Annual Report 2015 Year Ended March 31, 2015

Contents
1

What is KYB?

4

Ten-Years Summary

6

To Our Shareholders and Investors

8Interview with the President

12

Corporate Governance

15

Management

16

Risk Information

18

Consolidated Subsidiaries and Equity-Method Affiliates

20

Corporate Information

21

Shareholder Information

22

Financial Section

Forward-Looking Statements
This annual report contains forward-looking statements, including
KYB’s plans and strategies, as well as statements that reporthistorical results. Forward-looking statements involve such known
and unknown risks and uncertainties as economic conditions;currency exchange rates; laws, regulations, and government
policies; and political instability in principal markets.

KYB Corporation

What is KYB?

Business Domain

  2 Our Core Competence—Delivering Safety and Comfort
Automotive, Motorcycles,
Railroad Equipment,
Aircraft Components

Vibration
Control Technology

As a pioneer in hydraulic technology, KYB is active in a wide range of fields, including automotive,

motorcycle, construction machinery, railroad cars, aircraft, special-purpose vehicle, seismic isolation

system, vibration control damper, and marine equipment. KYB celebrated its 80th anniversary in March
2015, a milestone that represents years of consistently meeting a wide range of customer needs. By

Annual Report 2015

Automotive

Motorcycles

Railroad Equipment

Aircraft Components

Construction Machinery

Industrial Vehicles

Agricultural Machinery

Industrial Machinery

Construction Machinery,Special-purpose Vehicles,
Building and Stage
Equipment

Power Control
Technology

developing advanced products that combine hydraulics with electronic control and other technologies,
KYB has earned the trust of customers around the world. We aim to continue earning customer andstakeholder support with our relentless drive toward the technologies and products of tomorrow.

Special-purpose Vehicles Vibration Control Dampers Building and Stage Equipment Marine Components

Electronic Components,
System Technology

Electronic
Control Technology

Mobile Communication Device High-Performance EPS

Business Domain

1 KYB in Everyday Living

Business Domain

We support comfort and safety in all industries, from performance hydraulic technology
to electronics.

  3 Products that Improve our Lives

Automotive Components (AC) Operations:
Shock absorbers, Power steering systems, Vane pumps, Front forks, Rear cushion units, Stay dampers, System technology

Aircraft Components

Shock Absorbers

Vane Pumps for CVT
Hydraulic Systems

Steer-by-wire

Railroad Equipment

DLC Coated Front Fork

Rear Cushion Units

Hydraulic Components (HC) Operations:
Pumps, Motors, Cylinders, Valves, Semi-active suspension systems for bullet train cars, Dampers for railroad cars, Free locks, Actuators for aircraftSpecial-purpose Vehicles

Building Equipment

Construction Machinery
Automotive Components

Actuators

Motorcycle Components

Semi-active Suspension
Systems for Bullet Train Cars

Caliper Brakes

Dampers for Railroad Cars

Wheel Brakes

Special-purpose Vehicles and System Products and Electronics Components Business:
Concrete mixer trucks, Granule carriers, Special-function vehicles, Motion simulators, Auditorium and stage control systems, Naval ship
equipment, Tunnel borers, Environment-friendly equipment, Seismic isolation systems, Vibration control dampers, Electronic applications

Marine Equipment

Hydraulic Cylinders

Hydraulic Valves

Concrete Mixer Trucks

Vibration Control Devices

Vibration Control Dampers Hejacules (Self Propelled
Hydraulic Jack)

1

KYB Corporation

Annual Report 2015

What is KYB?

Business Domain

  4 Global Production and Sales Network

History

80 Years of Progress

13,732 employees at 89 plants and companies in 25 countries and areas around the world

Americas

Europe1935

Established Kayaba Manufacturing Co., Ltd.

1943

Established Gifu Works (presently Gifu South Plant)

1948

Established Kayaba Industry Co., Ltd. (based on the
Corporate Reconstruction and Reorganization Act)

1956

Established Kayaba Auto Service Co., Ltd.
(presently KYB Engineering and Service Co., Ltd.)

1968

Established Gifu North Branch Plant(presently Gifu North Plant)

2009

Established European Regional Headquarters inGermany

1970

Invested in Yung Hwa Machinery Industrial Co., Ltd.,of Taiwan (55.1% KYB ownership)2010

Established Regional Headquarters in China

1971

Established Kumagaya Plant and Mie Plant

2011

1974

Established sales company in the United States

Yanagisawa Seiki MFG Co., Ltd., becamea subsidiary and changed its name toKYB-YS Co., Ltd.

1975

Established Sagami Plant

1976

Established shock absorber manufacturing company
in Indonesia (30.0% KYB ownership)

1983

Established shock absorber manufacturing company
in Malaysia (33.4% KYB ownership)

Japan

Asia

KYB Holding Company
Production Base
Sales / Service Offices, etc.

Japan

Asia

Americas

Europe2008

Established railroad equipment and motorcycle
shock absorber manufacturing and sales company
in China
Established automobile shock absorber
manufacturing and sales company in Spain(66.7% KYB owned)

Established Developmental Experiment Center andMachine Tools Center
Established aftermarket hydraulic shock absorbersales company in Panama
Established joint venture company in Brazil withMando Corporation of Korea(50.0% KYB ownership)

Acquired shock absorber manufacturing company
in Spain
Gifu North Plant

Gifu South Plant

Gifu East Plant

Kumagaya Plant

Developmental ExperimentCenterKYB Kanayama Co., Ltd.

Kayaba System MachineryCo., Ltd.

KYB Trondule Co., Ltd.

KYB (China) Investment Co., Ltd.

KYB Steering (Thailand) Co., Ltd.

KYB-Conmat Private Limited

KYB Motorcycle Suspension
India Pvt. Ltd.

KYB Americas Corporation

KYB-Mando do Brasil
Fabricante de Autopeças S.A.

KYB Mexico S.A. de C.V.

COMERCIAL DE AUTOPEÇAS
KYB DO BRASIL LTDA.

KYB EUROPE
HEADQUARTERS GmbH1986

Established shock absorber manufacturing company
in the United States

1989

Established sales company in Germany

1996

Established shock absorber manufacturing company(67.0% KYB ownership) and automobile hydrauliccomponents manufacturing company in Thailand

KYB Manufacturing Czech s.r.o.

Merged U.S. subsidiary and its subsidiary, renamed
KYB Americas Corporation
2012

Cadac Co., Ltd., became a subsidiary and changed
its name to KYB-CADAC Co., Ltd.

2001

Automobile shock absorber manufacturing company
in the United States became a wholly owned
subsidiary.

2002

Established motorcycle shock absorber
manufacturing company in Vietnam and automobile
shock absorber manufacturing company in China

2003

Established automobile hydraulic shock absorber
manufacturing company in the Czech Republic

2004

Established industrial-use hydraulic equipment
manufacturing and sales companies in China

KYB CHITA Manufacturing
Europe s.r.o.

LLC KYB Eurasia

Established hydraulic components manufacturing
and sales company in Mexico
Established Regional Headquarters in the
Netherlands
Established sales company in Russia
2013

Established hydraulic components manufacturing
and sales company in Indonesia(75.0% KYB ownership)
Established aftermarket product sales company
in Brazil

Established Kayaba System Machinery Co., Ltd.
KYB-CADAC Co., Ltd.

PT. KYB Hydraulics
Manufacturing Indonesia

2006
Production Technology R&D
Center / Machine Tools Center2

Established aftermarket automobile suspension
spring manufacturing and sales company in the
Czech Republic (70.0% KYB ownership)

Established sales company in Mexico
2005

Established KYB Motorcycle Suspension Co.,
Ltd., for the manufacture and sale of motorcycle
hydraulic shock absorbers (66.6% KYB ownership)
Acquired shares of concrete construction
equipment maker in India and establisheda subsidiary (51.0% KYB ownership)

KYB Trondule Co., Ltd., became a subsidiary.
Sagami Plant

Established Electronics Technology Center
Established motorcycle shock absorber
manufacturing and sales company in India(66.6% KYB ownership)

Established automobile hydraulic components
manufacturing company in Spain
1999

Established Gifu East Plant

Unofficial company name was changed to KYB, newcorporate philosophy and vision were established.

2014

Established Chennai Sales Office in India

Established sales company in Thailand

2015

KYB Manufacturing Spain, S.A.U., an automobile
shock absorber manufacturing and sales company
in Spain, became a wholly owned subsidiary.

Takako Industries Inc., became a subsidiary.

KYB-YS Co., Ltd.

Note: KYB ownership is as of March 31, 2015. Companies with no ownership shown are wholly owned subsidiaries.

3

KYB Corporation

Annual Report 2015

Ten-Years Summary
Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
Years ended March 31,

Thousands of
U.S. dollars

Millions of yen

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2015

Net sales¥370,425¥352,711¥305,752¥337,159¥320,083¥252,021¥329,262¥387,080¥356,083¥290,456$3,086,875

Cost and expenses

356,834

334,541

295,279

315,621295,931

248,125

329,212368,809341,510

283,733

2,973,617

Operating income

13,591

18,17010,473

21,53824,152

3,896

50

18,271

14,573

6,723

113,258

3.7

5.2

3.4

6.4

7.5

1.5

0.0

4.7

4.1

2.3

3.7

Income (loss) before income taxes and minority interests

13,172

21,032

12,994

21,76024,4401,671(4,300)15,21813,481

8,009

109,767

Net income (loss)

7,052

12,761

7,789

13,89817,014661(5,230)

8,398

6,959

2,917

58,767

Comprehensive income

24,681

20,31016,061

14,997

14,406

—

—

—

—

—

205,675Return on equity (ROE)

4.4

9.7

7.3

14.8

21.1

0.9

—

9.9

8.7

4.0

4.4

Cash flows from operating activities

21,12428,78818,984

17,39935,43322,655

8,499

19,707

20,35813,821

176,033

Cash flows from investing activities(29,426)(36,078)(36,125)(20,000)(7,233)(12,828)(26,505)(20,166)(18,323)(15,960)(245,217)

Cash flows from financing activities

(580)

5,709

8,529

(3,455)(16,968)(6,646)32,200

4,192(3,157)

2,966(4,833)R&D expenses

8,910

6,917

5,468

4,035

3,218

2,817

3,268

3,367

3,707

3,705

74,250Depreciation and amortization

16,491

17,294

14,554

13,50813,427

15,31816,552

14,973

12,28910,407

137,425

Capital expenditure

29,78529,90839,21527,173

8,916

10,082

24,96823,564

19,735

15,678248,208

Working capital¥ 35,384¥ 39,303¥ 22,179¥ 42,006¥ 46,023¥ 48,701¥ 43,513¥ 29,120¥ 23,758¥ 21,392$ 294,867

Total net assets

174,259

153,997

116,435

102,762

89,96478,48976,45191,73987,81776,7181,452,158

Total assets

384,930

361,083

327,912301,349

285,134

269,361

269,655

289,739

285,146

247,966

3,207,750

Cash and cash equivalents at end of period

30,51038,13235,21542,01048,12337,66434,272

20,073

16,651

14,963

254,250

43.7

41.2

34.5

33.2

30.6

27.3

26.6

29.8

29.1

30.9

43.7

For the year:

Operating income margin [%]At year-end:

Equity ratio [%]Yen

U.S. dollars

Per share data:
Net income (loss)

27.60¥ 55.26

Net worth658.92

Cash dividends applicable to the year
P/E ratio [Times]
Number of employees

¥

¥

35.24

¥ 62.87

582.28512.18453.00

12.00

9.00

8.00

15.9

7.9

13,732

13,033

¥

77.54

¥

3.03

¥ (23.62)

¥

37.72

¥

31.33

¥

12.63

395.18336.55327.97387.45372.60343.99

5.49

9.00

8.00

2.50

3.50

7.00

7.00

6.00

0.10

13.1

8.0

8.6

113.9

—

10.2

20.8

35.2

12,306

11,975

11,44010,977

11,370

11,546

10,596

8,387

$

0.23

Notes: 1. U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥120=U.S.$1, the approximate exchange rate prevailing on March 31, 2015.							2. This document has been translated from the original Japanese, the Annual Securities Report. All amounts are rounded down to the nearest million yen,unless otherwise noted.						

4

5KYB Corporation

Annual Report 2015

To Our Shareholders and Investors

As KYB’s new President, I recognize that I am taking on a great responsibility in directing the KYB Group.
I believe it is critical to steer the Group towards further growth by increasing corporate value and making
sure customers around the world know that they can always count on us, and our products.
I must be honest; amidst the current challenging global environment, becoming the President of a global
company is enough to test anyone’s mettle.
In the Japanese economy, we see a positive factor in the form of increasing consumer spending.
However, Japan’s economic recovery has been progressing slowly overall, and the direction the recovery
will take in the future is still unclear. In overseas markets, the U.S. economy is facing a slow recovery,
weak crude oil prices, and high dollar valuation, all of which are causing a decline in capital investments andexports. However, the outlook for consumer spending is favorable, due to factors including falling gasoline
prices. In the European market, the economic situation in the eurozone is still unstable. Also, the Russian
economy continues to struggle, slowing growth in the region. At the same time, emerging economies
such as China continue trending towards a slowdown, and the situation remains difficult to forecast.
KYB celebrated a notable milestone in 2015 as we reached our 80th anniversary. We are working
to further expand, grow, and make strides with the Company as we move ahead towards our 100th
anniversary. In management, we are focused on ensuring profit generation. In our medium-term businessplan (the 2014 mid-term plan), which guides us for the fiscal years 2014 to 2016, we set forth the slogan,“Earning trust and orders from customers around the world by uniting the KYB Group’s functions.” Thisslogan guides us towards the growth ahead.
Fiscal 2014 Management Environment and Major Initiatives
In fiscal 2014, the year ended March 31, 2015, in our primary market of automobiles, we faced low sales in
Europe, brought on by deterioration in the Russian economy, which faced the Ukraine crisis and low ruble
valuation. However, various economic policies kept the U.S. economy strong, and favorable sales in Japanof light motor vehicles helped boost revenue on a consolidated basis.
In the construction machinery market in Japan, we had forecast a large decline due to a rush of demand
before new small excavator exhaust emissions regulations, but the effect was less significant than initially
expected. Overseas, inventory adjustments in the Chinese market caused a large decrease, but sales
were strong in the U.S. and Europe. Sales faced only a slight decline on a consolidated basis.
The following is an outline of the major initiatives the Group took amidst these circumstances:
1. We enhanced our global manufacturing, supply, and sales system.
   1) Started mass production of CVT (Continuously Variable Transmission) pumps at our new plant in
Mexico. (December 2014)   2) Started construction on a new plant in Mexico that will manufacture automotive hydraulic shock
absorbers. (December 2014)   3) Completed construction on a new plant in Indonesia that manufactures hydraulic cylinders for midsized excavators aimed at the ASEAN market. (February 2015)   4) Completed construction on a new plant in India that manufactures hydraulic shock absorbers formotorcycles under our jointly owned business with Yamaha Motor Co., Ltd. (April 2015)   5) Expanded a plant in the Czech Republic in order to increase our automotive hydraulic shock
absorber production system. (March 2015)   6) Expanded a plant in North America (Takako America) in order to increase our hydraulic component
production system. (March 2015)   7) Started operations at the Chennai Branch to conduct supply and business activities in India(January 2015)
2. Improved our development and experiment capabilities  Established the System Experiment Laboratory in Gifu prefecture, Japan. The facility conducts
development for automotive hydraulic shock absorbers, automotive hydraulic components, andmotorcycle hydraulic shock absorbers.
6

Yasusuke Nakajima
President

As you can see, we’ve had a busy year. Our efforts in fiscal 2014 increased sales by ¥17.7 billion, bringing
our total for the year to ¥370.4 billion. However, rising personnel and R&D expenses at the Company andour domestic group companies caused operating profit and net income to decline. I’ll discuss the Group’s
results further in the next section of this report.
Meeting Customer Expectations with Strong Workplaces
To grow KYB’s corporate value and earn our customers’ trust, we must increase performance at
our workplaces—our heart and soul as a manufacturing company. We must make improvements inevery aspect to maximize their potential and put them on a world-class level. Then, we will accurately
understand our position in the marketplace, and quickly respond to customers’ needs.
Our slogan in fiscal 2015 is “Narrow down important business tasks, complete them thoroughly.” Thisis a critical year in which we must speed up our progress towards the targets of the 2014 mid-term plan.
While increasing corporate value is our goal, we must do so while thoroughly committing to corporate
ethics, such as compliance with laws and regulations. In keeping with KYB’s corporate mission, we will
also contribute to society through our CSR programs. In this way, we will respond to the expectations of
our shareholders.
Moving ahead, KYB will continue with our constant product development, aimed at making ourcustomers happy. We will fulfill our social responsibilities and strive to be a company that can contribute toan abundant, vibrant society through the power of manufacturing expertise.
I thank our shareholders and investors, and ask for your continued support as we move ever forwardwith the KYB Group.

July 2015

Yasusuke Nakajima
Representative Director, President Executive Officer

7

KYB Corporation

Annual Report 2015

Interview with the President

Earning Trust and Orders
from Customers Around the World—Narrow down important business tasks,
complete them thoroughly—

Q. Having fallen short of the 2014 mid-term plantargets, and with new management in place,what are your targets for the current fiscal year?

KYB’s new President Executive Officer Yasusuke Nakajima discusses
his growth strategies for fiscal 2015, the second year of KYB’s fiscal
2014 to 2016 medium-term business plan (the 2014 mid-term plan).

A. We have revised our estimates for fiscal 2015,

increases in personnel expenses, R&D expenses,
and the amount of provisions for product warranties
caused operating income to decrease year on year.
Despite the positive influence of the exchange rate,
net income also decreased, caused by a drop in
business asset amounts.
	  Let’s look at our two major business divisions,
Automotive Components (AC Operations) andHydraulic Components (HC Operations). Sales in AC
Operations increased ¥18.1 billion to ¥237.1 billion,
driven by expanding sales of automotive hydrauliccomponents, particularly for OEM products suchas shock absorbers and Electric Power Steering(EPS). However, operating income decreased dueto the previously mentioned rising expenses. In HC
Operations, there was a large decrease in profits due
to an economic slowdown and declining demandin China, causing sales to fall ¥2.3 billion to ¥113.2
billion, and a drop in operating income.

Q. 	Tell us about how the Company performed infiscal 2014, the year ended March 31, 2015.

A. In fiscal 2014, the first year of the mid-term plan, net
sales were ¥370.4 billion, operating income was ¥13.6
billion, and net income was ¥7.1 billion. Unfortunately,
these results fall far short of our targets. The keycauses were a drop in demand for construction
machinery in China, and two factors in Russia: an
exchange loss caused by the devaluation of the ruble,
and a decrease in sales of aftermarket shock absorberproducts. On the brighter side, business remained
favorable in North American markets.
	  Looking at net sales, an increase in sales ofautomotive products and the positive exchange rate
effects boosted our results by 5%, or ¥17.7 billion,
compared to the previous fiscal year. However,Net Sales by Segment (Billions of yen)

113.2

115.5
2.9

4.4

20.1

6.1

18.3

218.9

8.2

6.9

4.2

2013

Special-purpose Vehicles Business,
System Components,
Electronic Components

HC Operations

237.1

AC Operations

2014 (Fiscal)

2013

2014 (Fiscal)

2013

SA for automobiles

SA for motorcycles

HE for industrial use

HE for aircraftSpecial-purpose vehicles

HE for automobiles

OthersOthersOperating Income Margin (%)

Operating Income Margin (%)

	  On the other hand, in our Special-purpose Vehicles
and System Products and Electronics Components
business divisions, strong domestic demand for
concrete mixer trucks boosted sales by ¥1.8 billion
to ¥20.1 billion, with operating income increasing to¥1.7 billion.

2014 (Fiscal)
OthersOperating Income Margin (%)

forecasting net sales of ¥377.0 billion and an
operating income margin of 3.6%. That represents
a large gap between the net sales of ¥400.0 billion
and operating income margin of 5.5% as originallytargeted when we determined the mid-term plan in
fiscal 2014. We have faced external factors such as
the sudden drop in ruble valuation and decreased
demand in China. However, the main causes for the
downward revisions are the affect of rising sales andadministrative costs on profits, and inability to workon our strategic policies quickly enough to keep up
with changes in the business environment.
	  To guide us in the task of closing the gap in the 2014
mid-term plan amidst an environment that remains
severe, we set forth the slogan: “Narrow down
important business tasks, complete them thoroughly.”	  If we can fully comprehend what caused the gap
and properly understand customer needs, thenwe will be able to solve problems at every position
and in every department: from development andmanufacturing to sales and quality assurance.
More than ever before, we will break down silos indepartment and Group communication while taking
our technological abilities, cost reductions, and ability
to quickly supply products to the next level.
	  Moving ahead, we forecast favorable conditionsin the railway and aircraft fields, and requests for
product types in the construction and industrial
machinery fields are increasing. We must also revise
our business categories, including entering new
fields based on their potential for growthand profitability.

Q. 	Please explain the management strategy andbusiness tasks for fiscal 2015.

A. Our tasks in fiscal 2015 will be targeted at making
KYB even more competitive. We’ll enhance our
global quality assurance system and construct highly
efficient, innovative lines. The LT50 activity, a campaign
aimed at cutting manufacturing lead time in half, will be
conducted at our overseas locations. In development,
we’ll monitor customers’ new product models andaccordingly conduct timely product development
to capture orders. These include products for highand low value markets and electronic control andcommunications technology. In management
strategy, we will thoroughly reduce fixed costs, andwork to maintain an environment where diverse
human resources can make great efforts.
	  In particular, we will use our global quality
assurance system to stop quality issues fromrecurring. In fiscal 2014, our companies in Spain and
the Czech Republic faced oil leak and component
omission defects, respectively. To guard against
future defects, we established a Quality Assurance
Division and a Technology Division within thecompanies to drastically revise their manufacturing
techniques.
	  Let’s look at the tasks ahead in fiscal 2015 for eachbusiness division.
AC Operations
Our OEM strategy is critical to winning amidst
the global competition. We are working to receive
orders for global product models by speeding up
to establish a unified product development in fiveareas around the world. For example, four of ourmanufacturing companies proposed an optimized
method at the right time, winning orders for Honda’s
next generation Civic.
	  We’re also creating the necessary facilities in key
areas to respond to customer demand. In Mexico,
we are establishing an automobile shock absorberplant in the same plot of land as our existing CVTpump plant. This new plant is scheduled to begin
mass production in 2016.
 	  We will also solve quality issues and increase
productivity. A global system will be set up to makesure each company within the Group understands
the quality issues we face. The system will also
include training our human resources working in

SA: Shock Absorbers HE: Hydraulic Equipment

89

KYB Corporation

Annual Report 2015

Interview with the President

and monozukuri. These are the keys to solving quality
issues, reducing costs, and conducting productdevelopment based on market needs.

manufacturing, and making sure information on
issues and solutions is shared globally throughout
the Group.
 	  Looking at market expansion, we plan to increase
our share by launching sales of new lower priced
brands at the end of 2015, in addition to our current
brand series.
	  At our Russian subsidiary, we are reducing
inventory by moving it out of the country. This
will minimize risk of exchange loss as we aim
for business continuance. And KYB Motorcycle
Suspension Co., Ltd., is working on sales promotions
targeting domestic manufacturers.
HC Operations
We have determined four main tasks in HC
Operations. We will offer the best costs globally,
surpassing our competition. We will conduct sales
promotions for Chinese manufacturers, and create
a flexible production system for the decelerating
market. We will expand beyond our businessdomains globally. And finally, we will quickly enter
new markets through speedy product developmentfor new fields.
 	  In construction machinery, we are working tolower costs for our major products. Our targets area decrease of 30% for cylinders and 10% for drive
motors. To reach these goals, we are increasing
in-house production within the Group and locallyprocuring materials to suppress costs. Progress withthe measures has been favorable.
 	  Meanwhile, we must carefully monitor the
slowdown in the Chinese economy, which is
causing our customers to reduce working days
due to lower production. We must face measures
such as cutting fixed costs by reducing personnel,
reducing working days due to lower production
and suspending lines. It is critical that we foster
multi-skill development in local staff members, andincrease productivity. We are planning to continue
with sales promotions for Chinese manufacturers,
focusing on the industry leaders.
 	  Another issue is the expansion of products otherthan hydraulic excavators. Our progress here has notbeen sufficient. We must quickly develop products
for new fields such as skid steer loaders andagricultural machinery. We are focusing our efforts onentering these markets as quickly as possible.

10

Special-purpose Vehicles Business, System
Components, Electronic Components

In the Special-purpose Vehicles Business, we
are working to establish a production system
to meet increased domestic demand andstrengthening our foothold in the Indian market.
There has been a temporary drop in demandfor concrete mixer trucks in the Indian market,
but we forecast a recovery in fiscal 2015. With
cooperation from our local partners, we will
expand our array of products, establish a costcompetitive manufacturing system, enhancequality, and increase sales networks. We will
get our first overseas special-purpose vehicles
plant back on the growth track.
In Systems Components, we are working
toward steady growth in the core business fieldof vibration control, where price competitionis severe. We are thoroughly reducing costs
by producing components in house, lowering
procured item costs, and developing low costproducts. We are also continuing to seek orders
related to the 2020 Tokyo Olympics.

Q. 	Outside of its business divisions, what else ishappening at KYB?

A. Our medium-term policy, set forth in the 2014
mid-term plan, is “Earning trust and orders from
customers around the world by uniting the KYBGroup’s functions.” Based on this, we are working
on tackling issues from the point of view of humanresources development, technology and productdevelopment, monozukuri (manufacturing expertise),and management. In particular, we are dealing withcritical initiatives for human resources development

Human Resources
The driving force behind KYB’s monozukuri is ourhuman resources. We will continue to train our workers
to maintain a global viewpoint. We will continue
amassing our technical skill, another key to monozukuri.
	  We are focusing our efforts on quickly training
management candidates from around the world. Our
highly skilled workers are passing on their knowledge
to ensure KYB’s core technologies and skills for the
next generation. We will continue reforming ourhuman resource system by establishing a sharedevaluation system throughout the Group and rules
for the international transfer of workers.
Technology and Product Development
In April 2015, the System Experiment Laboratory
became fully operational. It joins the test course andthe Electronics Experiment Laboratory as part of theDevelopmental Experiment Center’s facilities.
	  Having our own test course and experiment
facilities is now one of our strengths. They will
enable us to earn the trust of our customers because
we can now offer even better proposals, backed byrigorous in-house evaluations.
Monozukuri
With fixed costs rising throughout the Company andin each business division, we will continue working
to cut lead time in half and to thoroughly reduce
logistics expenses. In response to rising fixed costs,
we are working quickly on improvements, including
building a world-leading, innovative production linethat is compact and highly efficient.

Q. 	The 2014 mid-term plan involved plans for capital
expenditures to raise the Group’s productivity.
What investments will be made in fiscal 2015?

A. We estimate that our capital expenditures forfiscal 2015 will total ¥22.0 billion. Our major
investments will be in production equipment forour shock absorber plant in Mexico, expanding theaftermarket product manufacturing line in the U.S.,
and production equipment for new products in
Vietnam. Of course, we will take into account market

environments and progress with projects when
making investments.

Q. It has been announced that a commemorative
dividend for the Company’s 80th anniversary will
be included in the year-end dividend. Please tell
us about your policy on distributing returns toshareholders in the future.

A. KYB positions the appropriate distribution of earnings
to shareholders as an important management policy.
That, of course, will not change. KYB’s basic policy is
to pay a dividend equivalent to a Dividend to Equity(DOE)* ratio of at least 2%.
	  The 80th anniversary commemorative dividend willbe ¥2 per share, bringing the total to ¥7. In addition
to the interim dividend of ¥5, the year-end dividend
per share will be ¥12.
	  KYB will continue with the strategic use of retained
earnings for capital and R&D investments, and plan
to maximize our returns to shareholders throughachieving the continuous growth of the Company.
*DOE=Dividends / (Net assets−Minority interests in consolidated
subsidiaries−evaluation and translation differences)

Q. Finally, do you have a message to ourshareholders and investors?

A. Domestically and overseas, the economic and social
environment in which we are operating is changing
from moment to moment. To reach our mediumterm goals set for fiscal 2020, we are aware that it iscritical to secure profits in each term.
	  As much as possible, we must earn the trust of
our stakeholders and be a company for which our
employees can feel proud to work. We plan forfurther growth in business fields while being awareof our market position. Also, we must raise ourbrand awareness though the assertive disclosureof information, while conducting governance andcompliance fitting of a global company.
	  Having reached our 80th year, and looking forward
to reaching our 100th, our management seeks to guide
KYB in meeting the expectations of our shareholders
and investors. I sincerely thank our stakeholders fortheir continued support of the KYB Group.

11

KYB Corporation

Annual Report 2015

Corporate GovernanceOperation Review with the President

Basic Policy for Corporate Governance

These meetings are held at each site, with KYB’s president reviewing problems involving the quality of
products and issues concerning management.

The KYB Group positions the upgrading of its corporate governance as one of its highest priorities in order
to increase corporate value as the Group’s activities become more global. In addition, we regard making

Board of Corporate Auditors

contributions to society, including stakeholders, as our primary mission.

This board consists of four standing auditors, including two outside auditors (one of whom is anindependent auditor). KYB believes that audits performed by these auditors provide for the effective

Management Principles

oversight of management and create an effective framework for governance. There are no personal,

The KYB Group contributes to society by providing technologies and products that make life safe andfinancial, business, or other relationships involving financial or other interests between KYB and the

comfortable.

outside auditors.

1.	Challenge higher objectives and construct a livelier corporate cultural climate.
2.	Maintain grace and good faith, and pay attention to nature and the environment.

Audit Department

3.	Always seek creative ideas and contribute to the progress of customers, shareholders, suppliers,

The Audit Department performs internal audits. This department performs audits of all businessand society.

sites and group companies in accordance with the rules for internal audits. To ensure that audits are
performed efficiently, there are periodic meetings with the Board of Corporate Auditors to share
information about annual audit plans, discuss matters involving audits, exchange opinions about
internal controls, and discuss other matters.

Corporate Governance Systems

2. Internal controls
1.	Overview of the corporate governance system

KYB positions internal controls as a vital base for the effective functioning of corporate governance.

KYB uses the Board of Auditors system and has the following units for the purpose of ensuring theInternal controls contribute to heightening the transparency of business operations as well as to making

effectiveness of corporate governance. In addition, we are taking actions to strengthen the framework forthese operations effective, efficient, and reliable.

overseeing group management activities.

Every year, the Board of Directors approves resolutions regarding the Basic Policy for Internal Controls,
which covers systems for compliance, information management, and group management.

Board of Directors
The Board of Directors has seven members, including one outside director, and, in principle, meetsonce each month. Directors reach decisions about items prescribed by laws and regulations as

Management Structure and Internal Controls

well as policies and other important matters involving management. The directors also oversee themanagement of business operations. The outside director provides opinions to the Board from an

Annual Shareholders’ Meeting

independent standpoint, and plays a role in enhancing the management function as well as improving
corporate governance. There are no personal, financial, business, or other relationships involving

Elect / Dismiss

financial or other interests between KYB and the outside director.

Cooperation

Board of Corporate Auditors

Board of Executive Officers

Group Company Management Committee
This council discusses important matters concerning the management of business operations at groupcompanies in Japan.
Global Strategy Committee
This committee discusses important matters concerning the management of group companies in other

Cooperation

Executive officers meet to hold discussions about important matters associated with management.

Certified Public Accountant

the efficiency of management.

Audit

ReportKYB uses the executive officer system for the purposes of separating the role of management
supervision and the management of business operations, speeding up decision-making, and improving

Elect / Dismiss

Elect / Dismiss

Cooperation

Representative
Director, President
Executive Officer

Executive Officer
for Legal Affairs

Audit
Department

Internal
audit

Quick report

Executive
Officer for CSR

Legal Affairs Dept.
(In charge ofcompliance)
Accounting
Auditing

Board of Directors

Board of
Executive
Officers

Other
Management
Committees(whistleblowing)

Head Office Divisions, Departments, Business Operations, Group Companies, Branches, Representative Offices

countries.

12

13

KYB Corporation

Annual Report 2015

Management

Corporate Governance(As of June 24, 2015)

3. Risk management

Representative Director, Chairman

Head office departments are responsible for the management of risk as well as for monitoring issues

Masao Usui

Members of the Board of Directors,
Senior Managing Executive Officers

involving risk management and responding as needed to a natural disaster or other such event. KYB has

Keisuke Saito

established rules and guidelines for risks associated with compliance, the environment and safety, natural

Morio Komiya

disasters and accidents, product quality, information security, export controls, and other items. KYB also

Takaaki Kato

supervises, evaluates, and provides guidance for the implementation of these rules and guidelines.
Member of the Board of Directors (Outside)

Risks associated with the businesses and investments of the KYB Group are managed by the Board ofRepresentative Director,
President Executive Officer

Rokuro Tsuruta

an Emergency Response Headquarters led by the company President. This headquarters collects andanalyzes information about the event and oversees actions aimed at minimizing damage and other losses.

Yasusuke Nakajima

Managing Executive Officers

Directors, Board of Executive Officers and other units. When a major problem occurs, KYB establishes

Keiichi Handa
Takafumi Shoji

Compensation

Kazuhiro Ogata
Eiji Hisada

1.	Compensation for directors and corporate auditors and the number of applicable individuals
Compensation by category (Millions of yen)

Tadao Ogoshi

Kazuhisa Ikenoya

Kenji Yamanouchi

Yasuo Ooe

Total
compensation(Millions of yen)

Basiccompensation

Stock options

Directors

344

264

—

81

—

8

Standing auditors(excludes outside auditors)

46

46

—

—

—

2

Executive Officers

Outside auditors

43

43

—

—

—

2

Shigeo Kidokoro

Category

Retirement
payments

BonusesNumber ofapplicable
individuals

Representative Director,
Executive Vice President
Executive Officer

Hitoshi Arakawa

2. Compensation paid to the independent auditor
2. Compensation paid to the independent auditor

Hiroshi Ogawa
Hideki Nonoyama

Millions of yen
2014

2015
Category

Masao Ono

Shizuka Sakai

Compensation foraudit certification

Compensation for
non-auditing services

Compensation foraudit certification

Compensation for
non-auditing services

KYB Corporation

56

37

57

22

Sadaaki Hara

Consolidated subsidiaries

21

—

20

—

77

37

77

22

Toshihiko Hatakeyama

Total

Thousands of U.S. dollars (Note)

Osamu Kunihara
Masaru Tsuboi

2015
Category

Ikuo Inagaki

Compensation foraudit certification

Compensation for
non-auditing services

KYB Corporation

467

308

Consolidated subsidiaries

175—

Tomoo Akai

642

308

Michio Tani *TotalStanding Auditors

Note: U.S. dollar amounts were translated from Japanese yen, for convenience only, at ¥120=US$ 1, the approximate exchange rate prevailingon March 31, 2015.

Osamu Kawase *3. Other Significant Compensation* Outside

Motoo Yamamoto

Five consolidated subsidiaries, including KYB Americas Corporation, have paid ¥125 million to KPMGInternational, which belongs to the same network as the independent auditor used by the Company, foraudit certification and other services for fiscal 2015.

14

15

KYB Corporation

Annual Report 2015

Risk Information

This section explains the major risk factors involving the KYB Group’s results of operations and financial

3)	Procurement of Materials and Parts

position that may have a significant effect on decisions by investors. Forward-looking statements in thisThe KYB Group purchases materials and parts from a large number of suppliers. Prices of materials

section represent the judgments of the KYB Group as of the end of March 2015.

and other items are closely linked to prices on international commodity markets. If the Group is unable
to fully reflect an increase in the cost of materials or parts in its selling prices, or if the Group is unable

1. Risks Relating to the Economic Environment1)	Economic Climate

to reduce prices of materials and parts sufficiently to reflect a reduction in selling prices, there may be
a significant impact on results of operations.
4) Fund procurement

Consolidated net sales consist primarily of parts that are sold to makers of automobiles and

The KYB Group uses loans from financial institutions in Japan and other countries to meet

motorcycles, construction machinery, and commercial vehicles. Manufacturers of these parts are

requirements involving capital expenditures and working capital. The Group takes out these loans

expanding overseas operations even faster in response to the growing overseas manufacturingwhile carefully monitoring financial markets. However, the Group may not be able to procure funds

activities of their customers. The KYB Group supplies parts to customers outside Japan from plants

in a timely manner at favorable terms if there is broad decline in prices of the Group’s products, anin the Americas, Europe and Asia. These overseas plants are vulnerable to fluctuations in demand,

economic recession, a credit crunch, a decline in the Group’s credit rating, or for other reasons. Any ofand the resulting changes in customers’ production volume, caused by changes in the economies inthese events may affect the Group’s financial condition and results of operations.

the regions where these plants are located. As a result, there may be a significant impact on the KYBGroup’s results of operations and financial condition.

5) Worsening Overseas Business Conditions
If there is a bankruptcy at a KYB Group overseas manufacturing base caused by a decline in orders,2) Fluctuations in Exchange Rates and Interest Rates
Overseas sales are 52.0% of the KYB Group’s total net sales. As a result, changes in foreign exchange

falling earnings or some other reason, there may be a significant impact on the Group’s results ofoperations.

rates may have a significant impact on the Group’s exports from Japan as well as the performance ofgroup companies in other countries.
An increase in interest rates in Japan or other countries may have a significant impact on the KYBGroup’s results of operations.

6) Counterparty Credit Risk
The KYB Group sells its products to automobile and construction machinery makers and many othercustomers. An unexpected problem involving credit risk of a customer may affect the Group’s resultsof operations.

2. Risks Relating to Business Operations
3. Risks Relating to Significant Litigation or Other Legal Action1) Demand Trends
Sales of the KYB Group’s automotive components and hydraulic components operations depend

If the KYB Group is the defendant in a law suit and the outcome is unfavorable, the resulting demands

greatly on the global production volume of automobiles and construction machinery. The profitability

and requirements may have a significant impact on the Group’s results of operations.

of these two businesses fell sharply due to the decline in demand for these products during the
global economic downturn caused by the financial crisis. Future changes in demand, including shifts
associated with government economic stimulus measures, may have a significant impact on results ofoperations. In the special-purpose vehicles business, which involves primarily concrete mixer trucks,

4. Risks Relating to Fires, Accidents and Natural Disasters

demand may be significantly influenced by changes in the volume of construction activity, which
is closely linked to the economic outlook, as well as by changes in laws and regulations, such as

Many plants of the KYB Group produce hydraulic products that utilize the properties of oil. In addition,

restrictions on vehicle emissions.

plants often have coating equipment that uses organic solvents and storage tanks for various oils,
chemicals and other substances. If there is a fire or a leak of a hazardous substance, manufacturing

2)	Prices and Quality

activity may have to be suspended temporarily.

The KYB Group’s products are subject to intense price-based competition in Japan and other countries.

In Japan, many plants of the KYB Group and its suppliers are located in the Chubu area (central area

Customers are always asking for cost cuts and lower prices. Quality is also critical. The Group supplies

of Japan’s mainland). If there is a major earthquake in this region or other disaster that prevents thesevital automotive parts, such as shock absorbers, which maintain a vehicle’s stability, and power

plants from operating, there may be a substantial decline in the Group’s production capacity.

steering systems. For construction machinery and commercial vehicles, the Group supplies key
functional components such as hydraulic cylinders and motors. Consequently, if the Group supplies a

In addition, if an earthquake, fire, conflict, act of terrorism or other event outside Japan occurs where
the KYB Group has a plant, there may be a substantial decline in the Group’s production capacity.

defective product, there may be substantial expenses due to customers’ demands for the payment ofdamages and other events. Furthermore, sales volume and prices for aftermarket automotive shock
absorbers will probably be influenced by changes in the health of regional economies and the actionsof competitors.
16

17

KYB Corporation

Annual Report 2015

Consolidated Subsidiaries and Equity-Method Affiliates
As of March 31, 2015

Consolidated Subsidiaries

Japan
Name

Location

Principal business

Established

Ownership

Kayaba System Machinery Co., Ltd.

Tokyo, Japan

Manufacturing and sales of stage
equipment and seismic base isolationand vibration control dampers

Jul. 2004

100.0%KYB Trondule Co., Ltd.

Niigata, Japan

Manufacturing and sales of electronicequipment

Jun. 2004

100.0%KYB-YS Co., Ltd.

Nagano, Japan

Manufacturing and sales of shock
absorbers and hydraulic equipment

Apr. 1953

100.0%

KYB-CADAC Co., Ltd.

Nagano, Japan

Manufacturing and sales of casting andmetal mold products

Mar. 1996

100.0%KYB Kanayama Co., Ltd.

Gifu, Japan

Manufacturing of shock absorbers andhydraulic equipment

Jul. 1970

100.0%KYB Motorcycle Suspension Co., Ltd.

Gifu, Japan

Manufacturing and sales of shock
absorbers for motorcycles

Oct. 2013

66.6%

Takako Industries, Inc.

Kyoto, Japan

Manufacturing and sales of hydraulicpump components and electronic
machine parts

Apr. 1973

100.0%KYB Engineering and Service Co., Ltd.

Tokyo, Japan

Sales of shock absorbers and hydraulicequipment

Mar. 1956

100.0%KYB Logistics Co., Ltd.

Gifu, Japan

Packaging and delivery of shock
absorbers and hydraulic equipment

Jul. 1987

100.0%The Americas
Name

Location

Principal business

Established

Ownership

KYB Americas Corporation

Indiana, U.S.A.

Headquarters of KYB’s Americas base
Manufacturing and sales of shock
absorbers for automobiles

Oct. 2011

100.0%

Name

Location

Principal business

Established

Ownership

KYB Manufacturing Czech s.r.o.

Pardubice,
Czech Republic

Manufacturing and sales of shock
absorbers for automobiles

Aug. 2003

100.0%KYB CHITA Manufacturing
Europe s.r.o.

Chrudim,Czech Republic

Manufacture of suspension springs forautomobiles

Jan. 2013

70.0%

LLC KYB Eurasia

Moscow, Russia

Import and sales of shock absorbers

Jul. 2012

100.0%KYB Suspansiyon Sistemleri
Sanayi ve Ticaret, A.S.

Adapazari,Turkey

Import and sales of shock absorbers forautomobiles

May 2000

100.0%KYB Middle East FZE

Dubai,
United Arab Emirates

Sales of shock absorbers

May 2005

100.0%

Name

Location

Principal business

Established

Ownership

KYB (China) Investment Co., Ltd.

Jiangsu, China

Headquarter of KYB's China baseNov. 2010

100.0%

Wuxi KYB Top Absorber Co., Ltd.

Jiangsu, China

Manufacturing and sales of shock
absorbers for motorcycles

Aug. 2008

100.0%KYB Industrial Machinery(Zhenjiang) Ltd.

Jiangsu, China

Manufacturing and sales of shock
absorbers for automobiles

Dec. 2002

100.0%KYB Hydraulics Industry(Zhenjiang) Ltd.

Jiangsu, China

Manufacturing and sales of hydraulicequipment for industrial use

Feb. 2004

100.0%KYB Trading (Shanghai) Co., Ltd.

Shanghai, China

Sales of shock absorbers and supplies
components

Nov. 2004

100.0%KYB Steering (Thailand) Co., Ltd.

Chonburi, Thailand

Manufacturing and sales of pumps for
power steering

Oct. 1996

100.0%KYB (Thailand) Co., Ltd.

Chonburi, Thailand

Manufacturing and sales of shock
absorbers

Jan. 1996

67.0%

KYB Asia Co., Ltd.

Samutprakarn,
Thailand

Sales of shock absorbers

Jan. 2005

100.0%KYB Motorcycle Suspension
India Pvt. Ltd.

Chennai, India

Manufacturing and sales of shock
absorbers for motorcycles

Dec. 2012

66.6%

KYB-Conmat Pvt. Ltd.

Gujarat, India

Manufacturing and sales of concreterelated construction equipment

Feb. 2013

51.0%

PT. KYB Hydraulics Manufacturing
Indonesia

Bekasi, Indonesia

Manufacturing and sales of hydraulicequipment for industrial use

Nov. 2013

75.0%

Asia

TSW Products Co., Inc.*

Kansas, U.S.A.

Manufacturing and sales of hydraulicequipment

Mar. 1990

100.0%KYB Mexico S.A. de C.V.

Guanajuato, Mexico

Manufacturing and sales of pumps for
CVT

Oct. 2012

100.0%KYB Latinoamerica, S.A. de C.V.

Mexico D.F., Mexico

Sales of shock absorbers

Dec. 2004

100.0%KYB PanamA, S.A.

Panama City, Panama

Sales of shock absorbers

Sep. 2010

100.0%KYB Manufacturing
Vietnam Co., Ltd.

Hanoi, Vietnam

Manufacturing and sales of shock
absorbers for motorcycles

Oct. 2002

100.0%

COMERCIAL DE AUTOPEÇAS KYB DO
BRASIL LTDA.

Curitiba, Brazil

Sales of shock absorbers

Dec. 2013100.0%TAKAKO Vietnam Co., Ltd

Binh Duong, Vietnam

Manufacturing of internal parts forhydraulic equipment

Feb. 2003

100.0%KYB Manufacturing Taiwan Co., Ltd.

Taoyuan, Taiwan

Manufacturing and sales of shock
absorbers

Jun. 1963

55.1%*Changed name to Takako America CO., INC. as of April 2014

EuropeName

18

Principal business

Established

Ownership

KYB Europe Headquarters GmbH Krefeld, Germany

Location

Headquarters of KYB’s European baseSep. 2009100.0%KYB Europe GmbH

Krefeld, Germany

Sales of shock absorbers

Jun. 1989

100.0%KYB Europe Headquarters B.V.

Limburg,
The Netherlands

Supervising European business

Apr. 2012

100.0%
Name

Location

Principal business

Established

Ownership

KYB Suspensions Europe, S.A.

Navarra, Spain

Manufacturing and sales of shock
absorbers for automobiles

Jul. 1975

100.0%

TOWA MANUFACTURING CO., LTD.

Gifu, Japan

Manufacturing of hydraulic jacks andcylindersOct. 1948

33.4%

KYB Steering Spain, S.A.

Navarra, Spain

Manufacturing and sales of pumps for
power steering

Jun. 1996

100.0%

P.T. Kayaba Indonesia

Jakarta, Indonesia

Manufacturing and sales of shock
absorbers

Feb. 1976

30.0%

KYB Advanced Manufacturing Spain,
S.A.

Navarra, Spain

Manufacturing and sales of shock
absorbers for automobiles

Oct. 2008

66.7%

KYB-UMW Malaysia Sdn. Bhd.

Selangor, Malaysia

Manufacturing and sales of shock
absorbers

Jun. 1983

33.4%

KYB-UMW Steering Malaysia
Sdn. Bhd.

Selangor, Malaysia

Manufacturing and sales of pumps for
power steering

Sep. 1995

33.4%

KYB-Mando do Brasil Fabricantede Autopeças, S.A.

Paraná, Brazil

Manufacturing and sales of shock
absorbers for automobiles

Jun. 2011

50.0%

Equity-Method Affiliates

19Annual Report 2015

KYB Corporation

Corporate Information

Shareholder Information

As of March 31, 2015

As of March 31, 2015

Company Name:	Kayaba Industry Co., Ltd. (Use KYB Corporation as its popular name)Common Stock Issued:

257,484,315 shares

Head Office:	World Trade Center Bldg., 4-1, Hamamatsu-cho 2-chome,

Number of Shareholders:

16,390Transfer Agentand Registrar :Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku, Tokyo 103-8670, Japan

Major Shareholders:

Name

Minato-ku, Tokyo 105-6111, Japan
Tel: 81-3-3435-3511 Fax: 81-3-3436-6759
		URL: http://www.kyb.co.jp

Date of Establishment:

November 25, 1948

Fiscal Year:

April 1 to March 31

Paid-in Capital:¥27,647.6 million

Number of Employees:

13,732 (Consolidated basis)

Securities Traded:
Plants:Tokyo Stock Exchange (First Section)
Kumagaya, Sagami, Aikawa, Gifu North, Gifu South, Gifu East

R&D Centers: 	Basic Technology R&D Center, Electronics Technology Center,
Production Technology R&D Center, Machine Tools Center,
Developmental Experiment Center
Sales Branches:

Automotive Components Operations Sales Department No. 2, Nagoya,		Osaka, Fukuoka, Hiroshima

Shareholdings(Thousands)

Percent of Total
Shares Issued

Toyota Motor Corporation

19,654

7.63

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

11,1794.34

Meiji Yasuda Life Insurance Company

10,046

3.90

Hitachi Construction Machinery Co., Ltd.

8,920

3.46

Japan Trustee Services Bank, Ltd. (Trust Account)

7,579

2.94

KYB suppliers’ stock ownership

6,341

2.46

Trust & Custody Services Bank, Ltd. as trustee for Mizuho Bank, Ltd.
Retirement Benefit Trust Account re-entrusted by Mizuho Trust andBanking Co., Ltd.

6,115

2.37

Ogaki Kyoritsu Bank, Ltd.

5,914

2.30

JUNIPER (Standing proxy: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)

5,503

2.14

Mizuho Bank, Ltd.

4,905

1.91

Total

86,157

33.46

Composition of
Shareholders:

1,994 (0.8%)(Thousands)

54,391 (21.2%)

Financial institutions

83,664 (32.5%)

Other domestic companies
Individuals and others

57,267 (22.3%)

Foreign companies

59,613 (23.2%)

Monthly Stock
Price Range:(Tokyo Stock Exchange)

Treasury stock

Stock price (¥)
800
700
600
500
400
300
200
100
Trading volume(Share)090,000,000
60,000,000
30,000,000
020FY2010FY2011FY2012FY2013

FY2014High (¥)

745

690

508

675

523

Low (¥)

309

333

245

402

380

At year-end (¥)

669

503

460

436

440

21

Annual Report 2015

KYB Corporation

Financial Highlights

Operating Income

Net Income (Loss)

Consolidated Balance Sheets		

28

Consolidated Statements of Income		29

Consolidated Statements of Comprehensive Income		30

Consolidated Statements of Changes in Net Assets		32

Consolidated Statements of Cash Flows

33

Notes to Consolidated Financial Statements

51

12.8
7.1
16.5

17.3
14.6

29.8

27.2

29.9

39.2

8.9

2010 2011 2012 2013 2014 (Fiscal)

2010 2011 2012 2013 2014 (Fiscal)

2010 2011 2012 2013 2014 (Fiscal)

Independent Auditor’s Report

Total Net Assets and Total Assets

41.2
33.2

43.7

34.5

21.1
14.8
9.7

174.3

154.0

(%)

(%)

384.9

361.1

327.9

2010 2011 2012 2013 2014 (Fiscal)
Total Net Assets
Total Assets

Return on Equity (ROE)*

Equity Ratio

30.6

116.4

301.3
102.8

90.0

285.1

(Billions of yen)

22

(Billions of yen)

8.9

26

6.9

Financial Statements

5.5

Financial Review

26

Depreciation and Amortization(Billions of yen)

4.0

Financial Highlights

24

3.2

23

		

Capital Expenditure(Billions of yen)2010 2011 2012 2013 2014 (Fiscal)

13.5

R&D Expenses
Contents

2010 2011 2012 2013 2014 (Fiscal)

7.8

13.6

10.5

2010 2011 2012 2013 2014 (Fiscal)

13.9

17.0

(Billions of yen)

18.2

21.5

370.4

352.7

(Billions of yen)

305.8

337.2

320.1

(Billions of yen)

13.4

Net Sales

24.2

Financial Section

7.3
4.4

2010 2011 2012 2013 2014 (Fiscal)

2010 2011 2012 2013 2014 (Fiscal)* ROE = Net income/(Net assets – Minority interests
in consolidated subsidiaries)

23

KYB Corporation

Annual Report 2015

Financial Review

Summary

Financial Condition

In the automotive components segment, sales increased 8.3% to ¥237,086 million (US$1,975,717

Current assets decreased mainly because of a decrease in cash and time deposits and an increase inthousand). Despite a large decrease in sales in Europe accompanying the economic deterioration innotes and accounts receivable–trade, which were higher due to the growth in sales. The increase in

Russia, sales of automotive shock absorbers increased overall, supported by favorable domestic sales

noncurrent assets was primarily attributable to growth in property, plant and equipment that resulted

in Japan and a recovering U.S. economy. Sales of motorcycle shock absorbers also increased, withfrom speedy capital expenditures to expand and upgrade manufacturing facilities. As a result, total

increased shipments domestically and to Taiwan. Sales of automotive hydraulic components, mainly

assets increased ¥23,847 million to ¥384,930 million (US$3,207,750 thousand).

for power steering, were also higher. There were new orders for electric power steering products andhigher sales of CVT vane pumps.
In the hydraulic components segment, sales decreased 2.0% to ¥113,223 million (US$943,525

Total liabilities increased ¥3,585 million to ¥210,671 million (US$1,755,592 thousand). The changes
were due mainly to an increases in notes and accounts payable–trade because of sales growth and inloans payable.

thousand). In sales of industrial hydraulic components, mainly for construction machinery, a large

Net assets increased ¥20,262 million to ¥174,259 million (US$1,452,158 thousand) mainly because of

decline was forecast due to the rush demand before the previous year’s consumption tax increase

increases in retained earnings, net unrealized holding gains on securities, net of taxes, remeasurements

and exhaust emissions regulations. However, the effect was less significant than initially expected.

of defined benefit plans, net of taxes.

Overseas, the slow recovery in the Chinese market and sluggishness in the ASEAN market contributed
to the decrease in sales. Sales of hydraulic equipment for aircraft increased because of an increase in

The increase in net assets raised the equity ratio 2.5 percentage points to 43.7% at the end of March
2015.

orders for spare parts.
In the special-purpose vehicles, system products, and electronic components segment, which
represent as other in the reportable segment, sales increased 10.1% to ¥20,116 million (US$167,633
thousand). This strong growth was backed by growth in sales of special-purpose vehicles, mainly

Cash Flows

concrete mixer trucks, due to the combined benefits of demand associated with earthquake
reconstruction activities and replacement demand for older vehicles.
As a result, consolidated net sales increased 5.0% to ¥370,425 million (US$3,086,875 thousand).

Net cash used in operating and investing activities was ¥8,302 million (US$69,184 thousand). The
main reason for the negative cash flow was expenses associated with up-front investments to expand

Operating income decreased 24.7% in the automotive components segment and 37.9% in the hydraulicand upgrade production facilities. Net cash used in financing activities was ¥580 million (US$4,833

components segment and increased 47.0% in the special-purpose vehicles, system products, andthousand). As a result, cash and cash equivalents at end of year decreased ¥7,622 million to ¥30,510

electronic components segment. As a result, total operating income decreased ¥4,579 million tomillion (US$254,250 thousand).

¥13,591 million (US$113,258 thousand).
Other income and expenses resulted in net expenses of ¥419 million (US$3,492 thousand). Although

Net cash provided by operating activities decreased 26.6% to ¥21,124 million (US$176,033
thousand). This was mainly due to decreases in income before income taxes and minority interests

there was a ¥729 million increase in foreign exchange gain, net, there were ¥1,676 million increase into ¥13,172 million (US$109,767 thousand) and in depreciation and amortization to ¥16,491 million

impairment loss on fixed assets and ¥295 million increase in equity in losses of affiliates.

(US$137,425 thousand), while income taxes paid were ¥9,279 million (US$77,325 thousand) andIncome before income taxes and minority interests was ¥13,172 million (US$109,767 thousand). After
income taxes of ¥4,647 million (US$38,725 thousand) and minority interests, net income was ¥7,052
million (US$58,767 thousand).

decrease in notes and accounts receivable—trade was ¥3,677 million (US$30,642 thousand).
Net cash used in investing activities decreased 18.4% to ¥29,426 million (US$245,217 thousand). The
main use of cash was payment for acquisition of property, plant and equipment totaling ¥29,187 million(US$243,225 thousand).
Net cash used in financing activities was ¥580 million (US$4,833 thousand). This was mainly due
to ¥2,150 million (US$17,917 thousand) of procurement for long-term loans payable, net, and cash
dividends paid of ¥2,555 million (US$21,292 thousand).

24

25

KYB Corporation

Annual Report 2015

Financial Statements
Consolidated Balance Sheets

Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
As of March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 1)Millions of yen

ASSETS
Current assets:
Cash and time deposits (Notes 10 and 12)
Notes and accounts receivable—trade (Notes 4 and 12)
Inventories (Note 3)
Deferred tax assets (Note 16)
Short-term loans receivable
Other
Less—allowance for doubtful accounts    Total current assets

Property, plant and equipment:
Buildings and structures, net (Note 4)
Machinery, equipment and vehicles, net (Note 4)
Land (Note 4)
Leased assets, net
Construction in progress
Other, net (Note 4)    Total property, plant and equipment

Intangible assets:
Goodwill
SoftwareOther    Total intangible assets

Investments and other assets:
Investment securities (Notes 12 and 13)
Asset for retirement benefits (Note 15)
Deferred tax assets (Note 16)
OtherLess—allowance for doubtful accounts    Total investments and other assets    Total noncurrent assets    Total assets

2015

2014

2015

¥ 31,752
91,24947,126
4,756
117
10,167(307)
184,860¥ 39,505
86,444
46,577
4,816
46
8,854
(193)
186,049$ 264,600
760,408
392,717
39,633975
84,725(2,558)
1,540,500

52,01863,85027,253
2,752
14,5203,517
163,91047,362
54,847
26,6192,789
13,013
3,007
147,637

433,483
532,083
227,108
22,933
121,000
29,3101,365,917

317
219
1,441
1,977

622
157
1,392
2,171

2,642
1,825
12,00816,47528,204
1,700
2,190
2,146
(57)
34,183200,070¥384,930

20,713
95
1,935
2,540
(57)
25,226
175,034¥361,083

235,033
14,167
18,25017,883(475)
284,858
1,667,250$3,207,750

Millions of yen

Thousands of
U.S. dollars(Note 1)

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable—trade (Note 12)
Short-term loans payable (Notes 4 and 12)
Lease obligations
Accounts payable—other
Income taxes payable (Note 16)
Notes payable—equipment
Provision for product warranties
Allowance for directors’ and corporate auditors’ bonuses
Other    Total current liabilities

2015

2014

2015

¥ 64,992
46,785574
13,440
1,614
1,539
6,783
227
13,522
149,476¥ 62,584
44,207585
11,702
5,501
2,966
5,221
174
13,806
146,746$ 541,600
389,875
4,783
112,000
13,45012,82556,525
1,892
112,684
1,245,634

Noncurrent liabilities:
Long-term loans payable (Notes 4 and 12)
Lease obligations
Deferred tax liabilities for land revaluation
Deferred tax liabilities (Note 16)
Retirement benefits for directors and corporate auditors
Allowance for environmental measures
Liability for retirement benefits (Note 15)
Asset retirement obligations (Note 17)
Other    Total noncurrent liabilities    Total liabilities

42,624
2,105
3,600
5,157
88
220
6,012
400
989
61,195
210,671

41,395
2,272
3,965
888
74
220
9,949
386
1,191
60,340207,086355,200
17,54230,00042,975733
1,833
50,1003,333
8,242
509,958
1,755,592

27,64829,54381,066(573)
137,684

27,64829,54378,323(565)
134,949

230,400
246,191
675,550(4,775)
1,147,366

9,672
5,682
9,641
5,670
30,665
5,910
174,259¥384,930

4,354
5,317
3,651
506
13,8285,220
153,997¥361,083

80,60047,35080,34247,250255,542
49,2501,452,158$3,207,750

Contingent liabilities (Note 7):
Net assets (Note 6):
Shareholders’ equity   Common stock   Capital surplus   Retained earnings   Treasury stock, at cost    Total shareholders’ equity
Accumulated other comprehensive income   Net unrealized holding gains on securities, net of taxes   Revaluation reserve for land   Foreign currency translation adjustments   Remeasurements of defined benefit plans    Total accumulated other comprehensive income
Minority interests    Total net assets    Total liabilities and net assets

See accompanying notes.

26

27

KYB Corporation

Annual Report 2015

Financial Statements

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Millions of yen

Net sales
Cost of sales (Note 9)    Gross profit
Selling, general and administrative expenses (Note 9)    Operating income
Other income (expenses):
Interest income
Dividends income
Royalty income
Equity in earnings (losses) of affiliates
Interest expenses
Foreign exchange gain, net
Gain on sale of investment securities
Gain on sale of investment in affiliates
Loss on sale and disposal of fixed assets, net
Impairment loss on fixed assets (Note 8)
Loss on valuation of investment securities
Loss on sale of investment securities
Loss on change in equity
Special retirement expenses
Other, net    Income before income taxes and minority interests
Income taxes (Note 16):   Current   Past   Deferred
Income before minority interests
Minority interests    Net income

2015

2014

2015

¥370,425
299,60370,822
57,231
13,591¥352,711
282,466
70,24552,075
18,170$3,086,875
2,496,692
590,183
476,925
113,258

251
616
809
(19)
(1,518)
1,215
3
—
(619)
(2,032)
(5)
—
—
(27)
907
13,172

232
518
843
276
(1,577)
485
—
1,255
(164)
(356)
(13)
(21)
(32)
(26)
1,442
21,032

2,092
5,133
6,742
(158)
(12,650)
10,12525—(5,158)(16,933)
(42)
—
—
(225)
7,558
109,767

5,250
—
(603)
7,319
267
7,052

8,124
—
(291)
13,199438¥12,761

43,750—(5,025)60,992
2,225
58,767¥¥27.60
12.00$

Millions of yen

Income before minority interests
Other comprehensive income:Net unrealized holding gains on securities, net of taxes
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of defined benefit plans Share of other comprehensive income of affiliates accounted
for using equity method    Total other comprehensive income (Note 5)
Comprehensive income
Comprehensive income attribute to:Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

Thousands of
U.S. dollars(Note 1)

2015

2014

2015

¥ 7,319¥13,199$ 60,992

5,318
366
6,155
5,161

1,233
—
5,763
—

44,3173,050
51,29243,008362
17,362¥24,681115
7,111¥20,310

3,016
144,683$205,675

23,889792

19,664646

199,075
6,600

See accompanying notes.

U.S. dollars(Note 1)

Yen

Amounts per share of common stock:
Net income
Cash dividends applicable to the year

Thousands of
U.S. dollars(Note 1)

¥55.26
9.00

$0.23
0.10

See accompanying notes.

28

29

KYB Corporation

Annual Report 2015

Financial Statements

Consolidated Statements of Changes in Net Assets
Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Thousands

Millions of yen
Shareholders’ equity

Balance at March 31, 2013
Issue of new shares
Cash dividends paid
Net income Increase resulting from change
in scope of consolidation
Acquisition of treasury stock
Disposal of treasury stock Net change of items otherthan shareholder’s equity
Balance at April 1, 2014
 Cumulative effects of changes
in accounting policies
Cash dividends paid
Net income Change in functional currency of
consolidated foreign subsidiaries
Acquisition of treasury stock
Disposal of treasury stock Net change of items other thanshareholder’s equity
Balance at March 31, 2015

Accumulated other comprehensive income
Net unrealized
holding gains
on securities,
net of taxes

Revaluation
reservefor landForeigncurrency translation
adjustment

Total
accumulated othercomprehensive
incomeMinority
interests

Total
net assets

—
—
—
—

¥ 6,418———¥ 3,226———¥ 116,435
17,068(1,768)12,761

—
—
—

—
—
—

—
—
—

—
—
—

113
(16)
0

—
5,317

5,672
3,651

506
506

7,410
13,828

1,994
5,220

9,404
153,997

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(1,676)(2,555)
7,052

(78)
(9)
1

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(78)
(9)
1

—
¥137,684

5,318¥9,672365¥5,682

5,990¥9,641

5,164¥5,67016,837¥30,665690¥5,91017,527¥174,259

Number ofshares ofcommon stock

Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at costTotal
shareholders’equity222,984
34,500——¥ 19,114
8,534——¥21,009
8,534——¥ 67,217—(1,768)12,761¥(549)———¥106,791
17,068(1,768)12,761¥ 3,122———¥5,317———¥(2,021)
—
—
—

—
—
—

—
—
—

—
—
0

113
—
—

—
(16)
0

113
(16)
0

—
—
—

—
—
—

—
257,484—
27,648—29,543—78,323—(565)—
134,949

1,232
4,354

—
—
—

—
—
—

—
—
—

(1,676)(2,555)
7,052

—
—
—

(1,676)(2,555)
7,052

—
—
—

—
—
—

—
—
0

(78)
—
—

—
(9)
1

—
257,484—¥27,648—¥29,543—¥81,066—¥(573)

Remeasurementsof defined
benefit plans¥

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Balance at April 1, 2014
 Cumulative effects of changes
in accounting policies
Cash dividends paid
Net income Change in functional currency of
consolidated foreign subsidiaries
Acquisition of treasury stock
Disposal of treasury stock Net change of items other thanshareholder’s equity
Balance at March 31, 2015

Accumulated other comprehensive income
Net unrealized
holding gains
on securities,
net of taxes

Revaluation
reservefor landForeigncurrency translation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated othercomprehensive
incomeMinority
interests

Total
net assets

Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at costTotal
shareholders’equity$230,400$246,191$652,692$(4,708)$1,124,575$36,283$44,308$30,425$4,217$115,233$43,500$1,283,308

—
—
—

—
—
—

(13,967)(21,292)
58,767———(13,967)(21,292)
58,767

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(13,967)(21,292)
58,767

—
—
—

—
—
0

(650)
—
—

—
(75)
8

(650)
(75)
8

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(650)
(75)
8

—
$230,400—$246,191—$675,550—$(4,775)—$1,147,366

44,317$80,600

3,042$47,350

49,917$ 80,342

43,033$47,250

140,309$255,542

5,750$49,250

146,059$1,452,158

See accompanying notes.

30

31

KYB Corporation

Annual Report 2015

Financial Statements

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Kayaba Industry Co., Ltd. and its Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Millions of yen

2015

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Loss on sale and disposal of fixed assets, net
Loss (gain) on sale of investment securities
Loss on write down of investment securities
Gain on sale of investment in affiliates
Impairment loss on fixed assets
Amortization of goodwill
Amortization of negative goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in liability for retirement benefit
Increase in provision for product warranties
Increase in retirement benefits for directors and corporate auditors
Increase in allowance for directors' and corporate auditors' bonuses
Decrease in allowance for environmental measures
Interest and dividends income
Interest expense
Equity in (earnings) losses of affiliates
Decrease in notes and accounts receivable—trade
Increase in inventories
Increase in notes and accounts payable—trade
Increase in accounts payable—other
Other, net    Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Income taxes refunded    Net cash provided by operating activities
Cash flows from investing activities:
Increase in time deposits
Decrease in time deposits
Payment for acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payment for acquisition of investment securities
Payment for acquisition of investment in affiliates
Proceeds from sale of investment in affiliates
Payment for investments in capital of affiliates
Payment disbursement of loans receivable
Proceeds from collection of loans receivable
Other, net    Net cash used in investing activities¥13,172
16,491
619
(3)
5
—
2,032
190
—
107
(718)
1,715
12
52
—
(867)
1,518
19
(3,677)
(482)
1,563
1,333
(2,519)30,562
1,327(1,536)(9,279)50
21,124

2014¥21,032
17,294164
21
13(1,255)
356
156
(1)
(349)
241
1,308
3
26
(3)
(750)
1,577
(276)
(3,936)(1,747)520
277(1,279)33,392
1,304(1,719)(4,189)—28,788

1

Basis of Presenting Consolidated Financial Statements

Thousands of
U.S. dollars(Note 1)

The accompanying consolidated financial statements of Kayaba

2015

Industry Co., Ltd. (“the Company”) and its consolidated subsid-$109,767
137,425
5,158
(25)
42
—
16,933
1,583—
892(5,983)
14,292100
433—(7,225)
12,650158(30,642)(4,017)
13,025
11,108(20,991)
254,683
11,058(12,800)(77,325)417
176,033(c) Capitalized expenditures for research and development
activities

iaries (together “the Companies”) have been prepared in accor-(d) F air value measurement of investment properties anddance with the provisions set forth in the Financial Instruments

revaluation of property, plant and equipment and intan-

and Exchange Law and its related accounting regulations, andin conformity with accounting principles generally acceptedin Japan (“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements fromInternational Financial Reporting Standards (“IFRSs”).

gible assets(e) A ccounting for net income attributable to minority
interests
The accompanying consolidated financial statements havebeen restructured and translated into English from the consoli-

The accounts of consolidated overseas subsidiaries have

dated financial statements of the Company prepared in accor-

been prepared in accordance with either IFRSs or U.S. gener-

dance with Japanese GAAP and filed with the appropriate Local

ally accepted accounting principles (“U.S. GAAP”), with adjust-Finance Bureau of the Ministry of Finance as required by thements for the specified five items as applicable. Japanese

Financial Instruments and Exchange Law. Certain supplemen-

GAAP requires that accounting policies and procedures applied

tary information included in the statutory Japanese language

by a parent company and its subsidiaries to similar transactions

consolidated financial statements, but not required for fairand events under similar circumstances should be unified forpresentation, is not presented in the accompanying consoli-

the preparation of the consolidated financial statements. Japa-

dated financial statements.

nese GAAP, however, as a tentative measure, allows a parent

The translations of the Japanese yen amounts into U.S.

company to prepare consolidated financial statements using

dollars are included solely for the convenience of readers

foreign subsidiaries’ financial statements prepared in accor-

outside Japan, using the prevailing exchange rate at March 31,

dance with either IFRSs or U.S. GAAP. In this case, adjust-

2015, which was ¥120 to U.S.$1. The convenience translation

ments for the following five items are required in theshould not be construed as representation that the Japaneseconsolidation process so that their impacts on net income are

yen amounts have been, could have been, or could in theaccounted for in accordance with Japanese GAAP unless the

future be, converted into U.S. dollars at this or any other rate of

impact is not material.

exchange.

(a) Goodwill not subject to amortization(1,287)
1,566(29,187)
157
(307)
—
—
(232)
(331)
270
(75)
(29,426)(839)
871(35,550)859(1,475)
(474)
1,794
—
(252)
279
(1,291)(36,078)(10,725)
13,050(243,225)
1,308(2,558)——(1,933)(2,758)2,250(626)(245,217)

Cash flows from financing activities:
Net decrease in short-term loans payable
Repayments of lease obligations
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of common stock
Proceeds from stock issuance to minority shareholders
Purchase of treasury stock
Sale of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders   Net cash provided by (used in) financing activities

559
(623)
16,393(14,243)
—
206
(9)
1
(2,555)
(309)
(580)

3,251
(477)
12,265(25,188)
17,0681,015(17)
1(1,768)
(441)
5,709

4,658
(5,191)
136,608(118,691)
—
1,717
(75)
8
(21,292)(2,575)(4,833)

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from changes in scope of consolidation
Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of year (Note 10)

1,234(7,648)38,132—
26¥30,5101,837
256
35,215
2,661—¥38,132

10,283(63,734)
317,767—
217$254,250(b) E
 xpensing actuarial gains and losses of defined-benefit
retirement plans

2

Summary of Significant Accounting Policies

1. Consolidation

2. Equity Method

The consolidated financial statements of the Company include

Investments in 5 affiliated companies in 2015 and 2014 (20%the accounts of the Company and its significant subsidiaries

to 50% owned and certain others less than 20% owned) are(40 in 2015 and 2014), which are controlled through substantial

accounted for by the equity method and, accordingly, are statedownership of majority voting rights or the existence of certain

at cost adjusted for equity in undistributed earnings and losses

conditions.

from the date of acquisition.

All significant intercompany balances and transactions havebeen eliminated in consolidation.

Investments in the other affiliated companies and unconsolidated subsidiaries are stated at cost or less.

Financial statements of certain consolidated subsidiaries thathave the fiscal year ending December 31 were consolidated

3. Goodwill

with adjustments made for material transactions that took place

The difference between the cost of investments and equity

in the three-month period between the balance sheet date ofin their net assets at the date of acquisition is recognized assuch subsidiaries and that of the Company.

goodwill and is amortized using the straight-line method overtheir estimated useful lives (5 years).

See accompanying notes.

32

33

KYB Corporation

Annual Report 2015

Financial Statements

4. Foreign Currency Translation

If derivative financial instruments are used as hedges and

13. Allowance for Doubtful Accounts

meet certain hedging criteria, the Companies defer recognition

Allowance for doubtful accounts is provided in an amountattributing expected benefit to the accounting period is based

are translated into Japanese yen at the year-end rates withof gains or losses resulting from changes in the fair value of

sufficient to cover probable losses on collection. It consists ofon a straight-line basis.

the resulting gain or loss included in the current statements

derivative financial instruments until the related losses or gains

the estimated uncollectible amount with respect to certainof income.

on the hedged items are recognized.

identified doubtful receivables and an amount calculated usingstatements of income in equal amounts over the average of thethe actual historical rate of losses.

estimated remaining service lives (11 to 15 years), commencing

The balance sheets of consolidated overseas subsidiaries

However, if a forward foreign exchange contract is executed

Actuarial gains and losses are recognized in the consolidatedwith the succeeding period.

are translated into Japanese yen at the year-end rates except

to hedge a future transaction denominated in a foreign cur-for shareholders’ equity accounts, which are translated at therency, the future transaction will be recorded using the con-

14. Provision for Product Warranties

historical rates. The statements of income of consolidated

tracted forward rate and no gains or losses on the forward

Provision for product warranties is provided for the aggregate

19. Research and Development

overseas subsidiaries are translated at average rates.

foreign exchange contract are recognized.

amount of the estimated cost of certain identified claims from

Expenses relating to research and development activities arecustomers and an amount calculated using the historical rate

charged to the statement of income as incurred.

The resulting foreign currency translation adjustments are

Also, if interest rate swap contracts are used as hedges

presented in “Foreign currency translation adjustments”

and meet certain hedging criteria, the net amount to be paidand “Minority interests in consolidated subsidiaries” in theor received under the interest rate swap contract is added toconsolidated balance sheets.

or deducted from the interest on the assets or liabilities forwhich the swap contract was executed.

of sales to warranty.
20. Income Taxes
15. Allowance for Directors’ and Corporate Auditors’
Bonuses
Allowance for directors’ and corporate auditors’ bonuses is

5. Cash and Cash Equivalents

Income taxes comprise corporation, enterprise and inhabitants
taxes.
The Companies recognize the tax effects of timing differ-

In preparing the consolidated statements of cash flows, cash

9. Property, Plant and Equipment

provided bonuses for the estimated amounts which theences between the financial statement basis and the tax basison hand, readily available deposits and short-term highly liquid

Property, plant and equipment are stated at cost except for­Company is obligated to pay to directors and corporate auditorsof assets and liabilities.

investments with maturities not exceeding three months at

certain land used for business operation, which has been

subject to the resolution of the shareholders’ meeting.

the time of purchase are considered to be cash and cash

revalued. Depreciation is computed mainly by the straight-line

equivalents.

method over the estimated useful lives.

16. R
 etirement Benefits for Directors and Corporate

6. Inventories

10. Intangible Assets

The directors and corporate auditors of certain consolidated

has been used. Diluted net income per share is not presented

Inventories are stated at the lower of cost, determined mainly

Intangible assets are amortized using the straight-line method.

subsidiaries receive lump-sum payments upon termination

since the Company had no securities with dilutive effect.

of their services under unfunded termination plans. The fullCash dividends per share represent cash dividends declaredstraight-line method over the estimated useful lives mainly ofamount of such retirement benefits for directors and corporate

applicable to the respective years.

5 years.

auditors is accrued in accordance with the internal rules. The

21. Amounts per Share
Auditorsby the periodic-average method, or net realizable value.
7. Securities

Software costs used internally are amortized using the

The Companies examine the intent of holding each security

In computing net income per share of common stock, theaverage number of shares outstanding during each fiscal year

payments to directors and corporate auditors are subject to

22. Change in Accounting Policy

the resolution of the shareholders’ meeting.

(1) C hange in accounting policy that is difficult to distinguishand classify those securities as (a) equity securities issued by

11. Leased Assets

subsidiaries and affiliated companies and (b) available-for-saleFinance leased assets that are not deemed to transfer owner-

securities. The companies do not have trading securities andship of the leased property to the lessee are depreciated using

17. Allowance for Environmental Measures(Change in the depreciation method)

held-to-maturity debt securities.

the straight-line method over the lease term with zero residual

Allowance for environmental measures is provided based

From April 1, 2014, the Company and its consolidated domestic

value.

on estimated costs for the disposal of “PCB (Polychlorinatedsubsidiaries changed their depreciation method of property,

Biphenyl)” as mandated by the Law Concerning Special

plant and equipment, with some exceptions, from the declin-­Measures against PCB Waste.

ing-balance method (Buildings (including facilities attached toEquity securities issued by subsidiaries and affiliated companies that are not consolidated or accounted for using the equity

Finance leases commenced prior to April 1, 2008, and havemethod are stated at moving-average cost. Available-for-salebeen accounting for as operating leases, continue to be

securities with available fair market values are stated at fair­accounted for as operating leases with disclosure of certain

market value. Unrealized gains and losses on these securities“as if capitalized” information.

from change in accounting estimate

buildings) acquired on or after April 1, 1998, are depreciated
18. Accounting Policy of Net Defined Benefit Liability
The Company and certain consolidated subsidiaries provide two

are reported, net of applicable income taxes, as a separate

using the straight-line method.) to the straight-line method.
In April 2014, the Company established the slogan “Earningcomponent of net assets. Realized gains and losses on sales

12. Land Revaluation

types of employees’ severance and retirement benefit plans,

trust and orders from customers around the world by unitingof such securities are computed using moving-average cost.

Pursuant to the Law Concerning Revaluation of Land enacted

unfunded lump-sum payment plans and funded noncontributory

the KYB Group’s functions” in the medium-term business plan.

Other securities with no available fair market value are statedon March 31, 1998, land owned by the Company for businesspension plans, under which all eligible employees are entitled

In line with this slogan, we are working to quickly establish a

at moving-average cost.

operations was revalued at fair value as of March 31, 2002. Dueto benefits based on the level of wage and salary at the time ofbusiness structure that can accurately respond to change withto the revaluation, the related unrealized gain, net of applicableretirement or termination, length of service and certain otherspeed and flexibility.

income taxes, was reported as “Revaluation reserve for land”

factors. Some subsidiaries have pension plans of their own.

8. Derivative Transactions and Hedge Accounting
Derivative financial instruments are stated at fair value andin shareholders’ equity. The revaluation reserve for land in net

gains or losses are recognized for changes in the fair value

assets is not available for dividends under the law.

unless derivative financial ­instruments are used for hedging
purposes.

34

In calculating the retirement benefit obligation, the method of

Receivables and payables denominated in foreign currencies

According to the revised law, the Company and a certain

The liabilities and expenses for employees’ severance

More specifically, we are sequentially switching to production lines that can quickly respond to customer needs, andand retirement benefits are mainly determined based on thereforming our lines from the traditional type that specializes inamounts obtained by actuarial calculations.

large quantity production of a specific model to lines that can

subsidiary are not permitted to revalue the land at any time,

The Company and certain consolidated subsidiaries mainly

efficiently manufacture small lot production of various models.

even if the fair value of the land declines. Such unrecorded

recognize the liabilities for employees’ severance and retire-

As a result, production lines have become more versatile, so

revaluation loss amounted to ¥6,307 million (US$52,588 thou-ment benefits based on the amounts of projected benefit

the Company has determined that the revision from the previ-sand) and ¥6,300 million as of March 31, 2015 and 2014.

obligation and the fair value of the plan assets as of eachous declining-balance pattern of depreciation to the straight-line

balance sheet date.

pattern of depreciation is appropriate. Furthermore, the con-35

KYB Corporation

Annual Report 2015

Financial Statements

struction of integrated lines accompanying plant expansions

reflects the estimated period and amount of benefit payment in

has made possible an increase in efficiency and stable, long-each period.

term manufacture of many kinds of products. The Company

In accordance with article 37 of Statement No.26, the effecthas determined that the change to the straight-line method ofof changing the determination of retirement benefit obligations

calculating depreciation will enable proper cost allocation.

and current service costs has been recognized in retained

As a result of this change, operating income increased by

4

Short-Term Loans Payable and Long-Term Loans Payable

Short–term loans payable are generally represented by short-term notes and overdrafts from banks, and bearing average interest
as of March 31, 2015 and 2014 at 2.2% and 2.0% per annum, respectively.
Short-term loans payable as of March 31, 2015 and 2014 consisted of the following:

earnings at the beginning of the current fiscal year.
As a result of the application, the liability for retirement¥2,798 million (US$23,317 thousand) and income before

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

income taxes and minority interests increased by ¥2,803 million

benefits obligation increased by ¥2,574 million (US$21,450

Secured¥   102¥   133$    850(US$23,358 thousand) for the current fiscal year from thethousand) and retained earnings decreased by ¥1,676 million

Unsecured

30,511

30,668254,258

corresponding amounts which would have been recorded(US$13,967 thousand) at the beginning of the current fiscal

Total

30,61330,801

255,108

under the previous depreciation method.

year. In addition, operating income and income before tax

16,172

13,406

134,767(2) Application of Accounting Standard for Retirement Benefits

increased by ¥85 million (US$708 thousand) in the current fiscal¥46,785¥44,207$389,875

The Company and its consolidated domestic subsidiaries ad-

year, respectively. The amount of net assets per share de-opted article 35 of the “Accounting Standard for Retirement

creased by ¥6.56 (US$0.05). Also the effects on the earnings

Benefits” (ASBJ Statement No. 26, May 17, 2012 (hereinafter,

per share are immaterial.

Current maturities of long-term loans payable

Long-term loans payable as of March 31, 2015 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen“Statement No. 26”)) and article 67 of the “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No.

23. Change in Presentation

25, March 26, 2015 (hereinafter, “Guidance No. 25”)) from theConsolidated Balance Sheets

current fiscal year, and have changed the determination of“Deferred tax liabilities” was presented as included in theretirement benefit obligations and current service costs. In“Other” account under “Noncurrent liabilities” for the previous

addition, the Company and its consolidated domestic subsidiar-fiscal year, but because its importance in monetary terms

ies have changed the method of attributing expected benefit toincreased for the current fiscal year, it was changed to beperiods from the straight-line method to a benefit formula basis.

presented as a separate account. In order to reflect this change

Also, regarding the duration of bonds, which is the determinationin presentation method, the consolidated financial statements

basis of the calculation method used for the discount rate, theof the previous fiscal year have been reclassified.

Company and its consolidated domestic subsidiaries changed

As a result, in the consolidated balance sheets for the previ-from a determination method based on the approximate number

ous fiscal year, ¥888 million yen that was presented in “Other”

of years in an employee’s average remaining service period to aunder “Noncurrent liabilities” has been reclassified as “De-method using the single weighted-average rate of discount thatferred tax liabilities.”

2015

2014

2015

Secured¥    22¥   133$    183

Unsecured

58,77454,668489,784

Total

58,79654,801

489,967(16,172)(13,406)(134,767)¥42,624¥41,395$355,200

Loans from banks and others, due through 2026 with interest rates ranging
from 0.26% to 13.90%:

Less: Current maturities

As of March 31, 2015 and 2014, the following assets were pledged as collateral for short-term loans payable and long-term loans
payable:Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥240

¥244

$2,000

Buildings and structures

198

220

1,650

Machinery, equipment and vehicles

297

227

2,475

Land

96

56

800

Notes receivable—trade
Property, plant and equipment:

3

Inventories

Inventories as of March 31, 2015 and 2014 consisted of the following:
Millions of yen

2015

2014

2015

Finished goods¥25,365¥24,643$211,375

Work in process

12,906

13,566

107,550

Raw materials and supplies

8,855

8,368

73,792¥47,126¥46,577$392,717

Total

36

Thousands of
U.S. dollars

Other

20

13

167

   Total

¥851

¥760

$7,092Millions of yen

Thousands of
U.S. dollars

2016¥16,172$134,767

2017

17,585

146,5422018

11,50995,908

2019

8,349

69,575

2020

3,972

33,100

Thereafter

1,209

10,075¥58,796$489,967

The aggregate annual maturities of long-term loans payable as of March 31, 2015, were as follows:Year ending March 31,

37

KYB Corporation

Annual Report 2015

Financial Statements

5

7

Notes to Statements of Comprehensive Income

Contingent Liabilities

Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive income in the current

As of March 31, 2015, the Companies were contingently liable for trade notes receivable discounted amounting to ¥51 million

or previous periods and tax effects for each component of other comprehensive income are as follows:(US$425 thousand) and for trade notes receivable endorsed amounting to ¥637 million (US$5,308 thousand).
Thousands of
U.S. dollars

Millions of yen

The Company was also contingently liable under guarantees of indebtedness of unconsolidated subsidiaries and affiliated companies amounting to ¥1,852 million (US$15,433 thousand) as of March 31, 2015.

2015

2014

2015

¥ 7,337¥1,895$ 61,142000   Before tax effect

7,337

1,895

61,142For the years ended March 31, 2015 and 2014, the Companies recognized impairment loss on fixed assets on the following groups   Tax effect(2,019)(662)(16,825)of assets:   Net unrealized holding gains on securities, net of taxes

5,318

1, 23344,317Net unrealized holding gains on securities, net of taxes:
Amount arising during the year
Reclassification adjustments

8

Impairment Loss on Fixed Assets

For the year ended March 31, 2015

Revaluation reserve for land, net of taxes:   Tax effect366   Revaluation reserve for land, net of taxes

366

—
—

3,050

Location

Use

Category

3,050

Kani-shi, Gifu, Japan

Idle assets

Machinery

Nagaoka-shi, Niigata, Japan

Business assets

Building and structure, Machinery

Zhenjiang, China

Business assets

Machinery

—

Other

Goodwill

Location

Use

Category

Kani-shi, Gifu, Japan

Idle assets

Machinery

Higashi-Chikuma, Nagano, Japan

Idle assets

Building and structure, Land

Foreign currency translation adjustments:
Amount arising during the year

6,174

5,730

51,450Reclassification adjustments

(19)

33

(158)

6,155

5,763

51,292   Before tax effect   Tax effect

—

—

—

6,155

5,763

51,292

Amount arising during the year

7,371

—

61,425

Reclassification adjustments

128

—

1,067

   Foreign currency translation adjustments
Remeasurements of defined benefit plans, net of taxes:

For the year ended March 31, 2014

The companies classified their fixed assets by each plant. Each of idle assets was treated as an individual asset.

   Before tax effect

7,499

—

62,492   Tax effect(2,338)—(19,484)

The book value of idle assets, that are not used for business operation and are not expected to generate cash flow in the future,   Remeasurements of defined benefit plans, net of taxes

5,161

—

43,008was written down to the recoverable amounts. As a result, loss on impairment of fixed assets were recognized ¥13 million (US$108

362

115

3,016

¥7,111The book value of business assets was written down to the recoverable amounts, due to a significant decline in profitability. As a¥17,362$144,683

result, loss on impairment of fixed assets were recognized ¥1,870 million (US$15,583 thousand) for the year ended March 31, 2015.

Share of other comprehensive income of affiliated accounted for using equity method:

thousand) and ¥356 million for the years ended March 31, 2015 and 2014, respectively.

Amount arising during the year
Total other comprehensive income

As the Company’s urgent business recovery has been difficult, goodwill was written down to the recovery amounts because
investment expenditures are not expected to recover. As a result, loss on impairment of fixed assets were recognized as ¥149

6

million ($1,242 thousand) for the year ended March 31, 2015.

Net Assets

Net assets comprise three subsections, which are sharehold-reserve is included in retained earnings in the accompanying

ers’ equity, accumulated other comprehensive income, andconsolidated balance sheets.

minority interests.
Under Japanese laws and regulations, the entire amount paid
for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board ofUnder the Law, legal earnings reserve and additional paid in

Research and development costs charged to the cost of sales and selling, general and administrative expenses for the years ended

capitalize by a resolution of the shareholders’ meeting.

March 31, 2015 and 2014 were ¥8,910 million (US$74,250 thousand) and ¥6,917 million, respectively.

Additional paid-in capital and legal earnings reserve may
not be distributed as dividends. Under the Law, however, allprice of the new shares as additional paid-in capital, which isadditional paid-in capital and all legal earnings reserve may be

included in capital surplus.

transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.

where a dividend distribution of surplus is made, the smaller of

The maximum amount that the Company can distribute as

an amount equal to 10% of the dividend or the excess, if any,

dividends is calculated based on the non-consolidated financialof 25% of common stock over the total of additional paid-in

statements of the Company in accordance with Japanese

capital and legal earnings reserve must be set aside as addi-

laws and regulations.

tional paid-in capital or legal earnings reserve. Legal earnings

Research and Development Costs

capital could be used to eliminate or reduce a deficit, or could

Directors, designate an amount not exceeding one-half of theUnder the Japanese Corporate Law (“the Law”), in cases

910Cash and Cash Equivalents

The reconciliation of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents shown in the
consolidated statements of cash flows as of March 31, 2015 and 2014 was as follows:
Millions of yen

Cash and time deposits
Deposits with maturities more than three months
Cash and cash equivalents

38

Thousands of
U.S. dollars

2015

2014

2015

¥31,752¥39,505$264,600(1,242)(1,373)(10,350)¥30,510¥38,132$254,250

39

KYB Corporation

Annual Report 2015

Financial Statements

11

2. Fair Values of Financial Instruments

Lease Transaction

As discussed in Note 2, finance leases commenced prior to April 1, 2008 which do not transfer ownership to lessees are accounted
for as operating leases.

The following were book value, fair value, and difference between them as of March 31, 2015 and 2014. Certain financial instruments were excluded from the following table as the fair values were not available (see Note 2).
Millions of yen

Future lease payments for operating leases that cannot be terminated for the years ended March 31, 2015 and 2014 were as
follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2015

2014

2015

¥  493¥  578$4,108

637

1,138

5,309

¥1,130¥1,716$9,417(1) Cash and time deposits(2) Notes and accounts receivables—tradeBook value

Fair value

Differences

Book value

Fair values

Differences¥ 31,752¥ 31,752¥   —¥ 39,505¥ 39,505¥   —

91,24991,249—86,44486,444—(3) Investment securities

23,542

23,542—

15,903

15,903—

Assets146,543

146,543—

141,852

141,852—(4) Notes and accounts payables—trade64,99264,992—62,58462,584—(5) Short-term loans payable

30,61330,613—30,80130,801—(6) Long-term loans payable (including current portion)
Liabilities

12

2014

2015

58,79658,974178

54,80155,000199¥154,401¥154,579¥178¥148,186¥148,385¥199

Financial Instruments

1. Qualitative information on financial instruments
1) Policies for using financial instruments
The Companies raise necessary funds including their capital
expenditure through cash flows from operating activities andi)	Management of credit risk (risk relating to non-performanceof a contract obligation by a counterparty, etc.)
	In accordance with the Company’s internal administrative

mainly invested in short-term deposits, eligible repurchaserules, the appropriate department of each business unit

agreements and similar instruments. Derivative financial instru-

regularly monitors the status of all major customers, manag-

ments are mainly used in order to hedge the risk of interesting due dates and balances on an individual customer basis.

rate fluctuation risk and not used for speculative purposes.

In this manner, every effort is made to ensure early detec-2) Details of financial instruments and the related risks

tion and the mitigation of concerns regarding collection dueof customers. Furthermore, the Companies are vulnerable toforeign exchange rate volatility risk because of foreign currencydenominated receivables related to overseas operations.
Securities and investment securities are mainly long-termholdings of stock and the stock issued by business partner.
These securities are exposed to market price volatility risk.
Almost all trade notes and accounts payable are due within
one year. Foreign currency-denominated payables are vulnerable to foreign exchange rate volatility risk. However, theamount of exposure is within the balance of receivables in thesame foreign currency. Loans are used primarily to raise funds
for capital expenditure. Since certain loans carry floating interest rates, the Companies are exposed to interest rate volatility
risk. Derivative financial instruments (interest rate swaps) areused to hedge this risk.
Derivative financial instruments used by the Companies areforward exchange contracts to hedge foreign exchange rate
volatility risk and interest rate swap transaction to hedge
interest rate volatility risk related to loans. For information about
hedging methods, items hedged, hedging policies and the2015

instruments

loans from banks and others. Temporarily surplus funds are

Trade notes and accounts receivable are exposed to credit risk

Thousands of U.S. dollars3) Risk Management systems relating to financial

to deterioration in financial standing or other factors.
ii)	Management of market risks (risks associated with fluctuations in foreign currency exchange as well as interest rates,
etc.)	The Company utilizes forward exchange contracts to hedge
foreign exchange rate volatility risk and interest rate swap
transaction to hedge interest rate volatility risk related toloans.
	  With respect to investment securities, the Company
regularly monitors fair values as well as taking into consideration its relationship with counterparties.
iii)	Management of liquidity risks associated with the procurement of funds (the risk of being unable to make paymentson due dates)
	The Company manages liquidity risk by preparing andBook value(1) Cash and time deposits

Fair values$  264,600 $  264,600

Differences$     —

(2) Notes and accounts receivables—trade

760,408

760,408—(3) Investment securities

196,183

196,183—

1,221,191

1,221,191—

541,600

541,600—

Assets(4) Notes and accounts payables—trade(5) Short-term loans payable

255,108

255,108—(6) Long-term loans payable (including current portion)

489,967

491,450

1,483$1,286,675 $1,288,158$1,483Liabilities

Notes: 1.	Method of calculation of fair value of financial instruments and information concerning securities and derivative transactions
		 Assets:		 (1)	Cash and time deposits, and (2) Notes and accounts receivables—trade
			 The fair value approximates the book value because of their short-term maturities. Therefore, the fair value is recognized using the book value.
		 (3) Investment securities
			 The fair value of these securities is based on their stock market price.
		 Liabilities:		 (4) Notes and accounts payables—trade, and (5) Short-term loans payable
			 The fair value approximates the book value because of their short-term maturities. Therefore, the fair value is recognized using the book value.
		 (6) Long-term loans payable (including current portion)			The fair value of long-term loans payable is based on the present value by discounting expected repayments of principal and interest in the remaining period using an assumed interest rate on an equivalent new loan. The fair value of interest rate swaps for which the special treatment is applied
is included in the fair value of long-term bank loans, as such swaps are treated as a single item incorporating the hedged long-term bank loans. The
special treatment under Japanese GAAP may be applied for interest rate swap contracts that meet certain hedging criteria (see (7) below). In thespecial treatment, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on debts
for which the swap contract is executed.
		 Derivatives:
		 (7) Derivative transactions
			Interest rate swaps that use the special treatment are processed as a single unit with long-term loans payable that have been hedged.
Consequently, the fair values of these swaps are included in the fair values of the applicable long-term loans payable (see (6) above).
2. Financial instruments for which obtaining an estimated fair value is deemed to be extremely difficult­updating cash flow plans at departments responsible for
Millions of yen

these plans, using reports from other departments of theCompany, and by maintaining an adequate level of liquidity
and taking other actions.
4) Supplemental explanations for fair values, etc. of­Financial Instruments

evaluation of hedging effectiveness, please refer to “Derivative

The fair values of financial instruments are determined bytransactions and hedge accounting” described in Note 2

market prices. If no market price is available, the fair value­“Summary of Significant Accounting Policies”.

contains variable factors, and the adoption of wide ranging

Thousands of
U.S. dollars

Category

2015

2014

2015

Unlisted equity securities¥    52¥    57$   433

Securities in unconsolidated subsidiaries and affiliates

4,610

4,753

38,417

	  The above stocks are not included in “(3) Investment Securities” due to the extreme difficulty of determining a fair value because there are nomarket prices.

and differing assumptions may cause values to change.

40

41Annual Report 2015

KYB Corporation
Financial Statements

3. The aggregate maturities subsequent to March 31, 2015 and 2014 for financial assets are as follows:

14

Millions of yen

Due within
one year

Cash and time deposits
Notes and accounts receivables—trade
Total

Derivative financial instruments used by the Companies are forward exchange contracts to hedge foreign exchange rate volatility

2014

2015
Due after Due after
one year five years
and within and within Due over
five years ten years ten years¥ 31,752

¥—

¥—

¥—

91,249———¥123,001

¥—

¥—

¥—

Due within
one year

Due after Due after
one year five years
and within and within Due over
five years ten years ten years¥ 39,505 ¥ —

¥—

¥—

—

—

—

¥125,949 ¥ —¥—¥—86,444

Thousands of U.S. dollars

2015

Due within
one year

Cash and time deposits

$—

$—

$—

760,408———$1,025,008

$—

$—

$—

Notes and accounts receivables—trade
Total

13

Due after Due after
one year five years
and within and within Due over
five years ten years ten years$  264,600

Derivative Transactions

Securities

risk and interest rate swap transaction to hedge interest rate volatility risk related to loans.
The following tables summarize the fair value information as of March 31, 2015 and 2014 of derivative transactions for which
hedge accounting has been applied:Interest rate related derivatives
Millions of yen

2015
Contract
amountContract
amount due
over one year

Fair value

Hedge accounting method

Type of derivatives

Major hedged items

Specified treatment
for interest rate swaps

Interest rate swaps
Receive floating rate
Pay fixed rateLong-term loans
payable

¥ 800

¥ 400

(Note)

Specified treatment
for interest rate andcurrency swaps

Interest rate and currency swaps
Receive floating rate and U.S. dollar
Pay fixed rate and Thai Baht

Long-term loans
payable

2,422

1,637

(Note)

Specified treatment
for interest rate andcurrency swaps

Interest rate and currency swaps
Receive floating rate and U.S. dollar
Pay fixed rate and Indian Rupee

Long-term loans
payable817

817(Note)

The following tables summarize acquisition costs, book values and the fair value of securities with available fair values as ofMillions of yen

March 31, 2015 and 2014.

2014

Available-for-sale securities: Securities with book values exceeding acquisition costs
Millions of yen

2014

2015

Equity securities

Thousands of U.S. dollars

2015

Acquisition
cost

Book
value

Difference

Acquisition
cost

Book
value

Difference

Acquisition
cost

Book
value

Difference¥9,531¥23,542¥14,011¥7,144¥14,005¥6,861$79,425$196,183$116,758

Available-for-sale securities: Securities with book values not exceeding acquisition costs
Millions of yen

Equity securities

Acquisition
cost

Book
value

¥—

¥—

Thousands of U.S. dollars

2014

2015
Difference

Acquisition
cost

Book
value

¥—

¥2,084¥1,897

Difference

Book
value

Difference¥(187)$—$—$—

ended March 31, 2015 and 2014) are not included in the above table due to the extreme difficulty of determining a fair value­because there are no market prices.
The following table summarizes the proceeds from sales of available-for-sale securities in the years ended March 31, 2015
and 2014.
Millions of yen

Equity securities

Fair value

Hedge accounting method

Type of derivatives

Major hedged items

Specified treatment
for interest rate swaps

Interest rate swaps
Receive floating rate
Pay fixed rateLong-term loans
payable¥1,040¥ 800(Note)

Specified treatment
for interest rate andcurrency swaps

Interest rate and currency swaps
Receive floating rate and U.S. dollar
Pay fixed rate and Thai Baht

Long-term loans
payable

2,627

2,074

(Note)

2015
Acquisition
cost

Unlisted equity securities (consolidated balance sheet amount of ¥52 million (US$433 thousand) and ¥57 million for the years

Thousands of U.S. dollars

2014

2015

Contract
amountContract
amount due
over one year

2015

Proceeds
from sales

Gain onsales

Loss onsales

Proceeds
from sales

Gain onsales

Loss onsales

Proceeds
from sales

Gain onsales

Loss on
sales

¥4

¥3

¥—

¥13

¥—

¥21

$33

$25

$—

Impairment loss on securities
There was an asset impairment loss of ¥5 million (US$42 thousand) and ¥13 million for equity securities included in other securities

Thousands of U.S. dollars

2015
Contract
amountContract
amount due
over one year

Fair value

Hedge accounting method

Type of derivatives

Major hedged items

Specified treatment for interest
rate swaps

Interest rate swaps
Receive floating rate
Pay fixed rateLong-term loans
payable$ 6,667$ 3,333(Note)

Specified treatment
for interest rate andcurrency swaps

Interest rate and currency swaps
Receive floating rate and U.S. dollar
Pay fixed rate and Thai Baht

Long-term loans
payable20,183

13,642(Note)

Specified treatment
for interest rate andcurrency swaps

Interest rate and currency swaps
Receive floating rate and U.S. dollar
Pay fixed rate and Indian Rupee

Long-term loans
payable

6,808

6,808

(Note)

Note: T he interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not stated at fair value, but the amount paid or
received under the swap agreements is recognized and included in interest expenses of the long-term loans payable as hedged items. Accordingly,
the fair value of the interest rate swaps is considered to be included in the fair value of the long-term loans payable.

for the years ended March 31, 2015 and 2014, respectively.

42

43

KYB Corporation

Annual Report 2015

Financial Statements

15

Retirement benefit costs included in the consolidated statements of income for the years ended March 31, 2015 and 2014 wereRetirement Benefits for Employees

The Company and its domestic consolidated subsidiaries havepayment plans. In addition, for the Employees’ Pension Fund,

three types of defined benefits plans: Employees’ Pension

a company belonged to a comprehensive employees’ pension

Fund, defined benefit corporate pension plan, and lump-sum

fund and, for the defined benefit corporate pension plan, 6

payment plan. In addition, additional retirement payments

companies outsourced asset management to a life insurance

are made in some cases when employees retire or resign.

company, etc.

The Company has established a retirement benefit payment
trust.
At the year ended March 31, 2015, for the Company and its

as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Service cost

¥2,129¥1,872$17,742Interest cost

382

523

3,183

Expected return on plan assets

(821)

(384)

(6,842)have established a defined contribution pension system in

Net actuarial loss amortization

128

280

1,067

addition to a defined benefit pension system.

Other

28

90

234

¥1,846¥2,381$15,384

Some domestic consolidated subsidiaries and other countries

Total retirement benefit costs for the year ended March 31, 2015

consolidated companies in Japan, 7 companies had lump-sum

Note: The amounts of retirement benefit costs calculated based on simplified methods are included in service cost.

Retirement benefit obligation and pension plan assets as of March 31, 2015 and 2014 consisted of the following:Items included in cumulative adjustment for retirement benefits (before tax effect deduction) as of March 31, 2015 and 2014 are
as follows:

Defined benefit plans
Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥36,052¥34,592$300,433

Cumulative effects of changes in accounting policies

2,575

—

21,459

Restated balance

38,627

34,592321,892

Service cost

2,129

1,873

17,742

Interest cost

382

523

3,183

(2,543)(2,179)(21,192)

(479)

1,243

3,992

¥38,116¥36,052$317,633

Movement in retirement benefit obligations:
Balance at April 1, 2014

Retirement benefit paid
Other
Balance at March 31, 2015
Movement in plan assets:
Balance at April 1, 2014

¥26,198¥22,331$218,317

822

384

6,850

Actuarial gain

6,764

3,158

56,366

Contributions paid by the employer

1,022

997

8,517

Benefit expenses(1,002)(672)(8,350)¥33,804¥26,198$281,700

Expected return on plan assets

Balance at March 31, 2015
Note: The amounts in this table include figures for pension plans that use simplified methods.

2015

2014

2015

Actuarial loss¥(7,499)¥ —$(62,492)

Unrecognized actuarial difference¥(8,269)¥(770)$(68,908)

Plan assets as of March 31, 2015 and 2014 are comprised as follows:
2015

2014

Bonds

13%

18%

Equity securities

64

69

Cash and cash equivalents

4

7

Other

19

6

100%

100%

Total

Notes: 1. The amounts in this table include figures for pension plans that use simplified methods
2. P lan assets include the retirement benefit trust that were established in regards to lump-sum payment plans of 60% in the current fiscal year and
57% in the previous fiscal year.

Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered indetermining the long-term expected rate of return.

Reconciliation from retirement benefit obligations and plan assets to liability for retirement benefits

Actuarial assumptions
Thousands of
U.S. dollars

Millions of yen

2015

2014

The principal actuarial assumptions at March 31, 2015 and 2014 (expressed as weighted averages) are as follows:

2015

Funded retirement benefit obligations¥33,717¥32,101$280,975

Discount rate

Plan assets(33,804)(26,197)(281,700)

Long-term expected rate of return

(87)

5,904

(725)

4,399

3,950

36,658

Total Net liability for retirement benefits at March 31, 2015

¥ 4,312¥ 9,854$ 35,933

Liability for retirement benefits¥ 6,012¥ 9,949$ 50,100

Asset for retirement benefits(1,700)(95)(14,167)¥ 4,312¥ 9,854$ 35,933

Unfunded retirement benefit obligations

Total Net liability for retirement benefits at March 31, 2015

Thousands of
U.S. dollars

Millions of yen

2015

2014

1.0–3.6%

1.5–4.2%

1.8–3.7%

1.5–2.0%

The required contribution of certain consolidated subsidiaries to defined-contribution pension plans for the years ended March 31,
2015 and 2014 were ¥456 million (US$3,800 thousand) and ¥421 million, respectively.

Note: The amounts in this table include figures for pension plans that use simplified methods.

44

45

KYB Corporation

Annual Report 2015

Financial Statements

16

Income Taxes

17

The following table summarizes the significant differences between the statutory tax rate and the Companies’ effective tax rate for

1. Asset Retirement Obligations Recognized in the Consolidated Balance Sheetfinancial statement purposes for the years ended March 31, 2015 and 2014.

The Company and its certain consolidated subsidiaries have posted asset retirement obligations based on a reasonable estimate ofThousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥ 4,809¥ 7,220$ 40,075

Tax loss carried forward

2,544

1,857

21,200Accrued bonuses

1,488

1,596

12,400

Provision for product warranties

1,437

905

11,975

SoftwareDeferred tax assets:
Liability for retirement benefits

the cost of removing equipment that used chrome plating, asbestos and certain other materials. These estimates are based on the
Waste Management and Public Cleaning Act, Ordinance on Prevention of Health Impairment due to Asbestos and other laws andregulations.
Asset retirement obligations calculated by using the estimated useful period since acquisition of the equipment, 4 to 31 years,
and a discount rate of 2.0% for the years ended March 31, 2015 and 2014.
The asset retirement obligations as of March 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

1,209

1,292

10,075

Tax effect of unrealized gains on inventories

967

1,041

8,058

Tax effect of unrealized gains on fixed assets

660

519

5,500

Impairment loss on fixed assets

574

178

4,783

Valuation loss on inventories

434

326

3,617

Deductible expenses for assets used in research and development

389

249

3,242

Accrued expenses (social security payments for bonuses)

220

234

1,833

Retirement benefits for directors and corporate auditors

173

201

1,442

Loss on revaluation of securities

132

144

1,100

Accrued enterprise tax

121

329

1,008

The Company and its certain consolidated subsidiaries have obligation for future restoration mainly relating to the offices, pursuant

Cumulative asset retirement obligation

120

130

1,000

to the office rental agreements. However, these obligations were not recognized in the consolidated balance sheet because they

Other

1,043

861

8,692

could not specify the timing of its pursuance and estimate reasonably the amounts of these obligations for estimated period of use   Subtotal

16,32017,082

136,000

Less: Valuation allowance(3,369)(2,577)(28,075)   Total deferred tax assets

12,951

14,505

107,925

Unrealized holding gains on securities(4,316)(2,273)(35,967)

Undistributed earnings of consolidated overseas subsidiaries(3,639)(3,085)(30,325)

Securities contributed to employees’ retirement benefit trust

Deferred tax liabilities:

2015

2014

2015

¥386

¥391

$3,217

New obligations by acquisition of fixed assets

10

0

83

Changes in estimated obligations and accretion

6

5

50

Settlement payment

(2)

(10)

(17)

¥400

¥386

$3,333

Beginning of the year

End of the year

2. Asset Retirement Obligations Other Than Those Recognized in the Consolidated Balance Sheetof the relevant tangible fixed assets was uncertain and no plan or expectation of relocation.

18

Segment Information

1. Segment Information(2,517)(2,904)(20,975)(a) General information about reportable Segments

Tax allowable reserves for deduction of fixed assets

(128)

(158)

(1,067)

Each reportable segment of the Companies is the business unit

Other

(586)

(267)

(4,883)in the Companies, for which segment financial information is   Total deferred tax liabilities(11,186)(8,687)(93,217)

available. Reportable segments are reviewed periodically at the   Net deferred tax assets¥ 1,765¥ 5,818$ 14,708

Board of Directors Meeting in order to determine allocation of

On March 31, 2015, amendments to the Japanese tax

31, 2015, deferred income tax expense recognized for the fiscal

regulations were enacted into law. Based on the amendments,

year ended March 31, 2015 increased by ¥931 million

the statutory income tax rates utilized for the measurement of(US$7,758 thousand), evaluation differences of other securities

deferred tax assets and liabilities expected to be settled orincreased by ¥461 million (US$3,842 thousand) and remeasure-realized from April 1, 2015 to March 31, 2016 and on or afterments of defined benefit plans increased by ¥277 million

April 1, 2016 are changed from 34.8% for the fiscal year ended(US$2,308 thousand).

March 31, 2015 to 32.3% and 31.5%, respectively, as of March
31, 2015.
Due to these changes in statutory income tax rates, netdeferred tax assets (after deducting the deferred tax liabilities)
decreased by ¥193 million (US$1,608 thousand) as of March

46

Asset Retirement Obligations

Also, Deferred tax liabilities for land revaluation decreased by¥365 million (US$3,042 thousand) and revaluation reserve forland increased by the same amount as deferred tax liabilities forland revaluation.

In consideration of the volume standard and other items
concerning reportable segments, “Special-purpose Vehicles”
and “System Products and Electronic Equipment” are combined into “Other” for disclosure purposes. Consequently,
the Company has two reportable segments: “Automotive
Components” and “Hydraulic Components.”

management resources and evaluate business result on eachreportable segment.
The Company has a business headquarters or department for(b) B asis of measurement on reported segment net sales,
profit or loss, segment assets and other material items

individual products and services. Each headquarters or depart-

The accounting methods for each reportable segment arement determines comprehensive strategies in Japan andalmost the same as those set forth in the “Summary of Signifi-

overseas for its products and services and conducts businesscant Accounting Policies”. The amount of segment profit

operations. As a result, the Company has four business catego-corresponds to that of operating income. Intersegment sales

ries: ”Automotive Components,” “Hydraulic Components,”

and transfers are based on the market prices.

“Special-purpose Vehicles” and “System Products and Electronic Equipment,” which consists of activities that do notbelong to the other three segments.

47

Annual Report 2015

KYB Corporation
Financial Statements(c) Information about reported segment net sales, profit or loss, segment assets and other material items

Thousands of U.S. dollars

Segment information as of and for the years ended March 31, 2015 and 2014 was as follows:

2015
Reportable segment

Millions of yen

2015
Reportable segment
Automotive
Components

HydraulicComponents

Intersegment

Subtotal

Other

Total

Adjustment

Consolidated

Outside customers$167,633$3,086,875$     —

43,60821,87565,483(65,483)—

1,996,283

966,567

2,962,850

189,508

3,152,358(65,483)

3,086,875¥237,086¥113,223¥350,309¥20,116¥370,425¥    —¥370,425   Total sales

2,468

2,765

5,233

2,625

7,858

(7,858)—Segment profits

57,41741,39298,80913,757

112,566692

113,258

1,844,200

1,167,958

3,012,158

250,717

3,262,875(55,125)

3,207,750

76,58353,467130,050

7,417

137,467(42)

137,425

683

—

683

16,25016,933—

16,933

159,608

74,167

233,775

14,591

248,366(158)

248,208

292

—

292

1,291

1,583

—

1,583

355,542

22,741

378,283(7,858)370,425

4,967

11,857

1,651

13,50883

13,591Other items

Segment assets

221,304

140,155

361,459

30,086

391,545(6,615)384,930

Depreciation
Impairment loss on fixed assets

Other items
9,190

6,416

15,606890

16,496(5)

16,491

82

—

82

1,950

2,032

—

2,032

19,1538,900

28,053

1,751

29,804(19)

29,785

35

—

35

155

190

—

190

Millions of yen

2014 Increase in property, plant and equipment and intangible assets Amortization of goodwill andnegative goodwill

Notes: 1. “Other” includes “special-purpose vehicles” and “System Products and Electronic Equipment” that are not included in the two reportable segments.
2. All amounts of adjustment of segment profits are the elimination of intersegment transactions.
3. All amounts of adjustment of segment assets are the elimination of intersegment transactions.
4. Segment profits have been reconciled with operating income in the consolidated statement of income.
5. The increase in property, plant and equipment and intangible assets includes long-term prepaid expenses.

2. Related Information

Reportable segment(a) Information about products and services

Automotive
Components

HydraulicComponents

Subtotal

Other

Total

Adjustment

Consolidated¥218,948¥115,486¥334,434¥18,277¥352,711¥    —¥352,711

Intersegment

2,501

2,783

5,284

2,530

7,814

(7,814)—   Total sales

221,449

118,269

339,718

20,807

360,525(7,814)

352,711

Segment profits

9,153

7,994

17,147

1,123

18,270(100)

18,170

Segment assets

196,977

138,758

335,735

33,253368,988(7,905)361,083

The information about products and services for the years ended March 31, 2015 and 2014 was omitted since same information isdisclose in “1. Segment information”.

Segment sales:(b) Information about geographic region
The information about geographic region as of and for the years ended March 31, 2015 and 2014 was as follows:
Millions of yen

2015

Other items
Impairment loss on fixed assets Increase in property, plant and equipment and intangible assets Amortization of goodwill andnegative goodwill$3,086,875$2,919,242

115,988

Depreciation

Consolidated

23,042

6,890

Outside customers

Adjustment$943,525

239,554 Amortization of goodwill andnegative goodwill

Total

20,566   Total sales Increase in property, plant and equipment and intangible assets

Other$1,975,717

Segment profits

Depreciation

SubtotalIntersegment

Segment assets

Impairment loss on fixed assets

HydraulicComponents

Segment sales:

Segment sales:
Outside customers

Automotive
Components

8,687

7,431

16,118

1,176

17,294—

17,294

11

345

356

—

356

—

356

18,391

9,493

27,884

2,063

29,947(39)

29,908

0

—

0

155

155

—

155

Net sales
Property, plant and equipment

Japan

EuropeU.S.A.

China

South East
Asia

Other areas

Total¥178,259¥59,607¥42,480¥25,966¥25,902¥38,211¥370,425

92,673

13,364

8,714

21,26017,021

10,878

163,910

Millions of yen

2014

Net sales
Property, plant and equipment

Japan

EuropeU.S.A.

China

South East
Asia

Other areas

Total¥169,249¥60,711¥37,802¥25,676¥24,966¥34,307¥352,711

90,527

12,0496,222

19,292

14,291

5,256

147,637

Thousands of U.S. dollars

2015

Net sales
Property, plant and equipment

Japan

EuropeU.S.A.

China

South East
Asia

Other areas

Total$1,485,492$496,725$354,000$216,383$215,850$318,425$3,086,875

772,275

111,367

72,617

177,167

141,842

90,6491,365,917

Notes: 1. Net sales are based on the locations of customers and categorized by countries and areas.
2. Property, plant and equipment are based on the locations and categorized by countries and areas.
3. Regions are based on geographic proximity.

48

49

KYB Corporation

Annual Report 2015

Financial Statements(c) Information about major customers
The information about major customers for the years ended March 31, 2015 and 2014 was not disclosed since net sale to any
customer was less than 10% of the amount of net sales in consolidated statement of income.
(d) Information about impairment loss on fixed Assets by reportable segments
The information about impairment loss on fixed assets by reportable segment for the years ended March 31, 2015 and 2014 wasomitted since same information is disclosed in the reportable segments.
3. Amortization of Goodwill and Unamortized Balance of Goodwill by Reportable Segments
Amortization of goodwill and unamortized balance of goodwill by reportable segments for the years ended March 31, 2015 and2014 were as follows:
Millions of yen

2015
Reportable segment
Automotive
Components

HydraulicComponents

Subtotal

Other

Total

¥35

¥—

¥35

¥155

¥190

2

—

2

315

317

Goodwill
Amortization
Unamortized balance

Millions of yen

2014
Reportable segment
Automotive
Components

HydraulicComponents

Subtotal

Other

Total

¥ 1

¥—

¥1

¥155

¥156

3

—

3

619

622

Amortization

¥ 1

¥—

¥1

¥ —

¥   1

Unamortized balance

—

—

—

—

—

Goodwill
Amortization
Unamortized balance
Negative goodwill

Thousands of U.S. dollars

2015
Reportable segment
Automotive
Components

HydraulicComponents

Subtotal

Other

Total

$292

$—

$292

$1,291$1,583

17

—

17

2,625

2,642

Goodwill
Amortization
Unamortized balance

19

Subsequent Event

On June 24, 2015, the shareholders of the Company authorized the following appropriation of retained earnings as of March 31,
2015:
Millions of yen

Cash dividends, ¥7.0 (US$0.06) per share

50

Thousands of
U.S. dollars

2015

2015

¥1, 788$14,90051