses

12,11913,298108,911

Operating income

3,043

2,872

23,525

87

40

323

(627)

(544)

(4,456)

6(1,343)(11,000)

2,509

1,025

8,392

Current

1,243

1,883

15,426

Deferred(52)(1,308)(10,716)

1,191

575

4,710

Income before minority interests

1,318

450

3,682

Minority interests in subsidiaries

(42)

(23)

(189)

¥ 1,360¥ 473$ 3,871

Year Ended October 31, 2000 and 2001

Other income (expenses) :Interest and dividend income
Interest expenses
Others, net
Income before income taxes
Income taxes (Note 8)

Net income

Millions of yen

U.S. dollars (Note 1)

2000

2001

2001

Basic

¥ 45.51¥ 15.64$ 0.13

Diluted

36.35

13.89

0.11

18.00

18.00

0.15

Per share of common stock :Net income

Cash dividends applicable to the year

12 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 13

Consolidated Statement of Cash Flows

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

2001

2001

¥ 2,509¥ 1,025$ 8,392

8,926

9,486

77,693

Loss on disposal or sales of property and equipment

200

102

834

Write-down of marketable and investments in securities

213

126

1,036

Profit on sales of marketable and investments in securities

(130)

(376)

(3,082)

Bond issuance costs

147

-

-

Provision for allowance for doubtful accounts

78

368

3,012

Provision for accrued pension and severance costs

-

2,009

16,452

Interest and dividend income

(87)

(40)

(323)

Interest expenses

915

844

6,912

Other adjustments

399

1,401

11,472

2,119(2,476)(20,281)

Decrease (increase) in inventories

97

(291)

(2,385)

Increase (decrease) in trade payable

(641)

901

7,380

Others, net

(714)

964

7,898

14,031

14,043

115,010

87

40

323

(905)

(845)

(6,917)

Income taxes paid

(2,597)(768)(6,289)Cash flows from operating activities

10,616

12,470102,127

Payments for purchase of marketable and investments in securities(3,850)(2,772)(22,704)

Proceeds from sales of marketable and investments in securities

3,389

3,066

25,113

Payments for purchase of property and equipment(1,446)(1,073)(8,788)

81

16

131

(1,826)(763)(6,248)Decrease in short-term bank loans, net(3,976)(4,217)(34,534)

Proceeds from long-term debt

12,615

10,136

83,018

Repayments of long-term debt

(16,662)(17,542)(143,673)

(567)

(544)

(4,458)

45

29

238

(8,545)(12,138)(99,409)

245

(431)

(3,530)16,177

16,422

134,499¥ 16,422¥ 15,991$ 130,969

Year Ended October 31, 2000 and 2001

Cash flows from operating activities :Net income before income taxes and minority interests
Adjustments for :Depreciation expenses

Change in assets and liabilities
Decrease (increase) in trade receivables

SubtotalInterest and dividend income received
Interest expenses paid

Cash flows from investing activities :Others, net
Cash flows from investing activities

Cash flows from financing activities :Cash dividends paid
OthersCash flows from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Annual Report 2002 13

p1-30 06.6.14 0:00 PM ページ 14

Consolidated Statement of Shareholders' Equity

Millions of yen

Years Ended October 31, 2000 and 2001

Balance at October 31, 1999

Thousands ofshares ofcommon stock

29,477

Commonstock

Additional
paid-in
capitalRetainedearnings

Net unrealized
gain on othersecurities,
net of taxes¥ 8,316¥ 9,440¥ 11,705¥-

Net income

CommonCash dividends(566)

Bonuses to directors and auditors(15)

Conversion of convertible bonds

651

253

253

Issuance of common stock

101

22

22

Balance at October 31, 2000

30,229

8,591

9,715

11,1240

Net income
Cash dividends(544)

Bonuses to directors and auditors(17)

Issuance of common stock

24

6

5
141

Other
Balance at October 31, 2001-

30,253¥ 8,597¥ 9,720¥ 10,563¥ 141

Thousands of U.S. dollars (Note 1)

Balance at October 31, 2000

Commonstock

Additional
paid-in
capitalRetainedearnings$ 70,364$ 79,567$ 102,245

Net income

paid-inCash dividends(4,458)

43

43
1,151

Other
Balance at October 31, 2001

14 Annual Report 2002

$-

(135)

Bonuses to directors and auditors
Issuance of common stock

Net unrealized
gain on othersecurities,
net of taxes$ 70,407$ 79,610$ 97,652$ 1,151

p1-30 06.6.14 0:00 PM ページ 15

Notes To Consolidated Financial Statements

1. Basis of presenting of consolidated financial statements
The consolidated financial statements have been prepared from the accounts maintained by Kanamoto Co., Ltd. (the“Company”) and its consolidated subsidiaries in accordance with the provisions set forth in the Commercial Code of Japanand the Securities and Exchange Law of Japan and in conformity with accounting principles and practices generally
accepted in Japan, which may differ in some material respects from accounting principles and practices generally acceptedin countries and jurisdictions other than Japan.
The notes to the consolidated financial statements include information which is not required under accounting principles
generally accepted in Japan but is presented herein as additional information.
In order to facilitate the understanding of readers outside Japan, certain reclassifications are given to the consolidated
financial statements prepared for domestic purposes.
Translations of Japanese yen amounts into U.S. dollars are included solely for the convenience of the reader, using theapproximate exchange rate on October 31, 2001, which was ¥122.10 to US$1.00. These translations should not be
construed as representations that the Japanese yen amounts have been, or could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.

2. Summary of significant accounting policies(a) Consolidation principles
The consolidated financial statements include the accounts of the Company and significant companies which the Company
controls through majority voting right or existence of certain conditions. All significant inter-company transactions andaccounts are eliminated.
Investments in unconsolidated subsidiaries and affiliates of which the Company has the ability to excise significant
influence over operating and financial policies are stated at cost and equity method accounting is not applied for thevaluation of such investments since they are considered immaterial in the aggregate.
(b) Cash and cash equivalents
For the purpose of statements of cash flows, cash and cash equivalents are comprised of cash in hand, deposits held atcall with banks and all highly liquid investments with maturities of three months or less.
(c) Securities
Securities except for investments in unconsolidated subsidiaries and affiliates are classified as trading securities, held-tomaturity securities or other securities. Trading securities are carried at fair value. Held-to-maturity securities are carriedat amortized cost. Marketable securities classified as other securities are carried at fair value with unrealized gains andlosses reported in a separate component of shareholders’ equity, net of taxes. Non-marketable securities classified asother securities are carried at cost. Cost of securities sold is determined by the moving average method.
(d) Inventories
Inventories are mainly valued on the basis of lower of cost or market, using the last-in, first-out method.
(e) Property and equipment
Property and equipment are stated at cost. Depreciation is mainly computed at rates based on the estimated useful lives ofassets on the declining-balance method.
The principal estimated useful lives range from 5 to 10 years for rental equipment and from 10 to 34 years for building
and structures.
(f) Accrued pension and severance costs
To provide for employees` severance indemnities and pension payments, net periodic pension and severance costs arecomputed based on the projected benefit obligation and the pension plan assets.
The actuarial assumption adjustment is to be amortized by the straight-line method beginning the following fiscal year overa period of 10 years, which is less than the average remaining years of service of the active participations in the plans.
The unrecognized benefit obligation at transition is being amortized for the year ended October 31, 2001.
(g) Leases
All leases are accounted for as operating leases. Under Japanese accounting standards for leases, finance leases thatdeem to transfer ownership of the leased property to the lessee are to be capitalized, while other finance leases are
permitted to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in thenotes to the lessee’s financial statements.
(h) Earnings per share
Basic Earnings per Share (“EPS”) is computed based on the average number of shares of common stock outstanding forthe period. Diluted EPS assumes that outstanding convertible bonds were converted into common stock at the
beginning of the period at the current conversion price.
( i ) Appropriation of retained earnings
Under the Commercial Code of Japan, the appropriation of retained earnings with respect to a financial period is made byresolution of the shareholders at a general meeting held subsequent to the close of the financial period and the accounts
for that period do not, therefore, reflect such appropriations.
( j ) New accounting standards●Accounting for financial instruments effective the year ended October 31, 2001
Effective November 1, 2000, the Company and its consolidated subsidiaries adopted a new accounting standard for financial
instruments. Under this standard, securities except for investments in unconsolidated subsidiaries and affiliates are classified
as trading securities, held-to-maturity securities or other securities and stated based on these three categories.
At October 31, 2001, the Company and its consolidated subsidiaries did not possess any securities classified as trading
securities or held-to-maturity securities under this standard.
The effect of the adoption of this standard was to increase income before income taxes and minority interests by ¥14 million($116 thousand) for the year ended October 31, 2001.

Annual Report 2002 15

p1-30 06.6.14 0:00 PM ページ 16

Notes To Consolidated Financial Statements●Accounting for pension and severance costs effective the year ended October 31, 2001
Effective November 1, 2000, the Company and its consolidated subsidiaries adopted a new accounting standard for pension
and severance costs under which net periodic pension and severance costs are computed, in principle, based on the projected
benefit obligation and the pension plan assets.
The effect of the adoption of this standard was to decrease operating income by ¥27 million ($219 thousand) and income
before income taxes and minority interests by ¥2,009 million ($16,452 thousand) for the year ended October 31, 2001.

3. Short-term investments, investments in securities
As described in Note 2-(j), effective November 1, 2000, the Company and its consolidated subsidiaries adopted a new
accounting standard for financial instruments. Under this standard, securities except for investments in unconsolidated
subsidiaries and affiliates are classified as trading securities, held-to-maturity securities or other securities. Trading
securities are carried at fair value. Held-to-maturity securities are carried at amortized cost. Marketable securities classified
as other securities are carried at fair value with unrealized gains and losses reported in a separate component ofshareholders’ equity, net of taxes. Non-marketable securities classified as other securities are carried at cost.
At October 31, 2001, the Company and its consolidated subsidiaries did not possess any securities classified as trading
securities or held-to-maturity securities. Securities classified as other securities are included in “short-term investments”
and “investments in securities” in the consolidated balance sheets.
The components of unrealized gain or loss on marketable securities classified as other securities at October 31, 2001 wereas follows:
October 31, 2001

Acquisition costs

Millions of yen
Carrying value

Unrealized gain (loss)¥ 839¥ 1,521

¥ 682

839

1,521

682

Unrealized gain:
Stocks
Unrealized loss:
Stocks

839

636

(203)

Corporate bonds
Other

231
1,033

228
798

(3)
(235)

Total

October 31, 2001

2,103

1,662

(441)

¥ 2,942¥ 3,183¥ 241

Acquisition costs

Thousands of U.S. dollars
Carrying value
Unrealized gain (loss)

Unrealized gain:
Stocks$ 6,868$ 12,452$ 5,584

6,868

12,452

5,584

6,875
1,894

5,215
1,866

(1,660)(28)

Unrealized loss:
StocksCorporate bonds
Other

8,456

6,534

(1,922)

Total

17,225$ 24,093

13,615$ 26,067(3,610)$ 1,974

Non-marketable securities classified as other securities at October 31, 2001 amounted to ¥517 million ($4,235 thousand).
Proceeds from sales of securities classified as other securities amounted to ¥1,806 million ($14,795 thousand) with an aggregate
gain on sales of ¥377 million ($3,089 thousand) for the year ended October 31, 2001.
The redemption schedule for bonds with maturity dates at October 31, 2001 was summarized as follows:

October 31, 2001

Due in one year or lessCorporate bonds
Other

¥ 114

Total

Millions of yen
Due after one year
through five year

-

¥ 113
15

¥764

¥ 114

¥ 128

¥ 764

Thousands of U.S. dollars
Due after one year
Due in one year or lessthrough five year

Corporate bonds
Other
Total

16 Annual Report 2002

Due after five years
through ten years

Due after five years
through ten years

$ 937

$ 929

$-

-

122
$ 1,051

6,255$ 6,255$ 937

p1-30 06.6.14 0:00 PM ページ 17

Until the year ended October 31, 2000, marketable securities were stated at cost. Net unrealized gain or loss on marketablesecurities at October 31, 2000 was summarized as follows:
October 31, 2001

Millions of yen
Market value

Unrealized gain (loss)

¥ 479
228
40
¥ 747
10
¥ 757

¥ 478
228
39
¥ 745

¥ (1)
0
(1)
¥ (2)

¥ 1,04138
1,001¥ 2,080880¥ 2,960¥ 1,92938771¥ 2,738

¥ 888
0
(230)
¥ 658

Carrying amounts

Short-term investments:
Market value available:
StocksBonds
Other
Market value not available
Total
Investments in securities and associates:
Market value available:
StocksBonds
Other
Market value not available
Total

4. Short-term bank loans and long-term debt
The annual average interest rates applicable to short-term bank loans outstanding at October 31, 2001 and 2000 were1.66% and 0.75%, respectively.
Long-term debt at October 31, 2001 and 2000 consisted of the following:
Millions of yen

Loans from banks and insurance companies, maturing through 2009 :SecuredUnsecured
0.55% unsecured convertible bonds due 2003, convertible currently at ¥1,508.7 ($12.36) for one share
Zero coupon unsecured convertible bonds due 2003, convertible currently at ¥622 ($5.09) for one share
Floating rate U.S. dollar bonds due 2002
Obligations under installment purchases, maturing through 2005
Less current portion

Thousands of
U.S. dollars

2000

2001

2001

¥ 245
20,778
5,302
4,494
5,278
16,74852,845
14,477¥ 38,368¥22,367
4,787
4,494
5,278
18,35755,283
15,240¥ 40,043$183,182
39,20636,80643,224150,345452,763
124,813$ 327,950

Aggregate annual maturities of long-term debt subsequent to October 31, 2001 are as follows:Year Ending October 31

2002
2003
2004
2005
2006 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 15,240
26,718
7,881
4,198
1,246
¥ 55,283$ 124,813
218,820
64,544
34,382
10,204$ 452,763

5. Accrued pension and severance costs
An employee whose employment is terminated is entitled, in most cases, to pension payments or lump-sum severance
indemnities, the amounts of which are determined by reference to the basic rate of pay, length of service and theconditions under which the termination occurs.
The Company has established contributory defined benefit pension plans pursuant to the Welfare Pension Insurance Law
of Japan, which cover a portion of the governmental welfare pension program, under which the contributions are madejointly by the Company and its employees, and which include an additional portion representing the substituted noncontributory pension plans. In addition, certain subsidiaries have maintained lump-sum severance indemnity plans.
As described in Note 2-(j), effective November 1, 2000, the Company and its consolidated subsidiaries adopted a new
accounting standard for pension and severance costs. Under this standard, to provide for employees’ severance
indemnities and pension payments, net periodic pension and severance costs are computed based on the projected
benefit obligation and the pension plan assets.

Annual Report 2002 17

p1-30 06.6.14 0:00 PM ページ 18

Notes To Consolidated Financial Statements

The projected benefit obligation and funded status including a portion of the governmental welfare program were as
follows:
October 31,2001

Millions of yen

Thousands of
U.S. dollars¥ (5,270)
2,782
479¥ (2,009)$ (43,161)
22,7853,924$ (16,452)

Projected benefit obligation
Plan assets
Unrecognized actuarial assumption adjustment
Accrued pension and severance costs

In computing projected benefit obligation, several simplified methods are permitted to small companies, and certain
subsidiaries have adopted such methods.
The components of net periodic pension and severance costs were as follows:
Thousands of
U.S. dollars

Millions of yen

For the year ended October 31, 2001

Service cost

¥ 407

$ 3,335

138

1,133

Interest cost on projected benefit obligation
Expected return on plan assets

(105)

(864)

Amortization of unrecognized benefit obligation at transition

1,982

16,233¥ 2,422$ 19,837

Net periodic pension and severance costs
The assumptions used were as follows:
Discount rate
Expected rate of return on plan assets

3.0 %
4.0 %

Method of attributing benefit to periods of service
Amortization period for actuarial assumption adjustment

Straight-line basis
10 years

Amortization period for unrecognized benefit obligation at transiton

1 year

6. Contingent liabilities
At October 31, 2001 and 2000, the Company and its consolidated subsidiaries were contingently liable as follows:
Thousands of
U.S. dollars

Millions of yen

Guarantees of loans
Trade notes discounted
Trade notes endorsed

2000

2001

2001

¥ 305

¥ 377

$ 3,086

126
142

67
167

550
1,369

¥ 573

¥ 611

$ 5,005

7. Leases
Lease payments under finance leases for the years ended October 31, 2001 and 2000 were ¥3,115 million ($25,516
thousand) and ¥3,096 million, respectively.
Pro forma information on leased property such as acquisition costs, accumulated depreciation, obligations under financeleases, depreciation expenses, and interest expenses on finance leases that do not transfer ownership of the leased
property to the lessee on an “as if capitalized” basis for the years ended October 31, 2001 and 2000, was as follows:

For the year ended October 31, 2001

Rentalequipment

Millions of yen
Machinery andequipment

Acquisition costs¥ 14,914¥ 1,220¥ 16,134$ 122,142$ 9,992$ 132,134

Accumulated depreciation
Net leased property

7,163¥ 7,751

563
¥ 657

7,726
¥ 8,408

58,663$ 63,479

4,615$ 5,377

63,278$ 68,856

Obligations under finance leases:
Due within one year
Due after one year
Total

18 Annual Report 2002

Thousands of U.S. dollars
RentalMachinery andTotalequipment
equipment

Total

Millions of yen

Thousands of
U.S. dollars¥ 3,264$ 26,733

5,323

43,599¥ 8,587$ 70,332

p1-30 06.6.14 0:00 PM ページ 19

For the year ended October 31, 2000

Rentalequipment

Millions of yen
Machinery andequipment

Acquisition costs¥ 16,688¥ 776¥ 17,464

8,789

367

9,156

¥ 7,899¥ 409¥ 8,308

Accumulated depreciation
Net leased property

Millions of yen
Total

Obligations under finance leases:
Due within one year

¥ 2,654

Due after one year
Total

5,491
¥ 8,145

Depreciation expenses and interest expenses, which are not reflected in the consolidated statements of income,computed by the straight-line method and the interest method were ¥2,837 million ($23,239 thousand) and ¥291 million($2,385 thousand), respectively, for the year ended October 31, 2001.
Depreciation expenses and interest expenses, which are not reflected in the consolidated statements of income,computed by the straight-line method and the interest method were ¥2,834 million and ¥293 million, respectively, for theyear ended October 31, 2000.
The minimum rental commitments under non-cancellable operating leases for the years ended October 31, 2001 and 2000
were as follows:
Millions of yen

Thousands of
U.S. dollars

Due within one year

¥ 1,681$ 13,765

Due after one year

2,837

23,240¥ 4,518$ 37,005

For the Year Endied October 31,2001

Total
For the Year Endied October 31,2000

Millions of yen

Due within one year

¥ 1,423

Due after one year
Total

2,704
¥ 4,127

8. Income taxes
The difference between the statutory tax rate and the effective tax rate for the years ended October 31, 2001 and 2000
was as follows:

2000

2001

Statutory tax rate
Operating losses of subsidiaries

41.7 %
2.0

41.7 %
4.4

Expenses not deductible for tax purposes
Residents’ per capita taxes

1.1
2.9

2.6
7.8

Other
Effective tax rate

(0.2)
47.5 %(0.4)
56.1 %The significant components of deferred tax assets and liabilities at October 31, 2001 and 2000 were as follows:
Thousands of
U.S. dollars

Millions of yen
October 31

2000

2001

2001

Deferred tax assets:
Depreciation expenses

¥ 316

¥ 477

$ 3,903

Directors’ retirement benefits

120

118

965

Accrued bonuses for employees
Provisions for doubtful accounts

68
-

123
139

1,007
1,139

Accrued enterprise tax
Accrued pension and severance costs

12
-

105
836

862
6,851

Operating loss carryforwards

-

139

1,143

Others
Sub total

72
588

100
2,037

816
16,686

Less valuation allowance
Total deferred tax assets

588

(139)
1,898

(1,143)
15,543

Deferred tax liabilities:
Net unrealized gain on securities
Total deferred tax assets

-

(101)

(823)

¥ 588

¥ 1,797$ 14,720

Annual Report 2002 19

p1-30 06.6.14 0:00 PM ページ 20

Notes To Consolidated Financial Statements

9. Supplemental cash flow information
Non-cash investing and financing activities for the years ended October 31, 2001 and 2000 were as follows:
Thousands of
U.S. dollars

Millions of yen

2000

2001

2001

Non-cash investing and financing activities:
Conversion of convertible bonds to common stock and additional paid-in capital
Additions to obligations under installment purchases

¥ 506

¥-

$-

¥ 10,128¥ 9,701$ 79,451

Eliminations
andcorporate
items

Consolidated

10.Segment information
Business segment information for the years ended October 31, 2001 and 2000 was as follows:
Millions of yen
Information andcommunication
Total
related andother business

For the year ended October 31, 2000

Construction
relatedbusinessSteelrelatedbusiness

Sales
Outside customers¥ 52,751¥ 7,914¥ 1,332¥ 61,997

¥-

-

-

-

-

-

-

52,751

7,914

1,332

61,997-

61,997

Intersegment
Total¥ 61,997

Operating expenses

49,824

7,786

1,393

59,003(49)

58,954

Operating profit (loss)
Identifiable assets¥ 2,927¥ 74,087¥ 128¥ 3,958¥ (61)¥1,798¥ 2,994¥ 79,843¥ 49¥ 23,569¥ 3,043¥ 103,412

Depreciation
Capital expenditures

8,750
10,311

140
2

36
3

8,926
10,316310

8,926
10,626

Millions of yen
Information andcommunication
Total
related andother businessEliminations
andcorporate
items

Construction
relatedbusinessSteelrelatedbusiness

Outside customers
Intersegment¥ 57,613-¥ 8,342-¥ 1,391-¥ 67,346-¥-¥ 67,346-

Total
Operating expenses

52,61455,055

8,342
8,194

1,391
1,364

67,34664,613(139)

67,34664,474

For the year ended October 31, 2001

Consolidated

Sales

Operating profit (loss)¥ 2,558

¥ 148

¥ 27

¥ 2,733¥ 139¥ 2,872

Identifiable assets
Depreciation¥ 76,592
9,455¥ 3,97013¥ 1,43918¥ 82,001
9,486¥ 24,638-¥ 106,639
9,486

Capital expenditures

10,0451

0

10,046458

10,504

Thousands of U.S. dollars
Information andcommunication
Total
related andother businessEliminations
andcorporate
items

Consolidated$-$ 551,567-

Construction
relatedbusinessSteelrelatedbusiness$ 471,855-$ 68,319-$ 11,393-$ 551,567-

Total

471,855

68,31911,393

551,567-

551,567

Operating expenses
Operating profit (loss)

450,899$ 20,956

67,110$ 1,209

11,174$ 219

529,183$ 22,384(1,141)$ 1,141

528,042$ 23,525

Identifiable assets
Depreciation$ 627,290
77,439$ 32,512103$11,785151$ 671,587
77,693$ 201,788-$ 873,375
77,693

Capital expenditures

82,2657

582,227

3,753

86,030For the year ended October 31, 2001

Sales
Outside customers
Intersegment

11.Subsequent events
On January 29, 2002, the Company’s shareholders approved the payment of a cash dividend of ¥9.00 ($0.07) per one shareto shareholders of record at October 31, 2001, or a total payment of ¥272 million ($2,230 thousand).

20 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 21

Non-consolidated Financial Position CoverCash Flow
PCFR※1(Millions of yen)(%)

EBITDA+EBITDA+ Ratio※2

20,0004

8

15,000

3

6

10,000

2

4

5,000

1

2

0
(Millions of yen)

97

98

99

00

01

※3

ROE

0

0

(%)

(%)

97

EBITDA+ =Operating income + depreciation expense + other depreciation andamortization expense+ low-price rental assets, and others

98

99

00

01

※4

ROA

EBITDA+ is an indicator used only for the construction equipment rental businessand excludes steel products and computers and peripheral equipment.

(%)

97

98

99

00

01

Annual Report 2002 21

p1-30 06.6.14 0:00 PM ページ 22

Non-Consolidated Balance Sheets■ ASSETS
Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

2001

2001

¥ 10,197¥ 8,282$ 67,826

6,100

7,410

60,688Maketable securities

746

114

937

Notes receivable, trade

11,85912,520102,537

Accounts receivable, trade

11,487

12,587103,087

Inventories

817

806

6,602

Deferred income taxes (Note 5)

105

226

1,854

Other current assets

4,116

3,258

26,682Less : Allowance for doubtful accounts

(173)

(318)

(2,607)45,25444,885

367,606

Rental equipment

58,85656,321

461,273

Buildings

10,172

10,766

88,177Structures

3,686

3,857

31,585

Machinery and equipment

4,846

4,923

40,321(49,118)(46,491)(380,765)

28,442

29,376

240,591

24,04324,258

198,675

339

59

482

52,82453,693439,748

2,861

3,581

29,332

Investments in and advances to associates

334

662

5,419

Deferred income taxes (Note 5)

485

1,563

12,805

Other assets

1,393

1,486

12,168Less : Allowance for doubtful accounts

(230)

(447)

(3,660)Total investments and other assets

4,843

6,845

56,064¥ 102,921¥ 105,423$ 863,418

As of October 31, 2000 and 2001

Current assets :CashTime deposits

Total current assets

Property and equipment :Less : Accumulated depreciation

Land
Construction in progress
Total property and equipment

Investments and other assets :Investments in securities

22 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 23■ LIABILITIES AND SHAREHOLDERS’ EQUITY
Thousands of
U.S. dollars (Note 1)

Millions of yen
As of October 31, 2000 and 2001

2000

2001

2001

Current liabilities :¥ 4,400¥-$-

Current portion of long-term bank loans

7,735

7,755

63,514

Notes payable, trade

8,367

9,151

74,948

Accounts payable, trade

2,785

2,647

21,674

792

422

3,453

Accounts payable, other

7,583

8,284

67,848

Accrued income taxes

203

1,290

10,567

Accrued bonuses for employees

492

575

4,712

Other current liabilities

403

722

5,910

Total current liabilities

32,76030,846

252,626

Straight bonds

5,278

5,278

43,224

Convertible bonds

9,796

9,281

76,012Long-term bank loans

12,865

14,305

117,158

Long-term accounts payable, other

11,00812,399101,551-

1,998

16,362

288

282

2,313

39,23543,543356,6202001 – 30,253,241 shares

-

8,597

70,407

2000 – 30,229,241 shares

8,591

-

-

Additional paid-in capital

9,715

9,720

79,610Legal reserve

1,245

1,372

11,241Retained earnings

11,375

11,20591,767Net unrealized gain on other securities, net of taxes

-

141

1,151

Treasury stock

-

(1)

(4)

30,92631,034254,172¥ 102,921¥ 105,423$ 863,418

Short-term bank loans

Notes payable, otherNon-current liabilities :Accrued pension and severance costs
Other liabilities
Total non-current liabilities

Contingent liabilities (Note 3)

Shareholders' equity :Common stock :Authorized – 66,000,000 shares
IssuedTotal shareholders’ equity

Annual Report 2002 23

p1-30 06.6.14 0:00 PM ページ 24

Non-consolidated Statement of Income

Thousands of
U.S. dollars (Note 1)

Millions of yen

2000

2001

2001

Rental revenues¥ 39,883¥ 41,456$ 339,521

Cost of rentals

29,31431,303

256,370

Sales of goods

21,147

22,840187,059

Cost of sales

17,142

17,570143,895

Gross profit

14,574

15,423

126,315

Selling, general and administrative expenses

11,46912,652

103,618

Operating income

3,105

2,771

22,697

91

40

332

(612)

(524)

(4,295)44(1,215)(9,950)

2,628

1,072

8,784

Current

1,227

1,854

15,184

Deferred(54)(1,300)(10,647)

1,173

554

4,537

¥ 1,455¥ 518$ 4,247

Year Ended October 31, 2000 and 2001

Other income (expenses) :Interest and dividend income
Interest expenses
Others, net
Income before income taxes
Income taxes (Note 5)

Net income

Yen

U.S. dollars (Note 1)

2000

2001

2001

Basic

¥ 48.66¥ 17.14$ 0.14

Diluted

38.73

15.04

0.12

18.00

18.00

0.15

Per share of common stock :Net income

Cash dividends applicable to the year (Note 6)

24 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 25

Non-consolidated Statement of Shareholders' Equity

Millions of yen

Year Ended October 31, 2000 and 2001

Balance at October 31, 1999

Thousands ofshares ofcommon stock

29,477

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Net unrealized
gain on othersecurities,
net of taxes¥ 8,316¥ 9,440¥ 1,118¥ 10,628¥-

Net income

1,455Cash dividends(566)

Bonuses to directors and auditors(15)

Transfer to legal reserve
Conversion of convertible bonds

651

253

253

Issuance of common stock

101

22

22

Balance at October 31, 2000

30,229

8,591

9,715

127

(127)

1,245

11,375

Net income

518

Cash dividends(544)

Bonuses to directors and auditors

(17)
127

Transfer to legal reserve
Issuance of common stock

24

6

(127)

5
141

Other
Balance at October 31, 2001-

30,253¥ 8,597¥ 9,720¥ 1,372¥ 11,205¥ 141

Thousands of U.S. dollars (Note 1)
Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings$ 70,364$ 79,567$ 10,199$ 93,156

Year Ended October 31, 2001 (Unaudited)

Balance at October 31, 2000

(4,458)Cash dividends(136)

Bonuses to directors and auditors
1,042

Transfer to legal reserve43(1,042)

43
1,151

Other
Balance at October 31, 2001$-0

Net income

Issuance of common stock

Net unrealized
gain on othersecurities,
net of taxes$ 70,407$ 79,610$ 11,241$ 87,520$ 1,151

Annual Report 2002 25

p1-30 06.6.14 0:00 PM ページ 26

Notes To Non-consolidated Financial Statements

1. Basis of presenting of non-consolidated financial statements
The non-consolidated financial statements have been prepared from the accounts maintained by Kanamoto Co., Ltd. (the“Company”) in accordance with the provisions set forth in the Commercial Code of Japan and the Securities and Exchange
Law of Japan and in conformity with accounting principles and practices generally accepted in Japan, which may differ insome material respects from accounting principles and practices generally accepted in countries and jurisdictions otherthan Japan.
The notes to the non-consolidated financial statements include information which is not required under accounting
principles generally accepted in Japan but is presented herein as additional information.
In order to facilitate the understanding of readers outside Japan, certain reclassifications are given to the non-consolidated
financial statements prepared for domestic purposes.
Translations of Japanese yen amounts into U.S. dollars are included solely for the convenience of the reader, using theapproximate exchange rate on October 31, 2001, which was ¥122.10 to US$1.00. These translations should not be
construed as representations that the Japanese yen amounts have been, or could have been, or could in the future beconverted into U.S. dollars at this or any other rate of exchange.

2. Summary of significant accounting policies(a) Basis of presentation
The non-consolidated financial statements are prepared on the basis of the same accounting policies as those discussed
in Note 2 to the consolidated financial statements except that investments in subsidiaries and affiliates are stated atcost.
(b) New accounting standards●Accounting for financial instruments effective the year ended October 31, 2001
Effective November 1, 2000, the Company adopted a new accounting standard for financial instruments. Under thisstandard, securities except for investments in subsidiaries and affiliates are classified as trading securities, held-tomaturity securities or other securities and stated based on these three categories.
At October 31, 2001, the Company did not possess any securities classified as trading securities or held-to-maturity
securities under this standard.
The effect of the adoption of this standard was to increase income before income taxes by ¥14 million ($116 thousand)for the year ended October 31, 2001.
●Accounting for pension and severance costs effective the year ended October 31, 2001
Effective November 1, 2000, the Company adopted a new accounting standard for pension and severance costs underwhich net periodic pension and severance costs are computed, in principle, based on the projected benefit obligationand the pension plan assets.
The effect of the adoption of this standard was to decrease operating income by ¥25 million ($202 thousand) and income
before income taxes by ¥1,998 million ($16,362 thousand) for the year ended October 31, 2001.

3. Contingent liabilities
At October 31, 2001 and 2000, the Company was contingently liable as follows:

Guarantees of loans

26 Annual Report 2002

2000

Millions of yen
2001

¥ 305

¥ 337

Thousands of
U.S. dollars
2001$ 3,086

p1-30 06.6.14 0:00 PM ページ 27

4. Leases
Lease payments under finance leases for the years ended October 31, 2001 and 2000 were ¥2,717 million ($22,255
thousand) and ¥3,080 million, respectively.
Pro forma information on leased property such as acquisition costs, accumulated depreciation, obligations under financeleases, depreciation expenses, and interest expenses on finance leases that do not transfer ownership of the leased
property to the lessee on an “as if capitalized” basis for the years ended October 31, 2001 and 2000, was as follows:

For the year ended October 31, 2001

Rentalequipment

Millions of yen
Machinery andequipment

Total

Acquisition costs
Accumulated depreciation
Net leased property¥ 14,031
6,821¥ 7,210

¥ 623
306
¥ 317

¥ 14,654
7,127¥ 7,527

Obligations under finance leases:
Due within one year
Due after one year
Total

Thousands of U.S. dollars
RentalMachinery andTotalequipment
equipment$ 114,913
55,863$ 59,050

Millions of yen

Thousands of
U.S. dollars¥ 2,893
4,788¥ 7,681$ 23,699
39,210$ 62,909$ 5,1032,510$ 2,593

Millions of yen
Machinery andequipment$ 120,016
58,373$ 61,643

For the year ended October 31, 2000

Rentalequipment

Acquisition costs¥ 16,688¥ 654¥ 17,342

8,789

309

9,098

¥ 7,899¥ 345¥ 8,244

Accumulated depreciation
Net leased property

Total

Millions of yen

Obligations under finance leases:
Due within one year
Due after one year
Total

¥ 2,639
5,403¥ 8,042

Depreciation expenses and interest expenses, which are not reflected in the non-consolidated statements of income,computed by the straight-line method and the interest method were ¥2,472 million ($20,244 thousand) and ¥252 million($2,065 thousand), respectively, for the year ended October 31, 2001.
Depreciation expenses and interest expenses, which are not reflected in the non-consolidated statements of income,computed by the straight-line method and the interest method were ¥2,820 million and ¥291 million, respectively, for theyear ended October 31, 2000.
The minimum rental commitments under non-cancellable operating leases for the years ended October 31, 2001 and 2000
were as follows:
For the year ended October 31, 2001

Due within one year
Due after one year
Total

Millions of yen

Thousands of
U.S. dollars¥ 1,681
2,837¥ 4,518$ 13,764
23,240$ 37,004

For the year ended October 31, 2000

Due within one year
Due after one year
Total

Millions of yen¥ 1,423
2,704¥ 4,127

Annual Report 2002 27

p1-30 06.6.14 0:00 PM ページ 28

Notes To Non-Consolidated Financial Statements

5. Income taxes
The difference between the statutory tax rate and the effective tax rate for the years ended October 31, 2001 and 2000
was as follows:Year ended October 31, 2001 and 2000

2000

2001

Statutory tax rate

41.7 %

41.7 %

Residents’ per capita taxes

2.7

7.2

Expenses not deductible for tax purposes

1.0

2.4

Other

0.8

(0.4)

Effective tax rate

44.6 %

51.7 %The significant components of deferred income tax assets at October 31, 2001 and 2000 were as follows:
Thousands of
U.S. dollars

Millions of yen

2000

2001

2001

¥ 316

¥ 477

$ 3,903

Directors’ retirement benefits

120

118

965

Accrued bonuses for employees

68

120

982

Provisions for doubtful accounts

-

139

1,139

Accrued enterprise tax

-

105

862

Accrued pension and severance costs

-

833

6,823

Others

86

98

808

Total deferred tax assets

590

1,890

15,482

-

(101)

(823)

¥ 590

¥ 1,789$ 14,659

Year ended October 31, 2000 and 2001

Deferred tax assets:
Depreciation expenses

Deferred tax liabilities:
Net unrealized gain on securities
Net deferred tax assets

6. Subsequent events
On January 29, 2002, the company’s shareholders approved the payment of a cash dividend of ¥9.00 ($0.07) per one shareto shareholders of record at October 31, 2001, or a total payment of ¥272 million ($2,230 thousand).

28 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 29

Independent Auditors' Report

To the Board of Directors of Kanamoto Co., Ltd.

We have audited the accompanying consolidated balance sheet of Kanamoto Co., Ltd. and its consolidated
subsidiaries as of October 31, 2001 and the related consolidated statement of income, shareholders’ equity and cash
flows for the year then ended.

Our audits were made in accordance with generally accepted auditing standards, procedures and practices in Japanand all relevant auditing procedures as are normally required were carried out.

Based on our audit, we express the opinion that the above-mentioned consolidated financial statements present fairly
the consolidated financial position of Kanamoto Co., Ltd. and its consolidated subsidiaries as of October 31, 2001 andthe consolidated results of their operations and their cash flows for the year then ended in conformity with generally
accepted accounting principles in Japan applied on a consistent basis.

Sapporo, Japan
January 30, 2002

CENTURY OTA SHOWA & Co.

See Note 1 to the consolidated financial statements which explains the basis of preparing the consolidated financial statements of Kanamoto Co., Ltd.
and its consolidated subsidiaries under Japanese accounting principles and practices.

We have audited the accompanying non-consolidated balance sheets of Kanamoto Co., Ltd. as of October 31, 2001
and 2000, and the related non-consolidated statements of income and shareholders’ equity for the years then ended.

Our audits were made in accordance with generally accepted auditing standards, procedures and practices in Japanand all relevant auditing procedures as are normally required were carried out.

Based on our audit, we express the opinion that the above-mentioned non-consolidated financial statements present
fairly the financial position of Kanamoto Co., Ltd. as of October 31, 2001 and 2000 and the results of its operations forthe years then ended in conformity with generally accepted accounting principles in Japan applied on a consistentbasis.

Sapporo, Japan
January 30, 2002

CENTURY OTA SHOWA & Co.
See Note 1 to the non-consolidated financial statements which explains the basis of preparing the non-consolidated financial statements of KanamotoCo., Ltd. under Japanese accounting principles and practices.

Annual Report 2002 29

p1-30 06.6.14 0:00 PM ページ 30

Corporate Data (As of March 1, 2002)

Shareholders’ Information

Company Name

Principal Businesses

Kanamoto Company, Ltd.

Rental of construction equipments, sale of steel products andsteel scrap

Head OfficeRental of engineering workstations and computer peripherals

1-19, Odori Higashi 3-chome Chuo-ku, Sapporo,
Hokkaido 060-0041 Japan

Primary Lenders
The Bank of Tokyo-Mitsubishi

EstablishedThe Mitsubishi Trust and Banking Corporation

October 28, 1964

SUMITOMO MITSUI Banking Corporation
North Pacific Bank

Capitalization

The Industrial Bank of Japan¥ 8.6 billion (Paid-in capital)

The Norinchukin BankThe Fuji Bank (Mizuho Corporate Bank, Limited as of April 1, 2002)

Listing Exchanges

Hokkaido Shinren

Tokyo Stock Exchange, First Section

The Hokkaido Bank

Sapporo Stock Exchange

UFJ Bank Limited

Stock CodePrincipal Shareholders

9678

ORIX Corporation
Taichu Kanamoto

Common Shares Issued and Outstanding

Saburo Kanamoto

30,253,000

The Mitsubishi Trust and Banking Corporation
Komatsu

Fiscal Year-end

Kanamoto Capital Company

October 31

The Hokkaido BankThe Tokio Marine & Fire Insurance Company

Revenues

North Pacific Bank

¥64,295 million

DENYO Company(Fiscal year ended October 2001)

Number of Employees
1,124 (874 male, 250 female)(Excluding directors and temporary or part-timeworkers)

30 Annual Report 2002

p1-30 06.6.14 0:00 PM ページ 31

Board of Directors

Norizumi Tsuda

Kiyoshi Onishi

Nobuhito Utatsu

Toshizo Okumura

Hidemitsu
WashidaKenichi Katayama

SaburoKudo

Kimio Tsujioka

Masakazu Hirata

Hitoshi Narita

Eichu Kanamoto

Yoshikatsu Kon

Tetsuo Kanamoto

Kojiro Satsuma

Masahiro Matono

Shinroku
SawadaYukio Sato

Taichu Kanamoto

Kanchu Kanamoto

Directors

Auditors

ChairmanStanding Corporate Auditor

Taichu Kanamoto

Toshizo Okumura
Norizumi Tsuda

President

Kanchu Kanamoto

Nobuhito Utatsu
General Manager, Market Development Division
Manager, New Products Department

Hideki Nomiya
Kiyoshi Onishi

Deputy Division Manager, Construction Equipment
Rental Division
General Manager, Used Products Sales Division
Manager, Quality Assurance Department

Corporate Officers

Masakazu Hirata

Hidemitsu Washida

Shinroku Sawada
Yukio Sato

Division Manager, Accounting Division

Outside Corporate Auditor

Executive Vice President

Senior Corporate Officer

KazuakiTanakaHidekiNomiya
Keiichi Kitakata(Shown with the division that is representative of theirwork as an Executive Director)

Division Manager, Business Planning Division
Division Manager, Credit Management Division

Hitoshi Narita

Eichu Kanamoto
Director

Masahiro Matono
Kojiro Satsuma

Division Manager, Administration Division

General Manager, Construction Equipment Rental
Division, Tohoku Region

Kimio Tsujioka

Saburo Kudo

Affiliated Enterprises Division
Seconded to SRG Kanamoto Co., Ltd.

General Manager, Construction Equipment Rental Division
Kanto & Shinetsu Region
General Manager, Information Products Division

Kenichi Katayama

Tetsuo Kanamoto

Construction Equipment Rental Division

Kazuaki Tanaka

General Manager, Research & Investment Division

Keiichi Kitakata

Steel Sales Division

Yoshikatsu Kon

Annual Report 2002 31

p1-30 06.6.14 0:00 PM ページ 32

http://www.kanamoto.co.jp
1-19,Odori igashi 3-chome,Chuo-ku,Sapporo,okkaido 060-0041 Japan
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