*表1-表4 06.6.15 3:06 PM ページ 2

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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.

C O N T E N T S
Financial Highlights ………………………………………3
Kanamoto at a Glance……………………………………4

A Message from the President ………………………………6
Report of Operating Results for the 38th Business Period ………8
Consolidated Balance Sheets ………………………………10
Consolidated Statements of Income …………………………12
Consolidated Statements of Cash Flows………………………13
Consolidated Statements of Shareholders' Equity ……………14
Notes to Consolidated Financial Statements …………………15
Non-consolidated Balance Sheets…………………………22

Non-consolidated Statements of Income ……………………24
Non-consolidated Statements of Shareholders' Equity …………25
Notes to Non-consolidated Financial Statements ………………26
Topics 2001-2002 ………………………………………28
Corporate Data …………………………………………30
For purposes of this report, the Balance Sheets and Statements ofIncome were created using financial data prepared according to Japan’s
Securities Report guidelines, and adjusted to conform to U.S. SEC
reporting standards.

2 Annual Report 2002

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Financial Highlights■ Non-Consolidated Financial Highlights
Millions of yen

PercentchangeThousands of
U.S. dollars

2001

2002

(2001・2002)

2002¥ 64,295¥ 60,606-5.7$ 491,939

2,771

2,255

-18.6

18,308518

1,134+118.9

9,206

Total shareholders' equity

31,03431,356+1.0

254,520

Total assets

105,423

96,717-8.2

785,044

PercentchangeThousands of
U.S. dollars

Rental revenues and sales of goods
Operating income
Net income

Yen

Per share of common stock
Net income

17.14

37.49

+118.7$ 0.30Cash 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 ¥ 123.2=US $1,
the approximate exchange rate on October 31, 2002.

Annual Report 2002 3

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Kanamoto at a Glance

Construction Equipment Rental Division
Vigorously promotes construction company asset reductions andthe strengthening of operating efficiency by enabling construction
companies to obtain the right equipment at the right time and in
the right quantity.

Sales ratio

4 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 5

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

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

Sales ratio

Sales ratio

Annual Report 2002 5

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 6

A Message from the President

Seeking to expand Kanamoto’s current advantages in the construction
equipment rental market through a full-fledged rationalization strategy
Thank you very much for your continued interest and support of Kanamoto Co., Ltd.
Kanamoto Company has always made the centerpiece of its action agenda the concept, “constantly seek innovation and strive toenergize the business.” We believe that adapting to changes in the business environment, developing the firm on a sustainable basis andmaximizing earnings contributes to the best results for our stakeholders. Our focus is on maintaining our ability to continually distributeprofits to our shareholder partners, and on demonstrating Kanamoto’s potential to customers and local communities as the leading
construction equipment rental company, by developing our business throughout Japan. We seek to offer detailed services that are
intimately linked to each local area, by having each branch office act as an independent business enterprise.

Value of the rental business increasing under Japan’s tough economic environment
Japan is being swept along by the tide of structural reform alternatives currently being adopted to restore government finances to health.
In line with these alternatives, the central and local governments are slashing their budgets. Public-works expenditures are no exception.
Private sector capital investment also shows absolutely no signs of reviving, and as a result the volume of domestic construction
investment has been declining annually since reaching a peak in fiscal 1996.
These developments have also affected Kanamoto’s main business of construction equipment rentals. Business turned downwards into
negative growth, and for the fiscal year ended in October 2002 Kanamoto unfortunately was unable to avoid a drop in revenues andincome.
When we consider the outlook for the future, on the other hand, the fact is that the deterioration in business conditions holds not justnegative aspects but brings with it some positive factors for Kanamoto as well. The most important of these is the increase in the valueof the construction equipment rental business in a tough economic environment.
The construction firms that are Kanamoto’s customers are being compelled to rationalize various aspects of their operations. In particular,
the voice of the market is saying that firms must reduce their total assets and total liabilities and net worth, focus on becoming more
nimble with a lighter balance sheet, and improve earnings capabilities.
One of greatest strengths of the construction equipment rental business lies in the fact that it demonstrates its maximum benefit in the
reduction of a user's balance sheet. An equipment rental service that enables users to procure “the necessary assets” in “the necessary
quantity” for the “necessary period of time” without investing their own capital is a system that excels in producing outstanding
economic rationality.
Moreover, construction firms still rely on equipment rentals for less than 50% of their equipment needs at construction sites in Japan,
which provides sufficient room for equipment rentals to grow. At Kanamoto, we believe that how we turn the industry’s margin forgrowth to Kanamoto’s advantage, while making good use of the equipment rental business’ benefits, holds the key to Kanamoto’s
future.

Adding momentum to Kanamoto’s earnings recovery, with four measures for efficient utilization ofmanagement resources
In the construction equipment rental market, where competition over the remaining margin for growth is escalating, Kanamoto willconcentrate on the following four points to retain and expand its existing advantages and further enhance its position as the industry
leader.
The first is to shift management resources to Japan's three major metropolitan areas. This is a measure to increase operating revenues
through maximization of market share in the Tokyo, Osaka and Nagoya areas, where Kanamoto’s share in the past has been low, by
pursuing branch development.
The second is to be more thorough in equipment selection, in order to give priority to purchasing rental assets that produce the fastest
recovery of invested capital. This will enable Kanamoto to operate its owned assets more efficiently.
The third is to expand Kanamoto’s alliance strategy. Kanamoto has achieved positive results so far by forming alliances with other firmsthat have strong local ties, centered on areas in western Japan where Kanamoto does not have its own branches. In the future,
Kanamoto will seek to achieve growth of its business territory, promote asset sharing and prevent unreasonable price declines, by further
expanding and developing this approach.

6 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 7

The fourth is to boldly reduce various costs. Kanamoto will seek to cut expenses and expand earnings, by pursuing internal rationalizationand curtailing wasteful expenditures.
Against the backdrop of the measures described above, Kanamoto is aiming to enhance revenues and earning by increasing bothconsolidated revenues and consolidated operating income for the fiscal year ending in October 2003. This will set the stage for anearnings recovery in the following fiscal year.

Maintain Kanamoto’s policy of stable profit returns to shareholders based on the medium-term profit plan
To ensure the long-term, integrated expansion of shareholders’ profits, Kanamoto Company continues to focus comprehensively on both
capital investments based on its medium-term profit plan and on profitability, dividend trend and a sound financial position. The Company
also remains committed to its policy of stable dividend growth.
At the same time, the Company utilizes its internal reserves by allocating funds for the introduction of the rental equipment assets thatwill become the source of future earnings.
Furthermore, Kanamoto has established a policy and system for the amortization of treasury stock, based on the assumption the
Company will execute the policy at the appropriate time according to circumstances.
Given the Company’s present circumstances and markets, the Company believes it has adopted an appropriate position with regard to its
investment unit and stock allocation, and has no plans to reduce its positions at this time. The Company will continue to flexibly examine
its activities, however, in accordance with the future distribution of investment units.
For aspects of its business that require strict valuation of assets at market prices and the application of conservative accounting
principles, Kanamoto believes it is vitally important to vigorously fulfill these requirements. Moreover, Kanamoto has always emphasized
ROI (return on investment) and cash flow, and seeks growth in EBITDA (earnings before interest, taxes, depreciation and amortization) tomeet its primary objective of establishing a solid foundation for management. The Company considers EBITDA to be the mostappropriate measure for comprehensive evaluation of earnings in an industry that requires a large portfolio of assets such as construction
equipment rental, and continually measures this index and applies it for making management decisions.
Finally, I would like to comment on the tough economic environment we face in Japan today. Some individuals may look at this situationand judge the construction equipment rental business to be an unlikely candidate for investment. They may also see the construction
equipment rental industry as a traditional business, not a new sector that is enjoying rapid growth.
The fact remains true, however, that in order to improve their balance sheets, construction contractors in Japan must rely on construction
equipment rentals more than ever before. Additional painful steps will also be necessary to restore the construction industry to soundhealth. Both weak construction contractors and weak construction equipment rental companies will close their doors. Already theseparation of the strongest from weakest players is becoming a powerful wave that will sweep through both industries.
I remain steady in my conviction that by applying the solid management strategies and dynamic marketing tactics discussed in thisreport, Kanamoto will turn today’s weak economic conditions into a positive factor for the company, and will emerge the sole winner in
the industry.
In closing, on behalf of Kanamoto and all of its employees I would like to express my appreciation for your sincere understanding of thecompany’s management efforts, and for your steadfast goodwill and support.

Kanchu Kanamoto President

Annual Report 2002 7

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Report of Operating Results for the 38 th Business Period

Operating Results

Osaka and Nagoya metropolitan areas, demand also picked up in
the Hokuriku region as that area shook off a temporary slump, and1.Summary of fiscal year consolidated operating results (Fiscal year
ended October 2002)
During the fiscal year under review, restraints arising from theneed to restore central government finances prevented theadministration from implementing fiscal stimulus measures, andJapan’s economy did not see any improvement in businesssentiment. In the construction industry, the principal customer for
Kanamoto’s construction equipment rental business, an extremely
severe business environment continued not only because oflower public works spending, but also because of a rapid
slowdown in private sector capital investment, with the exceptionof the Tokyo metropolitan area. A summary of operating resultsfor each operating division is discussed below.

Construction-related business
The latest figures based on research by the Japan Civil
Engineering Association (issued June 2002) showed that Japan’sconstruction companies rely on construction equipment rentals
for 55.5% (up 1.2% points over the prior year) of their equipment

contributed positive results. For the territory as a whole,equipment rental revenues rose 9.8%.
With regard to sales revenues for the division, on the other hand,revenues from the overseas sale of used construction equipment
grew strongly, but despite steady sales activity in the domestic
sales territories unit price declines greatly influenced revenues. As
a result, sales revenues were off by 3.8% compared to the priorfiscal year.
From the standpoint of profitability, the Construction Equipment
Rental Division’s operating income can under intense pressure
from the effects of lower rental unit prices, with the result thatprofitability declined compared to the prior fiscal year. This was
despite the fact that the Company achieved cost reductions basedon the new “Kanamoto Survival Plan” Three-Year Plan, which theCompany began implementing during the period under review,
and attained a more balanced depreciation expense burden byemphasizing leases as the form for introducing assets.
■ Conditions for consolidated subsidiaries

needs. The demand for construction equipment rentals remains

Fiscal year operating results for the consolidated subsidiaries inunchanged and vigorous. The number of public works

construction-related businesses were as follows.

construction projects declined, however, and revenues for the

At Taniguchi Co., Ltd., revenue increased by 1.6% compared toconstruction industry overall were lower. As a result, companies

the prior fiscal year and net income jumped 35.1%, as the firm

faced strong pressure to reduce construction equipment rental

fought strongly in a tough environment in which public sector

prices. Despite the upward trend in the use of rentals to meet

construction in Hokkaido is declining.

construction equipment needs, therefore, revenues for theAssist Co., Ltd. enjoyed the results of its prior year efforts toconstruction equipment rental industry as a whole declined, andexpand and strengthen its sales offices. Revenue increased by

the business environment confronting the industry remained

18.5%, and net income rose by 108.3%.

extremely challenging.

Although SRG Kanamoto Co., Ltd. set the stage for strengthening■ Conditions for the Company (Unconsolidated)

In its Construction Equipment Rental Division, Kanamoto
reorganized the existing branch network according to territories,
and revised management reporting lines. The Company alsosought to reduce costs through several measures, including
closing four unprofitable branches and simultaneously integrating
the back-office activities of the branch network. During the fiscal
year under review, Kanamoto opened two new branches in the
Hokkaido territory, added three new branches and closed one
branch in the Tohoku territory, beefed up the Kanto-Shinetsu
territory by opening four branches and closing two branches, andadded one new branch while closing an unprofitable branch in the
Kinki-Chubu territory. Altogether, the branch network grew by a
net addition of six branches.
As a result of the above steps, the Company maintained theoperating rates for its rental asset at the same high levels
achieved in the past. By keeping reductions in rental unit prices tosales by opening a new branch in Sapporo, revenue fell 4.7% andthe company incurred a net loss as the result of stagnant
construction demand, lower unit prices and the rise in costs for
opening the new branch.
Kanatech Co., Ltd. increased its revenue by 14.2%, aided by the
supply of modular housing units to other members of Kanamoto’s
alliance group. Net income declined by 72.2%, however, as costsof sales rose because of efforts to broaden the firm’s productlineup and higher transportation expenses.
Daiichi Machine Industries Co., Ltd. became one of Kanamoto’s
consolidated subsidiaries during the fiscal year under review.
Although a true comparison of year-to-year results is not possible
because Daiichi changed its fiscal period closing month andapplied special accounting rules, the firm achieved steady growthin both revenues and operating earnings. Nevertheless, thecompany ended the fiscal year with a net loss, as the amortizationof prior year costs also increased.

a minimum, the Company held the decline in construction

As a result of the above activities, consolidated fiscal year

equipment rental revenues to 5.3%.

revenues from construction-related businesses fell by 1.8% to

By region, compared to the prior fiscal year rental revenues
declined by 10.6% in Hokkaido and 8.1% in the Tohoku territory,
respectively, as both regions bore the brunt of decreasing
demand for public works construction. In the Kanto-Shinetsu
territory, revenues increased by 3.9%. While public works
spending and private construction demand in the Tokyo
metropolitan area was vigorous, this was offset by weak
conditions in the Shinetsu region and the northern Kanto area. In
the Kinki-Chubu territory, business remained brisk in both the

8 Annual Report 2002

the alliance group strategy for developing western Japan also

¥56,558 million, and operating income decreased by 17.6% to¥2,108 million.

Steel sales-related business
The Steel Sales Division focused its sales efforts by shifting
human resources to the Sapporo metropolitan area, where
demand was strong. The division was unable to increase revenue
despite great efforts made to cover the drop in revenues
generated by its steel production raw materials (iron scrap)(November 1, 2001

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 9od(November 1, 2001-October 31, 2002)section, which the division decided to abolish as of the end ofJanuary 2002, by handling steel materials with strong demand and

The present circumstances provide an opportunity to expand

construction materials. The division also lowered prices to meetmarket share in the construction equipment rental business,market unit prices. The division was able to minimize the negative

which is the leading sector among construction-related industries.

influence of the local market, however, where private sector

Kanamoto will focus on ensuring increased earnings, by acting to

demand remained in a slump.

strengthen its business through greater cooperation andAs a result, sales fell 10.8% to ¥7,435 million, and operating

integration among the Kanamoto alliance group companies, andincome declined 67.7% to ¥47 million.

promoting a product line-up that suits customers needs byreviewing some of the products the companies handle. Kanamoto

Information Products-related business and other businesses

will simultaneously promote the rationalization of back-office

At Kanamoto’s Information Products Division, which manages theoperations and maintenance, to bolster low-cost operations. The

Company’s information and telecommunications businesses,

priority for new sales branch openings will be on the Tokyo

workstation rentals, which were strong in the prior fiscal year,

metropolitan area. Together with the recent expansion ofwere weakened by a delay in rental inquiries for models equipped

Kanamoto’s market share, we will aggressively introduce rental

with new OS because of the market’s outlook. Rentals ofassets during the next fiscal year as well.

personal computers were strong in terms of quantity, but rental

In other areas, although the Steel Sales Division and theprices weakened under the influence of falling sales prices. Given

Information Products Division represent only a small portion of

tough conditions, rental revenue declined 14.8% compared to theKanamoto’s total net revenues, we will work to continuallyprior year. Equipment sales were strong, particularly for wirelessincrease the revenues at each division. Furthermore, theLAN, which enjoyed steady sales similar to the previous fiscal

Company will fully write off the estimated loss incurred from theyear, with unit prices showing only a minute decline of 0.8%. For

liquidation of Providence Brewery Co., Ltd. during thethe division as a whole, revenues decreased 7.0%.

consolidated fiscal year under review.

In other businesses, Kanamoto faced uncertain prospects at
Providence Brewery Co., Ltd., which struggled from flat personal
consumption and the inability to expand sales channels in the
tradition-bound alcoholic beverage industry. The Company was
unable to avoid a decision to discontinue local beer production in
February 2002.
Revenues for the Company’s computer and peripheral equipmentrelated business and other businesses fell 9.6% to ¥1,257 million,

Financial positionand operating income was down 83.7% to ¥4 million.
For the consolidated accounting fiscal year under review, cash
flow from operating activities was down 14.6% to ¥10,645. Thiswas ¥1,823 million less than in the prior consolidated accounting
fiscal year. In addition to higher income before taxes andadjustments, this reflected a decrease in accrued employee
retirement benefits and lower depreciation and amortization
expense, plus an increase in payment of corporate and other

Other business operating results

taxes.

The Company did not locate any promising investment targets for
Kanamoto’s venture business support activities and did not

Cash flow used for investing activities was ¥442 million, ¥320

provide any support, such as new capital investment, during themillion (42.0%) less than in the prior fiscal year. This was

consolidated fiscal year under review.

primarily the result of fewer funds used for the purchase of
tangible fixed assets.

2. Outlook for the next consolidated fiscal year (Business period
ending October 2003)

Cash flow used for financing activities was ¥10,761 million, ¥1,376

The Japanese government is slowly taking steps to put Japan’s

million less than in the prior consolidated accounting fiscal year.

financial system back on a sound footing at an early stage, as part

The Company used funds provided by long-term bank borrowingsof the Koizumi Cabinet’s reforms. As a result, many observers

to repay outstanding loans and redeem straight and convertible

believe this will accelerate the restructuring and shuttering of so-

bonds.

called “heavily-indebted troubled companies.” With regard to the
supplementary budget as well, although the government drafted a

As a result of the above, the balance of cash and the cash

public works budget totaling roughly ¥1.5 trillion, this failed toequivalents at the end of the consolidated accounting fiscal year

satisfy industry expectations because of sharp cuts in the total

under review was ¥15,433 million, ¥558 million (3.5%) less thanamount of the initial budget. Given these conditions, Kanamotoat the end of the prior consolidated accounting fiscal year.

believes the tough competitive situation among manufacturerrelated rental companies, large multi-regional rental firms andmiddle-market rental companies will continue, but this will also
serve as a factor leading to greater industry reliance on
construction equipment rentals.

Annual Report 2002 9

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

Millions of yen

2001

2002

2002

¥ 15,991¥ 15,433$ 125,270

120

79

644

Notes and accounts receivable, trade25,80823,121

187,666

Inventories

1,118

810

6,570

230

167

1,359

Other current assets

3,283

2,960

24,023

Less : Allowance for doubtful accounts

(325)

(495)

(4,015)46,22542,075341,517

Rental equipment

56,32250,009405,922

Building and structures

14,883

15,177

123,190

Machinery and equipment

4,949

4,770

38,716(46,639)(44,097)(357,932)

29,51525,859209,896

24,397

24,601

199,683

59

109

883

53,971

50,569410,462

Investments in associates (Note 3)

204

199

1,615

Investments in securities (Note 3)

3,585

3,483

28,274

Deferred income taxes (Note 8)

1,567

1,749

14,196

Other assets

1,534

1,819

14,761Less : Allowance for doubtful accounts

(447)

(580)

(4,709)Total investments and other assets

6,443

6,670

54,137¥ 106,639¥ 99,314$ 806,116

As of October 31, 2002 and 2001

Current assets :Cash and cash equivalents
Short-term investments (Note 3)

Deferred income taxes (Note 8)

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

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 11■ LIABILITIES AND SHAREHOLDERS’ EQUITY
Thousands of
U.S. dollars (Note 1)

Millions of yen
As of October 31, 2001 and 2002

2001

2002

2002

Current liabilities :Short-term bank loans (Note 4)

¥ 510

¥ 905

$ 7,349

Current portion of long-term debt (Note 4)

15,24024,965

202,634

Notes and accounts payable, trade12,62011,965

97,121

Accrued income taxes

1,319

19

157

595

541

4,393

Other current liabilities

1,643

1,625

13,182

Total current liabilities

31,92740,020324,836

Long-term debt (Note 4)

40,04324,700200,489

Accrued pension and severance costs (Note 5)

2,009

1,676

13,602Other liabilities

1,750

1,580

12,821

Total non-current liabilities

43,802

27,956226,912

67

97

792

8,597

8,597

69,779Additional paid-in capital

9,720

9,720

78,899Retained earnings

12,396

13,044

105,876

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

141

(108)

(880)

Treasury stock

(11)

(12)

(98)

30,84331,241

253,576¥ 106,639¥ 99,314$ 806,116

Accrued bonuses for employees

Non-current liabilities :Minority interests

Contingent liabilities (Note 6)

Shareholders' equity :Common stock :Authorized–66,000,000 shares
Issued–30,253,241 shares

Total shareholders' equity

Annual Report 2002 11

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 12

Consolidated Statements of Income

Thousands of
U.S. dollars (Note 1)

Millions of yen

2001

2002

2002

Rental revenues¥ 41,839¥ 40,561$ 329,228

Cost of rentals

31,19030,631

248,625

Sales of goods

25,507

24,691

200,414

Cost of sales

19,986

19,376

157,276

Gross profit

16,17015,245

123,741

Selling, general and administrative expenses

13,298

12,957105,174

Operating income

2,872

2,288

18,567

40

56

452

(544)

(475)

(3,856)

Others, net(1,343)

259

2,108

Income before income taxes

1,025

2,128

17,271

Current

1,883

865

7,017

Deferred(1,308)

59

482

575

924

7,499

Income before minority interests

450

1,204

9,772

Minority interests in subsidiaries

(23)

(5)

(43)

¥ 473

¥ 1,209$ 9,815

Year Ended October 31, 2002 and 2001

Other income (expenses) :Interest and dividend income
Interest expenses

Income taxes (Note 8)

Net income

Yen

U.S. dollars (Note 1)

2001

2002

2002

Basic

¥ 15.64¥ 39.99$ 0.32

Diluted

13.89

30.76

0.25

18.00

18.00

0.15

Per share of common stock :Net income

Cash dividends applicable to the year

12 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 13

Consolidated Statements of Cash Flows

Thousands of
U.S. dollars (Note 1)

Millions of yen

2001

2002

2002

¥ 1,025¥ 2,128$ 17,271

9,486

8,120

65,908Loss on disposal or sales of property and equipment

102

199

1,618

Write-down of investments in securities

126

241

1,954

Profit on sales of investments in securities

(376)

(157)

(1,277)

Provision for allowance for doubtful accounts

368

301

2,440

2,009

(333)

(2,703)

Interest and dividend income

(40)

(56)

(452)

Interest expenses

844

746

6,058

Other adjustments

1,401

564

4,578

(2,476)

2,985

24,232

Decrease (increase) in inventories

(291)

337

2,732

Increase (decrease) in trade payable901(1,104)(8,963)

Others, net

964

(524)

4,252

Subtotal

14,043

13,447

109,144

40

56

452

Interest expenses paid

(845)

(748)

(6,072)

Income taxes paid

(768)

(2,109)(17,114)

12,47010,64686,410

Payments for purchase of investments in securities(2,772)(2,646)(21,474)

Proceeds from sales of investments in securities

3,066

2,243

18,206

Payments for purchase of property and equipment(1,073)(398)(3,232)

16

359

2,910

(763)

(442)

(3,590)

Increase (decrease) in short-term bank loans, net(4,217)

160

1,299

Proceeds from long-term debt

10,136

13,670110,958

Repayments of long-term debt

(17,542)(24,053)(195,239)

(544)

(545)

(4,420)29

6

52(12,138)(10,762)(87,350)

(431)

(558)

(4,530)16,422

15,991

129,800¥ 15,991¥ 15,433$ 125,270

Year Ended October 31, 2001 and 2002

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

Provision for accrued pension and severance costs

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

Interest and dividend income received

Cash flows from operating activities

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

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 14

Consolidated Statements of Shareholders’ Equity

Millions of yen

Year Ended October 31, 2001 and 2002

Balance at October 31, 2000

Thousands ofshares ofcommon stock

Commonstock

Additional
paid-in
capitalRetainedearnings

Net unrealizedgain(loss)on othersecurities,
net of taxes

30,229¥ 8,591¥ 9,715¥ 12,484¥-

Net income

473

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

12,396

Net income

1,209

Cash dividends(544)

Bonuses to directors and auditors

(17)
(249)

Other
Balance at October 31, 2002

141

30,253¥ 8,597¥ 9,720¥ 13,044¥ (108)

Thousands of U.S. dollars (Note 1)

Balance at October 31, 2001

Commonstock

Additional
paid-in
capitalRetainedearnings

Net unrealizedgain(loss)on othersecurities,
net of taxes$ 69,779$ 78,899$ 100,616$ 1,141

Net income

9,815

Cash dividends(4,420)(135)

Bonuses to directors and auditors(2,021)

Other
Balance at October 31, 2002

14 Annual Report 2002

$ 69,779$ 78,899$ 105,876$ (880)*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 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 ofJapan and 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, 2002, which was ¥123.20 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 is not applied for the valuation 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 comprise cash in hand, deposits held at call 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 andstructures.
(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.
In the year ended October 31, 2002, the Company made amendments to its welfare pension fund plans in accordance withthe amendments to the Welfare Pension Insurance Law of Japan. As a result, prior service cost was incurred. This priorservice cost is being amortized for the year ended October 31, 2002.
(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 capitaliz”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 beginningof 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.

3. Short-term investments, investments in securities
At October 31, 2002, 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, 2002 wereas follows:

Annual Report 2002 15

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 16

Notes to Consolidated Financial Statements

Acquisition costs

Millions of yen
Carrying value

Unrealized gain (loss)

¥ 873
873

¥ 1,276
1,276

¥ 403
403

1,143

783

(360)

141

137

(4)

Other

1,214
2,498

989
1,909

(225)
(589)

Total

¥ 3,371¥ 3,185¥ (186)

October 31, 2002

Unrealized gain:
Stocks
Unrealized loss:
StocksCorporate bonds

October 31, 2002

Acquisition costs

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

Unrealized gain:$ 7,085$ 10,360$ 3,275

7,085

10,3603,275

Stocks

9,278

6,352

(2,926)

Corporate bonds
Other

1,145
9,854

1,112
8,028

(33)
(1,826)

20,277$ 27,362

15,492$ 25,852(4,785)$ (1,510)

Stocks
Unrealized loss:

Total

The components of unrealized gain or loss on marketable securities classified as other securities at October 31, 2001 were as
follows:
October 31, 2001

Acquisition costs

Millions of yen
Carrying value

Unrealized gain (loss)¥ 839¥ 1,521

¥ 682

839

1,521

682

839
231

636
228

(203)
(3)

Unrealized gain:
Stocks
Unrealized loss:
StocksCorporate bonds
Other

1,033

798

(235)

Total

2,103
¥ 2,942

1,662¥ 3,183

(441)
¥ 241

Non-marketable securities classified as other securities at October 31, 2002 and 2001 amounted to ¥373 million ($3,032
thousand) and ¥517 million,respectively.
Proceeds from sales of securities classified as other securities amounted to ¥1,320 million ($10,712 thousand) with an aggregate
gain on sales of ¥159 million ($1,287 thousand) for the year ended October 31, 2002.
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, 2002 was summarized as follows:

October 31, 2002

Corporate bonds
Other
Total

Due in one year or lessDue after ten years

¥ 75

¥ 62

¥-

¥-

-

12
¥ 74

777
¥ 777

27
¥ 27

¥ 75

Due in one year or less

16 Annual Report 2002

Millions of yen
Due after one year
Due after five years
through five years
through ten years

Thousands of U.S. dollars
Due after one year
Due after five years
through five years
through ten years

Due after ten years

Corporate bonds
Other

$ 609
-

$ 502
95

$6,305

$220

Total

$ 609

$ 597

$ 6,305$ 220

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 17

The redemption schedule for bonds with maturity dates at October 31, 2001 was summarized as follows:
Millions of yen
Due in one year or lessDue after one year
through five years

Corporate bonds
Other

¥ 114
-

¥ 113
15

¥764

Total

¥ 114

¥ 128

¥ 764

October 31, 2001

Due after five years
through ten years

4. Short-term bank loans and long-term debt
The annual average interest rates applicable to short-term bank loans outstanding at October 31, 2002 and 2001 were
1.49% and 1.66%, respectively.
Long-term debt at October 31, 2002 and 2001 consisted of the following:
Millions of yen

Loans from banks and insurance companies, maturing through 2,011 :SecuredUnsecured
0.55% unsecured convertible bonds due 2003, convertible currently at ¥1,508.7 ($12.25) for one share
Zero coupon unsecured convertible bonds due 2003, convertible currently at ¥622 ($5.05) for one share
Floating rate U.S. dollar bonds due 2002
Obligations under installment purchases, maturing through 2007
Less current portion

Thousands of
U.S. dollars

2001

2002

2002

¥22,367
4,787
4,494
5,278
18,35755,283
15,240¥ 40,043¥ 568
25,218
3,164
1,000
5,278
14,43749,66524,965¥ 24,700$ 4,611
204,692
25,682
8,117
42,838117,183
403,123
202,634$ 200,489

Aggregate annual maturities of long-term debt subsequent to October 31, 2002 are as follows:Year Ending October 31

2003
2004
2005
2006
2007 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 24,965
11,486
7,738
4,076
1,400
¥ 49,665$ 202,634
93,23762,81433,081
11,357$ 403,123

At October 31, 2002, assets pledged as collateral for short-term bank loans and long-term debt, including current portion of
long-term debt were as follows:
Millions of yen

Buildings and structures
Land

¥ 38
197

Thousands of
U.S. dollars

$ 305
1,602

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 their employees, and which include an additional portion representing the substituted noncontributory pension plans. In addition, certain subsidiaries have maintained lump-sum severance indemnity plans.

Annual Report 2002 17

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 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 at October
31,2002 and 2001 were as follows:
Thousands of
U.S. dollars

Millions of yen

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

2001

2002

2002

¥ (5,270)
2,782
479¥ (2,009)¥ (5,409)
2,983
750¥ (1,676)$ (43,908)
24,2136,093$ (13,602)

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 for the years ended October 31,2002 and 2001 were as
follows:
Thousands of
U.S. dollars

Millions of yen

2001

2002

2002

¥ 407
138
(105)

¥ 413
143
(110)

$ 3,354
1,161
(894)

1,982
¥ 2,422

48
(395)
¥ 99

389
(3,207)$ 803

Service cost
Interest cost
Expected return on plan assets
Amortization:
Actuarial losses
Prior service cost
Unrecognized benefit obligation at transition
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 prior service cost

Straight-line basis
1 yearAmortization period for actuarial assumption adjustment

10 years

Amortization period for unrecognized benefit obligation at transiton

1 year

6. Contingent liabilities
At October 31, 2002 and 2001, 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

18 Annual Report 2002

2001

2002

2002

¥ 377

¥ 372

$ 3,022

67
167

85
178

686
1,447

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 19

7. Leases
Lease payments under finance leases for the years ended October 31, 2002 and 2001 were ¥4,343 million ($35,254
thousand) and ¥3,115 million, respectively.
Pro forma information on leased property such as acquisition costs, accumulated depreciation, obligations under financeleases, depreciations expenses, 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, 2002 and 2001, was as follows:

For the year ended October 31, 2002

Rentalequipment

Millions of yen
Machinery andequipment

Thousands of U.S. dollars
RentalMachinery andTotalequipment
equipment

Acquisition costs¥ 25,612¥ 667¥ 26,279$ 207,891$ 5,412$ 213,303

Accumulated depreciation
Net leased property

8,300¥ 17,312

384
¥ 283

8,684
¥ 17,595

67,373$ 140,518

3,115$ 2,297

70,488$ 142,815

Total

Millions of yen

Thousands of
U.S. dollars

Due within one year

¥ 4,663$ 37,848

Due after one year

13,357

108,418¥ 18,020$ 146,266

Obligations under finance leases:

Total

For the year ended October 31, 2001

Rentalequipment

Millions of yen
Machinery andequipment

Acquisition costs¥ 14,914¥ 1,220¥ 16,134

Accumulated depreciation
Net leased property

7,163¥ 7,751

563
¥ 657

7,726
¥ 8,408

Millions of yen
Total

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

¥ 3,264
5,323

Total

¥ 8,587

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 ¥3,732 million ($30,295 thousand) and ¥384 million($3,118 thousand), respectively, for the year ended October 31, 2002.
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 and ¥291 million, respectively, for theyear ended October 31, 2001.
The minimum rental commitments under non-cancellable operating leases for the years ended October 31, 2002 and 2001
were as follows:
Millions of yen

Thousands of
U.S. dollars

Due within one year
Due after one year

¥ 1,543
2,643$ 12,527
21,450Total¥ 4,186$ 33,977

For the Year Ended October 31,2002

For the Year Ended October 31,2001

Due within one year
Due after one year
Total

Millions of yen¥ 1,681
2,837¥ 4,518

Annual Report 2002 19

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 20

Notes to Consolidated Financial Statements

8. Income taxes
The difference between the statutory tax rate and the effective tax rate for the years ended October 31, 2002 and 2001
was as follows:

2001

2002

Statutory tax rate
Operating losses of subsidiaries

41.7 %
4.4

41.7 %
1.2

Expenses not deductible for tax purposes

2.6

1.1

Inhabitants per capita taxes

7.8

3.9

Write - down of investment in associates

-

(3.4)

(0.4)
56.1 %(1.1)
43.4 %

Other
Effective tax rate

The significant components of deferred tax assets and liabilities at October 31, 2002 and 2001 were as follows:
Thousands of
U.S. dollars

Millions of yen

2001

2002

2002

¥ 477

¥ 388

$ 3,150

Directors’ retirement benefits
Accrued bonuses for employees

118
123

82
150

665
1,216

Provisions for doubtful accounts
Accrued enterprise tax

139
105

223
1

1,812
4

Accrued pension and severance costs

836

696

5,653

Operating loss carryforwards
Net unrealized loss on securities

139
-

176
78

1,432
630

100
2,037

298
2,092

2,425
16,987

Deferred tax assets:
Depreciation expenses

Others
Sub total
Less valuation allowance

(139)

(176)

(1,432)

Total deferred tax assets

1,898

1,916

15,555

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

(101)

-

-

¥ 1,797¥ 1,916$ 15,555

9. Supplemental cash flow information
Non-cash investing and financing activities for the years ended October 31, 2002 and 2001 were as follows:
Millions of yen

Thousands of
U.S. dollars

2001

2002

2002

¥ 9,701¥ 3,637$ 29,521

Non-cash investing and financing activities:
Additions to obligations under installment purchases

20 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 21

10.Segment information
Business segment information for the years ended October 31, 2002 and 2001 was as follows:
Millions of yen
Information andcommunication
Total
related andother businessEliminations
andcorporateitems

For the year ended October 31, 2001

Construction
relatedbusinessSteelrelatedbusiness

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

¥-

-

-

-

-

-

-

57,613

8,342

1,391

67,346-

67,346

Operating expenses

55,055

8,194

1,364

64,613(139)

64,474

Operating profit (loss)
Identifiable assets¥ 2,558¥ 76,592¥ 148¥ 3,970¥ 27¥ 1,439¥ 2,733¥ 82,001¥ 139¥ 24,638¥ 2,872¥ 106,639

Depreciation
Capital expenditures

9,455
10,045

13
1

18
0

9,486
10,046458

9,486
10,504

2001

Intersegment
Total

Millions of yen
Information andcommunication
Total
related andother business

Consolidated¥ 67,346

Eliminations
andcorporate
items

Consolidated¥ 65,252¥-¥ 65,252---

65,252-

65,252

Construction
relatedbusinessSteelrelatedbusiness¥ 56,558¥ 7,436¥ 1,258---

56,558

7,436

1,258

Operating expenses

54,450

7,388

1,254

63,092(128)

62,964

Operating profit
Identifiable assets¥ 2,108¥ 70,991¥ 48¥ 3,444¥4¥ 1,437¥ 2,160¥ 75,872¥ 128¥ 23,442¥ 2,288¥ 99,314

Depreciation
Capital expenditures

7,950
4,677

6
2

12
-

7,968
4,679

152
31

8,120
4,710

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

Consolidated

2002
For the year ended October 31, 2002

Sales
Outside customers
Intersegment
Total

Construction
relatedbusinessSteelrelatedbusiness

Outside customers
Intersegment$ 459,080-$ 60,354-$ 10,208-$ 529,642-$-$ 529,642-

Total
Operating expenses

459,080
441,967

60,35459,968

10,208
10,173529,642
512,108(1,033)529,642
511,075

Operating profit (loss)
Identifiable assets$ 17,113$ 576,220$ 386$ 27,950$ 35$ 11,667$ 17,534$ 615,837$ 1,033$ 190,279$ 18,567$ 806,116

Depreciation

64,52950

96

64,675

1,233

65,908

Capital expenditures

37,963

16-

37,979253

38,232For the year ended October 31, 2002

Sales

11.Subsequent events
On January 28, 2003, 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, 2002, or a total payment of ¥272 million ($2,210 thousand).

Annual Report 2002 21

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 22

Non-consolidated balance sheets■ ASSETS
Thousands of
U.S. dollars (Note 1)

Millions of yen

2001

2002

2002

Cash and time deposits¥ 15,692¥ 14,578$ 118,331

Short-term investments

114

75

609

Notes receivable, trade

12,52010,42384,601

Accounts receivable, trade

12,587

11,79695,750Inventories

806

399

3,237

Deferred income taxes (Note 5)

226

152

1,233

Other current assets

3,258

2,899

23,526

Less : Allowance for doubtful accounts

(318)

(462)

(3,750)44,88539,860323,537

Rental equipment

56,321

48,816396,232

Buildings

10,766

10,82587,868Structures

3,857

3,874

31,441

Machinery and equipment

4,923

4,644

37,695(46,491)(42,841)(347,732)

29,37625,318205,504

24,25824,228

196,651

59

104

846

53,69349,650403,001

Investments in securities

3,581

3,468

28,147

Investments in associates

662

805

6,538

Deferred income taxes (Note 5)

1,563

1,727

14,019Other assets

1,486

1,780

14,452Less : Allowance for doubtful accounts

(447)

(573)

(4,650)Total investments and other assets

6,845

7,207

58,506¥ 105,423¥ 96,717$ 785,044

As of October 31, 2002 and 2001

Current assets :Total current assets

Property and equipment :Less : Accumulated depreciation

Land
Construction in progress
Total property and equipment

Investments and other assets :22 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 23■ LIABILITIES AND SHAREHOLDERS’ EQUITY
Thousands of
U.S. dollars (Note 1)

Millions of yen

2001

2002

2002

¥ 7,755¥ 8,289$ 67,281

Current portion of straight bonds

-

5,278

42,838Current portion of convertible bonds

-

4,164

33,799Notes payable, trade

9,151

8,091

65,675

Accounts payable, trade

2,647

2,857

23,189

422

289

2,346

Accounts payable, other

8,284

7,888

64,023

Accrued income taxes

1,290

-

-

Accrued bonuses for employees

575

519

4,217

Other current liabilities

722

676

5,488

Total current liabilities

30,84638,051

308,856

Straight bonds

5,278

-

-

Convertible bonds

9,281

-

-

Long-term bank loans

14,305

16,858136,834

Long-term accounts payable, other

12,3998,614

69,921

Accrued pension and severance costs

1,998

1,660

13,470

282

177

1,443

43,54327,309221,668

8,597

8,597

69,779Additional paid-in capital

9,720

9,720

78,899Legal reserve

1,372

1,372

11,140Retained earnings

11,205

11,77895,599Net unrealized gain (loss) on other securities, net of taxes

141

(108)

(880)

Treasury stock

(1)

(2)

(17)

31,03431,357

254,520¥ 105,423¥ 96,717$ 785,044

As of October 31, 2002 and 2001

Current liabilities :Current portion of long-term bank loans

Notes payable, otherNon-current liabilities :Other liabilities
Total non-current liabilities

Contingent liabilities (Note 3)

Shareholders' equity :Common stock :Authorized – 66,000,000 shares
Issued – 30,253,241 shares

Total shareholder’s equity

Annual Report 2002 23

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 24

Non-consolidated Statements of Income

Thousands of
U.S. dollars (Note 1)

Millions of yen

2001

2002

2002

Rental revenues¥ 41,456¥ 39,206$ 318,227

Cost of rentals

31,30329,952

243,118

Sales of goods

22,84021,401

173,712

Cost of sales

17,57016,505

133,964

Gross profit

15,423

14,150114,857

Selling, general and administrative expenses

12,652

11,89596,549Operating income

2,771

2,255

18,308

40

56

454

(524)

(446)

(3,624)

Others, net(1,215)

188(1,524)

Income before income taxes

1,072

2,053

16,662Current

1,854

830

6,735

Deferred(1,300)

89

(721)

554

919

7,456

¥ 518

¥ 1,134$ 9,206

Year ended October 31, 2002 and 2001

Other income (expenses) :Interest and dividend income
Interest expenses

Income taxes (Note 5)

Net income

Yen

U.S. dollars (Note 1)

2001

2002

2002

Basic

¥ 17.14¥ 37.49$ 0.30

Diluted

15.04

28.85

0.23

18.00

18.00

0.15

Per share of common stock :Net income

Cash dividends applicable to the year

24 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 25

Non-consolidated Statements of Shareholders' Equity

Millions of yen

Year Ended October 31, 2002 and 2001

Balance at October 31, 2000

Thousands ofshares ofcommon stock

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Net unrealizedgain(loss)on othersecurities,
net of taxes

30,229¥ 8,591¥ 9,715¥ 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

Net income

1,134Cash dividends(544)

Bonuses to directors and auditors

(17)
(249)

Other
Balance at October 31, 2002

141

30,253¥ 8,597¥ 9,720¥ 1,372¥ 11,778¥ (108)

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Net unrealizedgain(loss)on othersecurities,
net of taxes$ 69,779$ 78,899$ 11,140$ 90,948$ 1,141

Thousands of U.S. dollars (Note 1)

Year Ended October 31, 2002

Balance at October 31, 2001
Net income

9,206

Cash dividends(4,420)(135)

Bonuses to directors and auditors(2,021)

Other
Balance at October 31, 2002

$ 69,779$ 78,899$ 11,140$ 95,599$ (880)

Annual Report 2002 25

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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 andExchange 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 accepted in countries and jurisdictions
other than 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, 2002, which was ¥123.20 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.

3. Contingent liabilities
At October 31, 2002 and 2001, the Company was contingently liable as follows:

Guarantees of loans

2001

Millions of yen
2002

¥ 377

¥ 372

Thousands of
U.S. dollars
2002$ 3,022

4. Leases
Lease payments under finance leases for the years ended October 31, 2002 and 2001 were ¥3,838 million ($31,152
thousand) and ¥2,717 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, 2002 and 2001, was as follows:

For the year ended October 31, 2002

Rentalequipment

Millions of yen
Machinery andequipment

Total

Acquisition costs
Accumulated depreciation
Net leased property¥ 24,072
7,533¥ 16,539

¥ 563
339
¥ 224

¥ 24,635
7,872¥ 16,763

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

26 Annual Report 2002

Thousands of
U.S. dollars¥ 4,259
12,900¥ 17,159$ 34,569
104,706$ 139,275$ 4,567
2,752$ 1,815$ 199,957
63,893$ 136,064

Millions of yen

For the year ended October 31, 2001

Acquisition costs¥ 14,031¥ 623¥ 14,654

6,821

306

7,127

¥ 7,210¥ 317¥ 7,527

Net leased property$ 195,390
61,141$ 134,249

Millions of yen

Millions of yen
RentalMachinery andequipment
equipment

Accumulated depreciation

Thousands of U.S. dollars
RentalMachinery andTotalequipment
equipment

Total

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

¥ 2,893
4,788¥ 7,681

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 27

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 ¥3,272 million ($26,560 thousand) and ¥334 million($2,709 thousand), respectively, for the year ended October 31, 2002.
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 and ¥252 million, respectively, for theyear ended October 31, 2001.
The minimum rental commitments under non-cancellable operating leases for the years ended October 31, 2002 and 2001
were as follows:
For the year ended October 31, 2002

Due within one year
Due after one year
Total

Millions of yen

Thousands of
U.S. dollars¥ 1,543
2,643¥ 4,186$ 12,527
21,450$ 33,977

For the year ended October 31, 2001

Millions of yen¥ 1,681
2,837¥ 4,518

Due within one year
Due after one year
Total

5. Income taxes
The difference between the statutory tax rate and the effective tax rate for the years ended October 31, 2002 and 2001
was as follows:Year ended October 31, 2002 and 2001

2001

2002

Statutory tax rate

41.7 %

41.7 %

Inhabitants per capita taxes

7.2

3.8

Expenses not deductible for tax purposes

2.4

1.1

Other

0.4

△1.9

Effective tax rate

51.7 %

44.7 %The significant components of deferred income tax assets at October 31, 2002 and 2001 were as follows:
Thousands of
U.S. dollars

Millions of yen

2001

2002

2002

¥ 477

¥ 387

$ 3,145

Directors’ retirement benefits

118

74

601

Accrued bonuses for employees

120

144

1,172

Provisions for doubtful accounts

139

223

1,812

Accrued enterprise tax

105

-

-

Accrued pension and severance costs

833

692

5,617

Net unrealized loss on securities

-

78

630

Others

98

281

2,275

1,890

1,879

15,252

(101)

-

-

¥ 1,789¥ 1,879$ 15,252

Year ended October 31, 2002 and 2001

Deferred tax assets:
Depreciation expenses

Total deferred tax assets

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

6. Subsequent events
On January 28, 2003, 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, 2002, or a total payment of ¥272 million ($2,210 thousand).

Annual Report 2002 27

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Topics 2001-2002

Revealed: My Management,
My LifeBy Taichu Kanamoto /Published by The Hokkaido
Shimbun Press
Duodecimo font, 296 pages
List price ¥1,500

Taichu Kanamoto’s latest work, Revealed: My
Management, My Life, has been published
Revealed: My Management, My Life, written by Kanamoto’s
Chairman Taichu Kanamoto and published by The Hokkaido
Shimbun Press, was released in September 2002.
The book includes thoughts on Taichu Kanamoto’s management
philosophy in Part One and previously unreleased materials written overthe past 50 years in Part Two, plus a collection of 32 articles originallypublished in the Hokkaido Shimbun as the column “Breakfast Table” over athree-year period in 1986-87 and 1999. The book also includes drafts of
unpublished materials.
The book condenses the management principles and philosophy of life of
Kanamoto’s chairman, from the era when his father established his own
shop up to the present day. The work may best be described as a book thatwill help readers gain a deeper appreciation of Kanamoto Company’sbusiness approach (Currently only available in a Japanese-language edition).

“I sought to eliminate vague expressions to the extent
possible and aimed for clear, concise writing.” (Author Taichu
Kanamoto)

Daiichi Machine Industries Co., Ltd. now a Kanamoto subsidiary
On November 1, 2001, Kanamoto acquired a majority of the stock of Daiichi Machine Industries Co.,
Ltd. (Head office: Kanoya, Kagoshima Prefecture), converting the company into a Kanamoto subsidiary.
As a long-standing member of the Kanamoto alliance group, Daiichi built an excellent relationship with
Kiyoto Matsui,Daiichi’s
President

Kanamoto over many years as a business partner covering the southern Kyushu region. Like Kanamoto,Daiichi made construction equipment rentals its main business and has created a solid business base,particularly in the Okuma area of Kagoshima Prefecture, where Daiichi’s head office is located.
Kanamoto looks forward to the contribution that Daiichi’s earnings will make to Kanamoto’s
consolidated operating results.
Daiichi will continue operations under its trade name Daiichi Machine Industries Co., Ltd. Kiyoto Matsui

Daiichi Machine
Industries Co., Ltd.

will continue serving as Daiichi’s President and Representative Director.

Eliminating the mounting problem of construction equipment theft losses Kanamoto begins marketing Theft Sensor anti-theft warning device
To counter the construction equipment theft losses that have become a rapidly growing
problem recently, Kanamoto developed Theft Sensor, an anti-theft warning device. In
addition to installing the device on the company’s own construction equipment, Kanamoto
has also begun marketing the alarm to other construction equipment manufacturers andconstruction equipment rental companies.
According to statistics released by the Japan Construction Equipment Manufacturers

First machine equipped with Theft
Sensor, developed by Kanamoto

Association, the number of construction equipment theft losses increased by approximately
seven-fold over the five-year period since 1995, with over 1,000 thefts occurring in 2000. The number of cases in whichstolen construction equipment is used to commit other crimes is also climbing, and incidents in which stolen hydraulicexcavators are used to demolish a bank’s ATM corner and loot the cash from each ATM machine show no signs of abating.
After any initial disturbance, the Theft Sensor developed by Kanamoto will generate a warning message exceeding 100dB
when it detects any additional movement, such as slight vibrations, jolting or tilting of the construction equipment on which
the sensor is installed. In addition, the device incorporates a second-stage security system, which simultaneously with thewarning message will automatically alert police, via a monitoring and report center, if the device has been set to report mode.
What’s more, by installing options such as an intruder sensor and infrared sensors, companies can also use Theft Sensor for
security needs in other locations, such as job site offices.
The Theft Sensor II Hydro-Sever, which Kanamoto has begun selling as the second model in the Theft Sensor series,
incorporates a mechanism that enables the controller to shut off the hydraulic excavator’s power circuits. Because thehydraulic circuits have been disabled, thieves will be unable to move the equipment even if they manage to start the engine
28 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 29

by illegal means. This makes Theft Sensor II Hydro-Sever the optimal anti-theft device for large-scale construction equipmentthat must be driven onto a trailer under its own power.
Kanamoto plans to install anti-theft devices such as Theft Sensor or Hydro-Sever on all of the company’s rental equipment, so
customers will know they can use Kanamoto’s services with even greater peace of mind. This is just another example of how
Kanamoto increases the added value of its equipment rental system. Kanamoto doesn’t intend to keep this advantage as
added value all for itself, however, and is working to eliminate crime from the entire industry by recommending the broad useof Theft Sensor by other companies in the industry and construction equipment manufacturers.

Annual Report 2002 29

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Corporate Data

Shareholders’ Information(As of March 1, 2003)

Company Name

Principal Businesses

Kanamoto Company, Ltd.

Rental of construction equipments
Sale of steel products

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

Mizuho Corporate BankSUMITOMO MITSUI Banking Corporation

Capitalization

The Norinchukin Bank¥ 8.6 billion (Paid-in capital)

North Pacific Bank
Hokkaido Shinren

Listing Exchanges

The Hokkaido BankTokyo Stock Exchange, First Section

Shinkin Central 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

Komatsu
Kanamoto Capital Company

Fiscal Year-end

The Master Trust Bank of Japan,Ltd.

October 31

North Pacific Bank
The Hokkaido Bank

Revenues

The Tokio Marine & Fire Insurance Company¥60,606 million

DENYO Co., Ltd.

(Fiscal year ended October 2002)

Number of Employees
1,093 (859 male, 234 female)(Excluding directors and temporary or part-timeworkers)

30 Annual Report 2002

*ｶﾅﾓﾄﾏﾆｭｱﾙ 06.6.15 3:08 PM ページ 31

Board of Directors(As of April 21, 2003)

Directors

Auditors

Taichu Kanamoto

Toshizo Okumura

ChairmanStanding Corporate Auditor

Kanchu Kanamoto

Norizumi Tsuda

President
CEOStanding Corporate Auditor

Nobuhito Utatsu
Division Manager, Accounting Division

Hideki Nomiya
Business Coordination Headquarters

Kiyoshi Onishi

Masakazu Hirata
Deputy Division Manager,
Construction Equipment Rental Division
Division Manager, Used Products Sales Division
Manager, Quality Assurance Section

Hidemitsu Washida

Outside Corporate Auditor

Executive Vice PresidentManager in Charge ofOperations Control Headquarters

Corporate Officers

Hitoshi Narita(Shown with the division that is representative of their

Division Manager, Business Planning Division

Shinroku Sawada

work as a Corporate Officer)

Senior Corporate Officer
Manager in Charge of Business Planning

Kanchu Kanamoto

Yukio Sato
Senior Corporate Officer
Manager, Business Coordination Headquarters
Manager, New Products Section

Eichu Kanamoto
Division Manager, Administration DivisionNobuhito Utatsu
Division Manager, Accounting Division

Kojiro Satsuma

President
CEO

Hidemitsu Washida
Manager in Charge ofOperations Control Headquarters

Shinroku Sawada
Senior Corporate Officer
Manager in Charge of Business Planning

Yukio Sato
Senior Corporate Officer
Manager, Business Coordination Headquarters
Manager, New Products Section

Tadao Saika
Eichu Kanamoto
Division Manager, Administration Division

Tetsuo Kanamoto
Division Manager, Construction Equipment
Rental Division
Regional Manager, Kinki&Chubu Region
Construction Equipment Rental Division

Keiichi Kitakata
Division Manager, Research & Investment Division

Hiroshi Kumagai
Division Manager, Information System Division

Tatsuo Kanamoto
Regional Manager, Tohoku Region
Construction Equipment Rental Division

Yuichi Asano
Division Manager, Credit Management Division
Manager, Auditing Section
Manager, Legal Section

Annual Report 2002 31

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