Contents
1

What is KYB?

6

Ten-Years Summary

8

To Our Shareholders and Investors

14

Corporate Governance

17

Management

18

Risk Information

20

Consolidated Subsidiaries and Equity-Method Affiliates

22

Corporate Information

23

Shareholder Information

24

Financial Section

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

ANNUAL REPORT 2017 Year Ended March 31, 2017

KYB Corporation

What is KYB?
As a pioneer in hydraulic technology, KYB is active in awide range of fields, including automobiles, motorcycles,
construction machinery, railroad cars, aircraft, specialpurpose vehicles, seismic isolation systems, vibration
control dampers, and marine equipment.
By developing advanced products that combine
hydraulics with vibration control, power control, andsystemization technology, KYB has earned the trust ofcustomers around the world. We aim to continue earning
customer and stakeholder support with our relentless drive
to create the technologies and products of tomorrow.

Annual Report 2017

Vibration
ControlTechnology

Automobiles

Motorcycles

Railroad Equipment

Aircraft Components

Construction Machinery

Industrial Vehicles

Special-purpose Vehicles

Vibration Control Dampers

Agricultural Machinery

Industrial Machinery

Building and Stage Equipment

Marine Components

Mobile Communication Device

High-Performance EPS

KYB in Everyday Living
Power Control
Technology
Aircraft Components

Agricultural Machinery
Railroad Equipment

Special-purpose Vehicles

Construction Machinery

Building Equipment
Automotive Components
Motorcycle Components

Marine Equipment

3

Electronic
ControlTechnology

1

KYB Corporation

What is KYB?

Global Production and Sales Network

The KYB Group, which has plants and companies in 23 countries and areas around the world, remains
dedicated to working as a unified team to quickly meet customers’ needs and to providing technologies
and products that make people’s lives safe and comfortable.

Asia
1970
1976
1983

Americas

Europe

1996

Japan

2002

2004
Asia

2008

Production Base2010

Established KYB (China) Investment Co., Ltd. in China

Sales Office / Other Services

2012

Established KYB Motorcycle Suspension India Private Limited, a joint
venture, in India (66.6% KYB ownership)
Established PT. KYB Hydraulics Manufacturing Indonesia, a joint
venture, in Indonesia (75.0% KYB ownership)
Established Chennai Sales Office in India
Merged KYB Hydraulics Industry (Zhenjiang) Ltd. into KYB Industrial
Machinery (Zhenjiang) Ltd.
Merged KK Hydraulics Sales (Shanghai) Ltd. into KYB Trading(Shanghai) Co., Ltd.

Regional Headquarters

2013

Japan
1935
1943
1948
1956
1968
1970
1971
1975
1985
2004

2005
2006
2008
2011

2012
2013
2015
2016

Founded Kayaba Research Center
Established Kayaba Manufacturing Co., Ltd.
Established Gifu Works (presently Gifu South Plant)
Established Kayaba Industry Co., Ltd.
(based on the Corporate Reconstruction and Reorganization Act)
Established Kayaba Auto Service Co., Ltd.
(presently KYB Engineering and Service Co., Ltd.)
Established Gifu North Branch Plant (presently Gifu North Plant)
Established Kanayama Kayaba Co., Ltd.
(presently KYB Kanayama Co., Ltd.)
Established Kumagaya and Mie Plant
Established Sagami Plant
Established Japan Analyst Co., Ltd., a joint venture
Changed the company name “KYB” from kanji(Chinese characters) to katakana (Japanese characters)
Acquired Trondule Co., Ltd. (presently KYB Trondule Co., Ltd.)
Established Kayaba System Machinery Co., Ltd. to make the Systems
Products Division a separate company
Change alias name to KYB Corporation
Established new corporate philosophy and vison
Acquired Takako Industries Inc.
Established Gifu East Plant
Yanagisawa Seiki MFG Co., Ltd. (presently KYB-YS Co., Ltd.),
became a wholly owned subsidiary.
Established Developmental Experiment Center, a test course for
automobiles and motorcycles, and Machine Tools Center
Established Electronic Technology Center
Established KYB Motorcycle Suspension Co., Ltd., a joint venture(66.6% KYB ownership)
Changed the trade name to KYB Corporation
Established Aircraft Components Division, independent
from HC Operations
Merged KYB-CADAC Co., Ltd. into KYB-YS Co., Ltd.

Invested in Yung Hwa Machinery Industrial Co., Ltd. (presently KYB
Manufacturing Taiwan Co., Ltd.) of Taiwan (55.1% KYB ownership)
Established PT. Kayaba Indonesia, a joint venture, in Indonesia.
(30.0% KYB ownership)
Established Kayaba (Malaysia) Sdn. Bhd. (presently KYB-UMW
Malaysia Sdn. Bhd.), a joint venture, in Malaysia(33.4% KYB ownership)
Established Siam Kayaba Co., Ltd. (presently KYB (Thailand) Co., Ltd.),a joint venture, in Thailand (67.0% KYB ownership)
Established Kayaba Vietnam Co,. Ltd. (presently KYB Manufacturing
Vietnam Co,. Ltd.) in Vietnam
Established KYB Industrial Machinery (Zhenjiang) Ltd. in China
Established KYB Hydraulics Industry (Zhenjiang) Ltd. in China
Established KYB Trading (Shanghai) Co., Ltd. in China
Established KYB Asia Co., Ltd. (presently KYB Asian Pacific Corp., Ltd.)in Thailand
Established Wuxi KYB Top Absorber Co., Ltd., a joint venture, in China

2005

1919

Annual Report 2017

2014
2016
Gifu North Plant

Developmental ExperimentCenterKYB (China) Investment Co., Ltd. KYB Motorcycle Suspension
India Pvt. Ltd.

KYB Steering (Thailand) Co., Ltd. PT. KYB Hydraulics
Manufacturing Indonesia

KYB-Conmat Private Limited

Americas
Established KYB Corp. of America (presently KYB Americas
Corporation) in the United States2000 Established Arvin-Kayaba Do Brasil LTDA. (presently KYB-Mando do
Brasil Fabricante de Autopecas S.A.), a joint venture, in Brazil (50.0%
KYB ownership)2004 Established KYB Latinoamerica S.A de C.V. in Mexico
1974

Gifu South Plant

Gifu East Plant

KYB Kanayama Co., Ltd.

Kayaba System MachineryCo., Ltd.

2012

Established KYB Mexico S.A. de C.V. in Mexico

2013

Established Comercial de Autopeças KYB do Brasil Ltda. in Brazil.

Europe1983
1989

Kumagaya Plant

KYB Trondule Co., Ltd.

1996
2003
2008

Sagami Plant

KYB-YS Co., Ltd.

2009
2012
2013
2015

Production Technology R&D
Center / Machine Tools Center

Jointly acquired AP Amortiguadores S.A. (presently KYB Suspensions
Europe, S. A. U.) in Spain
Established Kayaba Europe GmbH (presently KYB Europe GmbH) in
Germany
Established Kayaba Spain, S.A. (presently KYB Steering Spain, S.A.U.),a joint venture, in Spain
Established KYB Manufacturing Czech s.r.o.,a joint venture, in the Czech Republic
Established KYB Advanced Manufacturing Spain, S.A.U.,a joint venture, in Spain
Established KYB Europe Headquarters GmbH in Germany
Established KYB Europe Headquarters B.V. in the Netherlands,
and LLC KYB Eurasia in Russia
Established KYB CHITA Manufacturing Europe s.r.o.,a joint venture, in the Czech Republic (70.0% KYB ownership)
KYB Advanced Manufacturing Spain, S.A.U. became a wholly owned
subsidiary.

KYB Americas Corporation

KYB Mexico S.A. de C.V.

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

COMERCIAL DE AUTOPEÇAS
KYB DO BRASIL LTDA.

KYB EUROPE
HEADQUARTERS GmbHKYB CHITA Manufacturing
Europe s.r.o.

KYB Manufacturing Czech s.r.o. LLC KYB Eurasia

Note: KYB ownership is as of March 31, 2017. Companies with no ownership shown are wholly owned subsidiaries.

2

3

KYB Corporation

What is KYB?

Annual Report 2017

At a Glance

KYB’s organizational structure is comprised of business operations and divisions based on products andservices. Business segments are Automotive Components (AC) Operations, Hydraulic Components (HC)Operations, and Others, which includes the Special-purpose Vehicles, Aircraft Components andthe System Products and Electronics Components Business.

Segment

Automotive
Components (AC)Operations

Sales Breakdown by Segment

Shock absorbers for automobiles

AC Operations

Shock absorbers (OE, aftermarket)¥231,036 million

Shock absorbers for motorcycles

65.0%

Front folk, Rear cushion units

Major Products

Hydraulic equipment for automobiles

Vane Pumps for CVT
Hydraulic Systems

DLC Coated Front Fork

Rear Cushion Units

Shock Absorbers for
Snowmobiles

Hydraulic ValvesSemi-active Suspension
Systems for Bullet Train Cars

Gear Pump

Caliper Brakes

Vibration Control Devices

Movable Floors with Variable
SeatingVibration Control Dampers

Mobile Communication Device

 ane pumps, Power steering systems,
V
Vane Pumps for CVT, EPS
Shock Absorbers

OthersSteer-by-wire

Stay damper

HydraulicComponents (HC)Operations:Hydraulic equipment for industrial use
Cylinders, Valves, Pumps, Motors, MMP, HST

Others ampers for railroad cars, Brakes for railroadDcars, Seals

HC Operations¥96,316 million

27.1%
Hydraulic Cylinders

Special-purpose
Vehicles, Aircraft
Components,
System Products
and Electronics
Components
Business

Special-purpose vehicles
Concrete mixer trucks

Hydraulic equipment for aircraft
Actuators, Valves, Wheels, Brakes

 ystem products and electronic
S
components, etc.
 ibration control dampers,
V
Auditorium and stage control systems, ECU,
Mobile communication devices

4

Integrated HST (pump and motor)

Special-purpose Vehicles,
Aircraft Components,
System Components andElectronic Components¥27,964 million

7.9%
Concrete Mixer Trucks

Actuators

5

KYB Corporation

Annual Report 2017

Ten-Years Summary
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31,

Millions of yen

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

IFRS

IFRS

IFRS

JGAAP

JGAAP

JGAAP

JGAAP

JGAAP

JGAAP

JGAAP

Net sales¥355,316¥355,320¥370,327¥352,711¥305,752¥337,159¥320,083¥252,021¥329,262¥387,080

Cost and expenses

336,692

337,732

354,821334,541

295,279

315,621295,931

248,125

329,212368,809

Operating profit

19,247

4,327

14,461

18,17010,473

21,53824,152

3,896

50

18,271

5.4

1.2

3.9

5.2

3.4

6.4

7.5

1.5

0.0

4.7

Profit before tax / Income (loss) before income taxes and minority interests

18,852

2,825

14,892

21,032

12,994

21,76024,4401,671(4,300)15,218

Profit (loss) attributable to owners of the parent / Net income (loss)

14,544(3,161)

8,036

12,761

7,789

13,89817,014661(5,230)8,398

Comprehensive income

18,345(17,832)

25,203

20,31016,061

14,997

14,406

—

—

—

9.3

—

5.1

9.7

7.3

14.8

21.1

0.9

—

9.9

Cash flows from operating activities

31,153

19,95822,33528,78818,984

17,39935,43322,655

8,499

19,707

Cash flows from investing activities(21,337)(20,320)(30,658)(36,078)(36,125)(20,000)(7,233)(12,828)(26,505)(20,166)

Cash flows from financing activities(969)(3,395)

(555)

5,709

8,529

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

4,192

R&D expenses

7,621

7,760

8,910*

6,917

5,468

4,035

3,218

2,817

3,268

3,367

Depreciation and amortization

15,922

17,075

15,191

17,294

14,554

13,50813,427

15,31816,552

14,973

Capital expenditures

20,57821,30030,087

29,90839,21527,173

8,916

10,082

24,96823,564

Working capital

33,27823,511

29,40539,303

22,17942,00646,02348,701

43,51329,120Total equity attributable to owners of the parent

164,299

148,278

169,307

—

—

—

—

—

—

—

Total equity / Total net assets

169,771

153,381

175,256

153,997

116,435

102,762

89,96478,48976,45191,739Total assets

381,326

359,002387,877

361,083

327,912301,349

285,134

269,361

269,655

289,739

Cash and cash equivalents at end of period

33,98825,29630,51038,13235,21542,01048,12337,66434,272

20,073

43.1

41.3

43.6

41.2

34.5

33.2

30.6

27.3

26.6

29.8

35.24

¥ 62.87

3.03¥ (23.620)

Operating profit margin [%]Return on equity attributable to owners of the parent / Return on equity (ROE)

Ratio of equity attributable to owners of the parent / Equity ratio [%]Yen
Per share data:
Basic earnings per share / Net income (loss)

56.93¥ (12.37)

Equity attributable to owners of parent per share / Net worth

643.15

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

¥

¥

31.45

¥ 55.25

¥

¥

77.54

¥

¥

37.72

580.40662.67582.28512.18453.00395.18336.55327.97387.45

12.00

11.00

12.00

9.00

8.00

9.00

8.00

2.50

3.50

7.00

10.2

—

14.0

7.9

13.1

8.0

8.6

113.9

—

10.2

14,35013,796

13,732

13,033

12,306

11,975

11,44010,977

11,370

11,546*JGAAP

67

KYB Corporation

Annual Report 2017

To Our Shareholders and Investors

Striving to Create New ValueA GLOBAL KYB– CHALLENGE & INNOVATION –Special-purpose Vehicles
		Domestic: Capture demand related to Olympics and urban redevelopment
		Overseas: Establish production system in India while strengthening cooperation with mother plants
in Japan.
Aircraft Components
		Resolve issues at hand, such as production streamlining
Vibration control equipment
		Respond to the urgent problem of the need for long period earthquake precautions, develop a seismic
isolation oil damper with a lock system that is effective for large buildings
Next, let’s look at the KYB Group’s performance in fiscal 2016. The recovery in the China excavator
market and the structural reforms carried out in fiscal 2015 drove net sales to ¥335.3 billion, with segment
profit at ¥18.6 billion, operating profit at ¥19.2 billion, and profit attributable to owners of the parent at ¥14.5
billion. These results greatly exceed our forecast at the start of the fiscal year.
There is a large divide between our results and the numerical targets we set forth three years ago.
However, even with the impact of a slump in the China excavator market, we still exceeded the goals set
forth at the start of the fiscal year: net sales of ¥342.0 billion and operating profit of ¥13.0 billion.

Yasusuke Nakajima

Net Sales by Business Segment

Segment Profits by Business Segmentt(Billions of yen)(Billions of yen)

240.9

96.3

231.0

1.6
0.5

18.6

88.0

28.0

17.6

26.4

355.3

355.3

President

6.6

15.5

11.2

A Look Back at the Management Environment in Fiscal 2016

Market Recovery in China Contributes to Performance
Fiscal 2016, ended March 31, 2017, the final fiscal year of our medium-term business plan, saw several
major factors impact the world economy. The UK has chosen to withdraw from the EU, triggering problems
regarding how the country will secede. In the US, there are political concerns regarding the shift towards
protectionism. And the Middle East is facing instability in its governments. Yet even with these challenges,
the global market has become relatively strong. On the other hand, the Japanese economy has seen an
improvement in corporate earnings and the employment situation. We have also seen signs of an upswing in
consumer spending and capital investment as the business environment moves towards a slight recovery.
In KYB’s major business domain of the automobile market, domestic demand remained flat, while
conditions were favorable in Europe, and we saw increasing demand in China. In the construction machinery
market, domestic demand increased in response to exhaust gas regulations, and there was a recovery indemand in the China market.
Amidst this environment, the KYB Group is working to strengthen its revenue base, construct a systemthat can respond to changes in the environment by improving information accuracy, and restore customer
trust through fair, transparent, sincere business activities. As we strive to close the gap between where weare and our ideal company, we are working on the following activities as we launch into our next mediumterm business plan.
AC (Automotive Components) Operations
		Develop value-added products and innovative monozukuri (manufacturing expertise), expand profits
with sales promotions for aftermarket products
HC (Hydraulic Components) Operations
		Carry out reforms aimed at a business structure that can respond to instability in demand, increase theratio of products other than excavators
82015
AC Operations

2016 (Fiscal)
HC Operations

Special-purpose Vehicles, Aircraft Components,
System Products and Electronics Components

2015
AC Operations

0.8

2016 (Fiscal)
HC Operations

Special-purpose Vehicles, Aircraft Components,
System Products and Electronics Components

Review of the 2014 Medium-term Business Plan
Concerns over the Balance of Supply and Demand
Under the 2011 medium-term business plan, we strengthened the business foundation by investing in newplants and increasing our production capacity. With this foundation, we carried out the 2014 medium-termbusiness plan (2014 mid-term plan) over the three years from fiscal 2014 to fiscal 2016. This plan focused on
our ideal goal for 2020: becoming “a trustworthy company that supplies products to all of the world’s major
manufacturers of automobiles and construction machinery.” We worked proactively to secure orders in aneffort to return the Group to a growth track.
However, our initial mid-term plan targets for net sales and operating income were not achieved, andwe have many things to learn from and reconsider over those three years. In particular, we faced a problem
where the balance of supply and demand was upset because the slowdown in the China market was worse
than initially forecast, while emerging markets faced an economic slump. With a high percentage of HC
Operations’ business related to excavators, we were unable to efficiently use the plants and production
facilities that we had invested in globally. Also, in AC Operations, the management level overseas was notable to match the expansion of the business scale, and quality and productivity suffered. Lack of overseas
earnings as well as an extraordinary loss related to the fine for a violation of the US Antitrust Law greatly
impacted our performance.
The second half of the 2014 mid-term plan saw a shift towards recovery, with the impact of the fiscal
9

KYB Corporation

Annual Report 2017

To Our Shareholders and Investors

2015 consolidation of HC Operations subsidiaries in China and Nagano and the bottoming out of theconstruction market in China.

2017 Mid-term Plan
Aiming for Group Net Sales of ¥500.0 Billion from 2020 Onward
The KYB Group has 80 years of experience with hydraulics as its core technology. We will continue to growglobally as a comprehensive hydraulic equipment manufacturer that brings together vibration control, power
control, and systems technologies. The Group will work together to provide people around the world withpeace of mind, safety, and comfort, and be a trusted brand that contributes to creating an abundant society.
The new mid-term plan starting in fiscal 2017 is our third and final mid-term plan since we envisioned ourideal for 2020 in 2010.
In the management environment surrounding the KYB Group, there are growing hopes forinfrastructure improvements in China and emerging countries. However, there is increasing uncertainty
in the world economy, in particular related to the trends in the US. In technology, we expect accelerating
innovation in such areas as IoT, AI, robotics and autonomous driving, and a rise in cooperation between
different types of businesses and new competitors. Furthermore, laws and regulations will tighten in
response to increasing Environmental, Social and Governance (ESG) criteria, and as a corporation we must
make sincere efforts to comply.
While being aware of the points for improvement during the previous mid-term plan, we must focus
on the key source for any manufacturer: the workplace. We will provide guidance to resolve management
issues at hand, such as production, sales and technology working together to improve quality, increasing
productivity, and responding to customers. At the same time, we will stabilize the revenue base, leading toa stronger KYB brand.
Regarding monozukuri, technology, and products, we will create new value for KYB through encouraging
innovation, move toward the next stage of becoming the industry leader, improving corporate value andachieving continuous growth.
Our targets for fiscal 2019, the final year of the plan, are net sales of ¥398.0 billion, segment profit of¥26.0 billion, segment profit ratio of 6.5%, and return on equity (ROE)* of 10%, while placing emphasis on
segment (by business division) management.
Our previous goal for fiscal 2020 was group net sales of ¥600.0 billion. However, with the changes in thebusiness environment, we have revised this target. We will use the three years of the 2017 mid-term plan
to lay down a steady foundation, aim for group net sales of ¥500.0 billion from 2020 onward, and achieve a
corporate ranking of A.
*ROE: Profit attributable to owners of the parent ÷ Equity

2017 New Mid-term Plan Policies

FY2017FY2018FY2019Sustainable growth
Develop new technologies and products, actively promote M&As

Accomplish drastic
structural reforms

Stabilize revenue base
Resolve management issues

2017–2019 mid-term slogan

A GLOBAL KYB- CHALLENGE & INNOVATION -10

Aim for KYB
Groupsales of¥500.0 billion

Our initiatives by division are as listed below:
AC Operations
We will form a three-division system comprising theSuspension Headquarters, Steering Headquarters, andMotorcycle Headquarters, clarify the person in charge
and profit contributions for each product line, improve themanagement level, and speed up decision making andstrategy execution.
Under this new system, we will reorganize plants, increase
capacities, and develop and conduct sales promotions for theadded-value electronics products that will support the futureof the Company. These activities will be based on customer
needs, business strategies, and compliance with their research and development road maps.
Specific initiatives are as follows:S hock Absorbers: Maintain our sales and profit expansion policy.
	   • Increase trust in the KYB brand by strengthening relations with customers (OEM and aftermarket
products).
	   • Reduce costs for existing products and pursue manufacturing efficiency by introducing innovative
production lines.
Motorcycles: Convert to a business structure that can generate profits.
	   • Make the necessary adjustments on redundant capacity.
	   • Improve profitability through innovative development and manufacturing.
M otorsports: Increase technological strength and brand recognition through the newly established
Motorsports Dept.
	   • Consolidate various activities for automotive suspension, automotive steering, and motorcycle
suspension in international races.
	   • Aim to participate in world top category races.
S ystems products: Advance technological development with a focus on autonomous driving.
	   • Strengthen development of high-value-added products for suspension, pumps, and steering basedon systems technology.
HC Operations
In order to ensure stable net sales and profits that are not impacted by changes in the market, we plan to builda revenue base that is not dependent on quantity and to increase competitive power. Also, we will strengthen asystem for the sales and development of hydraulic products for industries other than construction machinery, suchas for agricultural machinery and railways. We plan to progress further with localization particularly in China, where
government leadership is accelerating the development of railway systems.
Specific initiatives are as follows:E xcavators for construction machinery: Establish the optimum production system and establish abusiness constitution that earns profits.
	   • Create an integrated control valve production line (one that consolidates the casting process withthe machining, assembly, and coating processes).
Agricultural machinery: sales promotions by assertively entering the agriculture field	   • Product strategies and development that match the needs of the region.
	   • Commence overseas production of hydrostatic transmissions (HSTs), which incorporate bothpumps and motors.
F or railways: Sales promotions by strengthening overseas markets and releasing new products,
establish revenue base.
	   • Offer high-value-added products and systems suitable for high grade trains, limited express trains,and next-model bullet trains (Domestic).
11

KYB Corporation

Annual Report 2017

To Our Shareholders and Investors	   • Progress even further with localization, make efforts
in the maintenance business (China and elsewhere).
Special-purpose Vehicles Div., Aircraft Components Div.,
System Products and Electronics Components
In Special-purpose Vehicles, we will maintain sales andmarket share by making sure to capture domestic demand
related to the Tokyo Olympics/Paralympics and urban
redevelopment. Also, production system establishment
is progressing in India, where infrastructure investment isstrong and the sales ratio is high.
In Aircraft Components, we will ride the worldwide trend
toward increasing aircraft production. We are aiming for the
Aircraft Components Div. to generate sales of ¥10.0 billion independently by fiscal 2020. We are planningfor the Aircraft Components Div. to develop over a very long-term span, using the knowledge of aircraft
technology that is part of KYB’s heritage to respond to a wide range of needs.
Specific initiatives are as follows:Special-purpose Vehicles Div.: Maintain and expand sales and market share.
	   • Make sure to capture domestic demand related to the Tokyo Olympics/Paralympics and urban
redevelopment.
	   • Increase production capacity at India plant, make efforts that take into consideration an earnings
structure with a reduced variable cost ratio.
Aircraft Components Div.: Achieve sales of ¥10.0 billion independently (by fiscal 2020)	   • Promote cost reduction activity	   • Expand private sector business, continue activities to become a Tier 1 system supplier	   • Our initiatives outside of business activities are as follows:
Human Resources
We are training human resources that can act from a global mindset and point of view through the overseas
trainee dispatch system and increasing the work experience of young employees, thus improving thecompetitive power of our monozukuri and technology/product development. Furthermore, we are increasing
the sphere of activity for female employees to create a work environment where diverse human resources
can put in their best efforts, and ensuring human resources as Japan moves towards an aging population anddeclining birth rate.
Technology and Product Development
We will offer customers up-to-date technology and products through development based on a long-term
strategy, leading to further orders. Also, we will focus on efficiently developing products based on our coretechnology for everything from basic technology to product development, while also developing systems
products that combine those products and technologies.
Monozukuri
We are proactively promoting automation using our own highly developed production technology, manufacturingmethods and equipment together with IoT and AI. We are working to construct an innovative production linethat will reduce lead-time and space by half and double productivity. In order to recover quickly with minimal
investment, we will respond to demand for cost reductions from European and other manufacturers while making
possible a system that can ensure profits by making production lines more compact.
Management
In order to further increase the effectiveness of our internal controls system, we are working to comply
with global regulations, make the best use of our internal reporting system, and strengthen our compliance12with corporate governance and codes. Further, we have established a new CSR Division under the directcontrol of the President to respond to stricter ESG evaluations. In addition to strengthening our corporate
governance and internal controls functions by unifying them, we plan to improve business continuity by
putting in place a BCP (business continuity plan) as well as BCM (business continuity management). In
addition, we are making proactive efforts for social support/contribution activities (outside of businessactivities), and making contributions to the sound development of society.
Fiscal 2017 is the first year of the 2017 mid-term plan. During this year, we will construct a managementbase and revenue base with a system that is flexible towards sudden environmental changes. In particular,
we will move more quickly to carry out drastic structural reforms, including strengthening the Head
Office organization and business division structure, concentrating resources on investing in new productdevelopment, and reorganizing and consolidating plants.
Regarding our projected net sales in fiscal 2017, we forecast sales volume to increase in both AC and HC
Operations. However, with the currency exchange rate set for a higher yen, we forecast a decline in sales
performance compared to the previous fiscal year. Segment profits are also expected to decline, impacted
by a rise in the cost of steel material and a change in product composition, in addition to the effect of theexchange rate.

To our Shareholders and Investors
Maximizing Shareholder Value through Growth Strategy
and Appropriate Distribution of Earnings
The KYB Group is aiming to grow further on a global scale as we move toward our 100th year of operations in
2035. By strengthening our core hydraulics technology and bringing together vibration control, power control,and systems technologies, we will continue to evolve as a comprehensive hydraulic equipment manufacturer.
The KYB Group will work to provide people around the world with peace of mind, safety, and comfort.
We will strive to be a trusted brand widely known on a global scale while continuing to contribute toward
creating an abundant society.
Dividend Policy
KYB positions the appropriate distribution of earnings to shareholders as an important management policy.
In fiscal 2016, the annual dividend per share was¥12, consisting of an interim dividend of¥5 and a year-end
dividend of¥7. Starting in fiscal 2017, we will launch a new policy of aiming for a consolidated dividend payout
ratio of 30%, and at least 2% (annual rate) of shareholders’ equity on a consolidated basis.
Also, effective as of October 1, 2017, we plan to execute a reverse stock split at 1 share per 10 shares ofcommon stock. The purpose is to change the share unit number of common stock to one hundred shares,
maintain the price level per trading unit, and avoid changing the number of shareholder voting rights. For theannual dividend forecast, we plan to distribute an interim dividend of¥6 and a year-end dividend of¥65.
The profits generated from our structural reforms shall be reinvested primarily in new productdevelopment, new plant establishment and M&As. In addition, they shall be properly balanced between
returns to shareholders and solidifying our financial base as we seek to maximize shareholder value.
In closing, I’d like to offer my gratitude to KYB’s shareholders and investors, and humbly ask for yourcontinued support.
July 2017

Yasusuke Nakajima
Representative Director, President Executive Officer

13

KYB Corporation

Annual Report 2017

Corporate GovernanceCorporate Governance Structure

Basic Policy for Corporate Governance

Shareholders' Meeting

KYB seeks to meet stakeholders’ expectations with continuous growth and the improvement of corporate

Elect / Dismiss

Elect / Dismissvalue, and to contribute to society by fulfilling our corporate social responsibility. We have a swift, efficientmanagement system centering on the Board of Directors, and a highly fair and impartial management
supervisory function. The following Management Principles and Basic Policies are the foundation of ourapproach to strengthening governance and our efforts for further improvements.

Board of Directors
Audit & Supervisory
Board

RequestAdvisory Committee(Nomination, Compensation)

Audit
Representative Director,
Chairman andPresident Exective Officer

Management Principles
The KYB Group contributes to society by providing technologies and products that make life safe andcomfortable.
1.	Challenge higher objectives and construct a livelier corporate cultural climate.

Accounting Auditing

Audit

Board of Executive Officers,
Other Management Committees
Audit Dept.

2. Maintain grace and good faith, and pay attention to nature and the environment.

Audit

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

Responsible head office departments, operational headquarters,
Group Companies, Branches, Representative offices

and society.
Basic Policies
1.	We shall respect the rights of shareholders, and ensure the equal and fair treatment of allshareholders.

Selection of Outside Directors and Audit & Supervisory Board Members

2.	We shall take the benefits of stakeholders into consideration and endeavor to appropriately
KYB has two outside directors and two outside audit & supervisory board members and selects incooperate with those stakeholders.
3.	We shall disclose not only the information in compliance with the relevant laws and regulations, butaccordance with the requirements of the Companies Act. Standards for independence prescribed byalso actively provide the important and/or useful information to stakeholders for their well-informed

securities exchanges and other organizations are used for the selection of independent directors and audit

decision making.

& supervisory board members.

4.	The Board of Directors shall be cognizant of its fiduciary responsibility and accountability toshareholders, and shall appropriately fulfill its roles and responsibilities in order to promote sustainable
and stable corporate growth and increase corporate value, profitability, and capital efficiency.
5.	We shall engage in constructive dialogue with shareholders, and make efforts to obtainshareholders’ support regarding the Company’s Business Policies and also reflect shareholders’opinions and concerns in the improvement of management.

Outline of Corporate Governance Systems Structure

14

Structure based on Companies Act

Company with Audit & Supervisory Board

Board chairperson

Chairman of the Board of Directors

Number of directors

8 (including 2 outside directors)

Number of Audit & Supervisory
Board Members

4 (including 2 outside audit & supervisory board members)

Number of independent directors/
audit & supervisory board members

2 outside directors and 1 outside audit & supervisory board member

Independent auditor

KMPG AZSA LLC

Reasons for Selections of Outside Directors
Rokuro Tsuruta(Independent Director)
Representative of Rokuro Tsuruta
Law Office

Mr. Tsuruta is an outside director because KYB believes he can continue
to use his knowledge and experience as an attorney to provide valuable
opinions and recommendations for strengthening internal controls andcompliance and about other subjects.

Shuhei Shiozawa(Independent Director)
Professor of Economics,
Keio University

Mr. Shiozawa is an outside director because KYB believes he can continue
to use his extensive knowledge and insight concerning economics
to provide valuable opinions and recommendations concerning KYB’s
finances and CSR activities.

Reasons for Selections of Outside Audit & Supervisory Board Members
Michio Tani

Mr. Tani is an outside audit & supervisory board member because
KYB believes he can use his considerable expertise involving financeand accounting based on the knowledge and experience acquired
during his financial institution career to provide valuable opinions andrecommendations.

Osamu Kawase(Independent Audit & Supervisory
Board Member)

Mr. Kawase is an independent audit & supervisory board member because
KYB believes he can use his knowledge and experience acquired during
a career in the non-life insurance industry to provide valuable opinions
and recommendations primarily from the standpoint of audits of business
operations.

15

KYB Corporation

Management

Corporate Governance(As of June 23, 2017)

Representative Director,

Compensation

President Executive Officer

Yasusuke Nakajima

1.	Compensation for directors and audit & supervisory board members and the number ofCompensation by category (Millions of yen)

Keiichi Handa

Kazuhiro Ogata

Total
compensation(Millions of yen)

Basiccompensation

Stock options

256

206

—

51

—

6

43

43

—

—

—

2

58

58

—

—

—

4

Directors(excludes outside directors)
Audit & Supervisory
Board Members(excludes outside members)
Outside officers

Retirement
payments

BonusesNumber ofapplicable
individuals

Eiji Hisada
Representative Director,

Kenji Yamanouchi

Executive Vice President Executive
Officer

Hiroshi Ogawa

Takaaki Kato

Shizuka Sakai

Millions of yen
FY2015FY2016Compensation foraudit certification

Compensation for
non-auditing services

Compensation foraudit certification

Compensation for
non-auditing services

KYB Corporation

85

15

73

5

Consolidated subsidiaries

25

—

31

—

110

15

105

5

Total

Hideki Nonoyama
Osamu Kunihara
Toshihiko Hatakeyama

2. Compensation paid to the independent auditor

Category

Senior Managing Executive
Officers

Managing Executive Officers

applicable individuals
Category

Annual Report 2017

3. Significant Compensation
Five consolidated subsidiaries, including KYB Americas Corporation, have paid ¥122 million to KPMGInternational, which belongs to the same network as the independent auditor used by KYB, for audit
certification and other services for fiscal 2016.

Members of the Board of Directors,
Executive Vice President Executive
Officer

Executive Officers

Morio Komiya

Ikuo Inagaki

Hitoshi Nitta
Masaru Tsuboi

Members of the Board of Directors,
Senior Managing Executive Officers

Keisuke Saito

Tomoyuki Nagata
Masayoshi Sakemi
Shigeru Ooshita
Koji Yamamoto
Hiroshi Kurotaki

Takafumi Shoji

Takashi Kondo
kimiro sudo
Masahiro Kawase

Investor Relations Activities

Masao Ono

The IR Section of the Finance Division discloses information as required by laws and regulations andTomoo Akai

discloses other information that is important or useful for shareholders and other investors.

Michio Tani *The IR Section conducted the following activities during the fiscal year ended March 31, 2017.
Major Activities of FY201616

Activities for securities analysts andinstitutional investors• Information meetings: 2 (End of first half and fiscal year)• Small meeting: 1• Conferences: 2• Overseas IR events: 3

Activity for individual investors• Company information meetings: 4• Plant tour: 1

IR website• https://www.kyb.co.jp/ir/index.html• Information meeting materials, flash reports, securities reports, annual
reports and other documents

Audit & Supervisory
Board Members

Osamu Kawase *Member of the Board of Directors(Outside)

Motoo Yamamoto

Rokuro Tsuruta* Outside

Shuhei Shiozawa

17

KYB Corporation

Annual Report 2017

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 2017.

and other items are closely linked to prices on international commodity markets. If the KYB Groupis unable to fully reflect an increase in the cost of materials or parts in its selling prices, or if it is not

Risks Relating to the Economic Environment1) Economic Climate

possible 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 KYB Group takes out these loans

expanding overseas operations even faster in response to the growing overseas manufacturingwhile carefully monitoring financial markets. However, procuring funds in a timely manner at favorable

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

terms may not be possible if there is broad decline in prices of the KYB Group’s products, an economic

in the Americas, Europe and Asia. These overseas plants are vulnerable to fluctuations in demand,

recession, a credit crunch, a decline in the KYB Group’s credit rating, or for other reasons. Any of theseand the resulting changes in customers’ production volume, caused by changes in the economies in

events may affect the KYB 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 and sales base caused by a decline

2) Fluctuations in Exchange Rates and Interest Rates
Overseas sales are 53.5% of the KYB Group’s total net sales. As a result, changes in foreign exchange

in orders, falling earnings or some other reason, there may be a significant impact on 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.

Risks Relating to Business Operations
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 andgreatly on the global production volume of automobiles and construction machinery. The decline inrequirements may have a significant impact on the Group’s results of operations.

demand for these products during the global economic downturn caused by the financial crisis may
have a significant impact on results of operations. The KYB Group sells most of its special-purpose
vehicles, aircraft components, system products and electronic components in Japan. Especially in thespecial-purpose vehicles business, which involves primarily concrete mixer trucks, demand may be

Risks Relating to Fires, Accidents and Natural Disasters

significantly influenced by changes in the volume of construction activity, which is closely linked to theeconomic outlook, as well as by changes in laws and regulations.

Many plants of the KYB Group produce hydraulic products that utilize the properties of oil. In addition,
plants often have coating equipment that uses organic solvents and storage tanks for various oils,

2) Prices and Quality
The KYB Group’s products are subject to intense price-based competition in Japan and other countries.
Customers are always asking for cost cuts and lower prices. Quality is also critical. The Group supplies

chemicals and other substances. If there is a fire or a leak of a hazardous substance, manufacturing
activity may have to be suspended temporarily.
In Japan, many plants of the KYB Group and its suppliers are located in the Chubu area (central area ofvital automotive parts, such as shock absorbers, which maintain a vehicle’s stability, and power

Japan’s mainland). If there is a major earthquake in this region or other disaster that prevents these plants

steering systems. For construction machinery and commercial vehicles, the Group supplies key

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

functional components such as hydraulic cylinders and motors. Consequently, if the Group supplies a
defective product, there may be substantial expenses due to customers’ demands for the payment of

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.

damages 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.

18

19

KYB Corporation

Consolidated Subsidiaries and Equity-Method Affiliates

Annual Report 2017

As of March 31, 2017

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, hydraulic equipment, andcasting and metal mold products

Apr. 1953

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

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, and hydraulicequipment for industrial use

Dec. 2002

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%

KYB Manufacturing
Vietnam Co., Ltd.

Hanoi, Vietnam

Manufacturing and sales of shock
absorbers for motorcycles

Oct. 2002

100.0%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%

Asia

Takako America 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%

COMERCIAL DE AUTOPEÇAS KYB DO
BRASIL LTDA.

Curitiba, Brazil

Sales of shock absorbers

Dec. 2013100.0%

Location

Principal business

Established

Ownership

KYB EUROPE HEADQUARTERS GmbH Krefeld, Germany

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

Krefeld, Germany

Sales of shock absorbers

Jun. 1989

100.0%

Name

Location

Principal business

Established

Ownership

KYB EUROPE HEADQUARTERS B.V.

Limburg,
The Netherlands

Supervising European business

Apr. 2012

100.0%

TOWA MANUFACTURING CO., LTD.

Gifu, Japan

Manufacturing of hydraulic jacks andcylindersOct. 1948

33.4%

KYB Suspensions Europe, S.A.U.

Navarra, Spain

Manufacturing and sales of shock
absorbers for automobiles

Jul. 1975

100.0%

P.T. Kayaba Indonesia

Jakarta, Indonesia

Manufacturing and sales of shock
absorbers

Feb. 1976

30.0%

KYB Steering Spain, S.A.U.

Navarra, Spain

Manufacturing and sales of pumps for
power steering

Jun. 1996

100.0%

KYB-UMW Malaysia Sdn. Bhd.

Selangor, Malaysia

Manufacturing and sales of shock
absorbers

Jun. 1983

33.4%

KYB Advanced Manufacturing Spain,
S.A.U.

Navarra, Spain

Manufacturing and sales of shock
absorbers for automobiles

Oct. 2008

100.0%

KYB-UMW Steering Malaysia
Sdn. Bhd.

Selangor, Malaysia

Manufacturing and sales of pumps for
power steering

Sep. 1995

33.4%

KYB Manufacturing Czech s.r.o.

Pardubice,
Czech Republic

Manufacturing and sales of shock
absorbers for automobiles

Aug. 2003

100.0%

Changzhou KYB Leadrun Vibration
Reduction Technology Co., Ltd.

Jiangsu, China

Manufacturing, sales, repair, and after
services of railroad equipment

Aug. 2008

49.0%

KYB CHITA Manufacturing
Europe s.r.o.

Chrudim,Czech Republic

Manufacture of suspension springs forautomobiles

Jan. 2013

70.0%

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

Paraná, Brazil

Manufacturing and sales of shock
absorbers for automobiles

Jun. 2011

50.0%

EuropeName

20

Equity-Method Affiliates

21

KYB Corporation

Corporate Information

As of March 31, 2017

Shareholder Information

As of March 31, 2017

Company Name:	KYB Corporation

Common Stock Issued:

257,484,315 shares

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

Number of Shareholders:

11,847

Transfer 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:

March 10, 1935

Fiscal Year:

April 1 to March 31

Paid-in Capital:¥27,647.6 million

Number of Employees:

14,350 (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)

14,186

5.51

Japan Trustee Services Bank, Ltd. (Trust Account)

13,700

5.32

Meiji Yasuda Life Insurance Company

10,046

3.90

Hitachi Construction Machinery Co., Ltd.

8,920

3.46

KYB suppliers’ stock ownership

7,219

2.80

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

Mizuho Bank, Ltd.

4,905

1.91

THE BANK OF NEW YORK MELLON 140044(Standing Proxy: Settlement & Clearing Services Division,
Mizuho Bank, Ltd.)

4,120

1.60

94,780

36.81

Total

Composition of
Shareholders:

2,024 (0.8%)(Thousands)

41,828 (16.2%)

Financial institutions

94,295 (36.6%)

Foreign companies
Other domestic companies

57,772 (22.4%)

Individuals and others
Treasury shares

61,565 (23.9%)

Monthly Stock
Price Range:(Tokyo Stock Exchange)

Annual Report 2017

Stock price (¥)
800
700
600
500
400
300
200
100
Trading volume(Share)090,000,000
60,000,000
30,000,000
022

FY2011FY2012FY2013

FY2014FY2015High (¥)

508

675

523

471

646

Low (¥)

245

402

380

263

298

At year-end (¥)

460

436

440

333

580

23

KYB Corporation

Financial Highlights(Billions of yen)

Profit (Loss) Attributable to Ownersof the Parent / Net Income		29

Consolidated Statements of Income		29

Consolidated Statements of Comprehensive Income		30

Consolidated Statements of Changes in Equity		

32

Consolidated Statements of Cash Flows		

33

Notes to Consolidated Financial Statements(IFRS)(IFRS)(Billions of yen)(Billions of yen)(Billions of yen)

30.1

29.9

14.6

17.3

39.2

15.9

Depreciation and Amortization

17.1

Capital Expenditure

15.2

R&D Expenses

2013 2014 2015 2016 20172013 2014 2015 2016 20172013 2014 2015 2016 2017

(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)

Independent Auditor’s Report(%)

Return on equity attributable toowners of the parent /Return on Equity (ROE)
(%)

381.3

359.0

(Billions of yen)

387.9

Ratio of Equity Attributable to
Owners of the Parent / Equity Ratio

361.1

Total Equity and Total Assets /Total Assets

327.9

70

(IFRS)

20.6

Consolidated Statements of Financial Position(IFRS)

21.3

28(IFRS)

7.6

Financial Statements(IFRS)

7.8

Financial Review

282013 2014 2015 2016 2017

(IFRS)(IFRS)

8.9

Financial Highlights

26

2013 2014 2015 2016 2017

(IFRS)

6.925

2013 2014 2015 2016 2017

5.5

Contents

-3.2

4.3

10.5

14.5

7.8

8.0

12.8

19.2

18.2

14.5

(Billions of yen)

355.3

355.3

(Billions of yen)

370.3

Operating Profit

352.7

Net Sales

305.8

Financial Section

Annual Report 2017

41.2

43.6

41.3

43.1

34.5

9.7

9.3

7.3

169.8

153.4

175.3

154

116.4

5.1

2013 2014 2015 2016 20172013 2014 2015 2016 20172013 2014 2015 2016 2017

(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)(IFRS)

Total Equity / Total Net Assets
Total Assets

24

25

KYB Corporation

Annual Report 2017

Financial Review

Summary

Financial Condition

In the automotive components segment, sales of shock absorbers for automobiles decreased 7.1% toTotal assets increased ¥22.3 billion to ¥381.3 billion. This was mainly due to an increase in cash and cash

¥151.0 billion. Although sales were firm in Japan and overseas, monetary sales were reduced by theequivalents, trade and other receivables, and other financial assets.

yen’s strength. Sales of motorcycle shock absorbers increased 8.1% to ¥28.5 billion because of strong
sales in the core markets of China, Vietnam and India. Sales of hydraulic equipment for automobiles,
which is used mainly for power steering, increased 0.5% to ¥46.5 billion. Sales of power steering
hydraulic pumps decreased but there was an increase in sales of vane pumps for electric power
steering and for continuous variable transmissions. Sales of other products, mainly ATV (all-terrain
vehicle) equipment, were ¥5.1 billion. As a result, sales in the automotive components segment totaled

Total liabilities increased ¥5.9 billion to ¥211.6 billion mainly because of an increase in trade and otherpayables.
Total equity increased ¥16.4 billion to¥169.8 billion mainly because of an increase in retained
earnings.
The ratio of equity attributable to owners of the parent increased 1.8 percentage point from one year
earlier to 43.1% at the end of March 2017 due to an increase in net assets.

¥231.0 billion, segment profit was ¥11.1 billion and the segment profit margin was 4.8%.
In the hydraulic components segment, sales of industrial hydraulic components, which are usedmainly in construction machinery, increased 11.1% to ¥88.6 billion. In Japan, demand was higher
because of new restrictions on exhaust emissions. In addition, there was a recovery in sales ofhydraulic components in China. Sales of other components, mainly railway semi-active systems andCash Flows

shock absorbers, were down 6.6% to ¥7.7 billion. As a result, hydraulic components segment sales
were ¥96.3 billion, segment profit was ¥6.6 billion and the segment profit margin was 6.8%.
In the other segment, the primary activities are special-purpose vehicles, aircraft components,
system products and electronic components. Sales of special-purpose vehicles, mainly concrete
mixer trucks, decreased 6.1% to ¥8.5 billion due to a slowdown in demand associated with the 2011

Net cash flows from operating and investing activities was ¥9.8 billion and net cash used in financing
activities was ¥1.0 billion. After a deduction of ¥0.2 billion for changes in foreign exchange rates, there
was an increase of ¥8.7 billion in cash and cash equivalents to ¥34.0 billion.
Net cash from operating activities increased 56.1% to ¥31.2 billion. The main reasons for thisearthquake and tsunami in Japan. Sales of hydraulic equipment for aircraft increased 10.4% to ¥7.7

increase were profit before tax of ¥18.9 billion and depreciation and amortization of ¥15.9 billion.

billion. Sales of system products and electronic components increased 13.6% to ¥11.7 billion. As a

Net cash used in investing activities increased 5.0% to ¥21.3 billion. This was mainly due to payments ofresult, segment sales were ¥28.0 billion, segment profit was ¥834 million and the segment profit¥19.7 billion for purchases of property, plant and equipment.

margin was 3.0%.

Net cash used in financing activities was ¥1.0 billion. There were payments of ¥17.9 billion for the

As a result, consolidated net sales were ¥355.3 billion, almost same as in the previous year.

repayment of long-term borrowings and ¥2.8 billion for dividends. Major sources of cash inflow were

Earnings benefited from business structural reforms that consisted mainly of cost-cutting initiatives

proceeds of ¥15.3 billion from long-term borrowing and a net increase of ¥5.2 billion in short-term

at all KYB Group companies. As a result, operating profit was ¥19.2 billion, income before income taxes

borrowings.

was ¥18.9 billion and profit attributable to owners of parent was ¥14.5 billion.

26

27

Annual Report 2017

KYB Corporation

Financial Statements
Consolidated Statements of Financial Position

Consolidated Statements of Income

KYB Corporation and its Consolidated Subsidiaries
March 31, 2016 and 2017

KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2016 and 2017
Millions of yen

ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables
Inventories
Other current financial assets
Other current assets   Total current assets
Non-current assets:
Property, plant and equipment
Goodwill
Intangible assets
Investments accounted for using the equity method
Other non-current financial assets
Other non-current assets
Deferred tax assets   Total non-current assets   Total assets
LIABILITIESCurrent liabilities:
Trade and other payables
Borrowings
Income tax payables
Other current financial liabilities
Provisions
Other current liabilities   Total current liabilities
Non-current liabilities:
Borrowings
Liability for retirement benefits
Other non-current financial liabilities
Provisions
Other non-current liabilities
Deferred tax liabilities   Total non-current liabilities   Total liabilities
EQUITY
Equity attributable to owners of the parent:
Share capital
Capital surplus
Retained earnings
Treasury shares
Other components of equity    Total equity attributable to owners of the parent   Non-controlling interests   Total equity    Total liabilities and equity

28

Note

2016

7, 18
8, 15, 18
918¥ 25,296
87,99948,291
954
3,793
166,333¥ 33,988
92,65349,6401,039
3,641
180,962

10, 1511
11
31
18

158,609
318
4,424
3,833
18,999622
5,865
192,669¥359,002

158,990
283
5,850
5,438
23,169500
6,132
200,364¥381,326

24

Millions of yen

2017

Net sales
Cost of sales   Gross profit
Selling, general and administrative expenses
Equity in earnings (losses) of affiliates
Other income
Other expenses   Operating profit
Finance income
Finance costs   Profit before taxes   Income tax expenses    Profit (loss) for the year

Note

2016

2017

23
21

¥355,320
283,247
72,07354,485(1,292)
2,671
14,640
4,327
561
2,062
2,825
5,447
¥  (2,622)¥355,316
282,886
72,43053,806
1,016
2,036
2,430
19,247593
988
18,852
3,774¥ 15,078¥  (3,161)539¥  (2,622)¥ 14,544
533¥ 15,0782131
23
13, 2322
22
24

Profit attributable to:
Owners of the parent
Non-controlling interests    Profit (loss) for the year

Yen

14, 1815, 1818
16

15, 18
17
18
16
24

19
19
19
19
19

¥ 66,211
50,492
1,413
18,416
5,313
978142,822¥ 72,137
50,983
1,536
18,274
3,754
1,001
147,684

38,34813,893
2,592
1,994
777
5,194
62,799¥205,621

39,962
11,589
2,405
2,127
56
7,732
63,871¥211,555¥ 27,648
29,41486,393(579)
5,402
148,278
5,103
153,381¥359,002¥ 27,648
29,414
100,995(587)
6,829
164,299
5,472
169,771¥381,326

Earnings per share
Basic earnings per share26¥  (12.37)

Note

2016

2017

¥ (2,622)¥15,07825
25(2,415)(6,660)

3,342
1,705

25

(465)
(9,540)

17
5,064

25
25

(5,729)58(1,509)(85)

25—(5,670)(15,210)¥(17,832)(203)(1,797)
3,267¥18,345¥(17,828)(4)¥(17,832)¥17,708636¥18,345¥  56.93

Consolidated Statements of Comprehensive Income
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2016 and 2017

Millions of yen

Profit (loss) for the year
Other comprehensive income:Items that will not be reclassified to profit or loss:  Net change in financial assets measured at fair value throughother comprehensive income   Remeasurements of defined benefit plans  Share of other comprehensive income of investments
accounted for using the equity method   Total
Items that may be reclassified to profit or loss:  Exchange differences on translation of foreign operations  Effective portion of the change in the fair value of cash flow hedges  Share of other comprehensive income of investments
accounted for using the equity method   Total    Total other comprehensive income
Comprehensive income for the year
Comprehensive income for the year attributable to:
Owners of the parent
Non-controlling interests
Comprehensive income for the year

29

KYB Corporation

Annual Report 2017

Financial Statements

Consolidated Statements of Changes in Equity
KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2016 and 2017

Millions of yen
Other components of equity

Note

Balance at April 1, 2015
Comprehensive income for the year:
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners: Contributions by and distributions to owners
in their capacity as owners:   Acquisition of treasury shares   Disposal of treasury shares   Dividends of surplus   Transfer to retained earnings  Total contributions by and distributions to owners
in their capacity as owners
Changes in equity interest of subsidiaries:   Acquisition of non-controlling interests   Dividends of surplus   Total changes in equity interest of subsidiaries
Total transactions with owners
Balance at March 31, 2016
Comprehensive income for the year:
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners: Contributions by and distributions to owners
in their capacity as owners:   Acquisition of treasury shares   Disposal of treasury shares   Dividends of surplus   Change of scope of equity method   Changes in business combination   Transfer to retained earnings  Total contributions by and distributions to owners
in their capacity as owners
Changes in equity interest of subsidiaries:   Dividends of surplus   Total changes in equity interest of subsidiaries
Total transactions with owners
Balance at March 31, 2017

30

25

20

25

20

Net change infinancial assets
measured at fairvalue throughRemeasurements
other comprehenof defined
sive income
benefit plans

Exchangedifferenceson translationof foreign
operations

Effective
portion of
the change inthe fair value ofcash flow hedges

Total
other
componentsof equity

Comprehensive
income for theyear attributableto ownersof the parent

Noncontrollinginterests

Total
equitySharecapitalCapitalsurplusRetainedearnings

Treasuryshares¥27,648¥29,544¥ 97,931¥(573)¥8,697¥    —¥ 5,963¥ 97¥14,757¥169,307¥5,949¥175,256

—
—
—

—
—
—

(3,161)—(3,161)————(2,415)(2,415)—(6,627)(6,627)—(5,688)(5,688)—63
63—(14,667)(14,667)(3,161)(14,667)(17,828)

539
(543)
(4)

(2,622)(15,210)(17,832)

—
—
—
—

—
0
—
—

—
—
(3,066)(5,311)

(6)
0
—
—

—
—
—
(1,315)

—
—
—
6,627

—
—
—
—

—
—
—
—

—
—
—
5,311

(6)
0
(3,066)
—

—
—
—
—

(6)
0
(3,066)——

0(8,377)(6)(1,315)

6,627

—

—

5,311

(3,072)—(3,072)————
27,648

(130)
—
(130)
(129)
29,414———(8,377)86,393

—
—
—
(6)
(579)

—
—
—
(1,315)
4,967

—
—
—
6,627
—

—
—
—
—
275

—
—
—
—
160

—
—
—
5,311
5,402

(130)
—
(130)
(3,201)
148,278

(573)
(269)
(842)
(842)
5,103

(703)
(269)
(971)
(4,043)
153,381

—
—
—

—
—
—

14,544—
14,544

—
—
—

—
3,342
3,342

—
1,702
1,702

—
(1,796)(1,796)

—
(83)
(83)

—
3,164
3,164

14,544
3,164
17,708

533
103
636

15,0783,267
18,345

—
—
—
—
—
—

—
—
—
—
—
—

—
—
(2,810)
1,175
(45)
1,737

(8)
—
—
—
—
—

—
—
—
—
—
(35)

—
—
—
—
—
(1,702)

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
(1,737)(8)—(2,810)
1,175
(45)
—

—
—
—
—
—
—

(8)
—
(2,810)
1,175
(45)
—

—

—

57

(8)

(35)

(1,702)——(1,737)(1,687)—(1,687)———¥27,648———¥29,414——57¥100,995——(8)¥(587)——(35)¥8,274——(1,702)¥    ————¥(1,521)

—
—
—
¥ 77

—
—
(1,737)¥ 6,829——(1,687)¥164,299

(267)
(267)
(267)
¥5,472(267)(267)(1,955)¥169,771

31

KYB Corporation

Annual Report 2017

Financial Statements

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2016 and 2017

KYB Corporation and its Consolidated Subsidiaries
Years ended March 31, 2016 and 2017

1

Millions of yen

Note

2017

¥ 2,825
17,0754,049(70)(1,772)
(561)
1,215
1,292
6,010
(3,574)(3,645)
8,152
(64)
1,928
32,860109
782(1,283)(4,450)34(8,095)
19,958¥18,852
15,922147
149(1,495)(593)
988(1,016)(5,052)(1,889)
6,640
700
—
2,209
35,562
94
1,072(1,003)(3,815)—(757)
31,153

Cash flows from investing activities:
Payment into time deposits
Proceeds from withdrawal of time deposits
Payment for purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payment for purchases of other financial assets
Proceeds from sale of other financial assets
Other    Net cash flows from investing activities

(332)
665
(21,967)
350
(702)
2,942
(1,275)(20,320)(237)
255(19,734)31(1)
178(1,830)(21,337)

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings
Repayments of lease obligations
Proceeds from long-term borrowings
Repayment of long-term borrowings
Payments for purchase of treasury shares
Proceeds from sales of treasury shares
Dividends paid
Dividends paid to non-controlling interests Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation    Net cash flows from financing activities
Effects of changes in foreign exchange rates
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of period

32

2016

Cash flows from operating activities:
Profit before tax
Depreciation and amortization
Impairment loss
Increase (decrease) in assets and liabilities for retirement benefits
Increase (decrease) in provision for product warranties
Finance income
Finance costs
Equity in (earnings) losses of affiliates(Increase) decrease in trade and other receivables(Increase) decrease in inventories
Increase (decrease) in trade and other payables
Loss associated with the Anti-Trust law
Reversal of foreign currency translation adjustment
Other   Subtotal
Interest received
Dividends received
Interest paid
Income taxes paid
Refund of income taxes
Payments of loss associated with the Anti-Trust law   Net cash from operating activities

20

7

7

2,839
(615)
14,548(16,164)(6)
0(3,066)
(269)

5,207
(456)
15,294(17,928)(8)—(2,810)
(267)

(663)
(3,395)—(969)(1,458)(5,215)30,510—¥25,296

(160)
8,687
25,296
5¥33,988

Reporting Company

KYB Corporation (hereinafter, the “Company”) is a company

On June 23, 2017, the Board of Directors approved theincorporated and located in Japan. The principal business of

consolidated financial statements of the KYB Group for the

the Company and its subsidiaries (hereinafter, the “KYB

fiscal year ended March 31, 2017.

Group”) are the manufacture and sale of shock absorbers andhydraulic equipment and the provision of services related tothe above businesses.

2

Basis of Preparation(1) C ompliance with IFRS

(3) Presentation currency and units

As the KYB Group’s consolidated financial statements satisfy

The consolidated financial statements are presented in Japa-

the requirements of the specified company provided in Article

nese yen, which is the functional currency of the Company.

1-2 of the Ordinance on Terminology, Forms, and Preparation

Figures less than one million yen have been rounded to the

Methods of Financial Statements, these statements have beennearest million.

prepared in accordance with International Financial ReportingStandards (hereinafter, “IFRS”) as provided in Article 93 of the(4) Early adoption of new standards

same ordinance.

The KYB Group has early adopted IFRS 9 “Financial Instruments” (revised July 2014) for the preparation of the consoli-(2) Basis of measurement

dated financial statements.

The consolidated financial statements are prepared on thebasis of measurement at historical cost, except for financial
instruments, etc., as described in Note 3, “Significant­Accounting Policies.”

3

Significant Accounting Policies(1) Basis of consolidation2) Affiliates

1) Subsidiaries

Affiliates are entities in which the KYB Group has s­ ignificant

Subsidiaries are entities whose financial and operating policies

influence over financial and operating policies. Investments inare directly or indirectly controlled by the KYB Group in orderaffiliates are accounted for using the equity method from thefor the Group to benefit from those entities’ activities. The

day that significant influence commences until the date that

Company prepares the consolidated financial statements based

significant influence ceases.

on the financial statements of subsidiaries that are entities

3) Joint venturescontrolled by the KYB Group as of March 31 of each consoli-

Joint ventures are entities in which joint control by the KYB

dated fiscal year. Control is the power of a parent company toGroup and another entity is established by contractual agree-

determine the financial and operating policies of an investee

ment with regard to an economic activity. In the KYB Group,company in order to benefit from that company’s activities. The

these economic activities are carried out by the jointly con-existence and effect of voting rights that the KYB Group cantrolled entities. As with affiliates, the KYB Group’s interest in

potentially exercise or transfer at the moment are taken into

this joint control is accounted for using the equity method.

account in determining if the KYB Group controls other companies. The financial statements of subsidiaries are included in(2) Business combinations

the consolidated financial statements of the KYB Group fromThe KYB Group accounts for business combinations using thethe date that the control commences until the date that theacquisition method. Identifiable assets acquired and liabilities

control ceases.

and contingent liabilities assumed through business combina-

In preparing the consolidated financial statements, amounts

tions are initially measured at fair value on the acquisition date.

of internal transactions between consolidated c­ ompanies andExpenses generated in relation to acquisitions are recognized inamounts of claims and obligations are offset and eliminated.

expenses as incurred. Non-controlling interests are recognized

All balances and transactions between Group companies are

separately from the Group’s interests. The ways how to mea-

eliminated, including unrealized gain generated through transac-

sure non-controlling interests in acquired companies are deter-

tions within the KYB Group.

mined separately for each business combination transaction.

33

KYB Corporation

Annual Report 2017

Financial Statements

Non-controlling interests are measured either at fair value or(4) Cash and cash equivalents

in terms of the ratio between the net amount of identifiable

Cash and cash equivalents comprises cash on hand,assets of the acquired company and the non-­controlling interest.

deposits that can be withdrawn as needed, and short-term

Goodwill is measured as the amount by which the total ofinvestments—generally those with a maturity date withinvalue and changes are recognized through other comprehen-consideration for business combinations transferred, thethree months of the transaction date—that are easily converted

sive income. The selection of this method is irreversible.

	  At the end of each reporting period, the KYB Group per-amount of non-controlling interests in acquired companies, andinto cash with little risk from a change in value.

These financial assets are categorized as equity financial

forms an assessment to determine if there have been any

assets measured at fair value through other comprehensive

significant changes in credit risk associated with financial

the fair value of the equity interest in the acquired company

other comprehensive income	Certain equity financial assets are measured through fairiv) Impairment
	The KYB Group has an allowance for doubtful accounts for
expected credit losses associated with financial assets
measured at amortized cost.

previously held by the acquiring company exceeds the net(5) Financial instruments

income.

assets since these assets were initially recognized. To

recognized amount of identifiable assets acquired and liabilities

1) Non-derivative financial assets(d) F inancial assets measured at fair value through profit or

perform this assessment, the risk of the failure to fulfill

assumed at the time of acquisition.

i) Initial recognition and measurement

When that amount is less than the fair value of net assets

	The KYB Group categorizes financial assets as either (a)lossobligations concerning the financial assets as of the reporting	All financial assets that are not assigned to one of the threedate is compared with the risk as of the date the assetsof acquired subsidiaries, bargain purchase gain is recognizedfinancial assets measured at amortized cost, (b) debt finan-

preceding categories are categorized as financial assets

were initially recognized. This is done by using information

immediately in profit or loss.

cial assets measured at fair value through other comprehen-measured at fair value through profit and loss. When thesethat could indicate a significant increase in credit risk subse-

sive income, (c) equity financial assets measured at fair value

assets are initially recognized, the KYB Group’s decision notquent to the initial recognition by obtaining information that

(3) Foreign currency translation

through other comprehensive income, or (d) financial assets

to recognize these assets as financial assets measured at

can be used without excessive costs or labor. Furthermore,

1) Foreign currency transactions

measured at fair value through profit or loss. A category isfair value through profit or loss is not irreversible.

this information must be reasonable and supported.

The non-consolidated financial statements of individual Groupassigned when each financial asset is initially recognized.

ii) Subsequent measurementcompanies are prepared in the currency of the primary econom-

The KYB Group recognizes trade receivables and other	After being measured at initial recognition, financial assets

ic environment in which the entity operates. The consolidated

receivables when they occur. The normal purchases andare measured as described below, according to theirtion is made that there has been no significant increase infinancial statements are presented in Japanese yen, which issales of other financial assets are recognized on the transac-

classification.

the credit risk since the financial assets were initiallythe functional currency of the Company.

tion date when the KYB Group makes a firm commitment

Foreign currency transactions are translated into individualGroup companies’ functional currencies at the exchange rateon the transaction date. Monetary assets and liabilities denomi-

to purchase or sell an asset.
	  All financial assets, except those classified as measured
at fair value through profit or loss, are measured at fair value

nated in foreign currencies as of the fiscal year-end date areplus any directly attributable transaction costs.

retranslated into the functional currency at the exchange rate(a) Financial assets measured at amortized cost(a) Financial assets measured at amortized cost	Financial assets measured at amortized cost are measured	  If the KYB Group determines that credit risk concerning
financial assets is low as of the reporting date, the assump-recognized.
	  If there has been a significant increase in credit risk con-at amortized cost using the effective interest method.

cerning financial assets since the initial recognition, there is(b) D ebt financial assets measured at fair value through otheran allowance for doubtful accounts for the corresponding

comprehensive income

financial assets that is equal to the expected credit losses for	Changes in the fair value of debt financial assets measured

the entire fiscal period. If there has been no significant

on the fiscal year-end date. Non-monetary assets and liabilities	Financial assets are classified as financial assets measured

at fair value through other comprehensive income are recog-

increase in this credit risk, this allowance is equal to thedenominated in foreign currencies and measured at fair value

at amortized cost if both of the following conditions are

nized through other comprehensive income. If the recogni-

expected credit losses for 12 months.

satisfied.

tion of these financial assets is terminated, the amount	  Irrespective of the preceding paragraph, for trade receiv-

included in other comprehensive income in prior years isables that have no significant financing components, allow-

are translated into the functional currency at the exchange rateon the date that fair value was determined. Translation gain

	  •If the financial asset is held within business model whose

or loss arising from the settlement of such transactions isobject is to hold financial assets in order to collect con-transferred to profit or loss.

ance for doubtful accounts is always equal to expected credit

recognized in profit or loss. However, financial assets mea-

tractual cash flows and to sell financial assets.

(c) E quity financial assets measured at fair value throughlosses for the entire period.

sured through other comprehensive income and the effective	  •If the contractual terms of the financial asset give rise to

portion of the hedging instruments resulting from cash flow

cash flows that are solely payments of principal andhedges are recognized in other comprehensive income.

interest on a specified date on the principal and principal

at fair value through other comprehensive income are recog-

2) Foreign operations

amount outstanding.

nized through other comprehensive income. If the recogni-

The assets and liabilities of foreign operations are translated
into Japanese yen using the exchange rate on the fiscal yearend date, while income and expenses are translated into
Japanese yen at the average exchange rates during the con­solidated fiscal period unless exchange rates have varied
substantially during that period.
Translation gain and loss arising from the conversion of thefinancial statements of foreign operations is recognized in othercomprehensive income. These differences are included in othercomponents of equity as exchange differences on translation offoreign operations. In the event all interests in a foreign operation are disposed or a portion of the interest is disposed suchthat the control or significant influence is lost, that portion of
the cumulative amount in the other components of equity is
reclassified from accumulated other comprehensive income toprofit or loss.

34

(c) E
 quity financial assets measured at fair value through(b) Debt financial assets measured at fair value through othercomprehensive income	Financial assets are classified as debt financial assets measured at fair value through other comprehensive income ifboth of following conditions are satisfied.

other comprehensive income	Changes in the fair value of equity financial assets measured

tion of these financial assets is terminated, or there is asignificant decrease in fair value, the amount included in	  The KYB Group estimates expected credit losses forfinancial assets by using a method that incorporates thefollowing items.
	  •A probability-weighted amount with no deviation that is
calculated by evaluating results obtained over specific
range

other comprehensive income in prior years is transferred	  •The time value of money

directly to retained earnings.

	  •Information about past events, the current situation and	  Dividends on equity financial assets measured at fair value

the economic outlook that is reasonable and supported,	  •If the financial asset is held within business model whose

through other comprehensive are recognized in profit or loss.

as well as that can be used without any significant cost

object is to hold financial assets in order to collect con-(d) F inancial assets measured at fair value through profit ortractual cash flows and to sell financial assets.

loss

or labor	  Expected credit losses are probability-weighted estimates	  •If the contractual terms of the financial asset give rise	Financial assets measured at fair value through profit or loss

to cash flows that are solely payments of principal andare measured at fair value after the initial recognition and any

ated financial assets. Credit losses are the present values ofinterest on a specified date on the principal and principalchange is recognized through profit or loss.

the differences between the contractual cash flows the KYB

amount outstanding.

iii) Derecognition	Financial assets are derecognized if the right to receive
benefits ceases, if the assets are transferred, or if the effective risks and rewards of ownership are transferred.

of credit losses over the entire expected life of the associ-Group is to receive and the actual cash flows that the KYBGroup expects to receive.
	  To estimate expected credit losses for trade receivables,
the Group uses an expected credit loss allowance matrix for
performing this process with greater ease. This matrix is

35

KYB Corporation

Annual Report 2017

Financial Statements

consistent with the estimation method for financial assets
explained earlier in this section.
	  Expected credit losses for financial assets are recognizediii)	Derivatives that do not satisfy the conditions for hedge
accounting	Some derivatives do not satisfy the conditions for hedge

present value, using pre-tax discount rates that reflect current

measured at fair value at the acquisition date. Expenses onmarket assessments of the time value of money and the risksinternally generated intangible assets are recognized as expens-specific to the asset.

in profit or loss as impairment losses. If an event occurs after

accounting. The changes in the fair value of such derivatives

es in the period when incurred, except for development costs

recognition of an impairment loss that results in a reduction

are recognized immediately in profit or loss.

that satisfy the criteria for recognition as assets.

in this loss, this reduction is reversed to profit or loss.

Intangible assets are amortized on a straight-line basis over2) Non-derivative financial liabilities(6) Inventories

their estimated useful lives for historical costs less residuali) Measurement at the time of initial recognition

The historical cost of inventories includes purchase costs,

value. The estimated useful life of major intangible assets is	All financial liabilities are initially measured at fair value lessprocessing costs and all other costs incurred for bringing

as follows:

any directly attributable transaction costs.
ii) Subsequent measurement

inventories to their present location and condition.
Inventories are measured at the lower of cost or net realiz-•Software:

exceeds the recoverable amount, an impairment loss is recognized for that asset or cash-generating unit exceeds, and its
carrying amount is reduced to the recoverable amount.
Assets other than goodwill are evaluated for any indicationthat an impairment loss recognized in previous periods may be

5 years

reduced or eliminated. If such an indication exists, the recover-•Development costs: 5 years

able amount of the asset or cash-generating unit is estimated.

able value. Net realizable value represents the estimated selling

Amortization methods, estimated useful lives and residual

If the recoverable amount exceeds the carrying amount of theamortized cost using the effective interest method. In theprice in the ordinary course of business, less estimated costs

values for intangible assets are reviewed on the final day ofasset or cash-generating unit, the impairment loss is reversed.

event of amortization and derecognition using the effective

necessary to make the sale. Cost is mainly calculated using theeach fiscal year.

An impairment loss is reversed only to the extent that theinterest method, any gain or loss is recognized in profit orweighted-average method.

Goodwill is the amount by which the acquisition cost of theasset’s carrying amount does not exceed the carrying amount

non-controlling interest in a subsidiary or business at the timethat would have been determined, net of depreciation oramortization, if no impairment loss had been recognized.

iii) Derecognition(7) Property, plant and equipmentof the purchase exceeds the net amount of identifiable assets	Financial liabilities are derecognized when their obligation is

The KYB Group applies the cost model for the measurement

and liabilities acquired. The method for measuring goodwill

For goodwill, an impairment test is performed each yearof property, plant and equipment. Under this model, property,

when initially recognized is explained in Note 3, “(2) Business

whenever there is any indication of impairment. For goodwill,3) Derivative financial instruments and hedge accounting

plant and equipment are stated at historical cost less any

combinations.”

the carrying amount is presented as the historical cost lessAt the start of a transaction, the KYB Group documents theaccumulated depreciation and accumulated impairment losses.

relationship between the hedging instrument and the hedged

Historical cost of property, plant and equipment includes any

fulfilled, exempted or lapses.

accumulated impairment losses. For companies accounted(9) Leases

for under the equity method, the carrying amount of goodwill

item, and the various objectives and strategies of risk manage-

costs directly attributable to the acquisition of the asset and

The KYB Group classifies leases as finance leases when leaseis included in the investment carrying amount. Impairment

ment for undertaking the various hedges. At the inception of

dismantlement, removal and restoration costs, as well as

agreements transfer substantially all the risks and rewards oflosses on goodwill are recognized in profit or loss and are

the hedge and on an ongoing basis thereafter, derivatives usedborrowing costs that satisfy the conditions for capitalization.

ownership to the lessee. All other lease agreements are classi-

not reversed.

as hedges are assessed whether they are highly effective in

Finance leases recognized as assets are included in property,

fied as operating leases.

offsetting changes in the fair value or cash flows of the hedged

plant and equipment. Additional costs that arise after theitem, and these assessments are documented.

For the purposes of impairment testing, goodwill is allocated

For finance lease transactions, lease assets and lease liabili-each of the Group’s cash-generating units or groups of cash-

acquisition of an asset are added to the carrying amount of theties are recognized in the consolidated statement of financial

generating units that is expected to benefit from the businesscombination.

Derivatives are initially recognized at fair value on the date ofacquired asset or recognized as a separate asset only when theposition at the lower of the fair value of the leased property

the derivative contract. Fair value is subsequently remeasured,KYB Group is highly likely to accrue a future economic benefit

or the present value of the minimum lease payments, eachand any changes are accounted for as follows:from these costs and when the amount of such costs can be

determined at the inception of the lease. Lease payments are(11) Post-retirement benefitsi) Fair value hedges

reliability measured. All other costs associated with repair andapportioned between the reduction of the lease obligation andCompanies in the KYB Group have various pension plans.

	Changes in the fair value of derivatives designated as fairmaintenance are recognized in profit or loss as incurred.

the finance costs based on the interest method. Finance costs

These pension plans are typically accumulation-type plans,value hedges that fulfill the requirements for such derivatives

The historical cost less residual value of each structural

are recognized in profit or loss. Leased assets are depreciatedunder which funds paid are managed by insurance companies

are recognized in profit or loss as changes in the fair value ofcomponent of property, plant and equipment is depreciatedon a straight-line basis over their estimated useful lives or leaseor trust companies. The accumulated amounts are calculated

the hedged asset or liability.

mainly on a straight-line basis over its estimated useful life.

terms, whichever is shorter.

regularly using actuarial formulas. The KYB Group has definedii) Cash flow hedges
	Changes in the fair value of derivatives designed as cash

The estimated useful lives of major property, plant andequipment are as follows:

In operating lease transactions, lease payments are recognized as an expense using the straight-line method over the

Obligations under defined benefit pension plans recognized•Buildings and structures:are recognized in equity through other comprehensive•Machinery, equipment and vehicles: 2–25 years

income. Gains or losses on the ineffective portion is recog-•Tools and equipment:(10) Impairment of non-financial assets

ending date of the reporting period less fair value of plan assets

nized immediately in profit or loss.

Depreciation methods, estimated useful lives and residual

The KYB Group assesses in each fiscal year whether there isfor the fiscal period. Defined benefit obligations are calculated

values for property, plant and equipment are reviewed on the

any indication that a non-financial asset may be impaired. If

each year using the projected unit credit method.

final day of each fiscal year.

any such indication exists or if an annual impairment test is

loss for the period in which the hedged item affects profit

2–20 years

or loss. However, if the scheduled transaction designatedlease terms.

benefit plans and defined contribution plans.

flow hedges that fulfill the requirements for such derivatives

	  Cumulative amounts in equity are reclassified to profit or

2–65 years(8) Intangible assets and goodwill

non-financial asset or liability, the amount recognized inin the consolidated statements of financial position are calculated as the present value of defined benefit obligations at therequired, an impairment test is performed.

by the hedge accounting results in the recognition of a

Discount period is determined based on the period until the
expected date of benefit payment in each fiscal year, and the

In an impairment test, the recoverable amount is estimated.

discount rate is determined by reference to market yields for

After initial recognition, the KYB Group applies the cost model

The recoverable amount of an asset or cash-generating unit is

the period corresponding to the discount period on high-quality

equity is transferred to the carrying amount of such non-for the recognition of intangible assets, which are stated atdetermined at the higher of its fair value less costs of disposal

corporate bonds at the end of the fiscal year.

financial asset or liability.

historical cost less any accumulated depreciation and accumu-

or its value in use. In determining fair value less costs of dis-

Adjustments due to performance and actuarial differences

lated impairment losses.

posal, the KYB Group applies appropriate assessment models

resulting from changes in actuarial consumptions are recog-

backed by usable fair value indicators. In determining the value

nized in other comprehensive income in the period when theyin use, estimated future cash flows are discounted to theare incurred and immediately transferred to retained earnings.

	  If scheduled transaction designated by the hedge accounting is no longer expected to occur, cumulative gains orlosses recorded in equity are transferred to profit or loss.

Intangible assets acquired separately are measured at historical cost at the initial recognition, and the historical costs of4

If the carrying amount of an asset or cash-generating unit	After initial recognition, financial liabilities are measured at

loss.

36

intangible assets acquired through business combinations are37

KYB Corporation

Annual Report 2017

Financial Statements

Past service cost is recognized in profit or loss for the period in

Delivery occurs only when goods have been delivered to afuture taxable profit will be available against which they can•taxable temporary differences on investments in subsidiar-which it is incurred.

specified location, risks of obsolescence or loss have been

be utilized. Deferred tax liabilities are recognized for taxable

ies where the timing of the reversal of the temporarytransferred to the customer, and objective evidence is received

temporary differences. Deferred tax assets and deferred tax

difference is controlled and the temporary difference will

payments due to the defined contribution retirement programthat all conditions for acceptance have been satisfied.

liabilities are not recognized for the following temporary

not be reversed in the foreseeable future.

are recognized as expenses for the corresponding periods

2) Provision of services

differences:during which employees have provided the associated services.

Revenue from the provision of services in the course of ordi-•temporary differences on initially recognized goodwill

a legally enforceable right to offset current tax assets against

For the cost for defined contribution retirement benefits,nary business activities is measured at the fair value of the•temporary differences arising from the initial recognition

current tax liabilities and when they relate to income taxes(12) Provisions and contingent liabilities

consideration received or receivable. In the event the results ofof assets or liabilities in transactions that are not businesslevied by the same tax authority on the same taxable entity

Provisions are recognized when the KYB Group has a present

transactions related to the provision of services can be reliably

combinations and at the time of transaction affect neither

or on a different taxable entity intended for settlement on alegal or constructive obligation as a result of a past event, itmeasured, the KYB Group recognizes the revenue from thoseaccounting profit nor taxable profit or tax loss

net basis.

is probable that the KYB Group will be required to settle thetransactions based on the stage of completion of transactions

obligation by outflow of resources embodying economic

at the fiscal year-end.

­benefits, and a reliable estimate can be made of the amount3) Dividend incomeof the obligation.

Income from dividends is recognized at the fair value of consid-

The consolidated financial statements for the KYB Groupgenerated is based on reasonable estimates of taxable profit

eration received or receivable when the KYB Group’s right toincorporate management’s estimates and assumptions. The

forecasts, timings and amounts.

receive the payment of dividends has been established.

estimates and underlying assumptions are based on historical

The timing and amount of taxable profits generated is

Where the time value of money is material to the provisions,the amount of provisions is measured at the present value ofthe estimated future cash flows discounted to present value

4

Significant Accounting Estimates and Determining Estimates

experience and management’s best judgments of other factors­susceptible changing future economic conditions, which areusing the pre-tax discount rate reflecting current market as-(15) Government grantsthat are considered to be relevant as of the fiscal year-end.

uncertain. If actual timing and amounts differ from the KYB

sessments of the time value of money and the risks specific to

Government grants are recognized at fair value when there is

However, actual results may differ from accounting estimatesGroup’s estimates, amounts recognized in future consolidated

the liability. Interest cost associated with the passage of time

reasonable assurance that the KYB Group will comply with theand the assumptions forming their basis.

financial statements could be significantly affected.

is added to the provision.

conditions attached to them and that the grants will be re-

The KYB Group considers the following estimates andProvisions for product warranties are prepared to provide forceived. Government grants associated with an expense are­assumptions to have the potential to significantly affect its(3) Post-retirement benefits

the payment of product warranty costs. The provisions are theregularly recognized as revenue in the same accounting period

consolidated financial statements.

The KYB Group has a variety of retirement benefit plans,sum of estimated product warranty costs in relation to current

when the expense is incurred. Government grants associatedfiscal year sales based on actual product warranty costs in priorwith assets are subtracted from the historical cost of the(1) Impairment of non-financial assets

benefit obligations and related service costs for these systems

years and estimated product warranty costs that take into

associated asset.

The KYB Group conducts impairment tests on property, plant

are calculated based on actuarial assumptions, such as discountand equipment; goodwill; and intangible assets in accordance

rates and mortality rates. These actuarial assumptions are

consideration actual warranty costs in prior years. The future

including defined benefit plans. The present value of defined

period for the expected outflow of economic benefits is set to(16) Borrowing costswith the accounting policy described in Note 3, “(10) Impair-determined based on management’s best estimates andbe within one year from the end of each consolidated fiscal

For assets requiring a substantial amount of time until theirment of non-financial assets.” Calculations of recoverable

judgments. However, these assumptions are subject to chang-

year. Obligations whose probability as of the fiscal year-end

intended use or sale can be realized, the borrowing costs

amounts used in impairment tests require the establishment of

es in uncertain future economic conditions. If it becomesdate cannot be recognized and provisions that do not satisfy

related directly to the acquisition or manufacture of thoseassumptions, including of future cash flows and discount rates.

necessary to revise these assumptions, the consolidated

the recognition standards for provisions are noted as contingent

assets are recognized as part of the historical cost of those

These assumptions are based on management’s best esti-

financial statements could be significantly affected.

liabilities.

assets up to the point of their substantial use or sale. Other

mates and judgments but may be affected by future changes inborrowing costs are recognized as expenses in the fiscal

uncertain economic conditions. Revisions of these assumptions(4) Provisions and contingent liabilities

period in which they are incurred.

could significantly affect the consolidated financial statements.

The KYB Group recognizes various provisions, including provi-(13) Treasury shares
When treasury shares are acquired, the consideration of tax

sions for product liabilities, in its consolidated statements ofeffect, including directly related costs, is recognized as an(17) Income taxes(2) Income taxes

financial position. These provisions are recognized in consider-equity deduction item. When treasury shares are sold, theIncome tax expense is composed of current income taxes and

The KYB Group is affected by income taxes in multiple tax

ation of risks and uncertainties regarding the KYB Group’s

consideration received is recognized as an addition to equity.

deferred income taxes. These income taxes are recognized inzones. Significant judgments are necessary when determining

obligations as of the fiscal year-end and are based on its best

profit or loss, except for items recognized in other comprehen-estimated income taxes in various regions around the world.

estimates of payments required to satisfy its obligations.

sive income or directly in equity.

Some transactional and calculation methods include numerous

Although these provisions are calculated in consideration

Current income taxes are measured at the amount that is

uncertainties that ultimately affect tax amounts. The KYB Groupof the overall amount of payments required to satisfy these

Revenue from the sale of goods in the course of ordinary

expected to be paid to or refunded from the taxation authori-recognizes its potential liability that tax audit may issue based

obligations in the future, unexpected circumstances and chang-business activities is measured at the fair value of the consider-ties. For the calculation of the tax amount, the KYB Group useson estimates that could involve additional assessments. If thees in conditions could mean that actual payment amounts differ

ation received or receivable. Revenue from the sale of goods isthe tax rates and tax laws that have been enacted or substan-ultimate tax amount differs from the KYB Group’s initiallyfrom those estimated. In such an event, amounts recognized inrecognized at the net amount after deducting intragroup sales,

tively enacted by the end of the fiscal year.

recognized amount as a result of this issue, the consolidated

future consolidated financial statements could be significantly

financial statements could be significantly affected.

affected.

(14) Revenue recognition
1) Sale of goods

value-added taxes, discounts and rebates.
Revenue from the sale of goods is recognized when goods

38

Deferred tax assets and liabilities are offset when there isDeferred income taxes are calculated based on the temporary differences between the amounts of taxable assets andDeferred tax assets are recognized within the scope consid-

Contingent liabilities are recognized in consideration of all

have been delivered to a customer, the customer confirms

liabilities and the carrying amount of assets and liabilities at theered highly likely to be employable as deductible temporary

available evidence as of the fiscal year-end, and are presented

completion of the distribution method and the price related tofiscal year end. Deferred tax assets are recognized for deduct-differences against taxable profits. In recognizing deferred tax

based on their potential generation and amount of impact.

the sale of goods, and all the KYB Group’s obligations thatible temporary differences, unused tax credits and unused tax

assets, decisions on whether taxable profits are likely to bemight affect the customer’s acceptance of goods are fulfilled.

losses carried forward to the extent that it is probable that39

KYB Corporation

Annual Report 2017

Financial Statements

5(3) Information about reported segment net sales, profit or loss, and other material items

Published Standards and Interpretations Not Applied

As of the date of approval of the consolidated financial state-

not opted for early adoption. The KYB Group is currently

ments, announcements had been made regarding the new­considering the impact that their adoption may have on its

enactment or revisions of the following major Standards andconsolidated financial statements, but cannot estimate thisInterpretations. However, as their application to fiscal years

impact at present.

before March 31, 2017 is not obligatory, the KYB Group has
Enforcement period(from the year beginning)

IFRS

IAS 7

Statement of cash flows January 1, 2017

IFRS 15

Revenue from contracts January 1, 2018with customers
Lease
January 1, 2019

IFRS 166

Adoption period
for the KYB Group

Details of new enactment and revision

FY2017(April 1, 2017–March 31, 2018)
FY2018(April 1, 2018–March 31, 2019)
FY2019(April 1, 2019–March 31, 2020)

New disclosure concerning change inliabilities resulting from financial activities
Accounting and disclosure requirements
related to recognition of revenue
Accounting and disclosure requirements
related to lease transactions

Segment Information(1) General information about reportable segments

which consists of activities that do not belong to four

Each reportable segment of the KYB Group is the business unit

segments.

in the KYB Group, for which separable financial information is

In consideration of the volume standard and other items

available. Reportable segments are reviewed periodically at theconcerning reportable segments, “Special-purpose Vehicles,”Board of Directors Meeting in order to determine allocation of“Aircraft Components” and “System Products and Electronic

management resources and evaluate business result on each

Equipment” are combined into “Other” for disclosure purpos-

reportable segment.

es. Consequently, the Company has two reportable segments:

The Company has a business headquarters or department“Automotive Components” and “Hydraulic Components.”

for individual products and services. Each headquarters orAutomotive Components involves the manufacture of auto-

department determines comprehensive strategies in Japan

motive hydraulic devices and other products. Major products

and overseas for its products and services and conducts

are shock absorbers for automobiles and motorcycles and­business operations. As a result, the Company has five

power steering products. Hydraulic Components involves­business categories: “Automotive Components,” “Hydraulicthe manufacture of primarily industrial hydraulic components

Components,” “Special-purpose Vehicles,” “Aircraft Compo-

used in construction machinery.

nents” and “System Products and Electronic Equipment,”
Segment

Reportable segment

Major Products

Automotive Components
Hydraulic Components

Other

Special-purpose Vehicles,
Aircraft Components,
System Products andElectronic Equipment

Shock absorbers, suspension system, power steering, vane pumps, front folk,
oil cushion units, stay dampers, free rock, and other automotive products
Cylinders, valves, oil damper for railway vehicles, collision shock absorbers,
pumps, motors
Concrete mixer trucks, granule carriers, special-function vehicles, equipment
for landing systems, flight control systems, and emergency devices for aircraft, motion simulators, hydraulic systems, auditorium and stage control
systems, naval ships equipment, tunnel borers, environment-friendly equipment, seismic isolation systems and vibration control dampers, electronic
application(2) Basis of measurement on reported segment net sales,
profit or loss, and other material items­Accounting Policies.” Segment profit is calculated by deducting
cost of sales and selling, general and administrative expenses

The accounting methods for each reportable segment arefrom net sales. Intersegment sales and transfers are based on

almost the same as those set forth in Note 3, “­Significant

the market prices.

FY2015 (April 1, 2015–March 31, 2016)(Millions of yen)
Reportable segment

Net sales:
Outside customer
Intersegment sales and transfers  TotalSegment profit (Note 3)
Equity in earnings (losses) of affiliates
Other income and expenses (net)(Note 4)
Operating profit (loss)
Finance income and costs (net)Profit before taxes
Depreciation and amortization
Impairment losses
Increase of non current asssets(Note 5)

Automotive
components

Hydrauliccomponents

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Consolidated¥240,903
136
241,039
15,484(1,320)¥88,024
2,944
90,968444
28¥328,926
3,080
332,006
15,928(1,292)¥26,394
1,824
28,2181,631—¥355,320
4,904
360,224
17,559(1,292)¥    —(4,904)(4,904)30—¥355,320—
355,320
17,588(1,292)(8,944)
5,220(3,311)(2,839)(12,255)
2,381

286
1,917

(11,969)
4,297

—
30

10,224
463

6,012
3,478

16,236
3,941

845
108

17,081
4,050

(5)
(1)

(11,969)
4,327(1,502)
2,825
17,075
4,049

15,0704,518

19,5881,712

21,300—21,300Notes: 1. “Other” includes “Special-purpose Vehicles,” “Aircraft Components” and “System Products and Electronic Equipment” that are not included in
the two of reportable segment.
2. ¥30 million of adjustment of segment profits is the elimination of intersegment transactions.
3. Segment profit is calculated by deducting cost of sales and selling, general and administrative expenses from net sales.
4. Other income and expenses are described in Note 23, “Income and Costs (Except Finance Income and Finance Costs).”
5. Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.

FY2016 (April 1, 2016–March 31, 2017)(Millions of yen)
Reportable segment

Net sales:
Outside customer
Intersegment sales and transfers  TotalSegment profit (Note 3)
Equity in earnings of affiliates
Other income and expenses (net)(Note 4)
Operating profit
Finance income and costs (net)Profit before taxes
Depreciation and amortization
Impairment losses
Increase of non current asssets(Note 5)

Automotive
components

Hydrauliccomponents

Subtotal

Other(Note 1)

Total

Adjustment(Note 2)

Consolidated¥231,036
577
231,613
11,135
639¥96,316
2,336
98,6526,583
377¥327,352
2,913
330,265
17,7191,016¥27,964
1,812
29,776834—¥355,316
4,725
360,041
18,553
1,016¥    —(4,725)(4,725)71—¥355,316—
355,316
18,624
1,016(324)
11,451

(123)
6,837

(447)
18,288

53
887

(394)
19,175

—
71

9,938
80

5,206
37

15,144116

784
30

15,928
147

(6)
—

(394)
19,247(395)
18,852
15,922
147

14,733

3,804

18,537

2,037

20,575

4

20,578Notes: 1. “Other” includes “Special-purpose Vehicles,” “Aircraft Components” and “System Products and Electronic Equipment” that are not included in
the two of reportable segment.
2. ¥71 million of adjustment of segment profits are the elimination of intersegment transactions.
3. Segment profit is calculated by deducting cost of sales and selling, general and administrative expenses from net sales.
4. Other income and expenses are described in Note 23, “Income and Costs (Except Finance Income and Finance Costs).”
5. Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.

(4) Changes in reportable segments

After considering the quantitative criteria for a reportable

In the first quarter of this fiscal year, we reexamined thesegment with regard to the “Aircraft components division”,“­Aircraft components” business which had been included in

the decision was made to include this division in “Other.”“Hydraulic components” and made this the separate “Aircraftcomponents division” for the reinforcement and expansion of

Financial information for the previous fiscal year has beenrevised to reflect this change.

the KYB Group’s operations.

40

41

KYB Corporation

Annual Report 2017

Financial Statements(2) Non-current assets[Related Information]
FY2015 (April 1, 2015–March 31, 2016)
1. Information for Products and Services
Omitted because categories of products and services are the same as for reportable segments.
2. Information for Geographic Regions(1) Net sales(Millions of yen)Japan

EuropeU.S.A.

China

South East Asia

Other areas

Total¥160,369¥57,505¥43,381¥21,224¥24,712¥48,129¥355,320

Notes: 1. Net sales are based on the locations of customers and categorized by countries or areas.
2. Regions are based on geographic proximity.
3. Major countries and areas in each region:		 (1) Japan ........................... Japan		 (2) Europe ......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, Poland		 (3) U.S.A. ........................... U.S.A.
		 (4) China ............................ China
		 (5) South East Asia ............ Indonesia, Malaysia, Thailand, Vietnam
		 (6) Other areas .................. Taiwan, Korea, United Arab Emirates, Mexico, Brazil, Canada, Turkey, India¥98,236¥14,783¥8,998China¥14,006

South East Asia

¥14,329

China

South East Asia

Other areas

Total¥101,595¥14,524¥8,946¥11,243¥13,560¥15,256¥165,124

Of sales to outside customers, the Company’s sales to its largest customer group, Automotive Components, account for 9.47%
or ¥33,655 million of net sales on the consolidated statements of income.

(Millions of yen)
U.S.A.

U.S.A.

Notes: 1. Non-current assets are based on the locations of assets and categorized by countries or areas.
2. Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.
3. Regions are based on geographic proximity.
4. Major countries and areas in each region:		 (1) Japan ........................... Japan		 (2) Europe ......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, The Netherlands		 (3) U.S.A. ........................... U.S.A.
		 (4) China ............................ China
		 (5) South East Asia ............ Indonesia, Thailand, Vietnam
		 (6) Other areas .................. Taiwan, United Arab Emirates, Mexico, Brazil, Turkey, India

7
EuropeEurope3. Information about Major Customer(2) Non-current assets
Japan(Millions of yen)Japan

Other areas¥12,997

Cash and Cash Equivalents

The breakdown of cash and cash equivalents is as follows:(Millions of yen)Total¥163,351

Notes: 1. Non-current assets are based on the locations of assets and categorized by countries or areas.
2.	Non-current assets do not include investments accounted for using the equity method, other financial assets, deferred tax assets and other items.
3. Regions are based on geographic proximity.
4. Major countries and areas in each region:		 (1) Japan ........................... Japan		 (2) Europe ......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, The Netherlands		 (3) U.S.A. ........................... U.S.A.
		 (4) China ............................ China
		 (5) South East Asia ............ Indonesia, Thailand, Vietnam
		 (6) Other areas .................. Taiwan, United Arab Emirates, Mexico, Brazil, Turkey, India

Cash and time deposits
Deposits with maturities less than three months
Total

8

or ¥38,541 million of net sales on the consolidated statements of income.
FY2016 (April 1, 2016–March 31, 2017)
1. Information for Products and Services

FY2016(March 31, 2017)¥22,970
2,326¥25,296¥30,241
3,748¥33,988

Trade and Other Receivables

The breakdown of trade and other receivables is as follows:

3. Information about Major Customer
Of sales to outside customers, the Company’s sales to its largest customer group, Automotive Components, account for 10.85%

FY2015(March 31, 2016)

Trade notes and accounts receivables
Electronically recorded monetary claims
Other receivables
Allowance for doubtful accounts
Total(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥76,689
5,369
6,515
(574)
¥87,999¥77,836
8,179
7,085
(446)
¥92,653

Omitted because categories of products and services are the same as for reportable segments.
Amounts presented in the consolidated statements of financial position are after allowing for doubtful accounts.
Trade and other receivables are classified as financial assets measured at amortized cost.

2. Information for Geographic Regions(1) Net sales(Millions of yen)Japan

EuropeU.S.A.

China

South East Asia

Other areas

Total¥165,336¥52,454¥40,450¥24,751¥25,010¥47,315¥355,316

Notes: 1. Net sales are based on the locations of customers and categorized by countries or areas.
2. Regions are based on geographic proximity.
3. Major countries and areas in each region:		 (1) Japan ........................... Japan		 (2) Europe ......................... Germany, Great Britain, Spain, Italy, France, Czech Republic, Russia, Poland		 (3) U.S.A. ........................... U.S.A.
		 (4) China ............................ China
		 (5) South East Asia ............ Indonesia, Malaysia, Thailand, Vietnam
		 (6) Other areas .................. Taiwan, Korea, United Arab Emirates, Mexico, Brazil, Canada, Turkey, India

9

Inventories

The breakdown of inventories is as follows:

Finished goods
Work in process
Raw materials and supplies
Total(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥26,139
13,768
8,383¥48,291¥27,215
13,745
8,681¥49,640

Inventory write-downs recognized in cost of sales for the years ended March 31, 2016 and 2017 were ¥1,260 million and ¥1,426
million, respectively.

42

43

KYB Corporation

Annual Report 2017

Financial Statements

1 10

Property, Plant and Equipment

11

Goodwill and Intangible Assets

Changes in the historical cost of property, plant and equipment, accumulated depreciation and accumulated impairment losses are

Changes in the historical cost of intangible assets and changes in accumulated depreciation and accumulated impairment losses are

as follows:

as follows:

Historical costs

Balance at April 1, 2015
Acquisition
Disposals
Transfers from construction in progress
Exchange differences on translation
Other
Balance at March 31, 2016
Acquisition
Disposals
Transfers from construction in progress
Exchange differences on translation
Other
Balance at March 31, 2017

(Millions of yen)
Buildings
andstructures

Machinery,equipment
and vehicles

Tools andequipment

Land

Constructionin progress

Total¥ 98,018
849
(393)
5,541
(2,357)
13
101,672
792
(551)
3,743
(886)
(127)
¥104,644¥226,348
2,256(5,632)
11,835(6,818)(401)
227,587
2,227(5,435)
10,282(1,748)(1,542)¥231,371¥46,257
1,928(2,091)
396
(438)
107
46,1592,751(1,869)
559
(295)
(65)
¥47,239¥27,642
238
—
—
(327)
6
27,559
53
—
—
(18)
—
¥27,594¥14,520
14,088(8)(17,772)
(438)
(342)
10,047
12,602(4)(14,585)
(164)
(154)
¥ 7,743¥412,785
19,359(8,125)—(10,378)(616)
413,024
18,424(7,860)—(3,110)(1,888)¥418,591

Goodwill

Other

Total

¥622
—
—
—
—
—
622
—
—
—
(67)
—
¥555

¥2,472
—
1,261
(7)
(52)
(127)
3,547
—
2,070
(15)
6
(12)
¥5,597¥2,358
100
—
(1)
(148)
(6)
2,303
147
—
(12)
(55)
(0)
¥2,382¥5,453
100
1,261
(8)
(201)
(133)
6,472
147
2,070
(27)
(116)
(13)
¥8,533

Goodwill

Development
costs

Other

Total

¥304
—
—
—
304
—
—
(33)
¥271

¥  266
401
—
(10)
657
590
—
5
¥1,252

¥699
118
(0)
(48)
769
131
(9)
(15)
¥876

¥1,269
519
(0)
(57)
1,731
721
(9)
(43)
¥2,400(Millions of yen)

(Millions of yen)

Buildings
andstructures

Machinery,equipment
and vehicles

Tools andequipment¥45,868
3,737
1,138
(325)
(725)
8
49,701
3,365
5
(490)
(374)
(93)
¥52,114¥159,727
10,1502,768(5,340)(3,988)(6)
163,311
9,174
57(4,953)(1,350)(589)¥165,649¥41,1932,275
42(2,027)(340)
741,1502,414
9(1,775)(242)(48)¥41,508Land

Constructionin progress

Total

¥184
—
100
—
—
(32)
253
—
—
—
—
—
¥253

¥—
—
—
—
—
—
—
—
76
—
—
—
¥76

¥246,971
16,162
4,049(7,692)(5,053)(23)
254,415
14,953
147(7,218)(1,966)(730)¥259,601

Carrying amount

Balance at April 1, 2015
Balance at March 31, 2016
Balance at March 31, 2017

Balance at April 1, 2015
Acquisition
Internally generated
Disposals
Exchange differences on translation
Other
Balance at March 31, 2016
Acquisition
Internally generated
Disposals
Exchange differences on translation
Other
Balance at March 31, 2017

(Millions of yen)
Development
costs

Accumulated depreciation and accumulated impairment losses

Accumulated depreciation and accumulated impairment losses

Balance at April 1, 2015
Depreciation and amortization
Impairment losses
Disposals
Exchange differences on translation
Other
Balance at March 31, 2016
Depreciation and amortization
Impairment losses
Disposals
Exchange differences on translation
Other
Balance at March 31, 2017

Historical costs(Millions of yen)

Balance at April 1, 2015
Amortization (Note)
Disposals
Exchange differences on translation
Balance at March 31, 2016
Amortization (Note)
Disposals
Exchange differences on translation
Balance at March 31, 2017

Note:	Amortization of intangible assets is included in “cost of sales” and “selling, general and administrative expenses” in the consolidated statements ofincome.

Carrying amount

Balance at April 1, 2015
Balance at March 31, 2016
Balance at March 31, 2017

(Millions of yen)
Goodwill

Development
costs

Other

Total

¥318
318
283

¥2,206
2,890
4,345¥1,6591,534
1,505¥4,183
4,742
6,134

Buildings
andstructures

Machinery,equipment
and vehicles

Tools andequipment

Land

Constructionin progress

Total

Research and development expenditures recognized in the fiscal years ended March 31, 2016 and 2017 were ¥7,760 million¥52,150
51,97152,530¥66,62164,27665,722¥5,064
5,009
5,731¥27,458
27,30627,341¥14,520
10,047
7,667¥165,813
158,609
158,990and ¥7,621 million, respectively, and are included in selling, general and administrative expenses in the consolidated statements
of income.

For information on impairment losses, please refer to Note 13,“Impairment Losses.”
Property, plant and equipment under construction is presented above within construction in progress.

44

45

KYB Corporation

Annual Report 2017

Financial Statements

12

Leases13

Impairment Losses

The KYB Group leases fixed assets that are categorized as finance leases. The carrying amounts of lease assets for which finance

The KYB Group classifies minimum cash flow generating units

March 31, 2016 and 2017. These impairment losses areleases are used are as follows:by company and by business.

­included in “other expenses” in the consolidated statements

Buildings and structures
Machinery, equipment and vehicles
Land
Other
  Total(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥  661
1,148
201
554
¥2,563¥  569800
189632¥2,190The breakdown of finance lease obligations is as follows:

Minimum lease payments:
Due within one year
Due after one year and within five years
Due over five years
Future finance cost
Present value of finance lease obligations

FY2015(March 31, 2016)

FY2016(March 31, 2017)¥  571
1,763
269
135
¥2,467¥  5071,615
161
46¥2,238(Millions of yen)
FY2015(March 31, 2016)¥  5551,724
189¥2,467FY2016(March 31, 2017)¥  4971,595
146¥2,238The breakdown of impairment losses by reportable segment is as follows:
FY2015 (April 1, 2015–March 31, 2016)(Millions of yen)Segment

Area

Use

Category

AmountAutomotive Components

Japan
Spain
China
China
Japan

Idle assets
Idle assets
Idle assets
Business assets
Business assets

Buildings and structures, Machinery and otherMachinery
Machinery
Buildings and structures, Machinery and otherOther¥   63
28
372
3,479
108
¥4,049Hydraulic Components
Other  Total

For idle assets, each asset is treated as a cash-generating­cash-generating unit) against the value in use of that cash-­unit. Then each asset is written down to the amount that cangenerating unit. Value in use was determined by discounting

be recovered because the idle asset is no longer expected to

the future cash flows of each cash-generating unit to present

be useful for business purposes. The amount is value in use,value using a discount rate. Estimated future cash flows arewhich is zero.

based on the KYB Group’s budgets and plans up to five years,

For assets used for business operations, the book value of

which are approved by the Board of Directors. Future cash

assets for which no future cash flows are foreseen because offlows beyond the subsequent years are calculated using aa significant drop in profitability is written down to the amount

fixed-rate estimate. This is considered the maximum periodthat can be recovered. In China, value in use is used to mea-

during which management can reliably estimate future cash

sure the recoverable amount and this value is discounted at aflows.

rate of 10.3%. In Japan, the fair value is measured after deduction of disposal expenses. The fair value hierarchy level is 2.

The breakdown of the KYB Group’s future minimum lease payments under non-cancellable operating leases by payment date is
as follows:

Minimum lease payments:
Due within one year
Due after one year and within five years
Due over five years  Total(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥  4821,261
2¥1,745¥  742
1,284
54¥2,081Minimum lease payments recognized through profit or loss in the year ended March 31, 2017 were ¥721 million.

The KYB Group conducts impairment tests of goodwill ateach fiscal year-end date. Impairment tests were conductedby comparing the carrying amount of each cash-generating
unit (including the amount of goodwill allocated to that

The discount rate is calculated based on such factors as thepretax weighted average cost of capital and using external andinternal information to appropriately reflect business risks,
which is 10.4%.
There were no goodwill impairment charges during the year
ended March 31, 2016.

FY2016 (April 1, 2016–March 31, 2017)(Millions of yen)Segment

Area

Use

Category

AmountAutomotive Components
Hydraulic Components
Other  Total

Japan
Japan
Japan

Idle assets
Idle assets
Business assets

Machinery, Construction in progress and otherMachinery
Machinery, Tools and equipment and other

¥ 80
37
30
¥147

For idle assets, each asset is treated as a cash-generatingthat can be recovered. The fair value is measured after deduc-unit. Then each asset is written down to the amount that cantion of disposal expenses and the fair value hierarchy level is 2.

be recovered because the idle asset is no longer expected to

The KYB Group conducts impairment tests of goodwill at

be useful for business purposes. The amount is value in use,

each fiscal year-end date. Impairment tests were conductedwhich is zero.

by comparing the carrying amount of each cash-generating

For assets used for business operations, the book value of46

of income.

recognized impairment losses on assets in the years ended(Millions of yen)

The breakdown of the present value of finance lease obligations is as follows:

Minimum lease payments:
Due within one year
Due after one year and within five years
Due over five years  TotalDue to the worsening business climate, the KYB Group

unit (including the amount of goodwill allocated to that cash-

assets for which no future cash flows are foreseen because ofgenerating unit) against the value in use of that cash-generatinga significant drop in profitability is written down to the amountunit. Value in use was determined by discounting the future

47

Annual Report 2017

KYB Corporation

Financial Statements

cash flows of each cash-generating unit to present value using

The discount rate is calculated based on such factors as

a discount rate. Estimated future cash flows are based on thethe pretax weighted average cost of capital and using external

KYB Group’s budgets and plans up to five years, which are

and internal information to appropriately reflect business risks,approved by the Board of Directors. Future cash flows beyond

which is 8.4%.

the subsequent years are calculated using a fixed-rate estimate.
This is considered the maximum period during which manage-

There were no goodwill impairment charges during the year
ended March 31, 2017.

ment can reliably estimate future cash flows.

14

Trade and Other Payables

The breakdown of trade and other payables is as follows:

Notes and accounts payables
Electronically recorded monetary claims
Other payables  Total(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥58,7881,379
6,044¥66,211¥41,567
23,576
6,994¥72,137

Trade and other payables are categorized as financial liabilities that are measured at amortized cost.

15

Borrowings

The breakdown of borrowings is as follows:

Current liabilities
Current borrowings
Current portion of non-current borrowings  TotalNon-current liabilities
Non-current borrowings  Total(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥32,557
17,93550,492¥37,740
13,24250,98338,348¥38,348

39,962¥39,962(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)

¥273
178
232
85
14
781

¥341
196
242
86
17
883

The breakdown of provisions is as follows:(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥4,958
2,349
7,307
5,313
1,994

¥3,342
2,539
5,881
3,754
2,127

Provisions for product warranties
Other  TotalCurrent
Non-current

Changes in provisions are as follows:

Balance at April 1, 2015
Provisions madeProvisions used
Provisions reversed
Other
Balance at March 31, 2016
Current
Non-current
Balance at March 31, 2016
Provisions madeProvisions used
Provisions reversed
Other
Balance at March 31, 2017
Current
Non-current
Balance at March 31, 2017

(Millions of yen)
Provisions for
product warranties

Other

Total

¥6,7832,050(1,708)(2,114)
(53)
4,958
4,958
—
4,958
1,491
(1,919)(1,066)
(121)
3,342
3,342
—
¥3,342¥2,294
314
(251)
(5)
(3)
2,349
355
1,994
2,349
474
(165)
(122)
2
2,539
412
2,127
¥2,539¥9,077
2,363(1,959)(2,119)
(56)
7,307
5,313
1,994
7,307
1,965
(2,084)(1,188)
(119)
5,881
3,754
2,127
¥5,881

Explanations of various provisions are provided in Note 3, “Significant Accounting Policies, (12) Provisions and contingent
liabilities.”

114
2
5
¥121

84
2
3
¥ 90

benefits.

17

Other than the above items, there are no items with restrictions on ownership or a mortgage as collateral for a debt.

48

Provisions

Major other provisions are provisions for environmental measures, asset retirement obligations, directors’ bonuses and employee

Assets pledged as collateral and collateralized debt are as follows:

Pledged assets
Notes receivebles
Buildings and structures
Machinery and equipment
Land
Other property, plant and equipment  TotalCollateralized debt
Current borrowings
Current portion of non-current borrowings
Non-current borrowings  Total16

Post-Retirement Benefits

The Company and certain domestic consolidated subsidiaries

by their highest priority. They have an obligation to manage plan

have funded and unfunded defined benefit plans for retirement

assets in accordance with the designated policies. In addition,­benefit payments to employees. The amount of these pay-

the Company has an obligation to make contributions to thements is determined by using the number of years of service,fund. The rules state that this contribution shall be recalculated

skills, job responsibilities and titles, and other evaluation param-

every five years to enable the Company to maintain the proper

eters. In addition, some employees receive extra retirement

financial balance in the future.

benefits when they resign or leave for some other reason.

Please see Note 3, “Significant Accounting Policies, (11)Funded defined benefit pension plans are managed by a

Post-retirement benefits” for information about the accounting

pension fund that is legally separate from the consolidated
companies. The directors of a pension fund and companies towhich pension fund management is outsourced are legallypolicy for defined benefit plans.
Certain consolidated subsidiaries have a defined contribution
pension plan in addition to a defined benefit plan.

obligated to make the interests of the pension plan participants

49

KYB Corporation

Annual Report 2017

Financial Statements

FY2016 (April 1, 2016–March 31, 2017)(1) Defined benefit plans(Millions of yen)

1) Risks related to defined benefit plans
A variety of risks are inherent in the KYB Group’s defined benefit plans. The primary risks are outlined below. The KYB Group’s plan
assets are not subject to the risk of significant concentration.
Fluctuations in plan assets
Fluctuations in bond interest rates

Investments in equity instruments are exposed to fluctuation risk.
Decreases in market bond yields cause defined benefit obligations (net) to increase.

2) Amounts recognized in the consolidated statements of financial position
The present value of defined benefit obligations, the fair value of plan assets and defined benefit assets and liabilities in the consolidated statements of financial position are as follows:(Millions of yen)

Present value of defined benefit obligations in funded defined benefit plans
Fair value of plan assets
Net defined benefit assets and liabilities (funded)
Present value of defined benefit obligations in unfunded defined benefit plans
Net defined benefit assets and liabilities
Assets related to retirement benefits in the consolidated statements offinancial position
Liabilities related to retirement benefits in the consolidated statements offinancial position
Net defined benefit assets and liabilities

FY2015(March 31, 2016)

FY2016(March 31, 2017)¥38,004(29,293)
8,711
5,171
13,882¥38,071(31,641)
6,429
5,160
11,589(11)—

13,893¥13,882

11,589¥11,5893) Net defined benefit obligations (assets)
Below is an adjustment table of the present value of net defined benefit obligations (assets).
FY2015 (April 1, 2015–March 31, 2016)

Balance at April 1, 2015
Service cost
Interest expenses
Gains or losses on plan assets
Remeasurement:
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Contributions:Company contribution to plans
Benefits paid
Other
Balance at March 31, 2016

(Millions of yen)
Present value of
defined benefit
obligations

Fair value ofplan assets

Total¥38,116
2,827
399
—

¥(33,804)
—
—
(547)

¥ 4,312
2,827
399
(547)

682
3,281

—
5,540

682
8,821

—
(2,040)(90)¥43,175(1,405)898
25¥(29,293)(1,405)(1,142)(64)¥13,882

Balance at April 1, 2016
Service cost
Interest expenses
Gains or losses on plan assets
Remeasurement:
Actuarial gains and losses arising from changes in demographic assumptions
Actuarial gains and losses arising from changes in financial assumptions
Contributions:Company contribution to plans
Benefits paid
Other
Balance at March 31, 2017

Present value of
defined benefit
obligations

Fair value ofplan assets

Total¥43,175
2,423
149
—

¥(29,293)——(97)¥13,882
2,423
149
(97)

774
(1,026)—(2,053)774(3,079)—(2,268)3¥43,230(1,082)918(33)¥(31,641)(1,082)(1,350)(30)¥11,589

4) Breakdown of plan assets
The breakdown of plan assets is as follows:
FY2015 (March 31, 2016)

Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Life insurance general accountCash and time deposits
Other  Total(Millions of yen)
Assets withquoted market prices
in an active market

Assets without
quoted market prices
in an active market

Total¥16,815
336
4,900
1,400
—
449
—
¥23,899¥    —
—
—
—
4,539
—
855
¥5,394¥16,815
336
4,900
1,400
4,539
449
855
¥29,293

Domestic stocks include ¥16,449 million of stock held by the retirement benefit trust established for the lump-sum retirement
benefit plan.
FY2016 (March 31, 2017)

Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Life insurance general accountCash and time deposits
Other  Total(Millions of yen)
Assets withquoted market prices
in an active market

Assets without
quoted market prices
in an active market

Total¥19,027
803
3,657
854
—
1,767
—
¥26,108¥    —
—
—
—
4,700
—
834
¥5,533¥19,027
803
3,657
854
4,700
1,767
834
¥31,641

Domestic stocks include ¥18,079 million of stock held by the retirement benefit trust established for the lump-sum retirement
benefit plan.

50

51

KYB Corporation

Annual Report 2017

Financial Statements5) Actuarial assumptions(2) Categories of financial instruments

The principal assumptions used in actuarial calculations are as follows:
FY2015(March 31, 2016)

FY2016(March 31, 2017)

0.3%

0.5%

Discount rate6) Sensitivity analysis
The impact on defined benefit obligations of changes in assumptions used in actuarial calculations are as follows: This analysis­assumes that all other variables are fixed. Also, this analysis is based on the band of fluctuation of variables considered reasonable
as of the closing date of the reporting period.
Discount rate

(Millions of yen)

(Millions of yen)

Fluctuations

Impact on defined benefit obligations

Up 0.5%
Down 0.5%

Decrease ¥2,407 million
Increase ¥2,666 million

7) Information related to future cash flows

8) Information on correspondence of assets and liabilities

In the year ended March 31, 2017, expected contributions to

For plans with reserves, the KYB Group engages in long-term

defined benefit plans in the next fiscal year are ¥1,050 million.

investment to ensure correspondence of assets and liabilities

The weighted average duration of defined benefit obligations

with pension scheme obligations. The KYB Group positively

was 12.25 years and 13.16 years at the years ended March 31,

monitors investment durations and expected yields to ensure2016 and 2017, respectively.

correspondence with future cash outflows arising from pension
obligations. This risk management process is unchanged fromthe year ended March 31, 2016.

Financial assets
Financial assets measured at fair value through other comprehensive income:  Stock  Derivatives  Other
Financial assets valued at amortized cost:   Cash and cash equivalents   Trade and other recceivables  Other   Total
Financial liabilities
Financial liabilities measured at fair value through other comprehensive income:  Derivatives
Financial liabilities measured at fair value through net profit:  Derivatives
Financial liabilities valued at amortized cost:   Trade and other payables  Borrowings  Other   Total

Financial assets measured at fair value through other com-

(2) Defined contribution plans
Retirement benefit expenses related to defined contribution plans are recognized as expenses during the period in which employ-

FY2016(March 31, 2017)¥ 16,998
207
906¥ 21,761
98
382

25,29687,9991,843
133,248

33,98892,653
1,967
150,850

1

—

—

1

66,211
88,84018,538¥173,591

72,137
90,944
18,441¥181,523

Financial assets measured at fair value through otherprehensive income are included in “other financial assets” oncomprehensive income

the consolidated financial position.

The KYB Group has long-term holdings of stock in companies
for the purpose of enlarging its profit structure by preserving

ees provide services, and unpaid contributions are recognized as obligations.

and strengthening business relationships with these compa-

Retirement benefit expenses related to defined contribution plans are as follows:

Retirement benefit expenses related to defined contribution plans

FY2015(March 31, 2016)

nies. These stock investments are designated financial assets(Millions of yen)

FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)

¥553

¥414

measured at fair value through other comprehensive income.
In the fiscal years ended March 31, 2016 and 2017, the fair value and dividends received for financial assets measured at fairvalue through other comprehensive income and that are included in “other financial assets” are as follows:18

Financial Instruments(1) Capital management

The KYB Group monitors its capital by using the debt/equity

The KYB Group manages capital for the purposes of providing

ratio, which is net debt divided by capital. Net debt is all bor-shareholders with a return on their investments, providing

rowings less cash and cash equivalents. Capital is the total

benefits to other stakeholders and lowering the cost of capital.

equity as shown on the consolidated statements of financial

The KYB Group must preserve the capabilities required toposition plus net debt.

remain a going concern in order to maintain the best capital
structure for accomplishing these goals.
There are several ways to maintain or adjust the composition

Each time the KYB Group prepares or revises a medium-termbusiness plan, management examines and confirms profit andinvestment plans as well as these financial indicators. The KYB

of capital. Primary examples are revisions to dividends toGroup is not subject to any significant restrictions on capitalshareholders, the return of capital to shareholders, the issuance(except the general restrictions of the Companies Act and otherof stock and debt reductions funded by asset sales.

laws and regulations).

(Millions of yen)

FY2015(March 31, 2016)

FY2015(April 1, 2015–
March 31, 2016)

FY2016(March 31, 2017)

FY2016(April 1, 2016–
March 31, 2017)

Fair value

Dividends received

Fair value

Dividends received¥16,802
197
207
906¥18,110

¥398
1
—
49
¥448

¥21,438323
98
382¥22,242

¥330
43
—
0
¥373

Listed shares
Unlisted shares
Derivatives
Other
Total

Sales during the fiscal year of financial assets measured at fair value through other comprehensive income are as follows:(Millions of yen)

FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)

Fair value on
day of sale

Cummulative
gain/loss

Dividend
incomeFair value on
day of sale

Cummulative
gain/loss

Dividend
income¥2,851¥1,315

¥57

¥148

¥35

¥5

Most sales were the result of reviews of business relationships. In the fiscal years ended March 31, 2016 and 2017, theof other capital to retained earnings were ¥1,315 million and¥35 million, respectively.

cumulative amounts (after taxes) transferred from components

52

53

KYB Corporation

Annual Report 2017

Financial Statements(3) Financial risk management

may not be able to fulfill their obligations. To manage credit

Change in allowance for doubtful accounts

The KYB Group is vulnerable to credit risk, liquidity risk, market

risk, maturity and balance management is performed for each

The KYB Group makes additions to the allowance for doubtful accounts in accordance with estimates, which are based on therisk (changes in foreign exchange rates, interest rates and stock

counterparty in accordance with the KYB Group’s credit man-financial soundness of counterparties, of the likelihood that trade receivables and other obligations will be paid. Components ofprices) and other risk factors. To hedge exposure to market

agement rules. In addition, the financial soundness of majorchanges in this allowance are as follows:

risk, the KYB Group uses forward currency exchange contracts,

counterparties is examined on a regular basis. As needed,

interest rate swaps and other derivatives. Derivative transac-

group companies receive collateral, use factoring and taketions are conducted and managed in accordance with internal

other steps to ensure that amounts due will be received.

rules concerning the authority for these transactions. The KYB

The KYB Group uses financial institutions and other sourcesGroup has a policy of never using derivatives for speculation.

for derivatives that reduce risk involving foreign exchange rate

The KYB Group procures funds as needed based on a plan

movements. To limit the effect of these derivatives on credit

for capital expenditures. Common surplus funds are invested

risk, the KYB Group’s basic policy is to use only counterparties

in highly secure financial assets and bank loans are used forwith high credit ratings for these derivatives.

short-term working capital requirements. To manage liquidity

There is no significant credit risk exposure to any particularrisk associated with fund procurement activities, all groupcounterparty and there is no excessive concentration of credit

companies prepare cash flow plans every month and otherrisk that requires special management.

methods are used.

For financial assets, the KYB Group’s maximum credit risk
exposure is the book value after impairment as shown on the

FY2015 (March 31, 2016)(Millions of yen)
Expected credit losses for the entire period

Balance at beginning of the year
Allowance
Allowance used
Allowance reverded
Other
Balance at end of the year

Expected credit
losses over next
12 months

Financial assets
for which credit risk ismuch greater than theinitial credit risk

Financial assetsthat always have a
doubtful accountallowance equal toexpected credit losses
over the entire period

—
—
—
—
—
—

—
—
—
—
—
—

¥341
411
(100)
(26)
(41)
¥587

consolidated statements of financial position.

(4) Credit risk management
The KYB Group is vulnerable to the risk that companies and

The KYB Group holds no properties as collateral and has noother parties associated with the KYB Group’s financial assets

FY2016 (March 31, 2017)(Millions of yen)other credit enhancements with regard to this credit risk

Expected credit losses for the entire period

exposure.
FY2015 (March 31, 2016)

Days in arrears

No arrears
Less than 90 days
More than 90 days less than 180 days
More than 180 days
Total

(Millions of yen)
Financial assets for which the allowancefor doubtful accounts is measured by using
expected credit losses for the entire period

Financial assets forwhich the allowancefor doubtful accounts
is measured by using
expected credit losses
over the next 12 months

Financial assets
for which credit risk ismuch greater than theinitial credit risk

Financial assets
with doubtful accountallowance equal toexpected credit losses
over entire period

Total

—
—
—
—
—

—
—
—
—
—

¥86,848
1,031
199
508
¥88,586¥86,848
1,031
199
508
¥88,586

FY2016 (March 31, 2017)

Days in arrears

No arrears
Less than 90 days
More than 90 days less than 180 days
More than 180 days
Total

54

Total

¥341
411
(100)
(26)
(41)
¥587

(Millions of yen)

Financial assets forwhich the allowancefor doubtful accounts
is measured by using
expected credit losses
over the next 12 months

—
—
—
—
—

Financial assets for which the allowancefor doubtful accounts is measured by using
expected credit losses for the entire period

Balance at beginning of the year
Allowance
Allowance used
Allowance reverded
Other
Balance at end of the year

Expected credit
losses over next
12 months

Financial assets
for which credit risk ismuch greater than theinitial credit risk

Financial assetsthat always have a
doubtful accountallowance equal toexpected credit losses
over the entire period

—
—
—
—
—
—

—
—
—
—
—
—

¥587
156
(235)
(46)
(16)
¥447

Transfers of financial assets

defaults. Consequently, discounted notes receivable remain on

The KYB Group uses banks to discount some notes receivable

the balance sheet until maturity as trade and other receivables.

before the maturity dates. Even after a note is discounted, theFunds received from discounted notes are on the consolidated

KYB Group is still responsible for reimbursing the bank or otherstatements of financial position as bonds and loans.

company that discounted the note in the event that the issuer
Notes discounted as of March 31, 2016 and 2017 are as follows:

Financial assets
for which credit risk ismuch greater than theinitial credit risk

Financial assets
with doubtful accountallowance equal toexpected credit losses
over entire period

Total

—
—
—
—
—

¥91,506
886
184
523¥93,100¥91,506
886
184
523¥93,100

Total

¥587
156
(235)
(46)
(16)
¥447

(Millions of yen)

Discounted notes receivable

FY2015(March 31, 2016)

FY2016(March 31, 2017)

¥154

¥—

(5) Liquidity risk management

used in the event of a sudden need for funds, a big decline

The KYB Group uses loans from financial institutions and issues

in market liquidity or some other emergency.

bonds to procure funds for working capital and capital expendi-

The Company prepares a monthly funding plan based ontures. Liquidity risk is the risk of becoming unable to repay thisthe requirements for funds at each group company and thendebt. Group companies use loans and bonds in order to main-

compares the demand for funds with daily cash flows. This

tain the smallest amount of cash and cash equivalents required

monitoring method is another aspect of the management offor business activities. There are also credit facilities that can beliquidity risk.

55

KYB Corporation

Annual Report 2017

Financial Statements

The KYB Group’s non-derivative financial liabilities and derivative financial liabilities categorized by the remaining contractual
period to maturity are as follows:
FY2015 (March 31, 2016)

Non-derivative financial liabilities:
Trade and other payables
Short-term borrowings Current portion of non-current
borrowings
Long-term borrowings  TotalDerivative financial liabilities:
Forward exchange contract
Interest swap  Total(Millions of yen)BookbalanceDue within
one year

Due after
one year
and within
two years¥ 66,211
32,557¥ 66,211
32,557¥     ——

¥     ——

¥    ——¥    ——¥    ——

17,93538,348155,051

17,935—
116,703—
12,736
12,736—
12,022
12,022

—
7,521
7,521

—
4,560
4,560

—
1,509
1,509

—
1
¥      1—1¥      1——¥     ———
¥     ———
¥    ———¥    ———¥    —

2) Interest rate risk

floating rates, the KYB Group uses interest rate swaps withThe KYB Group pays interest on funds that are procured forfinancial institutions in order to limit the increase in interest

working capital, capital expenditures and other requirements inpayments when market interest rates increase. With theseorder to conduct business operations. If there are floating-rate

swaps, the KYB Group receives payments using a floating rateloans, changes in market interest rates will affect interest

and makes payments using a fixed rate and receives the differ-

payments. This exposes the KYB Group to interest rate risk dueence. By effectively converting the interest rate on long-term

Due after
two years
and within
three years

Due after
three years
and withinfour years

Due after
four years
and within
five years

Due overfive years

to possible changes in future interest payments. For long-termloans to a fixed rate, interest rate risk is hedged because futureloans, which are used mainly for capital expenditures, that haveinterest payments are stabilized.

Analysis of interest rate sensitivity
The following table provides information about sensitivity with respect to the KYB Group’s interest rate risk exposure.

FY2016(April 1, 2016–March 31, 2017)

¥126

¥71

Impact on profit before tax

Sensitivity analysis shows how much profit before tax wouldchange if market interest rates increased by one percentage(Millions of yen)

FY2015(April 1, 2015–March 31, 2016)

to a fixed rate. This analysis assumes that all other variables willremain unchanged.

point with respect to interest-bearing liabilities with floating
FY2016 (March 31, 2017)

Non-derivative financial liabilities:
Trade and other payables
Short-term borrowings Current portion of non-current
borrowings
Long-term borrowings  TotalDerivative financial liabilities:
Forward exchange contract
Interest swap  Total(Millions of yen)BookbalanceDue within
one year

Due after
one year
and within
two years

Due after
two years
and within
three years

Due after
three years
and withinfour years

Due after
four years
and within
five years

Due overfive years¥ 72,137
37,740¥ 72,137
37,740¥     ——

¥     ——

¥    ——¥    ——¥  ——

13,242
39,962
163,081

13,242—
123,119—
14,03014,030—10,956
10,956

—
8,232
8,232

—
5,879
5,879

—
865
865

1
—
¥      11—¥      1——¥     ———
¥     ———
¥    ———¥    ———¥  —(6) Market risk management

currencies. This results in exposure to foreign exchange risk

1) Foreign exchange risk

regarding foreign currency receivables and payables. Changes

Due to the global scale of its operations, the KYB Group pur-in the value of the US dollar account for the majority of the KYB

chases some raw materials and sells some products in foreign

Group’s foreign exchange risk.

Analysis of foreign exchange sensitivity
The following table provides information about sensitivity with respect to the KYB Group’s net foreign exchange risk exposure.

(Millions of yen)

Impact on segment profit:
US dollars
Euro

In the fiscal years ended March 31, 2016 and 2017, theappreciation or depreciation of the yen by one yen in relation to
the US dollar and euro would have the above effect on the56

FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)

¥156
49

¥155
42

KYB Group’s segment profit. For this analysis, all other variables are ­assumed to remain the same.

rates other than liabilities where swaps were used to convert(7) Fair value of financial instruments

price is used if available. If no market price can be obtained, the1) Method used to determine fair value

fair value is estimated by discounting future cash flows or by

The fair values of financial assets and financial liabilities areusing some other suitable valuation method.

determined as follows: For estimates of fair values, the market
2) Fair value for categories of financial instruments
Financial assets and liabilities measured at fair value through other comprehensive income and the financial assets and liabilities
measured at amortized cost are as follows: Information about financial instruments for which a fair value is determined is provided
in “(2) Categories of financial instruments.”(Millions of yen)
FY2015(March 31, 2016)

Financial assets measured at fair value through othercomprehensive income:
Stock
Derivatives
Other
Financial assets measured at amortized cost:
Cash and cash equivalents
Trade and other receivables
Other
Financial liabilities measured at fair value through othercomprehensive income:
Derivatives
Financial liabilities measured at fair value through net profit:
Derivatives
Financial liabilities measured at amortized cost:
Trade and other payables
Borrowings
Other

FY2016(March 31, 2017)

Book value

Fair value

Book value

Fair value¥16,998207
906¥16,998207
906¥21,76198
382¥21,76198
382

25,29687,9991,843

25,29687,9991,843

33,98892,653
1,967

33,98892,653
1,967

1

1

—

—

—

—

1

1

66,211
88,84018,53866,211
89,191
18,53872,137
90,944
18,441

72,13791,09818,441

The fair value of financial assets and liabilities measured at amortized cost, except borrowings, is virtually the same as book value.

57

KYB Corporation

Annual Report 2017

Financial Statements

3) Fair value hierarchy
For financial instruments measured at fair value, fair value4) Information concerning determination of Level 2 andLevel 2: Fair values other than those in level 1 that wereassets or liabilities that have already been recognized aremeasurement amounts are categorized as level 1, 2 or 3 de-measured by using direct or indirect observable

The fair value of derivatives is measured by using prices attreated by using this accounting method until profits or losses

pending on the observability and importance of the input used.

inputscounterparty financial institutions and other sources and otherare realized.

Level 1: Market value of the same asset or liability on a

Level 3: Fair values calculated by using valuation methods

market with significant trading volume

that include unobservable inputs

FY2015 (March 31, 2016)(Millions of yen)
Market value Other significant
in active markets
observablefor similar assets
inputs(Level 1)(Level 2)

Financial assets measured at fair value through othercomprehensive income:Listed shares
Non-listed shares
Derivatives
Other  TotalFinancial assets measured at fair value through othercomprehensive income:
Derivatives
Financial liabilities measured at fair value through net profit:
Derivatives  TotalSignificant
unobservable
inputs(Level 3)¥16,802———
16,802

¥  —
—
207
251
459

In accordance with internal administrative rules, the KYB

ments with a hierarchy of Level 2 or Level 3, comparisons areGroup uses interest rate and currency swaps and interest rate

made between the book values prior to the valuation and net

swaps to hedge risks associated with changes in cash flows

assets calculated based on the Company’s ownership of a

resulting from changes in interest rates on loans and changes

company in the case of non-listed stocks and the valuation inin foreign exchange rates associated with foreign currency

the case of a membership. If the net assets or membership

denominated transactions. These swaps are designated as

current value is less than the book value prior to the valuation,

cash flow hedges.

the difference is included in other comprehensive income.

¥  —
197
—
654
851

¥16,802
197
207
906
18,110

—

1

—

1

—
¥     —

—
¥  1

—
¥  —

—
¥     1

(Millions of yen)
Market value Other significant
in active markets
observablefor similar assets
inputs(Level 1)(Level 2)

Financial assets measured at fair value through othercomprehensive income:Listed shares
Non-listed shares
Derivatives
Other  TotalFinancial liabilities measured at fair value through othercomprehensive income:
Derivatives
Financial liabilities measured at fair value through net profit:
Derivatives  TotalTotal

information. To determine the fair values of financial instru-

When applying hedge accounting, in principle, the Company
aims for consistency for the notional principal of the hedging

FY2016 (March 31, 2017)

58

Level 3 fair values

from hedged unrealized future transactions or from hedged

Significant
unobservable
inputs(Level 3)

¥  —
323
—
118
441

¥21,438323
98
382
22,242

—

—

—

—

—
¥  —

and the basic interest value. This is for the purpose of maintain-

Cash flow hedges are hedges for changes in future cash flows

ing high hedging effectiveness during the entire hedging

from planned transactions or from assets or liabilities that haveperiod. In the fiscal years ended March 31, 2016 and 2017,

already been recognized. Changes in the fair value of deriva-

there were no gains or losses concerning the portion of hedges

tives designated as cash flow hedges are included in otherthat was not effective and the portion of hedges that wascomprehensive income. Changes in future cash flows derived

excluded from the evaluation of effectiveness.

As of March 31, 2016 and 2017, hedging methods designated as hedges had the following effect on the KYB Group’s consolidated statements of financial position.
FY2015 (March 31, 2016)

Total

¥  —
—
98
264
363

1
¥  1

method and item hedged, the length (maturity) of the hedge,

Cash flow hedges(Millions of yen)Book value¥21,438———¥21,438—¥     —

(8) Financial derivatives and hedges

Cash flow hedge:
Interest rate risk
Interest rate swap
Foreign exchange risk, interest rate risk
Interest rate and currency swap
Foreign exchange risk, interest rate risk
Interest rate and currency swap

None of these financial instruments are reclassified tomeasured at amortized cost shown in “2) Fair value for catego-

Level 1 or 2 during the fiscal years ended March 31, 2016ries of financial instruments.”

and 2017

Derovative
assetsDerovative
liabilities

Account on the
consolidated statementsof financial position

¥ 400

¥  —

¥  1

Other financial liabilities(non-current)

—

—

—

Other financial assets(current)

2,136

207

—

Other financial assets(non-current)

FY2016 (March 31, 2017)(Millions of yen)Book value1¥     1

The fair value hierarchy is Level 3 for financial instruments

Notional
principal

Cash flow hedge:
Interest rate risk
Interest rate swap
Foreign exchange risk, interest rate risk
Interest rate and currency swap
Foreign exchange risk, interest rate risk
Interest rate and currency swap

Notional
principal

Derovative
assetsDerovative
liabilities

Account on the
consolidated statementsof financial position

¥ —

¥—

¥—

Other financial liabilities(non-current)

632

46

—

Other financial assets(current)

851

52

—

Other financial assets(non-current)

59

KYB Corporation

Annual Report 2017

Financial Statements

19

Capital and Other Components of Capital

20

Dividends

Fiscal year dividend payments are as follows:(1) Share capital and capital surplus
The Companies Act of Japan (hereinafter, the “Companies

Furthermore, the Companies Act allows for the capital reserveAct”) requires at least half of payments for newly issued stock

to be incorporated in capital if this is approved by the general

to be included in share capital. The remainder can be added toshareholders’ meeting.

the capital reserve, which is included in the capital surplus.

FY2015 (April 1, 2015–March 31, 2016)
Resolution

Changes in the total number of shares authorized and the total number of shares issued are as follows:
Total number ofshares authorized(Shares)

Total number ofshares issued(Shares)

Share capital(Millions of yen)

Capital surplus(Millions of yen)

491,955,000—
491,955,000
81,045,000
573,000,000

257,484,315—
257,484,315—
257,484,315¥27,648—
27,648—27,648¥29,544(129)
29,414—
29,414

Balance at April 1, 2015
ChangeBalance at March 31, 2016
ChangeBalance at March 31, 2017

Notes: 1. The Company issues common stock with no par value.
2. Full payments have been made for all shares issued.
3.	The total number of authorized shares increased by 81,045,000 shares as a result of the partial amendment of the Articles of Incorporation on June24, 2016.

Annual Shareholders’ Meeting,June 24, 2015
Board of Directors Meeting,
October 30, 2015

(3) Treasury shares

Retained earnings consist of other retained earnings and the

The Companies Act states that a company can purchase its

retained earnings reserve. Other retained earnings are primarily

own stock, up to the distributable amount, with the number of

the accumulated earnings of the KYB Group.

shares, total cost and other terms determined by a resolution

The Companies Act assumes that one-tenth of the amountapproved by general shareholders’ meeting. In addition, if

of dividends paid from retained earnings will be added to thetreasury stock is purchased using open market transactions

capital reserve or retained earnings reserve until the sum ofor a public tender offer, the board of directors can approve athese two items reaches one-fourth of share capital. The

resolution to purchase treasury shares as prescribed in theretained earnings reserve can be used to offset a loss. In

Articles of Incorporation and with terms that comply with theaddition, it is possible to reverse the retained earnings reserve

requirements of the Companies Act.

  Record date

Effective dateCommon shares¥1,788¥7.00

March 31, 2015

June 25, 2015

Common shares

1,277

5.00

September 30, 2015

December 4, 2015

Type of shares

Aggregate
dividends(Millions of yen)

Dividends
per share(Yen)  Record date

Effective dateCommon shares¥1,533¥6.00

March 31, 2016

June 27, 2016

Common shares

1,277

5.00

September 30, 2016

December 2, 2016

FY2016 (April 1, 2016–March 31, 2017)
Resolution

Annual Shareholders’ Meeting,June 24, 2016
Board of Directors Meeting,
November 7, 2016

Resolution

Annual Shareholders’ Meeting,June 23, 201721

The number of treasury shares and changes in the number of these shares are as follows:
Number of shares(Shares)Amount(Millions of yen)

1,993,872
15,561
2,009,433
15,4032,024,836

¥573
6
579
8
587

(4) Other components of equity

portion that is regarded as effective in relation to the net1) Net change in financial assets measured at fair valuechange in the fair value of derivatives designated as cash

Type of shares

Aggregate
dividends(Millions of yen)

Dividends
per share(Yen)

Record date

Effective dateCommon shares¥1,788¥7.00

March 31, 2017

June 26, 2017

Breakdown of Expenses by Nature

The composition of the cost of sales and selling, general and administrative expenses is as follows:with the approval of the general shareholders’ meeting.

through other comprehensive income

Dividends
per share(Yen)

Dividends with a record date during the fiscal year but a payment date in the following fiscal year are as follows:(2) Retained earnings

Balance at April 1, 2015
ChangeBalance at March 31, 2016
ChangeBalance at March 31, 2017

Type of shares

Aggregate
dividends(Millions of yen)

Salaries and other costs
Retirement benefit expenses
Depreciation and amortization
Packing expenses
Other  Total(Millions of yen)

FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)¥ 66,693
2,845
17,075
12,112
239,007¥337,732¥ 67,740
2,913
15,922
11,226
238,891¥336,692

flow hedges.

This figure is the net change in financial assets measured at fairvalue through other comprehensive income.

3) Exchange differences on translation of foreign operations
These are differences that occur during the consolidation2) Effective portion of the change in the fair value of cash
flow hedges

process using the foreign currency-denominated financial
statements of foreign operations.

The KYB Group uses hedges to reduce exposure to risk associated with changes in future cash flows. This figure is the60

61

KYB Corporation

Annual Report 2017

Financial Statements

22

Finance Income and Finance Costs

24

The composition of finance income and finance costs is as follows:(Millions of yen)¥  113¥106

Current income taxes
Deferred income taxes  Total448—¥  561

373
114
¥593

(2) R
 econciliation of the difference between the statutory tax rate and the effective tax rate

(Millions of yen)
FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)¥4,445
1,002¥5,447¥3,628145¥3,774The components of the difference between the KYB Group’s statutory and effective tax rates are as follows: The effective tax rateis income tax expense divided by profit before tax.

¥1,215848¥2,062

¥988
—
¥988

FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)¥354,769
551¥355,320¥354,460
856¥355,316(1) Net sales
The composition of net sales is as follows:(Millions of yen)

(2) Other income
The composition of other income is as follows:

Technical assistance payments received
Gains on sales of fixed assets
Other
Total

The major components of income tax expenses are as follows:

FY2016(April 1, 2016–March 31, 2017)

Income and Costs (Except Finance Income and Finance Costs)

Product sales
Construction sales
Total(1) Tax expenses

FY2015(April 1, 2015–March 31, 2016)

Finance income:Interest income   Financial assets measured at amortized cost:
Dividends received  Financial assets measured at fair value through othercomprehensive income
Foreign exchange gain   Total
Finance costs:
Interest expense   Financial liabilities measured at amortized cost   Foreign exchange loss   Total

23

Income Taxes(%)

Statutory tax rate
Expenses never recognized as tax deductible expenses
Tax rate differential of consolidated subsidiaries
Tax credits
Retained earnings of foreign subsidiaries
Revision in assessment of probability of recovering deferred tax assets
Reversal of deferred tax assets due to change in applicable tax rates
Equity in profit or loss of affiliates
Fines and other penalties
Other
Effective tax rate

FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)

32.3%
4.9
(12.8)(20.5)
9.7
61.0
17.7
15.0
85.5
0.0
192.8%

30.2%
1.4
(2.2)
(1.0)
1.0
(8.0)
—
(1.6)
0.0
0.4
20.0%

The KYB Group pays primarily a corporate income tax, anrate was 32.3% and 30.2% in the years ended March 31, 2016

inhabitants tax and an enterprise tax that are deducted fromand 2017, respectively. Overseas subsidiaries pay income andtaxable income. Based on these three taxes, the effective tax

other taxes in the countries where they are located.

(Millions of yen)
FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)¥  89628
1,747¥2,671¥  77041
1,225¥2,036FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)¥ 1,499
509
4,049
8,152
431
¥14,640¥  799
498
147
700
286
¥2,430(3) Other expenses
The composition of other expenses is as follows:

Foreign exchange loss
Loss on disposal of fixed assets
Impairment loss
Loss associated with the Anti-Trust law
Other
Total

(Millions of yen)

Note:	FY2015 (April 1, 2015–March 31, 2016)	Losses associated with the Anti-Trust law are fine and other expenses involving a violation of U.S. antitrust law concerning the sale of shock absorbers forautomobiles and motorcycles.
FY2016 (April 1, 2016–March 31, 2017)	Losses associated with the Anti-Trust law are compensation cost involving a violation of U.S. antitrust law concerning the sale of shock absorbers forautomobiles and motorcycles.

6263

Annual Report 2017

KYB Corporation

Financial Statements

FY2016 (April 1, 2016–March 31, 2017)(3) Changes in deferred tax assets and liabilities(Millions of yen)

Changes in deferred tax assets and liabilities are as follows:
FY2015 (April 1, 2015–March 31, 2016)

Deferred tax assets:
Liability for retirement benefits
Deductible losses carried forward
Accrued bonuses
Provision for product warranties
SoftwareTax effect of unrealized gains on inventories
Tax effect of unrealized gains on fixed assets
Impairment loss
Valuation loss on inventories Deductible expenses for assets used in researchand development
Cumulative asset retirement obligation
Other  TotalDeferred tax liabilities:
Financial assets at fair value Undistributed earnings of consolidated overseas
subsidiaries
Property, plant and equipment
Development cost
Other  Total   Net deferred tax assets(Millions of yen)

Balance atApril 1, 2015

Amountrecognized forprofit or loss

Amountrecognized for othercomprehensive
incomeBalance at
March 31, 2016

¥ 2,264
318
1,488
971
1,198
770
365
418
434

¥     59
119
(98)
45
(205)
(210)
(12)
24
(283)

¥3,041
—
—
—
—
—
—
—
—

¥ 5,364
437
1,390
1,016
993
560
353
442
151

390
405
1,328
10,349

(85)
(196)
964
121

—
—
(39)
3,001

305
209
2,252
13,471

4,250

(800)

(1,354)

2,096

3,647
3,600
733
803
13,033¥ (2,683)

(273)
(192)
182
2,205
1,122
¥(1,002)————(1,354)¥4,356

3,374
3,408
915
3,008
12,801¥   670

Note: Differences resulting from changes in foreign exchange rates include amounts treated as profit or loss.

Deferred tax assets:
Liability for retirement benefits
Deductible losses carried forward
Accrued bonuses
Provision for product warranties
SoftwareTax effect of unrealized gains on inventories
Tax effect of unrealized gains on fixed assets
Impairment loss
Valuation loss on inventories Deductible expenses for assets used in researchand development
Cumulative asset retirement obligation
Other  TotalDeferred tax liabilities:
Financial assets at fair value Undistributed earnings of consolidated overseas
subsidiaries
Property, plant and equipment
Development cost
Other  Total   Net deferred tax assets

Balance atApril 1, 2016

Amountrecognized forprofit or loss

Amountrecognized for othercomprehensive
income¥ 5,364
437
1,390
1,016
993
560
353
442
151

¥ 154
(272)
185
(278)
(116)
72
144
49
382

¥  (753)
—
—
—
—
—
—
—
—

¥ 4,765
165
1,574
738
877
631
497
491
532

305
209
2,252
13,471

(14)
16
426
745

—
—
21
(732)

290
225
2,699
13,485

2,096

241

1,436

3,773

3,374
3,408
915
3,008
12,801¥   670

(185)
(1)
275
517
847
¥(102)

—
—
—
—
1,436
¥(2,168)

3,189
3,406
1,191
3,526
15,084¥ (1,599)

Balance at
March 31, 2017

Note: Differences resulting from changes in foreign exchange rates include amounts treated as profit or loss.

(4) Deductible temporary differences and deductible losses carried forward not recognized as deferred tax assets
Deductible temporary differences and deductible losses carried forward that are not recognized as deferred tax assets are
as follows:

Deductible temporary differences
Deductible losses carried forward
Total(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥ 9,074
10,215¥19,289¥13,424
10,532¥23,956

Deductible losses carried forward that are not recognized as deferred tax assets and that are expected to expire areas follows:

Within 1st year
2nd year
3rd year
4th year
5th year and thereafter
Total

64

(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥   552
7
100
312
9,244
¥10,215¥     7
92
486
3,981
5,967
¥10,532

65

KYB Corporation

Annual Report 2017

Financial Statements

25

Other Comprehensive Income

2 27

Reclassification adjustments and tax-effect amounts associated with other comprehensive income are as follows:
FY2015(April 1, 2015–March 31, 2016)

Items that will not be reclassified to profit or loss
Net change in financial assets measured at fair value throughother comprehensive income
Amount arising during the year
Tax effects  Subtotal
Remeasurements of defined benefit plans
Amount arising during the year
Tax effects  Subtotal
Share of other comprehensive income of investments accounted forusing the equity method
Amount arising during the year  Subtotal  TotalItems that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Amount arising during the year  Subtotal
Effective portion of the change in the fair value of cash flow hedges
Amount arising during the year
Reclassification adjustments
Before tax effectTax effects  Subtotal
Share of other comprehensive income of investments accounted forusing the equity method (net of tax)
Amount arising during the year  Subtotal  Total   Total other comprehensive income(Millions of yen)

FY2016(April 1, 2016–March 31, 2017)¥ (3,769)
1,354(2,415)¥4,779(1,436)
3,342(9,700)
3,041(6,660)

2,457
(753)
1,705

(465)
(465)
(9,540)

17
17
5,064

(5,729)(5,729)(1,509)(1,509)

98
—
98
(39)
58

(158)
53
(106)
21
(85)

—
—
(5,670)¥(15,210)

(203)
(203)
(1,797)¥3,267

Contingent Liabilities

The KYB Group guarantees the loans and other debt from financial institutions and other lenders at affiliates. The amount of theseguarantees at the end of each fiscal year is as follows:(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥1,689¥1,689¥1,289¥1,289Affiliates:
Bank loans  TotalInformation concerning the Anti-Trust law

In addition, some customers have asked for the payment of

In September 2015, the KYB Group reached an agreement

damages.

with the U.S. Department of Justice concerning plea bargain.

Although these lawsuits do not contain any specific monetary

In association with this agreement, a class action lawsuit has

figures, the results of this litigation may have an effect on the

been filed in the United States and Canada naming the Com-

Company’s performance and other aspects of businesspany and the Company’s U.S. subsidiary as the defendant.

operations.

28

Commitments

Significant commitments concerning contractual liabilities for purchases of property, plant and equipment as of March 31, 2016 and2017 are ¥1,673 million and ¥1,407 million, respectively.

29

Related Party Transactions

Compensation of senior executives
Compensation of KYB Group senior executives is as follows:(Millions of yen)
FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)

¥304
¥304

¥256
¥256

Compensation and bonuses
Total

30

Subsidiaries

Major subsidiaries of the Company are as describe on page 22 of this report.

26

Earnings per Share

The basis for calculating basic earnings per share is as follows:

Profit (loss) for the year attributable to owners of the parent(Millions of yen)
Average number of shares (Shares)
Basic earnings per share (Yen)FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)¥(3,161)
255,485,162¥(12.37)¥14,544
255,469,508¥56.93

Diluted earnings per share is not shown because there are no dilutive common stock equivalents.

66

67

KYB Corporation

Annual Report 2017

Financial Statements

31(5) Effect on per share information

Investments Accounted for Using Equity Method

The book values of the KYB Group’s equity investments in affiliates accounted for using the equity method and that are immaterial
individually are as follows:(Millions of yen)
FY2015(March 31, 2016)

FY2016(March 31, 2017)¥3,833¥5,438Book values

Summary information for affiliates accounted for using the equity method and that are immaterial individually is as follows:
All monetary figures have been adjusted in accordance with the KYB Group’s equity interest in each company.

Profit for the year (Profit (loss) from continuing operations)
Other comprehensive income (net of tax)
Total

32

(Millions of yen)

FY2015(April 1, 2015–March 31, 2016)

FY2016(April 1, 2016–March 31, 2017)¥(1,292)(465)¥(1,757)¥1,016(187)¥  830Subsequent Events(Consolidation of shares and change in number of sharesconstituting a trading unit)
On April 25, 2017, the KYB Board of Directors approved achange in the number of shares constituting a trading unit andapproved resolutions to submit proposals for a consolidation ofshares and amendments to the Articles of Incorporation at the95th general meeting of shareholders to be held on June 23,2017.
(1) Purpose for consolidation of shares and change innumber of shares constituting a trading unit

3) Reduction in number of shares as a result ofconsolidation
Total number of issued shares before
consolidation (March 31, 2017)
Reduction in number of shares as a resultof consolidation
Total number of issued shares after
consolidation

Assuming that KYB had implemented the said consolidation ofshares at the beginning of the previous fiscal year, per share
information for the fiscal year ended March 31, 2016 and 2017is as follows:

Equity attributable to ownersof the parent per share
Basic earnings per share(Yen)
FY2015(April 1, 2015–
March 31, 2016)

FY2016(April 1, 2016–
March 31, 2017)¥5,804.02(123.74)¥6,431.51
569.32

Note: D iluted earnings per share is not shown because there are no dilutive
common stock equivalents.

Other
Quarterly information for FY2016 (April 1, 2016–March 31, 2017)(Millions of yen)

Cumulative
first quarter

Cumulative
second quarter

Cumulative
third quarter

FY2016

Net sales
Income (loss) before income taxes and minority interests
Profit attributable to owners of the parent¥87,776
3,991
3,709

¥172,929
6,802
5,615

¥261,009
13,0799,605¥355,316
18,852
14,544

Basic earnings per share¥ 14.52¥   21.98¥  37.60¥  56.93

First quarter

Second quarter

Third quarter

Fourth quarter¥14.52¥7.46¥15.61¥19.34(Yen)

257,484,315 shares
231,735,884 shares(Yen)

25,748,431 shares

Note: T he reduction in number of shares as a result of consolidation and total
number of issued shares after consolidation are theoretical values
calculated based on the total number of issued shares before consolidation of shares and on the consolidation ratio.

Basic earnings per share4) Treatment of fractional shares

Japanese stock exchanges have announced the Action Plan

If any fractional shares arise as a result of the consolidation of

for Consolidating Trading Units, which aims to standardize theshares, pursuant to the provisions of the Companies Act oftrading unit of domestic companies listed on Japanese stock

Japan, KYB will pay shareholders that have fractional sharesexchanges at 100 shares of common stock by October 1, 2018.

in proportion to their respective fractions.

As a company listed on the Tokyo Stock Exchange, KYB shallrespect this aim and change in number of shares constituting a
trading unit from the current 1,000 shares to 100 shares. In(3) Summary of change in number of shares constituting a
trading unit

addition, to keep the current price level of number of shares

The trading unit will change from 1,000 shares to 100 shares on

constituting a trading unit and prevent a change in the number

the date of consolidation of shares.

of voting rights, KYB plans to consolidate 10 shares into 1
share.

(4) Schedule for stock consolidation and change in number(2) Detail of consolidation of shares

Board of Directors resolutions
Shareholders meeting
Stock consolidation and change in numberof shares constituting trading unitof shares constituting a trading unit
1) Type of shares to be consolidated
Common shares
2) Method and ratio of the consolidation of shares

April 25, 2017
June 23, 2017
October 1, 2017
(planned)

Shareholders of record on September 30, 2017 (effectively
September 29, 2017) will be consolidated at the rate of 1 sharefor each 10 shares originally held on October 1, 2017.

68

69

KYB Corporation

Annual Report 2017

Financial Statements

7071