October 2000 Accounting Bulletin (Consolidated)

December 14, 2000

Listed Company Name
Kanamoto Company, Ltd.
Listing Exchanges
Tokyo Stock Exchange, First Section;Sapporo Stock Exchange
９６７８Company Code Number
Head Office Address
1-19, Odori Higashi 3-chome, Chuo-ku, Sapporo, Hokkaido Japan
060-0041
Inquiries Person to Contact Director and General Manager, Accounting Department
Name
Nobuhito Utatsu
TEL (011) 209 -1650
Date of Report to the Board of Directors December 14, 2000
1. Consolidated operating results for the fiscal year ended October 31, 2000
(1) Consolidated operating results(Numbers less than one million yen have been rounded down)
Revenues

Operating Income¥ millions
Fiscal year ended
October 31, 2000
Fiscal year ended
October 31, 1999

¥ millions％

Ordinary Income％¥ millions

Net Income¥ millions％％

61,996

（ − ）

3,042

（ − ）

2,548

（ − ）

1,360

（ − ）

−

（ − ）

−

（ − ）

−

（ − ）

−

（ − ）

Net income pershare of common
stock

Net income pershare of common
stock after
adjustment forpotential ordinary
sharesReturn on
shareholders’ equity

Yen

Yen

％

Return on total
assetsOrdinary income
margin％％Fiscal year ended
45.51
36.35
4.4
2.5
4.1
October 31, 2000
Fiscal year ended
−
−
−
−
−
October 31, 1999−
(Notes) ① Equity method investmen t profit or loss Fiscal year ended October 31, 2000
Fiscal year ended−
October 31, 1999
② Valuation profit or loss on negotiable securities¥656 million
Valuation profit or loss on derivative−transactions③ Are there any changes in accounting method?
No④ The percentages shown for revenues, operating income, ordinary income and fiscal year net income are the percent
increase or decrease compared to the prior fiscal year

(2) Consolidated financial position
Total assets

Shareholders’ equity¥ millions
Fiscal year ended
October 31, 2000
Fiscal year ended
October 31, 1999

Shareholders’ equity ratio¥ millions

Shareholders’ equity
per shareYen％

103,41230,78129.7

1,018.72

−

−

−

−

(3) Consolidated cash flow (¥ millions)Fiscal year ended
October 31, 2000
Fiscal year ended
October 31, 1999

Cash flow fromoperating activities

Cash flow from investing
activities

Cash flow fromfinancing activities

Cash and cash
equivalents at the end of
the fiscal year

10,616△1,826△8,544

16,422

−

−

−

−

― 1 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin(4) Companies to which consolidation accounting and equity method accounting apply
Number of consolidated companies: 5 companies Number of unconsolidated subsidiaries accounted for under the equity
method: 0 companies Number of affiliated companies accounted for under the equity method: 0 companies(5) Changes to which consolidation accounting and equity method accounting apply
Consolidation (New): 5 companies (Excluded): 0 companies Equity method accounting (New): 0 companies (Excluded): 0
companies

2. Projected consolidated operating results for the fiscal year ending October 31, 2001
(November 1, 2000 – October 31, 2001) (¥ millions)
R

e

v

e

n

u

e

s

Ordinary Income

N e t

I n c o m eInterim period

30,7601,680

310

F u l l62,4302,550

220

y e a r(Reference) Projected net income per share of common stock (fiscal year) ¥7.28― 2 ―Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

Ⅰ

Current conditions of the Company’s group

The Kanamoto Company group is comprised of the parent company, six subsidiaries and three affiliated companies. The businessactivities of the group are centered on the rental and sale of construction equipment, temporary construction materials, safety
equipment and other products, the sale of steel materials, and the rental and sale of information technology equipment(computers and peripheral equipment). The Company is also undertaking development of electric power supply and service
businesses and food and beverage businesses as supplemental business activities. An explanation of each company’s position withregard to its relevant business is provided below.

〔 Businesses related to the Construction Equipment Rental Division 〕
The Company’s rental division is engaged in the rental of construction equipment and tools. Taniguchi Co., Ltd. (a subsidiarycompany) manages a rental business providing machines used for construction. Taniguchi Co., Ltd. operates in designatedmarketing areas and borrows rental equipment assets from the Company as needed in order to meet customer demand.
SRG Kanamoto Co., Ltd. (a subsidiary) operates a rental business that provides temporary materials for construction use. Assist
Co., Ltd. (a subsidiary company) is engaged in the rental of furniture and fixtures and safety products for the constructionindustry. The Company and Taniguchi Co., Ltd. borrow rental assets from SRG Kanamoto Co., Ltd. and Assist Co., Ltd. as needed
to rent to their own customers.
In addition to the above companies, Kanatech Co., Ltd. (a subsidiary company) develops, manufactures and sells modular housing
units for temporary use, and Polyshield Services Co., Ltd. (a subsidiary company) is engaged in the sale and construction of
specialized rust-proof, water-proof shields.

〔 Businesses related to the Steel Sales Division 〕
The Company’s Steel Sales Division sells steel products and construction -related manufactured goods. The Company has no
subsidiaries or affiliated companies that are related to this division.

〔 Businesses related to the Computer and Peripheral Equipment Rental Division and otherbusinesses〕
As the Company ’s information and telecommunications-related division, Kanamoto’s Computer and Peripheral Equipment
Rental Division is engaged in the rental and sale of computers, computer peripheral equipment and equipment for thedevelopment of computer products. Companies affiliated with this division include Newtech Co., Ltd. (an affiliated company),
which primarily manufactures and sells computer peripheral equipment such as RAID (products using technology to provide
faster HDD access), and Active Technology Co., Ltd. (an affiliated company), which is principally engaged in the sale oftelecommunications-related equipment such as wireless LAN devices.
As supplemental businesses, Active Power Co., Ltd. (an affiliated company) is engaged in the sale of micro-turbine generatorsand supplies these products to the Company, among others, and Providence Brewery Co., Ltd. (a subsidiary company) brews andsells regional beers and operates a brewpub restaurant in conjunction with this activity.

〔 Relationship of the operating businesses 〕
Construction-related businesses

Kanamoto Co., Ltd.
Construction Equipment
RentalDivision

Steel Sales Division
Computers

and(Consolidated companies)
Taniguchi Co., Ltd.
Assist Co., Ltd.
SRG Kanamoto Co., Ltd.
Kanatech Co., Ltd.

(Non-consolidated companies)
Polyshield Services Co., Ltd.

Peripheral Equipment
D

i

v

i

s

i

o

n

Computer and Peripheral Equipment-related and other businesses
Computer and peripheral
equipment-related businesses(Affiliated companies) ※Newtech Co., Ltd.
Active Technology Co., Ltd.

Other businesses(Consolidated company)
Providence Brewery Co., Ltd.
(Affiliated company)※
Active Power Co., Ltd.

(Note) ※ Indicates affiliated companies to which equity method accounting is not applied.

― 3 ―Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

ⅡManagement policies and operating results

1. Basic policies concerning business management and distribution of earnings
Every company’s mission is to a achieve successful performance that produces maximum satisfaction for all stakeholders of thecompany, including customers, shareholders and the local community. Based on this premise, at the Kanamoto group we’ve madecommitment to change – embodied in the philosophy “never be satisfied with present conditions and constantly move ahead,regardless of the environment” – the fundamental management outlook for developing our businesses. The Company’s group willfurther strengthen consolidated group management and continue to take actions adapted to the current environment by seeking
new customer needs and establishing new information and services focused around the construction equipment rental business,the mainstay of the Company’s principal business activity.
In order to ensure the long-term, integrated expansion of shareholders’ profits, Kanamoto Company continues to focus
comprehensively on both capital investments based on its medium-term profit plan and on profitability, dividend trend and asound financial position. The Company also remains committed to its policy of stable dividend growth.
To accomplish these goals Kanamoto Company focuses on the importance of cash flow and places particular impo rtance on thegrowth of EBITDA (earnings before interest, taxes and depreciation and amortization).

2. Medium to long-term corporate management strategy
Over the long term Kanamoto Company faces a situation in which public enterprise expense budgets are shrinking. As theconstruction industry slims down, construction equipment rentals will play a substantial role as an important outsourcing
industry and the percentage of equipment used at construction sites that is rented will continue a marked upward trend. There
are other numerous avenues that will also enable Kanamoto to grow, such as expansion of the Company’s business into regions
where it currently does not have branches and enhancement of the Company’s responsiveness to private sector and constructionindustry demand.
Kanamoto Company is also continuing its venture business support activities, in order to nurture new businesses that will follow
the growth path of its construction equipment rental business.
The principal elements of Kanamoto Company’s Medium-Term Management Plan for November 1999 through October 2002 are
the following.
① Expand the Company’s service area by opening branches where the Company still does not have branches in western Japanand building the Company’s group of business alliances.
② Continue to invest in venture businesses within the framework of a specified amount of net income.
③ Refine the Company’s financial strategy of focusing on global standards and strive to improve the Company’s debt rating.
With regard to building the alliance group as indicated in ①, Machida Machinery Co., Ltd. (an unlisted company), the largest
equipment rental company in Okinawa, joined the Company’s alliance group in March 2000. In other actions Kanamoto isplanning to establish Kanamoto Shikoku Co., Ltd. next spring in a joint venture with Tadano, Ltd., a manufacturer of cranes andother equipment used for construction (listed on the First Sections of the Tokyo Stock Exchange and the Osaka Stock Exchange),
which will provide construction equipment rentals as it primary business. The Company also plans to make Daiichi Machine
Industries Co., Ltd. (unlisted), a company with its headquarters in Kanoya in Kagoshima Prefecture with which we have had agood business relationship, into a subsidiary company.
In separate action we formed a collaborative business alliance for construction equipment rental in December 1999 with KomatsuGroup. Both companies will benefit by avoiding redundant investments and achieving more effective utilization of owned assets,
and by continuing to coordinate activities in each marketing region.
The Company’s investments in venture businesses indicated in ② above are being made for the purpose not only of capital gains
from a new public offering but as always with the goal of also developing new future businesses for the Company.
Based upon these fundamental paths, Kanamoto Company is aiming as a consolidated group to enhance the businessdevelopment capabilities of the Company group by strengthening the abilities of the respective businesses and ensuring that eachcompany has a solid financial foundation.

― 4 ―Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin2. Operating Results(1) Summary of fiscal year operating results (Fiscal year ended October 2000)〔 External environment 〕
Japan’s economy during the fiscal year saw signs of business uncertainty decrease at large enterprises as a result of support
provided by the government’s large-scale economic recovery package and greater efforts by companies over th e past few years to
improve their performance. At the same time, however, a look at the Bank of Japan’s short-term Diffusion Index showed that thebusiness outlook for small and medium -sized firms is still severe and that the gap between firms is widening. Individual
consumption also continued to stagnate, because the recovery in profits at large companies is fundamentally the result of
adjustments to personnel expense and has not resulted in an improvement to the employment environment. Overall, the economic
recovery did not spread to all parts of Japan’s economy.
In the construction industry, which remains Kanamoto’s leading customer, there remains concern over the future direction of
public works spending. There has been no improvement in the business environment, such as a sustained increase in private
sector demand, despite positive movements in local areas as a result of the large-scale economic measures mentioned above.

〔 Conditions for the Company〕
Looking at the Construction Equipment Rental Division, the Company’s primary business, the Company achieved revenues thatwere slightly above the level of the prior year, through efforts such as opening many small-scale branches in Hokkaido to ensure
no business was overlooked and allow Kanamoto to dominate the Hokkaido region. In the Tohoku area the Company showeddouble-digit growth thanks to the success of past efforts to dominate the region and the start of public works cons truction
centered on expressway projects. The Company also returned to bullish growth in the Sea of Japan region, where new demand inrecent years had been weak. In the Kanto region, for the past few years the Company has maintained operating results at theprior year’s level and has not been effected by the fluctuations in demand. In the Kinki-Tokai region the Company has steadily
increased its customers, and revenues grew by double digits over the prior year. As a result of the above activity, total rental
revenues increased 3.1% over the prior fiscal year. The division eked out only small gains in sales revenues, as used equipment
sales were postponed because of the influence of positive inquiries regarding equipment rentals and sales of new equipment
declined as construction firms refrained from new purchases. Total sales revenues edged upward 1.2% compared to the same
period of the prior fiscal year. For the division as a whole, operating revenues were up 2.6%.
During the fiscal year the Company adjusted its branch network by opening a total of 15 branches including nine branches in the
Hokkaido region, four branches in the Tohoku region, one branch in the Sea of Japan region and one branch in the Kinki-Tokai
region. The company also established a delivery yard and closed one branch in the in the Sea of Japan region.
In the Steel Sales Division, despite progress in steel market inventory adjustments in the Company’s main sales area in Hokkaido,
sales fell 5.9% from the prior year. This reflected a decline in actual demand because of the slow recovery in private sector
demand, and a decline in unit prices.
In the Computer and Peripheral Equipment Rental Division, rental revenues were off 4.6% as the Company was effected bycomputer workstation model changes, one of the division’s main products. Sales revenues dropped sharply, falling 34.7% becauseof a change in generations of wireless LAN boards for factory use. For the division as a whole total revenue declined 24.9%.

〔 Business conditions at consolidated subsidiaries〕
Taniguchi Co., Ltd. is building a definite share in the Shiribeshi region of Hokkaido. The company increased both revenues andincome during the current fiscal year.
Assist Co., Ltd. (Hokkaido) was successful in strengthening its branch activity and increased sales and income.
SRG Kanamoto Co., Ltd., which closed its books on its first fiscal year since being established, maintained its sales and income at
the level in its initial business plan. Amidst the clash of competing companies, the fir m steadily increased its level of nameawareness.
Business operations were transferred from the parent company to Kanatach Co., Ltd. only in October 2000. The new company’scontribution to consolidated operating results, therefore, will begin from the next business period (fiscal year ending October2001).
Providence Brewery Co., Ltd., which brews and sells craft beers in Muroran, Hokkaido, received a gold prize for its pilsner beer atlast year ’s international beer festival in Osaka. The company followed this achievement by winning bronze medals for its dunkel
and bock beers. The brewery has earned a solid reputation in the beer industry.

〔 Other business operating results〕
The Company completed its third year of efforts to invest in and support venture businesses. Venture businesses in which theCompany has invested continued to perform well. During the fiscal year the Company provided support to eight firms, by offering
capital funding or by purchasing bonds, and invested a total invested during the year of ¥162.0 million. Active Power Co., Ltd.,
which markets micro-turbine generators produced by Capstone Turbine Corporation in the U.S., recently began selling the Model
330 (U.S. specifications) and also began renting equipment during the fiscal year to meet users’ needs.

― 5 ―Fiscal Year ending October 31, 2000
Consolidated Accounting BulletinAs a result of the above activities, consolidated revenue was ¥61,996 million, ordinary income was ¥2,548 million and net income
for the fiscal year was ¥1,360 million.

(2) Outlook for the next fiscal year (business period ending October 2001)〔 Business environment 〕
Although Japan’s economy will continue its slow recovery, one key uncertainty factor will be the drift in the political situations inboth Japan and the U.S. When added to the fact that still more time will be required for personnel adjustments by Japanese firms,
full recovery remains a number of months away.
With regard to the environment surrounding the construction equipment rental industry, the Company’s principal business sector,
the second supplementary budget approved in November 2000 will ensure robust business expenditure during the first half of theCompany’s fiscal year ending in October 2001. On the other hand, changes such as a decision to cancel 210 public works projects
and reduce expenditures by ¥2,500.0 billion will mean that as expected, the overall direction will undoubtedly be towards large
cutbacks in public works spending. Under these conditions, the percentage of construction equipment rentals by construction
firms is continuing to increase annually as companies strive to maintain profitability. In the Fiscal 1999 industry survey the
proportion of rental equipment used at construction sites increased to 55.2%, the highest level ever recorded. Because thepercentage of subcontractors that have switched to rentals is still low, Kanamoto Company believes there is still considerable
room for growth in construction equipment rentals.
At the same time, the intensifying competition to survive the shakeout in the rental equipment industry is becoming more severe
each day, calling for extraordinary efforts to maintain profitability. The industry now finds itself in an era of survival of the fittest,
and companies will be clearly winnowed into winners and losers.

〔 Company response (including consolidated subsidiaries) 〕
From a management perspective, Kanamoto Company will move ahead with plans to strengthen its dominance in theConstruction Equipment Rental Division’s existing sales regions and pursue its alliance strategy in western Japan. The Company
plans to establish six branches that will strengthen its foundations in existing marketing areas. Kanamoto Shikoku Co., Ltd.,
which was described above, will begin operations in the spring of 2001. In other areas, Kanamoto Company is responding quickly
to the Internet sales transactions that have begun to be tested by the construction industry.
Past efforts by the Company to fine-tune its management and business have been well received. Going forward, the Company willcontinue to enhance its improvement program centered on full-time, hands-on directors.
With regard to consolidated subsidiaries, there are many potential tie-up partners for the Company’s Construction Equipment
Rental Division in construction-related businesses, and the Company plans further tie-ups that will promote efficientmanagement. The Steel Sales Division and the Computer and Peripheral Equipment Rental Division will continue to sell the
products they currently handle, and will push to increase sales of the unique rust-proof, water-proof shield Polyshield andShareWave, Inc.’s high-speed wireless LAN respectively, both new products. Both divisions will work to maintain present levels of
profitability. The Company will also plan efforts to continue expanding sales of micro-turbine generators.
Furthermore, because of the need for management decisions and business execution that encompass many aspects besides theprincipal businesses, the Company will introduce an Executive Director system as described earlier. This system will be designed
to speed up decision making and provide more flexible business execution. The change to the Company’s Articles of Incorporation
required for this system will be discussed at the 36th General Meeting of the Shareholders the Company plans to hold in January
2001.

〔Projected consolidated operating results for the fiscal year ending October 2001〕
As a result of the above activities, the Company projects revenues for the next fiscal year will be ¥62,430 million (an increase of
0.7% over the prior fiscal year), and ordinary income will be ¥2,550 million (no change from the prior year. Based on theassumption that an accumulated deficit of approximately ¥1,900 million from the application of accounting for retirement
benefits will be eliminated with a lump-sum amortization, net income for the fiscal year is projected to be ¥220 million.

― 6 ―Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

Ⅲ

Consolidated Financial Statements

1. Consolidated balance sheet(Amounts less than ¥1 thousand have been rounded down)
Consolidated accounting fiscal year
Category

36th Business Period（Fiscal year ended October 31, 2000）
Amount（Assets）
Current assets
Cash and deposits
Notes and trade accounts receivable
Negotiable securities
Inventory
Deferred tax assets
Construction equipment
Other current assets
Allowance for doubtful accounts

45,392,983

Fixed assets
Tangible fixed assets
Rental equipment
Accumulated depreciation
Buildings and structures
Accumulated depreciation※５
delivery

58,856,589
40,030,757

18,825,832

14,336,898
5,951,947

8,384,950

43.9

4,250,914
2,849,813

LandConstruction in progress
Other assets
Accumulated depreciation

1,401,100
24,181,603
338,959685,233
456,247

Total tangible fixed assets
Intangible fixed assets
Total intangible fixed assets
Investments and other assets
Investment securities
Other
Deferred tax assets
Allowance for doubtful accounts％

16,432,624
23,331,420
746,755
826,210103,282
3,691,573
434,903△173,786※５※１,２

Total current assets

Machinery, equipment andequipment
Accumulated depreciation

Percent¥ thousands※３

228,985
53,361,432

51.6

62,6580.1

2,960,312
1,380,019
485,310△230,181

Total investments and other assets
Total fixed assets

4,595,461
58,019,552

4.4
56.1

Total assets

103,412,535

100.0

― 7 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

(Amounts less than ¥1 thousand have been rounded down)
Consolidated accounting fiscal year
Category

36th Business Period（Fiscal year ended October 31, 2000）
Amount（Liabilities）

Percent¥ thousands

Current liabilities
Notes and accounts payable, trade
Short-term bank loans
Long-term bank loans due within one
year
Corporate taxes payable
Accrued bonuses to employees
Accounts payable, other
Other current liabilities％

11,696,005
4,726,615※５

7,793,285
203,817502,9037,607,164
418,080

Total current liabilities

32,947,871

Long-term liabilities
Straight bonds
Convertible bonds
Long-term bank loans

5,277,692
9,796,000
13,230,142

※５

31.9

Retirement allowances to directors andauditors
Long-term accrued expenses

11,023,476

Total long-term liabilities
Total liabilities

39,614,765
72,562,637

38.3
70.2

68,261

0.1

8,591,481
9,715,111
12,484,124

8.3
9.4
12.0

30,790,715
△165

29.7
△0.0

△8,915△0.0

30,781,636

29.7

103,412,535

100.0

287,454（Minority interest）
Minority interest（Shareholders’ equity）
Common stock
Additional paid-in capital
Consolidated retained earnings
Treasury stock
Parent company
subsidiaries

※４
stock

Total shareholders’ equity
Total liabilities, minority
shareholders’ equity

held

by

interest

and

― 8 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin2. Consolidated statement of income(Amounts less than ¥1 thousand have been rounded down)
36th Business Period
Consolidated accounting fiscal year
From November 1, 1999
To October 31, 2000
Category
AmountPercent％¥ thousands
Revenues from operations
Rental revenues
40,376,456
Sales
21,620,128
61,996,584
100.0
Cost of revenues from operations
Cost of rental revenues
Cost of goods sold

29,407,688
17,426,785

46,834,473

75.5

15,162,111

24.5

12,119,518

19.6

3,042,592

4.9

123,975

777,433

1.3

627,344
197,066
147,500
159,724
139,474

1,271,109

2.1

2,548,916

4.1

175,8250.3

216,0460.4

2,508,695

4.0

1,191,113

1.9

42,8291,360,411

0.1
2.2

Gross profit
Selling and administrative expenses※１

Operating income
Non-operating revenue
Interest revenue
Dividend income

47,972
39,486

Gain on sale of negotiable securities

128,873

Insurance benefits
Rents

224,685
211,014

Consolidation account write-off

1,425

Other
Other expenses
Interest expense
Valuation loss on negotiable securities
Bond issue expense
Contribution to pension plan
Other
Ordinary income
Extraordinary profit
Adjustment of prior period profit or loss

※３

Gain on sale of fixed assets

42,596
205

Guarantee of moving expenses

131,462

Gain on sale of investment securities

1,561

Extraordinary loss
Loss on sale or retirement of fixed
assets※３

Valuation loss on investment securities
Fiscal year
adjustments

incomebeforetaxes

199,694
16,351

andCorporate, local and business taxes

1,242,998

Adjustment for corporate and other taxes△51,884

Minority interest loss
Net income― 9 ―Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

3. Statement of Consolidated Retained Earnings(Amounts less than ¥1 thousand have been rounded down)
Consolidated accounting fiscal year
Category

36th Business Period
From November 1, 1999
To October 31, 2000
Amount¥ thousands

Balance of consolidated retained surplus at the
beginning of the period

11,704,914

Reduction in consolidated retained earnings
Dividends
Directors and auditors’ bonuses

566,500
14,700581,200

Fiscal year net income

1,360,411

Balance of consolidated retained surplus at the end of
the period

12,484,124― 10 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

4. Consolidated Statement of Cash Flows(Amounts less than ¥1 thousand have been rounded down)
Consolidated accounting fiscal year
36th Business Period
From November 1, 1999
Category
To October 31, 2000
I. Cash flow from operating activities¥ thousands
Interim period net income before taxes and adjustments
2,508,695
Depreciation and amortization expense
8,925,928△1,425
Amortization of consolidated adjustment account△205
Gain on sale of fixed assets
Loss on disposal of fixed assets
199,694△41,232
Profit from adjustment of prior period profit or loss
Installment purchases of assets for small-value rentals
477,179
Reclassification of cost of sales associated with disposal of
100,156
construction equipment
Reclassification of cost of sales associated with disposal of rental
784,842
assets△909,340
Expenditures for acquisition of rental assets
Valuation loss on negotiable securities
197,066
Valuation loss on investment securities
16,351△128,873
Gain on sale of negotiable securities△1,561Gain on sale of investment securities
Bond issuance expense
147,500△28,358
Gain on redemption of bonds
Increase in allowance for doubtful accounts
77,840
Increase in accrued bonuses to employees
23,486
Increase in retirement allowances to directors and auditors
8,653△87,458
Interest revenue and dividend income
Interest expense on installment purchases of rental assets
287,428
Interest expense
627,344
Decrease in accounts receivable, trade
2,118,674
Decrease in inventory assets
96,860△640,466
Decrease in accounts payable, trade△452,636
Decrease in accounts payable, other△14,700
Directors and auditors’ bonuses paid
△260,986
Other
Sub-total
14,030,456
Interest and dividends received
87,458△904,592
Interest expense△2,597,030
Payment of corporate and other taxes
Cash flow from operating activities
10,616,292
ⅡCash flow from investing activities
Disbursements for investments in term deposits
Revenue from payments of term deposits
Revenue from repayment of lo ans
Funds used for purchase of negotiable securities
Funds provided from the sale of negotiable securities
Funds used for purchase of investment securities
Funds provided from sale of investment securities
Funds used for purchase of investments
Funds used for the purchase of tangible fixed assets
Funds provided from the sale of tangible fixed assets
Funds used for the purchase of intangible fixed assets
Cash flow from investing activities― 11 ―△5,506200,000
37,500△3,034,898
3,145,151△814,647
243,454△140,234△1,445,974
3,510△14,710△1,826,355

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

Ⅲ

Cash flow from financing activities
Decrease in short-term bank borrowing¥ thousands△3,975,710

Funds provided by long-term bank borrowing
Funds used to repay long-term bank borrowing

7,762,200△7,909,668

Funds provided from the issue of straight bonds

4,852,500

Funds used for repayment of straight bonds△310,642

Funds provided from the issue of common stock
Funds used for repayment of installment obligations
Reduction in treasury stock
Payment of dividends to parent company
Payment of dividends to minority interest shareholders
Cash flow from financing activities

44,137△8,441,391
807△565,352△1,750△8,544,869

Ⅳ

Increase in cash and equivalents

Ⅴ

Balance of cash and equivalents at beginning of period

16,177,328

245,067

Ⅵ

Balance of cash and equivalents at end of the interim period

16,422,395― 12 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

5. Significant Accounting Policies for the Consolidated Financial Statements(1) Companies included in the consolidation
The five subsidiary companies included in the consolidation are SRG Kanamoto Co., Ltd., Taniguchi Co., Ltd., Assist Co.,
Ltd., Kanatech Co., Ltd. and Providence Brewery Co., Ltd.
In addition to the subsidiary companies listed above, Polyshield Services Co., Ltd. has been excluded from consolidation
because the company’s total assets, sales, profit or loss and retained earnings are small in size and do not have a material
effect on the consolidated financial statements.

(2) Matters pertaining to application of equity method accounting
The Company’s investments in one unconsolidated company and in Newtech Co., Ltd., an affiliated company, have been
omitted from items to which equity method accounting is applied because their respective effect on consolidated net income
or loss and consolidated retained earnings is immaterial and neither company is important to the Company’s overall
operations. Both companies have been valued using the cost method.

(3) Matters pertaining to the fiscal year for consolidated subsidiaries
The fiscal year-end for the consolidated subsidiary companies is August 31. When preparing the consolidated financial
statements the Company uses the subsidiaries’ financial statements as of August 31, adjusted for significant transactions
that have occurred between the subsidiaries’ fiscal year-end and the consolidation date that have a material effect on the
consolidated financial results.

(4) Accounting principles and standards used for normal accounting treatment① Appraisal standards and appraisal methods for principal assets
a. Appraisal standards and appraisal methods for negotiable securities
Securities with a market on an exchange ････ Lower of cost or market method based upon the moving average method
Other negotiable securities ･･･････････････ Cost method, cost being determined by the moving average method
b. Appraisal standards and appraisal method for construction equipment
Amount after deduction of depreciation expense calculated according to the declining -balance method from theoriginal prices, by separate fiscal year of purchase.
c. Appraisal standards and appraisal method for merchandise inventories and supplies
Merchandise inventories ･･･････････ Lower of cost or market based on the Last-in, First-out method
Supplies･････････････････････････ The Latest Purchase Cost method② Depreciation methods for principal depreciable assets
a. Tangible fixed assets
The Company has adopted the declining-balance method based upon provisions in the corporate tax code. Buildings onland that is leased under a fixed-term land lease agreement, however, are depreciated using the straight-line method
using the remaining period of the fixed-term lease as the depreciable life and zero residual value.
Furthermore, for some consolidated subsidiary companies the Company has adopted the straight-line depreciation
method for buildings acquired on or after April 1, 1998 (excluding equipment installed in buildings).
b. Intangible fixed assets
Software acquired for the Company’s internal use is depreciated using the straight-line method based on the assumed
useful life for internal use (5 years).

③ Accounting standards for allowances and reserves

a. Allowance for doubtful accounts ･･･････････ In order to provide for losses on doubtful accounts such as accounts
receivable, the Company charges to income the maximum amount that can be charged to income basedon the provisions of the Corporate Income Tax Law plus an amount for projected unrecoverable
amounts based on assessments of individual accounts. In addition, for consolidated subsidiaries theCompany charges the maximum amount that can be charged to income based on the provisions of the
Corporate Income Tax Law.

b. Accrued bonuses to employees････････････ In order to provide for bonus expenditures paid to employees the Company
appropriates an amount based on estimated salaries for the fiscal year.
c. Retirement allowances to directors and auditors ････････ The Company provides for retirement allowances to directors
and auditors based upon pertinent rules and appropriates amounts proportionately to theaccount based upon length of service.

④ Accounting treatment for lease transactions
For finance lease transactions except for leases that transfer ownership of the property to the lessee, rent expenses arecharged to income as payments are made.

― 13 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin⑤ Other important matters that are the basis for creation of the consolidated financial statementsa. Qualified pension plan(a) The Company adopted a qualified corporate pension plan (Kanamoto Pension Fund) for its retirement benefit system
on July 1, 1990.
(b) Past service costs are being funded over a period of 7 years.
(c) The liability for past service costs as of March 31, 2000 was ¥505,081,000.
b. Accounting treatment for consumption tax
Consumption tax is taken out of all Statement of Income items and Balance Sheet items, except mainly for receivables
and payables.

(5) Valuation of consolidated subsidiary assets and liabilities
The Company has adopted the market value method and appraisal method of depreciation for the assets and liabilities
of consolidated subsidiaries.

(6) Amortization of the consolidation adjustment account
As a general rule, the Company’s offsetting elimination of the parent company’s investment account and thesubsidiaries’ capital accounts are based on the date of investment rule. The portion of the excess of cost over underlying
net assets at the date of investment resulting from the offset elimination for which the cause is not known is transferredto the appropriate account. The remainder is transferred to the consolidation adjustment account.
The consolidation account is amortized over five years using the straight-line method, except for extremely small
amounts which are written off completely in the year in which they occur.

(7) Appropriation of retained earnings
The Statement of Consolidated Retained Earnings is created based upon the appropriation of net income decided uponby the Company during the consolidated accounting fiscal year.

(8) Items included in cash and equivalents on the Consolidated Statement of Cash Flows
Funds included in cash (cash and cash equivalents) on the Consolidated Statement of Cash Flows include cash on hand,deposits that can be withdrawn on demand and highly liquid short-term investments that mature within 3 months of thedate of acquisition and which can be easily converted into cash and that have minimal risk of a change in price.

― 14 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin6. Notes to the Financial Statements(Notes to the Consolidated Balance Sheet)
※1.
※2.
※3.
※4.
※5.

※6.

Discount on notes receivable, trade
Balance of notes receivable – trade endorsed
Balance of stocks and bonds of non -conso lidated subsidiaries andaffiliated companies (Fixed assets) Investment securities
Treasury stock shares
Assets offered as collateral security(1) Assets provided as collateral
Deposits
Buildings and structures
Total(2) Liabilities secured by the above collateralLong-term bank loans due within one year
Long-term bank loans
Total
Guarantees¥305,398,000¥126,279,000¥141,558,000¥86,500,000
277 shares¥3,012,000¥230,911,000¥233,924,000¥18,995,000¥226,005,000¥245,000,000(Notes to the Consolidated Statement of Income)
※1.

※2.

※3.

Major expense categories and amounts included in selling expense
and administrative expenses
Employee salaries and wages
Depreciation expense
Rents
Amount transferred to allowance for doubtful accounts
Amount transferred to accrued bonuses to employees
Amount transferred to retirement allowances to directors andauditors
Details of the adjustment to prior period net income
Amount received from adjustment of tax liability
Recovery of bad debts
Reduction in allowance for doubtful accounts
Total
Loss on sale or disposal of fixed assets(Loss on sale of fixed assets)
Buildings(Loss on disposal of fixed assets)
Rental assets
Buildings and structures
Machinery, equipment and delivery equipment
Other
Total

¥4,596,035,000¥1,108,982,000¥1,441,240,000¥246,747,000¥502,903,000¥8,653,000¥41,232,000¥971,000¥392,000¥42,596,000¥18,716,000¥62,375,000¥19,908,000¥4,904,000¥93,788,000¥180,977,000(Notes to the Consolidated Statement of Cash Flows)1.

2.

Relationship between the ending balance for cash and cash
equivalents and the amounts in the categories shown on the
consolidated balance sheet
Cash and equivalents
Term deposits with a maturity longer than 3 months
Cash and cash equivalents
Details of major non-fund transactions(1) Conversion of convertible bonds to capital
Increase in capital from conversion of convertible bonds
Increase in additional paid-in capital from conversion of
convertible bonds
Decrease in convertible bonds from conversion(2) The amount of assets and liabilities related to installment
transactions that are newly accounted for during this consolidated
accounting fiscal year is ¥10,127,000 respectively.

― 15 ―¥16,432,624,000- 10,229,000¥16,422,395,000¥253,000,000
253,000,000¥506,000,000

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

(Notes for leasing transactions)1.

2.

Finance lease transactions except for leases that transfer ownershipof the property to the lessee.
(1) Amounts corresponding to lease property acquisition prices,
accumulated depreciation and outstanding balances at the end of the
fiscal year accounting period.
Rental assets
Tools, furnishings andfixtures
Acquisition price¥16,688,293,000¥775,954,000
Accumulated depreciation
8,788,906,000
366,698,000
Outstanding balance
7,899,386,000
409,255,000(2) Outstanding balance of future lease payments a the end of the
fiscal year
Within one year
¥2,654,146,000
After one year
5,490,558,000
Total¥8,144,704,000(3) Amount of lease payments, depreciation expense and interest
expenseLease payments¥3,095,716,000
Depreciation expense
2,834,121,000Interest expense
292,721,000(4) Accounting method for amount equivalent to depreciation expense
Straight-line depreciation using the lease term as the depreciable
life and zero residual value.
(5) Accounting method for amount equivalent to interest expense
Interest method using the difference between total lease payments
and the acquisition price of the lease property, allocated equally toeach year.
Operating leases
Future lease payments
Within one year
¥1,422,400,000
After one year
2,704,382,000
Total¥4,126,782,000(Notes related to tax effect accounting)1.

2.

Principal causes of deferred tax assets
Disallowance of excess depreciation
Excess accrued retirement allowances to directors and auditors
Excess accrued bonuses to employees
Other
Total
Causes of the main differences between the statutory tax rate andburden ratio for corporate and other taxes following application oftax effect accounting, by major cate gory
Statutory corporate tax rate
(Adjustments)
Local tax equalization
Items not included permanently in losses such as expense
accounts
Consolidated subsidiary losses
Other
Burden ratio for corporate and other taxes after application oftax effect accounting― 16 ―¥315,974,000
119,868,000
68,370,000
84,379,000¥588,592,000

41.7％
2.9％
1.1％
2.0％
△0.2％
47.5％

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin

Ⅳ

Business segment information

1. Segment information by type of businessCurrent consolidated accounting year (From November 1, 1999 to October 31, 2000)(Unit: Yen thousands)

Steel sales
business

Computerandperipheral
equipment
and otherbusinesses

Total

52,750,998

7,913,856

1,331,730−
52,750,998
49,824,402
2,926,596−
7,913,856
7,786,326
127,530

74,087,494
8,749,672
10,310,902

3,957,846
140,0732,148

Construction
equipment
rentalbusiness

Eliminations
or entirecompany

Consolidated

61,996,584−

61,996,584−
1,331,730
1,392,625△60,895−
61,996,584
59,003,353
2,993,231−−△49,361
49,361−
61,996,584
58,953,992
3,042,592

1,797,710
36,181
3,405

79,843,051
8,925,928
10,316,457

23,569,484−
309,754

103,412,535
8,925,928
10,626,212

I. Revenues and operating
incomeRevenues
(1)
Sales
to
outsidecustomers(2) Sales or transfers
between related segments

Total
Operating expenses
Operating income
II. Assets, depreciation
expenseandcapitaldisbursements
AssetsDepreciation expense
Capital disbursements(Notes)1. Method of business classification
Businesses are classified based on consideration of similarities such as the type of labor and products, thenature of the business and the business markets.
2. Principal products, by business
B

u

s

i

n

e

s

s

Principal products

Construction equipment
r
e
n
t
a
l
s

Construction equipment such as hydraulic shovels, generators, temporary materials
used for construction, construction safety equipment, temporary modular housing
units, special rustproof and waterproof shields

S t e e ls a l e s
Computers and peripherals
and o t h e r b u s i n e s s e sSteel bar, sheet steel, steel products such as round bar, steel scrap
Computers and peripheral devices, telecommunications-related
microturbine generators, microbrewery

equipment,

3. The total amount for assets that were eliminated or included in the categories for all companies was¥23,569,484,000 and represents primarily assets used for idle working capital at the parent company (cash, deposits
and negotiable securities), long-term investment funds (investment securities and assets used in administrative
departments.

2. Segment information by location
Current consolidated accounting period fiscal year (November 1, 1999 to October 31, 2000)
The Company does not report segment information by location because the Company does not have any consolidated
subsidiaries or important offices located in countries or regions outside of Japan.

3. Foreign sales
Current consolidated accounting period fiscal year (November 1, 1999 to October 31, 2000)
The Company did not have any foreign sales during the current consolidated accounting period fiscal year.

― 17 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting BulletinMarket value of negotiable securities

Ⅴ

Current consolidated accounting period fiscal year
(As of October 31, 2000)

Type

Amount reported on the
consolidated balance sheet

Assets classified as current
assetsStocks
Bonds
Other
Subtotal
Assets classified
assetsStocksBonds
Other(Unit: Yen thousands)

asMarket value

Valuation profit or loss

479,035
227,681
40,038477,964
227,808
39,188△1,070746,755744,961△1,793

1,041,030
38,3371,000,578

1,928,794
38,392771,210887,76354△229,368

2,079,945
2,826,701

2,738,396
3,483,358

658,450
656,657

126
△850

fixed

Subtotal
Total(Notes) 1. Method used to calculate market value(1) Listed negotiable securities
Valued mainly on the basis of the final closing prices on the Tokyo Stock Exchange(2) Over-the-counter negotiable securities
Valued on the basis of trading prices such as those published by the Japan Association of Securities Dealers(3) Beneficiary certificates for unlisted security investment trusts
Valued on the basis of each trust’s standard valuation
2. Consolidated balance sheet valuation of negotiable securities that are excluded from disclosure requirements
Assets classified as fixed assets
Unlisted stock except for over-the-counter stocks¥870,367,000
Corporate bonds with stock warrants attached¥10,000,000

Derivative contract amount, market value and valuation profit and loss

Ⅵ

From time to time Kanamoto Company utilizes interest rate and currency derivative transactions. The amounts of thesecontracts and the amounts equivalent to valuation profit and loss during the current consolidated accounting period fiscal year
are very small. Details of the transactions have been omitted because the amounts are deemed to have little influence on thecompany’s financial position.

Transactions with affiliated parties

Ⅶ

Directors and individual shareholders(Unit: Yen thousands)

Name

Address

Capital or
financingWork or
responsibilities

Concurrent
director ’s
duties, etc.

BusinessrelationshipType oftransaction

Amount oftransaction

Category

Balance at end of
periodOwned (Unowned)
percentage ofvoting rights, etc.

Position

RelationshipDirector

TaichuKanamoto

Shibuya ku, Tokyo−

Chairman(Unowned)
Direct5.5%−−

Commonstock
purchase

3,342

−

−

Director

KanchuKanamoto

Higashi-ku,Sapporo−President(Unowned)
Direct1.5%−−

Commonstock
purchase

5,014

−

−

Director

SaburoKanamoto

Muroran,
Hokkaido−

S e n i o r
Advisor(Unowned)
Direct5.2%−−

Commonstock
purchase

3,342

−

−

(Note) Transaction terms and conditions and policy for decisions on transaction terms and conditions
Stock purchase prices are determined based on the appraised price, with the terms of payment being a lump-sum cash payment.

― 18 ―

Fiscal Year ending October 31, 2000
Consolidated Accounting Bulletin