Profile

Sanden continues to create new value through
Challenge & Innovation based on the “Environment”
The Sanden Group continues to develop and deliver products, systems, and services thatprovide constant satisfaction to our customers around the world.
Automotive Systems Business
Sanden manufactures and delivers
compressors and climate systems
for automotive air conditioners
around the world. Our state-ofthe-art technology suitable forhybrid vehicles and electricvehicles is highly evaluatedby the world’s leading car
manufacturers.

Compressor

Electric Compressor
HVAC Unit

Commercial Store Systems Business
Sanden manufactures and delivers
freezing and refrigerating showcases, vending machines, and coffeeservers around the world. Our
products, systems, and services
contribute to our customers’
business growth.

Vending
MachineCoffeeMachineRoundShowcase

Open
Showcase

Contents
Corporate Philosophy...............................................................1
Interview with Sanden’s President............................................2
Highlights of the Fiscal Year......................................................6
Performance Overview.............................................................8
CSR.........................................................................................9Results of Activities.................................................................10

Financial Section
Management’s Discussion & Analysis...................................... 14
Consolidated Balance Sheets................................................. 18
Consolidated Statements of Operations/
Consolidated Statements of Comprehensive Income.................. 20
Consolidated Statements of Changes in Net Assets................... 21
Consolidated Statements of Cash Flows.................................. 22
Notes to Consolidated Financial Statements..............................23

Corporate Governance...........................................................12

Independent Auditor’s Report..................................................37

Directors/Audit & Supervisory Board Members/
Corporate Officers.................................................................13

Corporate Data.......................................................................38
Stock Information...................................................................39

Corporate Philosophy
Sanden’s Corporate Philosophy, which was adopted in 2003, sets forth our universal shared values
and basic stance. By putting this Corporate Philosophy into practice, the Sanden Group aims toattain sustainable growth and continue to be a company that is trusted by society.

Structure of the Corporate Principles
Aiming to Become “Global Excellent Companies”

Founding
Spirit“Let Us Develop with Wisdom and Prosper in Harmony”“Let Us Develop with Wisdom and Prosper in Harmony” meansthat we should use our intelligence in combining our development and pioneering abilities to win prosperity for us all.

Management
Principles

Founding
SpiritManagement
Principles
Corporate Philosophy• Satisfy our customers needs withhigh-quality products• Contribute to the social andcultural improvement of the ­community
through business activity• Build a company of which all are proud,
through the efforts of self-motivatedemployees
These principles have served as fundamental employee action guidelines since
Sanden’s founding.

Corporate Vision
Management Policies
Mid-Term Plan, Execution Plan

STQM
STQM SANDEN WAY

The Sanden Group (G-SDC) will observe the following 10 principles
in full compliance with laws, regulations, and rules.

Basic Principles(Universal Values Shared by
the Global Community)

1. Good Corporate Citizenship and Harmony with Society We will grow as good corporate citizens, trusted by society
and in h­ armony with the international community.
2. Respect for Human Rights We will build a corporate culture founded on respect for­individuals and human rights.
3. The Environment We will endeavor to preserve the environment in every aspectof our corporate activities to ensure that future generations
will inherit our beautiful, irreplaceable earth.
4. Corporate Ethics We will conduct our corporate activities in a spirit of sincerityand ­fairness based on a strong sense of ethics.
5. Safety and Health We will enable our employees to achieve a healthy lifestyle by­creating an environment that assures their health and safety.

Basic Stance toward Stakeholders
6. Customers We will stand on the admired ability of engineering d­ evelopment
and manufacturing, and can offer products, systems, and­services, based on the QUALITY FIRST, that provide constantsatisfaction to our customers around the world.
7. Employees We will grow together with our employees by creating anorganizational culture that encourages free and vigorous­communication imbued with a spirit of respect for humanity inline with our corporate culture of challenge and innovation.
8. Shareholders and Investors 
We will respond to the trust and expectations of our ­shareholders
and investors by expanding the Sanden Group, enhancing ourcorporate value and making our management more transparent.
9. Communities We will respect regional customs and cultures around theworld and contribute to the social and cultural development of
the communities, which we are related with.
10. SuppliersWe will grow together with our suppliers as business partners who
provide our customers with the best possible products, systems,
and services on the basis of fair and transparent relationships.

Sanden Holdings Corporation

1Interview with Sanden’s President

Announcing the Corporate
Mid-Term Plan toEnsure Revitalization for
Future GrowthKin-ei Kanda
Director & President

Fiscal 2016 was extremely challenging in terms of performance.
Please explain the management
challenges that Sanden is currently
facing.

In terms of business competitiveness, the challenge is

In response to recent currency fluctuations and changes

ization of both production and procurement, and con-in the market environment, we decided to reinforce ourstruct a structure that is less vulnerable to currency

operations, and, from August of last year, we began

fluctuations and urgently break away from a low profit

implementation of Group-wide structural reforms. We are

structure.

Q

seeing a steady stream of positive effects in a shortspace of time from this activity.

Q

How do you view each individual
challenge?

to further tap into growth markets and enable increased
sales. In addition, we must reap the benefits of past local-

In terms of the financial structure, we are concerned
about any further weakening resulting partly due to

However, the reforms are not yet fully implemented.

extraordinary losses for the implementation of structural

Resolving challenges over the Corporate M­ id-Term Plan,

reforms and fines imposed by the European Commission.

such as increasing profitability through strengthened busi-

Accordingly, it is an urgent issue to quickly improve ourness competitiveness, enhancing our financial position,

financial structure by pressing forward with measuresand restructuring corporate governance are necessary insuch as the optimization of working capital and enhance-order for the Sanden Group to continue to achieve

ment of asset efficiency.

­sustainable growth.

Furthermore, in order to maximize corporate value, wemust strengthen our corporate governance system andaccelerate the speed of our management processes witha prompt PDCA activity cycle to quickly adjust to changes
in the business environment.

2

Annual Report 2017

You have announced the 2017
Corporate Mid-Term Plan. What isin the Plan?

While the structural reforms are focused on the creation

The Corporate Mid-Term Plan is divided into two phasesof a stable earnings structure, the Corporate Mid-Termand establishes as its target ensuring revitalization toPlan looks toward future growth and profitability.

achieve future growth. The first phase involves prompt

Accordingly, we aim to steadily implement the Corporate

implementation of structural reforms. In order to set

Mid-Term Plan while achieving four key initiatives:course towards future growth, a robust structure must be(1) comprehensive cost transformation to improve profit-

established within fiscal 2017. The next phase is to return

ability, (2) asset efficiency enhancement to strengthen theto a growth track in fiscal 2018. By strategically allocating

overall financial structure, (3) optimization of the businessresources into growth areas, we aim to attain sustainable

portfolio to create corporate value, and (4) management

growth and improved profitability.

system reform to achieve sustainable growth.

Q

With emphasis on the assured implementation of measures aimed at regaining the trust of our stakeholders, wehave established management targets of net sales of¥320 billion, an ordinary income ratio of 5%, and an equity
ratio of 25% for fiscal 2020. We aim to achieve thesetargets as early as possible.

Q

What are the key initiatives of
the Corporate Mid-Term Plan?

1. Comprehensive cost transformation to improve
profitability
We will restructure processes through a bottom-up
approach and value chain reform. We will pursue
reforms in the structure of procurement, innovationsin productivity, and quality as three main initiatives.
Regarding the structure of procurement, we have­c entralized purchasing for certain commodities andCorporate Mid-Term Plan
Basic Concept

Mid-Term Target for FY2020(Billions of Yen)

Direction: Revitalization for future growth
Corporate Value

Structural reforms

2017

FY2020Net Sales

282

320

Ordinary
Income Ratio

(1)%

5%

Equity Ratio

16%

25%

Return to a growth track✓ Continually enhance profitability✓ Reaffirm growth business domains
and redistribution of resources✓ Constantly strengthen management
control system

2016

FY2016

2018

2019

2020
Fiscal year

Accomplish the structural reforms in FY2017 to return to a growth path
in FY2018 and beyond

Sanden Holdings Corporation

3

Interview with Sanden’s President

improved cost-competitiveness through value chain

ners to enhance efficiency. In regard to working capi-

actions, with an aim towards strengthening our global

tal, while reducing and liquidating retained receivables,

competitiveness. In addition, we will construct a sys-

we will work towards optimizing inventories throughtem that looks to create target costs together with ourglobal SCM reform. Moreover, we will also review

suppliers from the component development stage. In

cross-shareholdings and non-core assets to generateterms of innovations in productivity, we will work

cash in the near term.

towards achieving a next­- generation manufacturing
plant model, promoting the standardization of processes that utilize IT, and improving the productivityof back-office divisions through consolidation and outsourcing. In terms of quality reforms, we will restructure the Sanden Total Quality Management (STQM)
system while strengthening quality assurance.

3. Optimization of the business portfolio to create
corporate value
We have formulated the Corporate Mid-Term Plan
based on Sanden’s management policies of creating
corporate value based on “environment” utilizing ourglobal strength and quality capabilities. Our customers’ interest in the environment continues to increase

2. A sset efficiency enhancement to strengthen theyear by year. Based on this recognition, we will pursue

overall financial structure

growth centered on “new technologies and new prod-

We will clarify our investment policy with a select anducts” in the Automotive Systems Business. As “envi-

focus approach. Future investment will be concentrat-ronmentally friendly vehicles” such as electric anded in environmental technologies and growth areas

hybrid vehicles become more widespread mainly inbased on our business portfolio strategy. We also willdeveloped markets, we will work towards growth relat-

construct production systems utilizing external part-ed to thermal management systems, centered primarily

Corporate Mid-Term Plan
4 Key Initiatives

Material and parts procurement transformation
1

Comprehensive cost transformation
to improve profitability

Productivity innovation
Quality reforms

2

Asset efficiency enhancement
to strengthen the overall financial
structure3

Optimization of the business portfolio
to create corporate value

4

Management system reformto achieve sustainable growth

Selection and concentration of investment
Reduction of working capital
Securitization of non-core assets
Concentration of management resources to growing environment
related fields
Innovation in corporate governance
Enhancement of global management control
Revamp the decision-making system

4

Annual Report 2017

on environmental technologies, such as heat pumpsystems, electric compressors, and CO2 compressors.

4. Management system reformto achieve sustainable growth

We will develop the Commercial Store Systems

We will strive to maximize corporate value by reforming

Business largely based on two growth areas. The first

corporate governance, global business management,

area is “new markets.” We will expand globally theand decision-making systems. For corporate gover-cold-chain business model that we have cultivatednance, we place a special importance on strengthening

domestically, particularly in Asian markets. Further­

the training of management personnel and stimulating

more, we will accelerate this process by utilizing thediscussions at Board of Directors meetings. For global

overseas locations of the Automotive Systems

business management, following transition to a holding

Business and strengthening the alliances with ourcompany structure, we will further clarify roles andpartners. The second area is “new technologies andauthorities in terms of business and functions. By

new products.” Introducing IoT technologies to current

accelerating the transfer of authority, we will strive

cold-chains, we will pursue growth by providing our

towards thorough PDCA management and account-customers with solutions centered on the “optimum

ability for results in each business. For decision-making

temperature and humidity control” resulting in “highsystems, we will aim to realize speedy management

quality and high freshness.”that can adapt to changes in the business environment.

Corporate Mid-Term Plan

Optimization of Business Portfolio Toward Creating Corporate Value
New
markets/customers

Other

Commercial
Store
Systems

Conventional
markets/customers

Commercial
Store
Systems

Other

New
Business
Creation✓E xpansion of cold-chain throughout ASEAN countries✓D eveloping closer ties with business partners✓U tilization of overseas Group locations✓ Cold-chain✓ System/service/maintenance

Automotive
Systems

Conventional technology/products✓ High-efficient cold-chain system✓ IoT✓ High quality/high freshness✓A dvance heat management✓H P systems✓ Increase PX compressors✓E xpand business in China

Commercial
Store
Systems
Automotive
Systems✓ Electric compressors✓ CO2 refrigerant compressors

New technology/products“Concentrate on core business/technology leveraging our strength”

Sanden Holdings Corporation

5

Highlights of the Fiscal Year
Thousands of
U.S. dollars (Note)

Millions of yen

FY2012

Net sales............................................................ ¥241,780

FY2013

FY2014FY2015FY2016FY2016¥274,786¥306,984¥294,237¥282,061$2,514,136

Operating income (loss)......................................

(896)

4,858

9,407

5,494

1,582

14,101

Net income (loss) attributable to ownersof the parent.....................................................

1,084

5,843

5,580

6,965

(22,488)(200,445)

Comprehensive income (loss).............................

5,331

13,123

11,713

2,044(24,232)(215,990)

Total net assets.................................................. ¥ 52,961¥ 65,651¥ 75,677¥ 75,503¥ 49,159$  438,176

Total assets........................................................

247,387

277,920299,265

301,325

280,194

2,497,495

Net assets per share (yen and U.S. dollars)........ ¥ 364.35¥ 443.68¥ 510.80¥ 507.56¥ 315.27$     2.81

(162.82)(1.45)Net income (loss) per share(yen and U.S. dollars)........................................

7.96

42.65

40.40

50.43

Capital adequacy ratio (%)..................................

20.1%

22.1%

23.6%

23.3%

15.5%

Return on equity (%)...........................................

2.3

10.5

8.5

9.9

(39.6)

Price earnings ratio (%).......................................

47.1

10.8

13.3

6.4

—

Cash flows from operating activities.................... ¥  3,148¥ 18,803¥ 16,223¥  6,304¥ 10,048$   89,562(12,105)(13,301)(14,932)(10,371)(92,441)

Cash flows from investing activities.....................

(16,794)

Cash flows from financing activities....................

17,740(8,675)(2,022)

6,066(2,479)(22,096)

Cash and cash equivalents at end of the year......

19,961

19,07820,58817,482

14,040125,144

Gross profit........................................................ ¥ 36,731¥ 48,101¥ 57,246¥ 53,311¥ 49,319$  439,602

Gross profit ratio (%)...........................................

15.2%

17.5%

18.6%

18.1%

17.5%

Ratio of SG&A expenses (%)..............................

15.6

15.7

15.6

16.3

16.9

Total net assets ratio (%)....................................

20.1

22.1

23.6

23.3

15.5

Note: U.S. dollar figures are translated, for convenience only, at the rate of ¥112.19 to US$1.00, the effective rate of exchange prevailing on March 31, 2017.

Environmental Figures
FY2012FY2013

FY2014FY2015FY2016

Energy usage (in GJ)...........................................

2,676,267

2,654,591

2,764,352

2,803,609

2,829,938

CO2 emissions (in t-CO2)....................................

118,693

124,080129,026

130,335

132,505

Number of Employees by Region

6

FY2012FY2013

FY2014FY2015FY2016

Japan.................................................................

4,344

4,432

4,340

4,168

3,836

Asia-Pacific.........................................................

4,879

5,449

5,901

5,655

5,634

Americas............................................................

1,664

1,581

1,464

1,251

1,186

Europe...............................................................

1,672

1,818

1,810

2,152

2,742

Total...................................................................

12,55913,28013,515

13,226

13,398Annual Report 2017

Net Sales

Gross Profit Ratio

Operating Income (Loss)(Millions of yen)(%)

(Millions of yen)

400,000

20

300,000

241,780

274,786

306,984 294,237
282,061

18

8,000

18.1

17.5

16

200,000

9,407

10,000

18.6

17.5

6,000

5,494

4,858

4,000

15.2

1,582

2,000
14

100,000

0

2012

2013

2014

2015

2016 (FY)

0

12

2012

2013

2014

2016

2015

(FY)

(896)

-2,0002012

Ordinary Income (Loss)Net Income (Loss) Attributableto Owners of the Parent

Total Assets(Millions of yen)

(Millions of yen)

(Millions of yen)

12,0008,000

10,314

5,843

6,000

6,138

4,976

(2,262)

253

2012

2013

300,000

2014

2015

2016 (FY)(22,488)0247,387-22,000

2012

2013

2014

2015

2016

0

(FY)

ROE

(Millions of yen)

(%)

(%)

40

15

30

10

75,677 75,503

2012

65,651
52,961

49,15940,00020

20,000

10

0

2012

2013

2014

2015

2016

(FY)

20.1

22.1

23.6

2012

2013

2014

2015

2016

(FY)

2012

(t CO2)(Persons)

150,000

15,0002,500,000

125,000

12,5002,000,000

100,000

10,0001,500,000

75,0007,500

1,000,000

50,0005,000

500,000

25,000

2,500

Japan
China

EuropeAmericas2015

Asia-Pacific2016 (FY)

0

Japan
China

2012

8.5

2015

2016 (FY)

9.9(39.6)-50

3,000,000

2014

2014

2.3

0

(GJ)

2013

280,194

5

CO2 Emissions by Region

2012299,265 301,325

23.3

15.5

0

2013

10.5

Energy Usage by Region

0277,920

100,000

Capital Adequacy Ratio

60,0002016 (FY)1,084

Total Net Assets

80,0002015

200,000
2,000-3,000

5,580

4,000

3,000
0

2014

400,000

6,965

6,000

9,000

2013

2013

EuropeAmericas

2014

2013

2014

2015

2016

(FY)

Number of Employees by Region

2015

Asia-Pacific2016 (FY)

0

2012

2013

2014

Japan
EuropeAsia-Pacific (including China)

20152016 (FY)

Americas* No companies are accounted for by the equity
method.

Sanden Holdings Corporation

7

Performance Overview
Automotive Systems
Business

Net Sales

Commercial Store Systems
Business

Other Business

70.6% ¥199,180 25.3% ¥71,311 4.1% ¥11,569(Millions of yen)

(Millions of yen)

(Millions of yen)

¥282,061(Millions of yen)

Note: Percentages have been adjusted to add to 100%.

In the fiscal year that ended in March 2017, consolidated net

The ordinary loss was ¥2,262 million (ordinary income ofsales decreased 4.1%, to ¥282,061 million, due to sales¥6,138 million in the previous fiscal year). In addition, due todeclines in the Commercial Store Systems Business in Japanthe radical implementation of structural reforms aimed atand the impact of foreign exchange rates, although sales vol-future business growth, impairment losses and restructuring

ume of overseas automotive systems increased.

expenses resulting from the integration and consolidation ofWith regard to profit and loss, operating income decreased

operations have been posted as extraordinary losses, and71.2%, to ¥1,582 million, due to partial delays in the rate of

the loss attributable to owners of parent was ¥22,488 million

improvement in the productivity of the overseas Automotive(profit attributable to owners of parent of ¥6,965 million in the

Systems Business, sales declines in the Commercial Storeprevious fiscal year).

Systems Business in Japan, and exchange rate effects.

Automotive Systems
Business

Commercial Store Systems
Business

8

Annual Report 2017

In the Automotive Systems Business, wehave promoted innovative product development that accurately captures our customers’ environmental-related needs, andoffered valuable products centering on compact, lightweight, and energy saving. As aresult, sales in Europe and China remained
steady and sales volume in the Automotive
Systems Business as a whole increased, but
overall sales were almost the same as in theprevious year due to the impact of foreignexchange and other factors.
Regarding profit and loss, although we
made efforts to take parts manufacturing­in-house and to reform the procurement
structure for global parts, profit declined
compared to the previous year due to an
investment in environmental technology
development for the future, a partial delay to

improvement in overseas productivity, andimpact of foreign exchange and other factors.
As a result, segment sales increased 0.4%,
to ¥199,180 million, and operating income
decreased 32.3%, to ¥4,418 million.

In the retail store systems sector, we continued
to create comprehensive proposals combining
products, systems, and services that reflectchanges in customers’ interest in environmental
issues and their growth strategies. Despite
these activities, industry reorganization in Japanand other changes in the market environment
caused this sector’s sales to decrease.
In the vending systems sector, there wereextensive measures to develop environmentallyfriendly products, chiefly vending machines
incorporating our exclusive CO2 heat pump. We
also intend to expand business by developing
other environmental and new products.
However, sales decreased primarily because oflower demand in Japan associated with capital
expenditures.
Although we continued to use a variety ofactions for improving operations in this segment,

chiefly by cutting costs and boosting productivity,
the decline in sales caused earnings to fall.
As a result, segment sales decreased 15.1%,
to ¥71,311 million, and the operating loss was¥370 million (¥1,894 million operating income in
the previous fiscal year).

Sales and Operating Income (Loss)(Billions of yen)
200
160

200

182

180

199

198

153

140
120
100
80
60
40
20

6.5

5.6

3.8

0
–20

4.4

(2.8)
2012

2013

2014

2016 (FY)2015

Operating Income (Loss)

Sales

Sales and Operating Income (Loss)(Billions of yen)
94

100
80

83

81

80

71

60
40
20
0
-20

3.7

3.5

6.2

1.8
(0.3)

2012

2013
Sales

2014
Operating Income (Loss)2015

2016 (FY)CSR
The Sanden Group’s Corporate Philosophy (see page 1) is the cornerstone of our corporate­activities, and our Group’s CSR activities seek to put this philosophy into practice. In order to­promote these activities across the Group, we established the CSR Promotion Committee in 2014.
Furthermore, in 2016, we established a CSR working group to periodically monitor the progress of
the activities plan and work towards further enhancing our CSR activities.

CSR Priority Areas
Based on the founding spirit of Sanden, “Let us develop with wisdom and prosper
in harmony” (see page 1), in the previous fiscal year, we established the “environment” and “people” as the CSR areas we should place an emphasis on tackling,
towards realizing a sustainable society and from the perspectives of the “importance to management” and the “importance against the demands of society(the expectations of our stakeholders)”.

Importance in the light ofsocial requirements(Expectations of stakeholders)Material
CSR
Domains

Environment

PeopleMateriality

Importance for management

Environment
Based on our management policy of “to create corporate value from the environment”,
the Sanden Group’s environmental activities revolve around “technological development”
and “contributing to society”.
We are pushing forward with a sense of urgency the development of environmental
technologies that will contribute to resolving global environmental problems, with “coolingand heating” as core technologies.
The Sanden Forest/Akagi Plant, which was built on the concept of “a harmonious
coexistence between the environment and industry”, celebrated its 15th anniversary in
April 2017. While working with local NPOs and other various organizations to help promote the creation of a local community rich in nature, the plant welcomes 15,000 visitorsa year, such as when being utilized as a place for the environmental education of elementary and junior high school students.
Having been awarded the Prime Minister’s Award for Outstanding Merit concerning
Greenification Campaigns (2013), Social and Environmental Green Evaluation System(SEGES) Superlative Stage (2014), and the Civil Engineering Design Prize (2016), theplant is the “environmental” symbol of the Sanden Group.

An aerial view of the Sanden Forest/
Akagi Plant

People“A company is as good as the people it keeps.”
This is Sanden’s basic philosophy that “teamwork among employees and within the organization is the basis of the Company’s prosperity”, handed down from the time of its founding.
Based on this philosophy, we have proactively engaged in “diversity promotion”, “worklife balance measures”, and “personnel training” as priority issues.
In December 2016, we held the “Sanden Diversity Forum 2016” based on the theme of“what is diversity from a management strategy perspective?” Approximately 130 peoplecame together at the venue, such as female leaders from Group companies, leader candidates, and their immediate supervisors, as well as people participating remotely using
tablet devices.
In addition, the President holds “Humanity Training Workshop” sessions for the trainingof the next generation of senior management. Selected young employees from each division are learning communication, presentation, and coaching skills, etc.
We aim to create a work environment in which each person can work in a lively mannerand enables them to fully demonstrate a diverse range of values and strengths.

A company is as good as the people
it keeps.

On March 8, 2017, the European Commission decided to impose total fines of approximately 64 million euros on Sanden Holdings Corporation (Sanden HD) and its wholly owned
European subsidiary Sanden International (Europe) Ltd. in connection with certain automotive air-conditioning systems business, for violations of the EU competition law with respect
to sales made in Europe.
Sanden HD has taken appropriate measures continually to review its compliance system, internal rules, and compliance training for employees in order to prevent a recurrence.
Sanden HD will continue strengthening its system for thorough compliance with laws and regulations throughout its global organization to rebuild trust from its stakeholders.

Sanden Holdings Corporation

9

Results of Activities
The following Sanden Group milestones and external awards were realized from April 1, 2016 to
March 31, 2017.

2016
Apr.

May

June

 elocation of Tokyo
R
Headquarters

 arket Expansion ofM“Ice Cold Machines”
for Convenience
Stores (Coca Cola)
 onstruction Begins on
CChinese Environmental
Testing Facility

JulyLaunch of “e-mesh moderno”
We launched the cloud-based temperature andhumidity monitoring service “e-mesh moderno”
that utilizes IoT technologies.

Base station

Tokyo Headquarters
relocated to Akihabara
Daibiru Building

Polish Plant
Compressors
Operation ofSecondary LineAug.

Temperature and humidity sensor

 nnouncement of Drastic
A
Structural Reforms
1. Review of business portfolio
2. Integration and consolidation ofoperations and organizations
3. Optimization of personnel structure
4. Consolidation of procurement
sources
5. Selection and concentration of
investments
6. Drastic review of expenditures
7. Financial structure reform

Topics6 Sanden Group employees received“2016 Prize for Creativity by the
Minister of Education, Culture,
Sports, Science and Technology”

The 9th Global STQM World
Convention HeldAwarded “Order of Meritof the Italian Republic”

Awarded “President Gold Award” at the
Office, Sales and Service Category
Times Square Circle

10 Annual Report 2017

The 9th All Japan QC Circle Conference

We held the Global STQM Conference at theSanden Forest/Akagi Plant in Gunma Prefecture,a unique set of management quality reforms
throughout the Sanden Group.

2017
Sept.

Oct.

Nov.

Dec.

Feb.

Mar.

 roposal of “Cold-Chain” that Connects
P
Freshness at Supermarket Trade Show aunch of IPC Supply
L(Integrated Parking Cooling System for
Scania, Daimler, and Volvo trucks)
We launched air-conditioning
systems that can be used
when the engine is stopped
for truck manufacturers.

 aunch of ShowcasesLin 4 ASEAN Countries(Thailand, Malaysia,
Myanmar, Vietnam)Jan.

 rench Plant
F
Compressor Production
50 Million Units Reached aunch of New-Type Electric
L
Compressor and Hot Water Heaterfor Fuel Cell Vehicles

We newly introduced showcases for convenience stores.

Electric Compressor

Hot Water Heater

 onstruction of New Plant
C
Begins for Compressors/
Climate Systems for Automotive
Air Conditioners in China
 erger of Domestic
M
Manufacturing
Subsidiaries
5 Automotive Systems
Business related subsidiaries
merged into Sanwa Co., Ltd.,and 3 Commercial Store
Systems Business related
subsidiaries merged into
Sanwa Fabtech Co., Ltd.

Awarded the “Minister ofthe Environment Ozone
Layer Protection/Global
Warming Protection
Prize” for the development

Awarded “Quality ExcellenceAward” and “Innovation Award”
by Volvo

and implementation of built-in
refrigerator/stand-alone typeCO2 systems for small storesAwarded “President Silver Award” atthe 46th All Japan QC Circle Conference

Received the ExcellenceAward of the “Civil

Engineering Design
Prize” for landscape andconservation that unites thesurrounding environment andthe local region as a result oforiginality and ingenuity at theSanden Forest/Akagi Plant

Hot Forging Circle

Sanden Holdings Corporation 11

Corporate GovernanceFundamental Corporate Governance Policies
Employing the “company with auditors” model basedon Japan’s Corporate Law, Sanden has created a
corporate governance system that includes a Board of
Directors, Audit & Supervisory Board Members, an Audit& Supervisory Board, and an accounting auditor. In
addition, with the aim of securing the transparency andobjectivity of management, Sanden has also establisheda Nomination and Compensation Committee as an­advisory committee to the Board of Directors.
The Board of Directors has 10 members, including
three outside directors, while the Audit & Supervisory
Board has four members, including three outside Audit& Supervisory Board Members.
To strengthen management oversight functions,
Sanden appoints fully independent outside directors
and outside Audit & Supervisory Board Members.
Currently, Sanden’s four outside executives are certified
as “independent” under the Securities Listing

Regulations of the Tokyo Stock Exchange. By setting
directors’ terms to one year, Sanden has put in placea system to ensure management transparency and onethat enables quick responses to changes in the market
environment. Also, by adopting a Corporate Officer system, the Group aims to strengthen business executionfunctions and increase management efficiency.
Moreover, the Management Committee and Board of
Directors deliberate in a timely fashion on importantmatters in compliance and risk management.
Furthermore, by putting in place internal and external
hot lines as an internal reporting system, Sanden is
working to strengthen risk management, corporate
ethics, and legal compliance. In view of such factors
as Sanden’s business category, history, and culture,
the Company has judged that the current system
is appropriate for the corporate governance of
the Sanden Group.

Sanden’s Corporate Governance and Internal Control Organization Units
and Their Interrelationships
General Meeting of Shareholders
Appointment/Removal

Appointment/Removal

3 Outside Directors

Board of Directors(3 Independent Directors)(10 Directors)

Supervision/advice

Nomination
andCompensation
Committee
Advisory
committee

Representative Director
President

Management
Committee
Drafting Management
Strategies
Directors

Directors,
Corporate Officers

The Company

Business Companies, Subsidiaries,
and Affiliated Companies

12 Annual Report 2017

3 Outside Audit &Supervisory Board Members(2 Independent Audit &Supervisory Board Members)

Internal
Auditors
Business
Execution

Audit & Supervisory Board(4 Audit & Supervisory Board Members)

Internal
Auditing

Accounting
AuditorAccounting Auditing

AuditingDirectors/Audit & Supervisory Board Members/Corporate Officers

Directors

Corporate Officers

Mitsugi Takahashi

Mitsunori Kodaka

Takao Kaihatsu

Takashi Shimomura

Kin-ei Kanda

R&D, Production, MPS,
Quality

Tsuguo Ito

Kenichi Yamamoto

Senior Director

Tadashi Kondo

Shigeharu Nakamura

Administration,
Human resources

Akihiro Yamato

Norio Kamikura

Takashi Kageyama

Yuri Tsuji

Shinji Maruyama

Yoshihiro Tachikawa

Nobuhiro Umemura

Hideyuki Kobayashi

Director & Chairman
Director & President

Tsutomu Sakakibara
Director & Executive Vice
President
Management system,
Corporate GovernanceMark Ulfig

Director & Executive Vice
President
Global business

Katsuya Nishi

Director & Executive Vice
President

Executive Director

Ryuhei Ushikubo

Hideto Ozaki

Director (outside)

Hideo Hohgi

Director (outside)

Naonori Kimura
Director (outside)

Executive Corporate Officer
Executive Corporate Officer
Senior Corporate Officer
Senior Corporate Officer
Senior Corporate Officer
Corporate Officer
Corporate Officer

Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer

Hiroshi Takahashi

Planning, Control, Finance,
Accounting

Corporate Officer

Audit & Supervisory Board Members
Shinji Ichikawa

Ichiro Yumoto

Audit & Supervisory Board
MemberAudit & Supervisory Board
Member (outside)

Hiroshi Yomo

Kazumichi Matsuki

Audit & Supervisory Board
Member (outside)

Audit & Supervisory Board
Member (outside)

As of June 2017

Sanden Holdings Corporation 13

Financial Section

Management’s Discussion & Analysis
Net Sales

ly friendly products, chiefly vending machines incorporating our

On a consolidated basis of the Sanden Group, net sales for fiscal

exclusive CO2 heat pump. Sanden also intended to expand busi-

year 2016, ended March 31, 2017 decreased by 4.1%, or ¥12.1

ness by developing other environmental and new products.

billion, compared with the previous fiscal year, to ¥282.0 billion

However, sales decreased primarily because of lower demand in($2,514.1 million).

Japan associated with capital expenditures.

First, in the Automotive Systems Business, Sanden has promot-

Although Sanden continued to use a variety of actions fored cutting-edge product development that accurately captures its

improving operations in this segment, chiefly by cutting costs andcustomers’ environmental-related needs, and offered valuable prod-

boosting productivity, the decline in sales caused earnings to fall.

ucts centering on compact, lightweight, and energy-saving fea-

As a result, segment sales were ¥71.3 billion ($635.6 million),tures. As a result, sales in Europe and China remained steady anddown 15.1% from the previous fiscal year, and the operating loss

sales volume in the Automotive Systems Business as a wholewas ¥0.3 billion ($3.2 million) (compared with ¥1.8 billion in operat-

increased, but overall sales were almost the same as in the previ-

ing income in the previous fiscal year).

ous year due to the impact of foreign exchange and other factors.

In the Eco Systems and Other Products Business, based on our

Regarding profit and loss, although Sanden made efforts to takecore strategies for future growth, Sanden is promoting, in addition

parts manufacturing in-house and to reform the procurement struc-to a heat pump water heater that uses the natural CO2 refrigerant

ture for global parts, profit declined compared to the previous year(“Eco Cute”), global expansion for its heat pump for space heating

due to an investment in environmental technology development forand other items that use environmental technologies, and is also

the future, a partial delay to improvement in overseas productivity,

working on expanding to other new business areas.

and the impact of foreign exchange and other factors.
As a result, segment sales were ¥199.1 billion ($1,775.3 million),up 0.4% from the previous fiscal year. Operating income was ¥4.4

Costs, Expenses, and Earnings

billion ($39.3 million), representing a decrease of 32.3% from the

Net sales decreased by 4.1%, or ¥12.1 billion, to ¥282.0 billion

previous fiscal year.

($2,514.1 million) as mentioned above. Cost of sales decreased bySecond, in the Retail Store Systems Sector of the Commercial

3.4%, or ¥8.1 billion, compared with the previous fiscal year, toStore Systems Business, Sanden continued to create comprehen-¥232.7 billion ($2,074.5 million). Consequently, gross profit amount-sive proposals combining products, systems, and services thated to ¥49.3 billion ($439.6 million), down 7.5%, or ¥3.9 billion, andreflect changes in customers’ interest in environmental issues andthe gross profit ratio fell from 18.1% to 17.5%.

their growth strategies. Despite these activities, industry reorganiza-

SG&A expenses decreased to ¥47.7 billion ($425.5 million), andtion in Japan and other changes in the market environment caused

the ratio of SG&A expenses to net sales rose 0.6 percentage point,

this sector’s sales to decrease.

to 16.9%, compared with the previous fiscal year. Research andIn the Vending Systems Sector of the Commercial Store Systems

development (R&D) expenses, which are charged to manufacturing

Business, there were extensive measures to develop environmental-

costs and SG&A expenses, increased 16.8%, to ¥7.9 billion ($70.5

Breakdown of Net Sales

4.1%
25.3%

Net Sales

Gross Profit Ratio(Billions of yen)
350

(%)
20

300

Net Sales

15250¥282,061

200(Millions of yen)

10
150

70.6%

100

5

50

Automotive Systems Business Group
Commercial Store Systems Business Group
Other Business Group

14 Annual Report 2017

0

2011

2012

2013

2014

2015

2016

(FY)

0

2011

2012

2013

2014

2015

2016

(FY)

million). The ratio of R&D expenses to net sales rose 0.5 percentagelion) as well as equity in net income of affiliates amounting to ¥3.3

point, to 2.8%, compared with the previous fiscal year.

billion ($30.1 million), which is non-cash income, negatively affected
operating cash flows, the Company reported net cash inflows fromOperating income amounted to ¥1.5 billion ($14.1 million),

operating activities that mainly resulted from depreciation and amor-­compared with ¥5.4 billion in the previous fiscal year.

tization amounting to ¥12.0 billion ($107.6 million), which are non-Other income (expenses) amounted to a loss of ¥20.5 billion($183.1 million), compared with a gain of ¥2.4 billion in the previous

cash expenses, as well as from changes in assets or liabilities,

fiscal year.

including a decrease in inventories of ¥2.2 billion ($20.3 million).

As a result of the above factors, loss before income taxes was

Net cash used in investing activities amounted to ¥10.3 billion¥18.9 billion ($169.0 million), compared with income of ¥7.9 billion($92.4 million), which was ¥4.5 billion lower than the ¥14.9 billion

in the previous fiscal year. Net loss attributable to owners of theused in the previous fiscal year. Major investing cash outflows­parent amounted to ¥22.4 billion ($200.4 million), compared withincluded purchases of property, plant and equipment, mainly forincome of ¥6.9 billion in the previous fiscal year. Return on equity

overseas investments related to the transition to local production

was down from 9.9% to -39.6%.

and in-house production, of ¥13.4 billion ($120.1 million), and payments for investments in affiliates of ¥3.0 billion ($26.9 million). The
principal investing cash inflow was proceeds from sale of property,

Financial Position

plant and equipment of ¥6.3 billion ($56.9 million).

Total assets at March 31, 2017 decreased by ¥21.1 billion, to

Net cash used in financing activities came to ¥2.4 billion ($22.0¥280.1 billion ($2,497.4 million), mainly reflecting a decrease inmillion). Factors accounting for this were proceeds from long-term

notes and accounts receivable-trade.

debt and a net increase in short-term bank loans of ¥21.2 billion

Total liabilities rose by ¥5.2 billion, to ¥231.0 billion ($2,059.3 mil-($188.9 million), which were offset by the repayment of long-term
debt of ¥19.8 billion ($176.7 million) and cash dividends paid oflion), mainly reflecting an increase in payables-other.

¥2.0 billion ($18.5 million).

Total net assets decreased by ¥26.3 billion, to ¥49.1 billion

Taking into consideration these cash flows together with the($438.1 million), largely owing to the impact of the loss attributableeffect of exchange rate changes on cash and cash equivalents,

to owners of the parent.

cash and cash equivalents at the end of the fiscal year were ¥14.0
billion ($125.1 million), which was ¥3.4 billion lower than the cash
Liquidity

and cash equivalents of ¥17.4 billion at the end of the previous(1) Cash Flows­fiscal year.

Net cash provided by operating activities for the fiscal year underreview amounted to ¥10.0 billion ($89.5 million), which was ¥3.7 bil-(2) Capital Demands

lion higher than the ¥6.3 billion reported in the previous fiscal year.

The Sanden Group requires working capital primarily for the

While the net loss before income taxes of ¥18.9 billion ($169.0 mil-­purchase of materials and parts for products manufactured by the

Net Income (Loss) Attributable to Ownersof the Parent

Net Income (Loss) per ShareTotal Assets/Capital Adequacy Ratio(Billions of yen)
10

(Yen)
50

(Billions of yen)
300

(%)
30

8

40

250

25

6

30

200

20

4

20

150

15

2

10

100

10

0

0

50

5

-20

2011

2012

2013

2014

2015

2016

(FY)

-150

2011

2012

2013

2014

2015

2016

(FY)

0

2011

2012

2013

2014

2015

2016 (FY)0

Total Assets (left scale)
Capital Adequacy Ratio (right scale)

Sanden Holdings Corporation 15

Sanden Group, manufacturing costs, and operating expenses suchmeasures to control risks. Please note that forward-looking state-

as SG&A expenses.

ments below are based on Sanden Group judgments made at theMoreover, funds for capital investment are mainly required forend of the fiscal year under review.

enhancing both local production and self-manufacture to strengthen the global production system and developmental facilities, main-(1) Economic Conditions

taining and renewing facilities related to streamlining, and acquiring

The Sanden Group mainly sells automotive air-conditioning sys-

molds for production. In the fiscal year under review, capital invest-

tems, air-conditioner compressors, vending machines, and refriger-

ments principally comprised investments related to the Group’s

ated showcases throughout the world. Demand for these products

Automotive Systems Business in Japan and overseas.

is affected by economic conditions in the various countries andregions in which these products are sold. In particular, automotive(3) Financing

market trends in North America, Europe, Asia, and China, where weWith regard to financing, the Sanden Group makes decisions

operate the Automotive Systems Business, may affect the Sanden

according to the intended use of funds as well as the timing,

Group’s business results and financial position.

­duration, and the region in which the funds are required.
The Sanden Group companies principally secure the required(2) Fluctuations in Exchange Rates

working capital by short-term bank loans. As of March 31, 2017,

The Sanden Group’s global operations, including its Automotive

short-term bank loans amounted to ¥54.5 billion ($485.9 million)

Systems Business, involve foreign currency transactions. In par­and were denominated primarily in Japanese yen, the U.S. dollar,

ticular, exchange rate fluctuations in the Sanden Group’s major

and the Euro.

transaction currencies, the U.S. dollar and the Euro, and currency

Funds for production facilities are obtained through long-termloans. As of March 31, 2017, long-term bank loans amounted tofluctuations in China and other parts of Asia may affect the SandenGroup’s business results and financial position.

¥73.9 billion ($659.3 million). A large part of the long-term bankIn addition, the currencies stated in the financial statements ofloans was borrowed with fixed interest rates from financial institu-

consolidated overseas subsidiaries and companies accounted fortions. It included ¥18.9 billion ($168.7 million), which was borrowedby the equity method have been translated into Japanese yen andduring the fiscal year under review, mainly in Japan for investment

recorded in the Company’s consolidated financial statements.

in facilities.

Therefore, the translation rate may affect net income and stock­

The Sanden Group considers interest rates, the market environment, the ratio of direct and indirect fund-raising, bond ratings, andholders’ equity as accounted for in the consolidated financial­statements.

the business situation between financial institutions and the SandenGroup when deciding on an appropriate long-term fund-raising(3) Changes in Raw Material and Parts Market Conditions

plan.

Operations of the Automotive Systems Business and the

The Sanden Group aims to maintain a firm financial position

Commercial Store Systems Business primarily involve the manu­

and believes the net cash provided by operating activities, indirect

facture and sales of products and systems. As these operations

financing through loans and the issuance of bonds, and direct

involve the procurement of raw materials and parts, upswings infinancing through the issuance of stock provide possible sources

these markets resulting in higher manufacturing costs may affectof funds for future growth.

the Sanden Group’s business results and financial position.

Business and Other Risks(4) Natural Disasters

The following is an overview of major business and other risks faced

If the manufacturing and business bases of the Sanden Groupby the Sanden Group that may significantly affect investors’ deci-­suffer serious damage as a result of a natural disaster such as ansions. The Sanden Group examines risks and takes appropriate

earthquake, the Sanden Group’s business results and financial

16 Annual Report 2017

position may be impacted by the halting of production activities(8) Reliance on Customer Performanceand delay in the deliveries of materials and parts.

The Sanden Group provides products to automobile and beverage
manufacturers around the world. Therefore, customer performance(5) New Product Development

and other factors that are beyond the control of the management of

The operations of the Automotive Systems Business and thethe Sanden Group may affect the Group’s business results andCommercial Store Systems Business extend throughout the world

financial position.

and encompass the development of cutting-edge technologies andthe application of those technologies to products. At times, the(9) Limitations on Intellectual Property Protection

Sanden Group may not be able to fully predict or respond to market

The Sanden Group has accumulated a wide range of proprietary

trends and changes, and this may have an impact on the successtechnologies, know-how, and other intellectual property through itsof product development and market introduction. These circum-

development activities over the long period since its establishment.

stances may affect the Sanden Group’s business results andLegal restrictions in certain regions may prevent the Sanden Group­financial position.

from completely protecting its intellectual property or restrain the
Sanden Group from fundamentally restricting third parties to manu-(6) Potential Risks Associated with International Operations
and Entry into Overseas Markets

facture imitations of the Sanden Group’s products through the useof its intellectual property.

The operations of the Automotive Systems Business and theCommercial Store Systems Business encompass development,(10) Product Liability

manufacturing, and sales bases located in 23 countries and regions

The Sanden Group is continuing quality control initiatives based on

in North America, Europe, Asia, and China. Business activities in

its Sanden Total Quality Management (STQM). However, productthese countries and regions are subject to the following risks:liability claims related to items manufactured by the Sanden Group• Changes in and revisions to laws and regulations in countries

in the past, at present, and into the future could affect the Sanden

in which the Sanden Group operates,

Group’s business results and financial position.

• Changes in the economic and political climate,• Unstable political situations, including wars,(11) Legal and Regulatory Risks• Labor disputes, andThe Sanden Group is subject to various governmental regulations in• Marine transport-related strikes.

the countries and regions in which it operates, including those relat-

Any of the aforementioned events may affect the Sanden Group’sbusiness results and financial position.

ed to business investment permits, export restrictions, taxation, theenvironment, and other matters. In the event that these regulations
are changed or new regulations are introduced, this could affect the(7) Price Competition
The Sanden Group’s operating conditions are marked by increas-

Sanden Group’s business results and financial position.
Meanwhile, the Company and certain subsidiaries have enteredingly fierce price competition in the automobile and vending

into a plea agreement with the U.S. Department of Justice and havemachine industries, and demands from automobile and beverage

received notification to pay a fine from the European Commission

manufacturers to lower prices intensify every year.

regarding violations of certain antitrust laws in connection with spe-

The Sanden Group believes that its products possess a competi-

cific automotive air-conditioning systems transactions. In this con-tive advantage in terms of quality, cost, and technology. However,text, the possibility exists that certain customers and other parties

in the aforementioned difficult business environment, there is no

may file civil actions against the Group. Taking into consideration

guarantee of maintaining such advantages, including the supply

the difficulty in predicting any outcome at this time, the Sandenof materials and parts, and this may affect the Sanden Group’sGroup is unable to clarify the impact on its business results andbusiness results and financial position.

financial position.

Sanden Holdings Corporation 17

Consolidated Balance Sheets
Sanden Holdings Corporation and Consolidated Subsidiaries
March 31, 2017 and 2016
Thousands of
U.S. dollars (Note 1)

Millions of yen

2016

2017

¥ 17,491$  125,144

62,59323,374
5,498(1,863)50,5852,359
12,922
172,961

497,441
217,737
40,707(6,711)
420,536
21,142
84,5701,400,588

22,567
9,299
90
2,621
4,422
6,026
(3,216)
41,811

21,343
7,860
115
2,765
4,906
1,994
(177)
38,808201,149
82,886
802
23,362
39,41553,712(28,665)
372,680

Property, plant and equipment, at cost (Note 9):Land����������������������������������������������������������������������������������������������������������������������������������������������������
17,879Buildings and structures������������������������������������������������������������������������������������������������������������������������
62,128���������������������������������������������������������������������������������������������������������������������
Machinery and equipment
106,240
Furniture and fixtures����������������������������������������������������������������������������������������������������������������������������
43,482
Lease assets����������������������������������������������������������������������������������������������������������������������������������������
23,394
Construction in progress�����������������������������������������������������������������������������������������������������������������������
5,562  Total������������������������������������������������������������������������������������������������������������������������������������������������ 258,688
Accumulated depreciation��������������������������������������������������������������������������������������������������������������������� (177,438)   Net property, plant and equipment�����������������������������������������������������������������������������������������������������
81,25018,69762,489105,423
42,64020,885
7,943
258,079(168,523)
89,555

159,363553,774
946,964
387,574
208,52149,5762,305,802(1,581,584)
724,217

Total assets ����������������������������������������������������������������������������������������������������������������������������������������� ¥280,194¥301,325$2,497,495

ASSETS2017

Current assets:
Cash and time deposits (Notes 6, 9 and 15)������������������������������������������������������������������������������������������� ¥ 14,040
Receivables (Notes 6 and 9):   Trade notes and accounts�����������������������������������������������������������������������������������������������������������������
55,808   Unconsolidated subsidiaries and affiliates�������������������������������������������������������������������������������������������
24,428  Other�����������������������������������������������������������������������������������������������������������������������������������������������
4,567   Allowance for doubtful accounts��������������������������������������������������������������������������������������������������������
(753)
Inventories (Notes 3 and 9)��������������������������������������������������������������������������������������������������������������������
47,180
Deferred income taxes (Note 5)��������������������������������������������������������������������������������������������������������������
2,372
Prepaid expenses and other current assets��������������������������������������������������������������������������������������������
9,488   Total current assets ������������������������������������������������������������������������������������������������������������������������� 157,132

Investments and other assets:
Investment securities (Notes 4 and 6):   Unconsolidated subsidiaries and affiliates�������������������������������������������������������������������������������������������
  Other�����������������������������������������������������������������������������������������������������������������������������������������������
Net defined benefit asset (Note 8)����������������������������������������������������������������������������������������������������������
Deferred income taxes (Note 5)��������������������������������������������������������������������������������������������������������������
Intangible assets�����������������������������������������������������������������������������������������������������������������������������������
Other���������������������������������������������������������������������������������������������������������������������������������������������������
Allowance for doubtful accounts������������������������������������������������������������������������������������������������������������
   Total investments and other assets����������������������������������������������������������������������������������������������������

See accompanying notes.

18 Annual Report 2017

Thousands of
U.S. dollars (Note 1)

Millions of yen

2016

2017

¥ 52,873
20,447$  485,943
265,52255,019
1,101
11,193
681
4,279
2,657
1,551
6
8,783
158,593461,788
10,883130,9298,851
33,80851,876
16,93562
78,901
1,545,556

44,181
3,257
112
1,724
5,247
3,115
57,63755,621
3,452
179
305
4,800
2,867
67,228393,805
29,031
998
15,366
46,76827,765
513,744

11,037
3,747
29,447

11,037
3,747
54,021

98,37733,398262,474(1,203)43,028(1,221)
67,584(10,722)
383,5273,618(16)(2,048)(1,032)
520

2,496
(147)
1,464
(1,299)2,513

32,248(142)(18,254)(9,198)
4,634

Non-controlling interests in consolidated subsidiaries�������������������������������������������������������������������������
5,610
Total net assets�������������������������������������������������������������������������������������������������������������������������������������� 49,159   Total liabilities and net assets�������������������������������������������������������������������������������������������������������������� ¥280,194

5,405
75,503¥301,325

50,004438,176$2,497,495

LIABILITIES AND NET ASSETS

2017

Current liabilities:
Short-term bank loans (Notes 6 and 9)����������������������������������������������������������������������������������������������������� ¥ 54,518
Long-term debt due within one year (Notes 6 and 9)��������������������������������������������������������������������������������� 29,789
Payables (Note 6):   Trade notes and accounts������������������������������������������������������������������������������������������������������������������� 51,808   Unconsolidated subsidiaries and affiliates���������������������������������������������������������������������������������������������
1,221  Other������������������������������������������������������������������������������������������������������������������������������������������������� 14,689
Income taxes payable (Notes 5 and 6)������������������������������������������������������������������������������������������������������
993
Accrued employees’ bonuses������������������������������������������������������������������������������������������������������������������
3,793
Accrued liabilities������������������������������������������������������������������������������������������������������������������������������������
5,820
Lease obligations due within one year (Notes 6 and 9)������������������������������������������������������������������������������
1,900
Deferred income taxes (Note 5)����������������������������������������������������������������������������������������������������������������
7
Other current liabilities����������������������������������������������������������������������������������������������������������������������������
8,852   Total current liabilities������������������������������������������������������������������������������������������������������������������������� 173,396
Long-term liabilities:
Long-term debt due after one year (Notes 6 and 9)�����������������������������������������������������������������������������������
Net defined benefit liability (Note 8)����������������������������������������������������������������������������������������������������������
Officers’ retirement benefits��������������������������������������������������������������������������������������������������������������������
Deferred income taxes (Note 5)����������������������������������������������������������������������������������������������������������������
Lease obligations due after one year (Notes 6 and 9)��������������������������������������������������������������������������������
Other noncurrent liabilities (Note 13)��������������������������������������������������������������������������������������������������������
   Total long-term liabilities���������������������������������������������������������������������������������������������������������������������
Contingent liabilities (Note 12)
Net assets (Note 10):Stockholders’ equity:
Common stock:  Authorized: 396,000,000 shares  Issued:
140,331,565 shares��������������������������������������������������������������������������������������������������������
����������������������������������������������������������������������������������������������������������������������������������������
Capital surplus
Retained earnings�����������������������������������������������������������������������������������������������������������������������������������
Treasury stock, at cost:   2,197,243 and 2,222,736 shares in 2017 and 2016, respectively����������������������������������������������������������
   Total stockholders’ equity��������������������������������������������������������������������������������������������������������������������
Accumulated other comprehensive income:Net unrealized gains (losses) on securities, net of taxes�����������������������������������������������������������������������������
Unrealized gains (losses) on hedging derivatives, net of taxes��������������������������������������������������������������������
Foreign currency translation adjustments�������������������������������������������������������������������������������������������������
Remeasurements of defined benefit plans, net of taxes�����������������������������������������������������������������������������
   Total accumulated other comprehensive income�����������������������������������������������������������������������������������

See accompanying notes.

Sanden Holdings Corporation 19

Consolidated Statements of Operations
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016
Thousands of
U.S. dollars (Note 1)

Millions of yen

2017

Net sales (Note 19)������������������������������������������������������������������������������������������������������������������������������������ ¥282,061
Cost of sales�������������������������������������������������������������������������������������������������������������������������������������������� 232,742
Gross profit���������������������������������������������������������������������������������������������������������������������������������������������� 49,319
Selling, general and administrative expenses (Note 20)�������������������������������������������������������������������������� 47,737
Operating income (Note 19)����������������������������������������������������������������������������������������������������������������������
1,582
Other income (expenses):
Interest and dividend income�������������������������������������������������������������������������������������������������������������������
248
Exchange gains (losses), net��������������������������������������������������������������������������������������������������������������������
(2,838)Equity in net income of affiliates��������������������������������������������������������������������������������������������������������������
3,385Interest expense�������������������������������������������������������������������������������������������������������������������������������������
(2,218)
Allowance for doubtful accounts��������������������������������������������������������������������������������������������������������������
(1,702)
Taxes and dues��������������������������������������������������������������������������������������������������������������������������������������
(673)
Gain (loss) on sales and disposals of property, plant and equipment, net����������������������������������������������������
2,386
Extraordinary product warranty cost (Note 21)������������������������������������������������������������������������������������������
(3,410)Loss related to antitrust law (Note 22)������������������������������������������������������������������������������������������������������
(7,777)Structure reform cost (Notes 23 and 24)��������������������������������������������������������������������������������������������������
(7,803)
Other, net�����������������������������������������������������������������������������������������������������������������������������������������������
(145)   Other income (expenses)��������������������������������������������������������������������������������������������������������������������� (20,548)
Income (loss) before income taxes��������������������������������������������������������������������������������������������������������� (18,966)
Income taxes (Note 5):
Current��������������������������������������������������������������������������������������������������������������������������������������������������
1,812
Deferred�������������������������������������������������������������������������������������������������������������������������������������������������
1,071   Total income taxes������������������������������������������������������������������������������������������������������������������������������
2,884
Net income (loss)������������������������������������������������������������������������������������������������������������������������������������� (21,850)
Net income attributable to non-controlling interests����������������������������������������������������������������������������
638
Net income (loss) attributable to owners of the parent������������������������������������������������������������������������� ¥ (22,488)

2016

2017

¥294,237
240,926
53,31147,8165,494$2,514,136
2,074,534
439,602425,501
14,101237(1,248)4,147(2,585)
—
(486)
218
—
—
—
2,128
2,410
7,905

2,210
(25,296)
30,172(19,770)(15,170)(5,998)21,267(30,394)(69,319)(69,551)(1,292)(183,153)(169,052)

1,196
(987)
208
7,696
731
¥  6,965

16,151
9,546
25,706(194,758)
5,686$ (200,445)

Yen

U.S. dollars (Note 1)

2017

Amounts per share of common stock:
Net income (loss):  Basic������������������������������������������������������������������������������������������������������������������������������������������������� ¥ (162.82)  Diluted�����������������������������������������������������������������������������������������������������������������������������������������������—Cash dividends applicable to the year������������������������������������������������������������������������������������������������������� ¥      —

2016

2017

¥  50.43—¥  15.00$    (1.45)—$       —See accompanying notes.

Consolidated Statements of Comprehensive Income
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016
Millions of yen

2017

Thousands of
U.S. dollars (Note 1)

2016

2017

Net income (loss)������������������������������������������������������������������������������������������������������������������������������������� ¥(21,850)
Other comprehensive income (Note 11):
Net unrealized gains (losses) on securities, net of taxes ����������������������������������������������������������������������������
1,116
Unrealized gains (losses) on hedging derivatives, net of taxes �������������������������������������������������������������������
131
Foreign currency translation adjustments ������������������������������������������������������������������������������������������������ (2,406)
Remeasurements of defined benefit plans, net of taxes ����������������������������������������������������������������������������
266
Share of other comprehensive income of affiliates accounted for using equity method ������������������������������� (1,490)
Total other comprehensive income��������������������������������������������������������������������������������������������������������������� (2,381)
Comprehensive income��������������������������������������������������������������������������������������������������������������������������� ¥(24,232)¥7,696$(194,758)(2,111)(44)(2,831)343(1,007)(5,652)¥2,044

9,947
1,167(21,445)
2,370(13,281)(21,222)$(215,990)

Total comprehensive income attributable to:
Owners of the parent������������������������������������������������������������������������������������������������������������������������������ ¥(24,481)
Non-controlling interests�������������������������������������������������������������������������������������������������������������������������
249¥1,664380$(218,210)
2,219

See accompanying notes.

20 Annual Report 2017

Consolidated Statements of Changes in Net Assets
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016
Millions of yen
Stockholders’ equity

CommonCapitalYear ended March 31, 2016stock
surplus
Balance at beginning of year
¥11,037 ¥4,453
Change in treasury shares of parent arising from transactions with non-controllingshareholders��������������������������������������������
—(731)
Net income attributable to owners of
the parent������������������������������������������������——Cash dividends paid (¥10.00 per share)�������
——Increase in net unrealized gains (losses)
on securities, net of taxes��������������������������
——Decrease due to changes in fair valueof hedging derivatives�������������������������������
——Adjustments from translation offoreign currency financial statements���������
——Remeasurements of defined benefit plans����
——Increase in non-controlling interests�������������
——Disposal of treasury stock����������������������������
—24
Acquisition of treasury stock������������������������
——Balance at end of year���������������������������� ¥11,037 ¥3,747

Accumulated other comprehensive income
Remeasure­Totalments ofaccumulated
definedotherbenefit plans, comprehensive
net of taxes
incomeRetainedearnings

Treasurystock,
at costTotal
stockholders'equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes

Noncontrollinginterests inconsolidated
subsidiaries

Total
net assets¥48,438¥(1,190)¥62,739¥4,625¥(102)¥4,934¥(1,642)¥7,814¥5,123¥75,677

—

—

(731)

—

—

—

—

—

—

(731)

6,965
(1,381)——

6,965(1,381)

—
—

—
—

—
—

—
—

—
—

—
—

6,965
(1,381)———(2,128)———(2,128)—(2,128)

—

—

—

—

(44)

—

—

(44)

—

(44)

—
—
—
—
—
¥54,021

—
—
—
456
(488)
¥(1,221)

—
—
—
481
(488)
¥67,584—————¥2,496—————¥(147)(3,470)————¥1,464—343———¥(1,299)(3,470)343———¥2,513——281——¥5,405(3,470)
343
281
481
(488)
¥75,503

Accumulated other comprehensive income
Remeasure­Totalments of
Foreignaccumulated
currency
definedothertranslation
benefit plans, comprehensive
adjustments
net of taxes
incomeNoncontrollinginterests inconsolidated
subsidiaries

Total
net assets

Foreigncurrencytranslation
adjustments

Millions of yen
Stockholders’ equity

Year ended March 31, 2017
Balance at beginning of year
Net loss attributable to ownersof the parent���������������������������������������������Cash dividends paid (¥15.00 per share)�������
Increase in net unrealized gains (losses)
on securities, net of taxes��������������������������
Decrease due to changes in fair valueof hedging derivatives�������������������������������
Adjustments from translation of foreign
currency financial statements��������������������
Remeasurements of defined benefit plans����
Increase in non-controlling interests�������������
Disposal of treasury stock����������������������������
Acquisition of treasury stock������������������������
Balance at end of year��������������������������������

Retainedearnings

Treasurystock,
at costTotal
stockholders'equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes¥11,037 ¥3,747¥54,021¥(1,221)¥67,584¥2,496¥(147)¥ 1,464¥(1,299)¥2,513¥5,405¥75,503————(22,488)(2,085)——(22,488)(2,085)

—
—

—
—

—
—

—
—

—
—

—
—

(22,488)(2,085)

—

—

—

—

—

1,121

—

—

—

1,121

—

1,121

—

—

—

—

—

—

131

—

—

131

—

131

—
—
—
—
—
—
—
(0)
—
—
¥11,037 ¥3,747

—
—
—
—
—
¥29,447

—
—
—
23
(5)
¥(1,203)

—
—
—
23
(5)
¥43,028—————¥3,618—————¥ (16)(3,512)————¥(2,048)

—
266
—
—
—
¥(1,032)(3,512)266———¥  520——205——¥5,610(3,512)
266
205
23
(5)
¥49,159

Accumulated other comprehensive income
Remeasure­Totalments ofaccumulated
definedotherbenefit plans, comprehensive
net of taxes
incomeNoncontrollinginterests inconsolidated
subsidiaries

Total
net assets

Commonstock

CapitalsurplusThousands of U.S. dollars (Note 1)
Stockholders’ equity

CommonCapitalRetained

Treasurystock,
at costTotal
stockholders'equityUnrealized
Net unrealized gains (losses)
gains (losses) on hedging
on securities, derivatives,
net of taxes
net of taxes

Foreigncurrencytranslation
adjustments

Year ended March 31, 2017stock
surplusearnings
Balance at beginning of year
$98,377 $33,398 $481,513 $(10,883) $602,406 $22,247 $(1,310) $ 13,049 $(11,578)
Net loss attributable to ownersof the parent���������������������������������������������
—— (200,445)— (200,445)————
Cash dividends paid ($0.13 per share)���������
——(18,584)—(18,584)————
Increase in net unrealized gains (losses)
on securities, net of taxes��������������������������
—
—
—
—
—
9,991
—
—
—
Decrease due to changes in fair valueof hedging derivatives�������������������������������
—
—
—
—
—
—
1,167
—
—
Adjustments from translation of foreign
currency financial statements��������������������
—
—
—
—
—
—
— (31,304)—
Remeasurements of defined benefit plans����
—
—
—
—
—
—
—
—
2,370
Increase in non-controlling interests�������������
—
—
—
—
—
—
—
—
—
Disposal of treasury stock����������������������������
—
(0)
—
205
205
—
—
—
—
Acquisition of treasury stock������������������������
—
—
—
(44)
(44)
—
—
—
—
Balance at end of year�������������������������������� $98,377 $33,398 $262,474 $(10,722) $383,527 $32,248 $  (142) $(18,254) $ (9,198)$22,399 $48,177 $672,992——— (200,445)— (18,584)

9,991

—

9,991

1,167

—

1,167

(31,304)— (31,304)
2,370
—
2,370
—
1,827
1,827
—
—
205
—
—
(44)
$ 4,634 $50,004 $438,176

See accompanying notes.

Sanden Holdings Corporation 21

Consolidated Statements of Cash Flows
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016
Millions of yen

2017

Cash flows from operating activities:
Income (loss) before income taxes������������������������������������������������������������������������������������������������������������� ¥(18,966)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   Depreciation and amortization��������������������������������������������������������������������������������������������������������������� 12,076   Amortization of goodwill������������������������������������������������������������������������������������������������������������������������
283   Equity in net income of affiliates������������������������������������������������������������������������������������������������������������ (3,385)   Loss (gain) on sales and disposals of property, plant and equipment, net������������������������������������������������� (2,386)   Structure reform cost����������������������������������������������������������������������������������������������������������������������������
7,803   Decrease (increase) in assets:    Trade accounts and notes receivable�������������������������������������������������������������������������������������������������
1,148   Inventories���������������������������������������������������������������������������������������������������������������������������������������
2,280   Accounts receivable–other����������������������������������������������������������������������������������������������������������������
1,089    Allowance for doubtful accounts��������������������������������������������������������������������������������������������������������
1,934   Other current assets�������������������������������������������������������������������������������������������������������������������������
1,321   Increase (decrease) in liabilities:    Trade accounts and notes payable���������������������������������������������������������������������������������������������������� (3,466)   Accrued employees’ bonuses������������������������������������������������������������������������������������������������������������
(415)   Accounts payable–other�������������������������������������������������������������������������������������������������������������������
6,066    Other current liabilities and long-term liabilities����������������������������������������������������������������������������������
3,871   Income taxes paid�������������������������������������������������������������������������������������������������������������������������������� (2,177)  Other, net��������������������������������������������������������������������������������������������������������������������������������������������
2,971���������������������������������������������������������������������������������������������
    Net cash flows from operating activities
10,048Cash flows from investing activities:
Purchases of property, plant and equipment����������������������������������������������������������������������������������������������� (13,476)
Proceeds from sale of property, plant and equipment����������������������������������������������������������������������������������
6,388�������������������������������������������������������������������������������������������������������������������
Purchases of intangible assets(257)
Investments in affiliates����������������������������������������������������������������������������������������������������������������������������� (3,024)
Proceeds from purchase of investments in subsidiaries   resulting in change in scope of consolidation (Note 15)�����������������������������������������������������������������������������
166
Other, net�������������������������������������������������������������������������������������������������������������������������������������������������
(168)    Net cash flows from investing activities���������������������������������������������������������������������������������������������� (10,371)
Cash flows from financing activities:
Net increase in short-term bank loans��������������������������������������������������������������������������������������������������������
2,271
Proceeds from long-term debt������������������������������������������������������������������������������������������������������������������� 18,930
Repayment of long-term debt�������������������������������������������������������������������������������������������������������������������� (19,830)
Repayment of lease obligations������������������������������������������������������������������������������������������������������������������ (1,746)
Cash dividends paid���������������������������������������������������������������������������������������������������������������������������������� (2,085)
Other, net�������������������������������������������������������������������������������������������������������������������������������������������������
(19)���������������������������������������������������������������������������������������������
    Net cash flows from financing activities(2,479)Effect of exchange rate changes on cash and cash equivalents���������������������������������������������������������������
(638)
Net increase (decrease) in cash and cash equivalents �������������������������������������������������������������������������� (3,440)
Cash and cash equivalents at end of year (Note 15)��������������������������������������������������������������������������������� ¥ 14,040
See accompanying notes.

22 Annual Report 2017

Thousands of
U.S. dollars (Note 1)

2016

2017

¥ 7,905$(169,052)

12,374166(4,147)(218)—

107,638
2,522(30,172)(21,267)
69,551(1,147)(5,045)(1,043)10(430)

10,232
20,322
9,706
17,238
11,774

(592)
(165)
(874)
184
(1,762)
1,090
6,304

(30,894)(3,699)54,06834,503(19,404)
26,481
89,562(11,141)
1,690
(950)
(4,427)(120,117)
56,939(2,290)(26,954)—(103)(14,932)

1,479(1,497)(92,441)

6,528
13,960(10,516)(1,713)(1,381)
(811)
6,066
(544)
(3,106)¥17,482

20,242
168,731(176,753)(15,562)(18,584)(169)(22,096)(5,686)(30,662)$ 125,144

Notes to Consolidated Financial Statements
Sanden Holdings Corporation and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Sanden Holdings
Corporation (the “Company”), a Japanese corporation, and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Law and its related accounting
regulations, and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as to applicationand disclosure requirements of International Financial Reporting Standards(“IFRS”).
The accounts of the consolidated overseas subsidiaries are prepared in accordance with either IFRS or generally accepted accounting principles in the UnitedStates (“US GAAP”), with adjustments for four specified items as applicable.
Please refer to “Unification of Accounting Policies Applied to Overseas Subsidiaries
for Consolidated Financial Statements” below for details. The accompanying consolidated financial statements have been restructured and translated into English(with some expanded descriptions) from the consolidated financial statements of
the Company prepared in accordance with Japanese GAAP and filed with theappropriate Local Finance Bureau of the Ministry of Finance as required by the
Financial Instruments and Exchange Law. Some supplementary information
included in the Japanese language statutory consolidated financial statements,
but not required for fair presentation, is not presented in the accompanying consolidated financial statements.
The consolidated financial statements are stated in Japanese yen, the currencyof the country in which the Company is incorporated and operates.
The translations of the Japanese yen amounts into U.S. dollars are included
solely for the convenience of readers outside Japan, using the prevailing exchange
rate at March 31, 2017, which was ¥112.19 to U.S. $1.00. The conveniencetranslations should not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be converted into
U.S. dollars at this or any other rate of exchange.
2. Significant Accounting Policies
Consolidation — The consolidated financial statements include the accounts of
the Company and its consolidated subsidiaries (49 subsidiaries in 2017 and 52
subsidiaries in 2016). For the purposes of preparing the consolidated financial
statements, all significant intercompany balances, transactions and unrealized
profits have been eliminated.
In accordance with the Accounting Principles for Consolidated Financial
Statements (the “Accounting Principles”), all companies are required to consolidate all significant investees, which are controlled through substantial ownershipof majority voting rights or the existence of certain conditions.
The changes in the scope of consolidation are as follows:
Due to new acquisition of equity interests, Choon Tian Pte Ltd. and two other companies were included in the scope of consolidation for the year ended March 31, 2017.
Sanwa Tech Co., Ltd. and three other subsidiaries, all of which had been
included in the scope of consolidation, were merged into Sanwa Co., Ltd., which isa consolidated subsidiary, resulting in an exclusion of the former four subsidiaries
from the scope of consolidation for the year ended March 31, 2017. In the sameway, Sanden Denso Co., Ltd. and one other subsidiary, both of which had been
included in the scope of consolidation, were merged into Sanwa Fabtech Co., Ltd.,
which is a consolidated subsidiary, resulting in an exclusion of the former two
subsidiaries from the scope of consolidation for the year ended March 31, 2017.
Certain subsidiaries including Sanden Bright Partner Corporation are excluded
from the scope of consolidation because the effect of their sales, net income
or loss, total assets and retained earnings on the accompanying consolidated
financial statements are immaterial.
Financial information of Tianjin Sanden Automotive Air-Conditioning Co., Ltd.,
Sanden Shanghai Refrigeration Co., Ltd., Sanden (Suzhou) Precision Parts Co.,
Ltd., Sanden Chongqing Automotive Air Conditioning Co., Ltd., Sanden Shanghai
Environment Thermal Systems Co., Ltd., Sanden Mexicana, S.A. de C.V.,
Consorcio Teksan, S.A. de C.V., Sanden Manufacturing Mexico S.A. de C.V. andSanden Recursos Mexico SRL. de C.V. for the fiscal year ended December 31,
2016 is included for the purpose of preparing the consolidated financial statements, with necessary adjustment for significant transactions that occurred during

the period between December 31, 2016 and March 31, 2017. In respect ofChoon Tian International (Shanghai) Co., Ltd., whose fiscal year-end is also
December 31, financial information of the subsidiary as of and for the 12-month
period ended March 31, 2017 is consolidated.
Equity method — The equity method was applied to the investments in 8
­affiliates in 2017 and 2016, by using financial statements for the fiscal yearsof each affiliate, some of which differ from those of the Company. Investments inall other unconsolidated subsidiaries and affiliated companies including Sanpak
Engineering Industries (PVT) Ltd. are stated at acquisition cost. These companies
are not accounted for using the equity method, due to their immaterial impact on
the consolidated net income and consolidated retained earnings. Earnings of suchcompanies are recorded in the Company’s books only to the extent that cash
­dividends are received.
Allowance for doubtful accounts — Under Japanese accounting standards forfinancial instruments, allowance for doubtful accounts provided by the Company
and its domestic subsidiaries consists of the estimated uncollectible amount withrespect to identified doubtful receivables and an amount calculated using anexperienced rate with respect to the remaining receivables.
Consolidated overseas subsidiaries have provided an allowance for doubtful
accounts at the estimated amounts of possible losses.
Inventories — Inventories are principally stated at the weighted-average cost,
unless the market value of inventories declines significantly and the cost is notexpected to be recovered. In such cases, cost is reduced to net realizable value.
Investment securities — Investment securities held by the Company and its
consolidated subsidiaries are classified as: a) equity securities issued by unconsolidated subsidiaries and affiliated companies and b) available-for-sale securities.
The Company and its consolidated subsidiaries do not hold trading securities orheld-to-maturity debt securities.
Equity securities issued by unconsolidated subsidiaries and affiliated companies that are not accounted for using the equity method are stated at acquisition
cost and written down to its impaired value if an indication of impairment is­present and the fair value is less than the cost.
Available-for-sale securities for which fair value is readily determinable are­stated at market value. Unrealized gains or losses, net of taxes are posted ina separate component of net assets. Available-for-sale securities for which fairvalue is not readily determinable are stated at cost.
Those available-for-sale securities which are significantly impaired are written
down to an estimated realizable value regardless whether the fair value is readily
determinable or not.
Gains and losses on sales of available-for-sale securities are determined byusing the moving average method.
Derivatives and hedges — Derivative financial instruments are stated at fairvalue and changes in the fair value are recognized as gains and losses in the­consolidated statements of operations.
If derivative financial instruments are used as hedges and meet certain hedging criteria, the gains or losses resulting from changes in the fair value of the derivatives arerecorded in accumulated comprehensive income in the consolidated balance sheets
until the related gains and losses on the hedged items are recognized.
If interest rate swaps used by the Company and its consolidated domestic­subsidiaries meet certain hedge criteria, the net settlement of interest under suchinterest rate swaps is reported as a component of interest on related hedged
assets or liabilities (the “Exceptional method”).
The Company and its consolidated subsidiaries use forward exchange contracts, currency swaps, interest rate swaps and commodity swaps mainly for the
purpose of mitigating (i) fluctuation risk of foreign currency exchange rates withrespect to receivables in foreign currency and future transactions in foreign­currency, (ii) fluctuation risk of interest rates with respect to long-term debt,
and (iii) fluctuation risk of commodity prices of raw materials.
The Company and its consolidated subsidiaries evaluate hedge effectivenessannually by comparing the cumulative changes in fair value of hedged items withthe corresponding changes in the hedging derivatives, except for interest rate
swaps to which the Exceptional method applies.
Sanden Holdings Corporation 23

Property, plant and equipment — Property, plant and equipment are stated atcost. Depreciation is computed using the straight-line method. For the Company
and its consolidated domestic subsidiaries, depreciation of assets whose acquisition costs are between ¥100 thousand and ¥200 thousand is provided using thestraight-line method over three years.
Estimated useful lives are as follows:   Buildings and structures		
8 to 50 years   Machinery and equipment		
3 to 13 years
Goodwill and intangible assets — Goodwill is amortized over a period of five
years using the straight-line method. Intangible assets are amortized using thestraight-line method over the estimated useful lives.
Long-lived assets impairment — Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amountof an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use andeventual disposition of the asset or asset group. The impairment loss is measured
as the amount by which the carrying amount of an asset or asset group exceeds
its recoverable amount, which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or asset group or the net­selling price at disposition.
The impairment of assets for certain overseas subsidiaries is accounted for inaccordance with either International Financial Reporting Standards or US GAAP,
which requires long-lived assets and certain identifiable intangibles to be held andused by an entity to be reviewed for impairment whenever events of changes in­circumstances indicate that the carrying amount of an asset may not be recoverable.
Accounting for lease transactions as lessee — For the finance leases that do
not transfer ownership, the Company and its consolidated subsidiaries account forthem in the same manner as usual acquisitions. Depreciation of leased assets is computed using the straight-line method over the lease period with zero residual value.
Income taxes — The provision for income taxes is computed based on pretax
income included in the consolidated statements of operations. Deferred tax assets
and liabilities are recognized for the expected future tax consequences of temporary differences between the accounting and tax basis of assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets to the extent that
it is no longer probable that relevant tax benefit will be realized.
Retirement benefits — The Company’s consolidated subsidiaries have adopted
the benefit formula basis for calculation of projected benefit obligation incurredin the current fiscal year. Prior service costs are recognized in the consolidated
statements of operations using the straight-line method beginning from the fiscal
year in which they are incurred, over years within average residual periods of service of employees. Actuarial gains and losses are recognized in the consolidated
statements of operations using the straight-line method beginning from the next
fiscal year after the year in which they are incurred, over years within the average
residual periods of service of employees. The Company recognizes actuarial gains
and losses in the fiscal year when they are incurred.
Provision for directors’ stock compensation — Provision for directors’ stockcompensation represents the amounts for future payments of the Company’s
stock to directors. The provision is recognized based on the amount that is expected to be paid, which is determined using the points allocated to each director asprescribed in the Company’s share delivery policy.
Foreign currency translation — Under Japanese GAAP, all receivables andp­ ayables denominated in foreign currencies are translated at the exchange rate
prevailing at the year-end, and differences arising from translation are includedin the consolidated statements of operations.
Translation of financial statements of overseas subsidiaries — The balance
sheet accounts of overseas subsidiaries and affiliated companies are translated
into Japanese yen at the year-end rates. Annual revenue and expense accounts
are accumulated amounts of quarterly figures that are translated at the quarterly
average rates of exchange.
24 Annual Report 2017

The increase and decrease in net assets resulting from this translationp­ rocedure were reported as foreign currency translation adjustments in othercomprehensive income and non-controlling interests in consolidated subsidiaries.
Unification of Accounting Policies Applied to Overseas Subsidiaries for
Consolidated Financial Statements — The Company adopted Practical Issues
Task Force No. 18, entitled the “Practical Solution on Unification of Accounting
Policies Applied to Overseas Subsidiaries for Consolidated Financial Statements”(as amended on March 29, 2017, “PITF No. 18”).
PITF No. 18 provides as follows: 1) the accounting policies and procedures
applied to a parent company and its subsidiaries for similar transactions andevents under similar circumstances should, in principle, be unified for the preparation of the consolidated financial statements; 2) financial statements preparedby overseas subsidiaries in accordance with either IFRS or US GAAP tentatively
may be used for the consolidation process; and 3) the following items should be
adjusted in the consolidation process so that net income is accounted for inaccordance with Japanese GAAP unless they are not material:(i) Amortization of goodwill(ii)	Actuarial gain and loss of defined benefit plans recognized outside profit or loss(iii) Capitalization of intangible assets arising from development phases(iv)	Fair value measurement of investment properties and the revaluation model
for property, plant and equipment, and intangible assets
Consolidated statements of cash flows — In preparing the consolidated statements of cash flows, cash on hand, readily available deposits and highly liquid
short-term investments with maturities not exceeding three months at the time ofpurchase are considered to be cash and cash equivalents.
Amounts per share — Basic net income (loss) per share of common stock is
computed using the weighted-average number of shares of common stock outstanding during the year. Diluted net income (loss) per share of common stock is
computed using the weighted-average number of shares of common stock outstanding during the year after giving effect to the dilutive potential of the shares ofcommon stock to be issued upon the exercise of warrants. Cash dividends per
share represent actual amounts declared as applicable to the respective years.
Revenue recognition — The Company and its consolidated domestic subsidiaries generate revenue principally through the sales of finished products. In the
Automotive Systems Business and the Other Business, sales revenue is recognized when products are shipped and the customer takes ownership. In theCommercial Store Systems Business, sales revenue is principally recognized when
products are shipped. However, certain products require installation by theCompany and its consolidated domestic subsidiaries and, in such cases, sales
revenue is recognized when the installation is completed.
Reclassifications — Certain previous year amounts have been reclassified toconform to the 2017 presentation to reflect the changes of importance on someaccounts. This reclassification had no impact on previously reported results ofoperations or retained earnings.
3. Inventories
The following is a summary of inventories at March 31, 2017 and 2016

Millions of yen
2017
2016

Merchandise and finished goods���������������� ¥23,200
Work in process���������������������������������������� 10,547
Raw materials������������������������������������������� 10,026
Other inventories��������������������������������������� 3,406
Total�������������������������������������������������������� ¥47,180¥25,225
8,563
13,968
2,828¥50,585

Thousands of
U.S. dollars(Note 1)
2017

$206,792
94,01089,36630,359$420,536

4. Investment in Securities
The following is a summary of the acquisition costs and book values of available-forsale securities with available fair values as of March 31, 2017 and 2016.

Securities with book value exceedingacquisition cost

Millions of yen
2017
Acquisition
Book
cost
value
Difference

Equity securities���������������������������������������������� ¥3,836
Bonds������������������������������������������������������������
—Others������������������������������������������������������������
—Total�������������������������������������������������������������� ¥3,836¥8,686——¥8,686¥4,849——¥4,849Acquisition
cost

Book
value

Difference

Equity securities���������������������������������������������� ¥   94Bonds������������������������������������������������������������
300
Others������������������������������������������������������������
—Total�������������������������������������������������������������� ¥  394¥   94299—¥  394¥   (0)(0)—¥   (0)

Securities with book value not exceedingacquisition cost

Securities with book value exceedingacquisition cost

Millions of yen
2016
Acquisition
Book
cost
value
Difference

Equity securities���������������������������������������������� ¥2,464
Bonds������������������������������������������������������������
—Others������������������������������������������������������������
—Total�������������������������������������������������������������� ¥2,464¥5,859——¥5,859¥3,394——¥3,394

Acquisition
cost

Book
value

Difference

Equity securities ��������������������������������������������� ¥1,523
Bonds �����������������������������������������������������������
300
Others �����������������������������������������������������������
—Total ������������������������������������������������������������� ¥1,823¥1,476298—¥1,775¥  (46)(1)—¥  (47)

Securities with book value not exceedingacquisition cost

Securities with book value exceedingacquisition costThousands of U.S. dollars (Note 1)
2017
Acquisition
Book
cost
value
Difference

Equity securities���������������������������������������� $34,191
Bonds������������������������������������������������������
—Others������������������������������������������������������
—Total�������������������������������������������������������� $34,191
Securities with book value not exceedingacquisition cost

Acquisition
cost$77,422——$77,422$43,221——$43,221

Book
value

Difference

Equity securities���������������������������������������� $   837Bonds������������������������������������������������������
2,674$   8372,665$     (0)(0)

Others������������������������������������������������������
—Total�������������������������������������������������������� $ 3,511—$ 3,511—$     (0)The following is a summary of the book values of available-for-sale securities forwhich fair value was not readily determinable at March 31, 2017 and 2016.

Millions of yen
2017
2016

Unlisted stock������������������������������������������������������� ¥219

¥225

Thousands of
U.S. dollars(Note 1)2017

$1,952

Total sales of available-for-sale securities for the years ended March 31, 2017and 2016 amounted to ¥125 million ($1,114 thousand) and ¥3,190 million, andrelated gains amounted to ¥38 million ($338 thousand) and ¥1,531 million,
respectively.

5. Income Taxes
The Company and its consolidated domestic subsidiaries are subject to corporation, inhabitants’ and enterprise taxes, which, in the aggregate, indicate the statutory tax rate in Japan of approximately 30.7% and 32.8% for the years ended
March 31, 2017 and 2016, respectively.
The following table summarizes the significant difference between the statutory
tax rate and the Sanden Group’s effective tax rate for accounting purposes for theyear ended March 31, 2016:
2016

Statutory tax rate:
32.8%
Nondeductible expense������������������������������������������������������������������ 1.8
Foreign tax credits������������������������������������������������������������������������� 1.4
Different tax rates applied to overseas subsidiaries�������������������������� (1.1)
Amortization of goodwill����������������������������������������������������������������� 0.7
Equity in net income of affiliates����������������������������������������������������� (17.2)
Excess deferred taxes on unrealized profits on inventories   eliminated for consolidation����������������������������������������������������������
Tax credit��������������������������������������������������������������������������������������
Tax breaks for investment for facilities��������������������������������������������
Effect from change in tax rates�������������������������������������������������������
Valuation allowance�����������������������������������������������������������������������
Others�������������������������������������������������������������������������������������������

(6.4)
(2.4)
(1.4)
1.7
(9.4)
2.1

Effective tax rate��������������������������������������������������������������������������������

2.6%

For the year ended March 31, 2017, disclosure of the difference between thestatutory tax rate and the Sanden Group’s effective tax rate for accounting purposes is omitted due to loss before income taxes.
Significant components of the Sanden Group’s deferred tax assets and l­iabilities
as of March 31, 2017 and 2016 were as follows:

Millions of yen
2017
2016

Deferred tax assets: Unrealized gains on inventories
from intercompany sales��������������������� ¥   121
 Accrued expenses��������������������������������
429
Warranty liabilities�������������������������������� 1,100
Allowance for doubtful accounts �����������
598 Doubtful accounts written off�����������������
718 Loss on devaluation for slow-moving
inventory��������������������������������������������
809
Accrued employees’ bonuses����������������
750 Unrealized gains on fixed assets
from intercompany sales���������������������
104
Depreciation�����������������������������������������
701 Net defined benefit liability��������������������
515 Net operating loss carryforward������������� 13,873 Environmental liability����������������������������
144 Impairment loss on long-lived assets������ 1,255 Tax breaks for investment for facilities��� 1,470 Others�������������������������������������������������� 1,505
Gross deferred tax assets�������������������������� 24,098
Less: Valuation allowance�������������������������� (17,337)
Total deferred tax assets��������������������������� 6,760

Thousands of
U.S. dollars(Note 1)2017¥   121
830
305
303
691

$  1,078
3,823
9,804
5,330
6,399

653
915

7,210
6,685

158
947
646
10,796
149
319
1,568
1,544
19,952(12,563)
7,389

926
6,248
4,590
123,656
1,283
11,186
13,102
13,414
214,796(154,532)
60,254

Deferred tax liabilities:
Depreciation�����������������������������������������
Net unrealized gain on securities�����������

(921)(1,228)

(806)
(845)

(8,209)(10,945) Effect on retained earnings
of foreign affiliates������������������������������
Others��������������������������������������������������
Gross deferred tax liabilities�����������������������

(760)
(589)
(3,499)

(788)
(136)
(2,576)(6,774)(5,250)(31,188)

Net deferred tax assets ���������������������������� ¥ 3,261¥ 4,813$ 29,066

Sanden Holdings Corporation 25

Net deferred tax assets are included in the accompanying consolidated balance
sheets as follows.

Millions of yen
2017
2016

Assets:Deferred income taxes�������������������������������� ¥2,372 ¥2,359
Deferred income taxes, non-current������������� 2,621
2,765
Liabilities:
Deferred income taxes��������������������������������
(7)(6)
Deferred income taxes, non-current������������� (1,724)(305)
Net deferred tax assets����������������������������������� ¥3,261 ¥4,813

Thousands of
U.S. dollars(Note 1)
2017

$21,142
23,362(62)(15,366)$29,066

Revision to the amounts of deferred tax assets and liabilities resulting fromchanges in income tax rates:
On November 18, 2016, the “Act for Partial Amendment of the Act for thePartial Amendment of the Consumption Tax Act for the Drastic Reform of theTaxation System for Ensuring Stable Financial Resources for Social Security(Act No. 85, 2016)” and the “Act for Partial Amendment of the Act for the Partial
Amendment of the Local Tax Act and the Local Allocation Tax Act for the Drastic
Reform of the Taxation System for Ensuring Stable Financial Resources for Social
Security (Act No. 86, 2016)” were enacted in the Diet session. As a result of theseamendments, the effective date of the proposed increase in the consumption tax
rate to 10% has been postponed from April 1, 2017 to October 1, 2019.
In relation to these amendments, timing of abolishment of special local corporation tax, restoration of corporation enterprise tax, change of local corporation tax
rate and change of the local inhabitant tax corporation levy has also been postponed from the fiscal years beginning on or after April 1, 2017 to the fiscal years
beginning on or after October 1, 2019.
Impact of these amendments is immaterial since there will be no change in thestatutory income tax rate utilized for the measurement of deferred tax assets andliabilities although change in composition of the statutory income tax rates
between rates for national taxes and local taxes will occur.
6. Financial Instruments
1. Qualitative information on financial instruments(1) Policies for using financial instruments
The Sanden Group raises funds according to its medium-term financial plan, andit utilizes diversified financing methods of raising funds through bank loans or
issuance of bonds. If surplus funds arise, the Sanden Group uses highly liquid
instruments for the management of funds. The Sanden Group also enters into
financial derivative transactions to hedge various risks, as described in detailbelow and does not use derivatives for speculative purposes.
(2) D etails of financial instruments used and the exposures to risk and how they arise
Trade notes and accounts receivable are exposed to the credit risks of customers.
Receivables denominated in foreign currencies are exposed to foreign currency
exchange risk. In principle, foreign exchange forward contracts are used to hedge
this risk.
Marketable and investment securities are mostly shares of our related business
partners, and are exposed to stock market fluctuation risk.
Maturities of trade notes and accounts payable are mostly within four months.
Payables denominated in foreign currencies are exposed to foreign currency
exchange risk. In principle, foreign exchange forward contracts are used to hedge
this risk.
Principally, the purposes of long-term debt and lease obligations are for financing capital investment, and the longest maturity is 14 years after March 31, 2017.
A large part of them are borrowed or issued with fixed interest rates; therefore,
there is no interest rate risk. The Sanden Group enters into interest rate swap
agreements to reduce exposure to losses resulting from adverse fluctuations ininterest rates on the part of long-term debt with variable interest rates.

26 Annual Report 2017

The Sanden Group entered into financial derivative transactions such asf­orward exchange contracts, to hedge exchange rate risk associated with foreign
currency denominated trade receivables and payables, interest rate swap agreements to reduce exposure to losses resulting from adverse fluctuations in interest
rates on long-term debt, and currency and interest rate swap agreements tohedge exchange rate risk and interest rate risk associated with foreign currency
denominated bank loans.
(3) Supplemental information on fair values
Fair values of financial instruments are measured based on the quoted market
prices, if available, or reasonably calculated values if quoted market prices are notavailable. Fair values of financial instruments for which quoted market prices are
not available are calculated based on certain assumptions, and the fair values
might differ if different assumptions are used. In addition, the contract amount of
the derivative transactions described below in “7. Derivatives” does not represent
the market risk of the derivative transactions.
2. Fair values of financial instruments (at March 31, 2017)
Book values of the financial instruments included in the consolidated balance
sheet and their fair values at March 31, 2017 are as follows.
In addition, financial instruments whose fair value cannot be reliably measured
are not included. (Please see “Note 2. Financial instruments for which the fair­values cannot be reliably measured.”)Book value

Millions of yen
2017
Fair value(1) Cash and time deposits������������������������ ¥ 14,040(2) Receivables*1��������������������������������������� 84,050(3) Consumption taxes receivable���������������
3,246(4) Investment securities����������������������������
9,080
Total assets���������������������������������������������� ¥110,418¥ 14,040
84,0503,246
9,080¥110,418

¥ —
—
—
—
¥ —

(1) Payables���������������������������������������������� ¥ 67,720(2) Short-term bank loans�������������������������� 54,518(3) L ease obligations due within
one year����������������������������������������������
1,900(4) Income taxes payable���������������������������
993(5) Long-term debt������������������������������������ 73,970(6) Lease obligations due after one year�����
5,247
Total liabilities������������������������������������������� ¥204,352
Derivatives *2�������������������������������������������� ¥   (458)¥ 67,720
54,518

¥ —
—

1,916
993
74,4705,302¥204,922

16
—
499
55
¥570

¥   (458)¥ —Difference

Thousands of U.S. dollars (Note 1)
2017Book value
Fair value
Difference(1) Cash and time deposits������������������������ $  125,144 $  125,144(2) Receivables *1�������������������������������������� 749,175
749,175(3) Consumption taxes receivable���������������
28,93328,933(4) Investment securities����������������������������
80,93480,934
Total assets���������������������������������������������� $  984,205 $  984,205(1) Payables���������������������������������������������� $  603,618 $  603,618(2) Short-term bank loans�������������������������� 485,943
485,943(3) Lease obligations due within
one year����������������������������������������������
16,935
17,078(4) Income taxes payable���������������������������
8,851
8,851
(5) Long-term debt������������������������������������ 659,327
663,784(6) Lease obligations due after one year�����
46,76847,259Total liabilities������������������������������������������� $1,821,481 $1,826,562
Derivatives *2�������������������������������������������� $    (4,082) $    (4,082)

$   —
—
—
—
$   —
$   —
—
142
—
4,447
490
$5,080$   —*1: Allowance for doubtful accounts associated with trade notes and accounts
receivable is deducted.
*2: Derivative assets and liabilities are disclosed on a net basis.

Note 1: Fair value measurement of financial instruments
Assets1. (1) Cash and time deposits, (2) receivables and (3) consumption taxes receivable
The book value of these assets approximates fair value because they are­settled in a short period.
2. (4) Investment securities 
The fair value of equity securities equals to the quoted market price, if available.
The fair value of debt securities equals to the quoted market price or price provided by financial institutions. More information on available-for-sale securities
is described in “4. Investment in Securities.”
Liabilities
1. (1) Payables, (2) short-term bank loans and (4) income taxes payable
The book value of these liabilities approximates fair value because they are­settled in a short-term period.
2.(3) Lease obligations due within one year, (5) long-term debt and (6) lease­obligations due after one year
Fair value equals to the present value of future cash flows discounted by using
the current interest rate for similar debt and lease contracts of comparable
maturities and contract conditions.
Note 2: F inancial instruments for which the fair values cannot be reliably­measured are as follows:

Millions of yen
2017

Thousands of
U.S. dollars(Note 1)
2017

Investment securities:
Unlisted���������������������������������������������������������������� ¥   219Unconsolidated subsidiaries and affiliates��������������� 22,567$  1,952
201,149

The above are not included in “(4) Investment securities” because these investment securities do not have a quoted price in an active market and whose fairvalue cannot be reliably measured.
Note 3: T he redemption schedule for monetary claims and investment securities
with maturities at March 31, 2017 was as follows:
Millions of yen
2017
WithinMore than
1 year
1 yearCash and time deposits����������� ¥ 14,040
Receivables���������������������������� 84,050
Consumption taxes
receivable�����������������������������
3,246
Investment securities
with maturities(1) Bonds���������������������������
300(2) Others���������������������������
—Total�������������������������������������� ¥101,636

Thousands of
U.S. dollars (Note 1)
2017
WithinMore than
1 year
1 year¥——$125,144
749,175$———

28,933—

Millions of yen
2016Book value
Fair value(1) Cash and time deposits�������������������������� ¥ 17,491(2) Receivables*1����������������������������������������� 89,602(3) Consumption taxes receivable�����������������
4,581(4) Investment securities������������������������������
7,635
Total assets������������������������������������������������ ¥119,310

Difference¥ 17,491
89,602
4,581
7,635

¥ —
—
—
—

¥119,310¥ —¥ 67,313
52,873
1,620
681
76,678
5,070

¥ —
—
69
—
609
270

(1) Payables������������������������������������������������ ¥ 67,313(2) Short-term bank loans���������������������������� 52,873(3) Lease obligations due within one year�����
1,551(4) Income taxes payable�����������������������������
681(5) Long-term debt�������������������������������������� 76,069(6) Lease obligations due after one year�������
4,800
Total liabilities��������������������������������������������� ¥203,290¥204,239¥948

Derivatives*2����������������������������������������������� ¥    564¥    564¥ —*1: A llowance for doubtful accounts associated with trade notes and accounts
receivable is deducted.
*2: Derivative assets and liabilities are disclosed on a net basis.
Note 1: Fair value measurement of financial instruments
Assets1. (1) Cash and time deposits, (2) receivables and (3) consumption taxes receivable
The book value of these assets approximates fair value because they are­settled in a short period.
2. (4) Investment securities
The fair value of equity securities equals to the quoted market price, if available.
The fair value of debt securities equals to the quoted market price or price provided by financial institutions. More information on available-for-sale securities
is described in “4. Investment in Securities.”
Liabilities
1. (1) Payables, (2) short-term bank loans and (4) income taxes payable
The book value of these liabilities approximates fair value because they are­settled in a short-term period.
2. (3) Lease obligations due within one year, (5) long-term debt and (6) lease­obligations due after one year
Fair value equals to the present value of future cash flows discounted by using
the current interest rate for similar debt and lease contracts of comparable
maturities and contract conditions.
Note 2: F inancial instruments for which the fair values cannot be reliably­measured are as follows:
Millions of yen
2016

—
—

2,674
—

—
—

¥—

$905,927$—

3. Fair values of financial instruments (at March 31, 2016)
Book values of the financial instruments included in the consolidated balance
sheet and their fair values at March 31, 2016 are as follows.
In addition, financial instruments whose fair value cannot be reliably measured
are not included. (Please see “Note 2. Financial instruments for which the fair­values cannot be reliably measured.”)Investment securities:
Unlisted�������������������������������������������������������������������������������������� ¥   225Unconsolidated subsidiaries and affiliates������������������������������������� 21,343
The above are not included in “(4) Investment securities” because these investment securities do not have a quoted price in an active market and whose fairvalue cannot be reliably measured.
Note 3: The redemption schedule for money claims and investment securities withmaturities at March 31, 2016 was as follows:
Millions of yen
2016
WithinMore than
1 year
1 yearCash and time deposits���������������������������������������������������� ¥ 17,491
Receivables��������������������������������������������������������������������� 89,602
Consumption taxes receivable�������������������������������������������
4,581
Investment securities with maturities(1) Bonds��������������������������������������������������������������������
—(2) Others��������������������������������������������������������������������
—Total������������������������������������������������������������������������������� ¥111,675

¥ —
—
—
300
—
¥300

Sanden Holdings Corporation 27

7. Derivatives
1. Forward exchange contracts and currency swaps, which are stated at fair value and to which hedge accounting is not applied, at March 31, 2017 and2016:(Forward exchange contracts and currency swaps)
Millions of yen
2017Transaction

Contract
amountForward exchange
contracts������������������������� ¥35,540
Currency swaps�����������������
94
Total��������������������������������� ¥35,633

2016

Thousands of U.S. dollars (Note 1)
2017
More
Unrealized
Contract
than
Fair
gains
amount1 yearvalue(losses)Morethan
1 yearFair
value

Unrealized
gains(losses)

Contract
amountMorethan
1 yearFair
value

Unrealized
gains(losses)¥——¥(480)
27¥(480)
27¥16,728
154

¥ —
154

¥346
62

¥346
62

$316,784
837$——$(4,278)240$(4,278)240¥—¥(452)¥(452)¥16,882

¥154

¥409

¥409

$317,612$—$(4,028)$(4,028)

Millions of yen
Contract amountMore than 1 year

Fair value

Interest rate swaps, which are stated at fair value and to which hedge accounting is not applied, at March 31, 2016 were as follows:(Interest rate swaps)
Millions of yen
2016

Transaction

Receiving floating rate
and paying fixed rate��������
Total ��������������������������������

Contract
amountMore than
1 yearFair
value

Unrealized
gains(losses)

¥33

¥—

¥(0)

¥(0)

¥33

¥—

¥(0)

¥(0)

There were no interest rate swaps, which are stated at fair value and to which hedge accounting is not applied, at March 31, 2017.
2. Derivative transactions to which hedging accounting was applied at March 31, 2017 and 2016:(Forward exchange contracts)
Hedging accounting method

2017
Deferral hedge accounting

Transaction

Hedged items

Accounts payable��������������������������������������������������� ¥  207Accounts receivable����������������������������������������������� 7,682

¥—
—

127

Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥7,888

¥—

¥126

Hedging accounting method

2017
Deferral hedge accounting

Forward exchange contracts

Transaction

Hedged items¥  (0)

Thousands of U.S. dollars (Note 1)
Contract amountMore than 1 year Fair value

Accounts payable��������������������������������������������������� $ 1,845
Accounts receivable����������������������������������������������� 68,473

$—
—

1,132

Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� $70,309$—$1,123

Hedging accounting method

2016
Deferral hedge accounting

Forward exchange contracts

Transaction

Millions of yen
Contract amountMore than 1 year

Hedged items$   (0)Fair value

Accounts payable �������������������������������������������������� ¥273¥—

Accounts receivable����������������������������������������������� 127
Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥401

—

1

¥—

¥4

Forward exchange contracts(Interest rate swaps)
Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2017
Exceptional method
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������� ¥19,283
Deferral hedge accounting
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������� 8,265
Total ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥27,548

Hedging accounting method

Transaction

Hedged items

Fair value¥3,0304,647¥    — *1(132)¥7,677¥(132)

Thousands of U.S. dollars (Note 1)
Contract amountMore than 1 year
Fair value

2017
Exceptional method
Receiving floating rate and paying fixed rate Long-term debt ��������������������������������������������� $171,878
Deferral hedge accounting
Receiving floating rate and paying fixed rate Long-term debt ���������������������������������������������
73,669Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������ $245,547
28 Annual Report 2017¥2

$27,007
41,420$     — *1
(1,176)$68,428$(1,176)*1: For certain long-term debt for which interest rate swaps under the Exceptional method are used to reduce exposure to losses resulting from adverse fluctuations ininterest rates, the fair value of such swaps was included in the fair value of such long-term debt, which is the hedged item.

Hedging accounting method

Transaction

Hedged items

Millions of yen
Contract amountMore than 1 year

2016
Exceptional method
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������ ¥31,900
Deferral hedge accounting
Receiving floating rate and paying fixed rate Long-term debt ������������������������������������������������
6,436
Total ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� ¥38,336

Fair value¥18,1835,631¥   — *1
151

¥23,814¥151*1: F or certain long-term debt for which interest rate swaps under the Exceptional method are used to reduce exposure to losses resulting from adverse fluctuations ininterest rates, the fair value of such swaps was included in the fair value of such long-term debt, which is the hedged item.
8. Retirement Benefits
1. Outline of the retirement benefit plans
The Company has adopted the defined contribution pension plan for enrolled
employees since March 1, 2014. Retirement benefit liability to the pensioners isrecorded based on the estimated amount of retirement benefit obligations andplan assets at the end of the fiscal year. Expected plan assets exceed retirement
benefit obligations at March 31, 2017, and therefore the excess is recorded in net
defined benefit asset.
The post-retirement pension fund is scheduled to be transferred once a year (inApril) over four years.
Consolidated domestic subsidiaries also have their own retirement benefit plansfor employees terminating their employment. Certain consolidated domestic subsidiaries have a funded defined contribution pension plan or utilize the governmental mutual aid institution to cover a portion of the benefits. The remaining
portion is unfunded and covered by severance payments by those consolidated
domestic subsidiaries.
Consolidated overseas subsidiaries have various retirement and post-retirement
benefit plans. Such plans consist of defined benefit severance payment or pension
plans, defined contribution pension plans, post-retirement medical plans anddefined contribution plans based on government regulations. Some of these plans
adopted by the consolidated overseas subsidiaries are funded.
2. Defined benefit plans, including plans to which the simplified method
is applied(1) Movement in retirement benefit obligations
Millions of yen
2017
2016

Balance at beginning of year���������������������������� ¥7,465
175
Service cost������������������������������������������������

Thousands of
U.S. dollars(Note 1)
2017

¥8,095283$66,538
1,559
1,550

Interest cost�����������������������������������������������
Actuarial losses (gains)��������������������������������

174

215

142

(562)

1,265

Benefits paid����������������������������������������������
 Termination of the defined benefit
retirement plan�����������������������������������������
Exchange differences����������������������������������

(277)

(330)

(2,469)

(30)

—

(267)

(152)

(236)

(1,354)

Balance at end of year������������������������������������ ¥7,496¥7,465$66,815

Millions of yen
2017
2016

Thousands of
U.S. dollars(Note 1)
2017(2) Movements in plan assets

Balance at beginning of year���������������������������� ¥4,128 ¥4,500
Expected return on plan assets��������������������
259
273
Actuarial gains (losses)��������������������������������
(16)
(355)
Contributions paid by the employers�������������
153
172
Benefits paid���������������������������������������������� (196)(237)
Exchange differences����������������������������������
2(225)
Balance at end of year������������������������������������ ¥4,329 ¥4,128$36,794
2,308
(142)
1,363
(1,747)17(3) Reconciliation from retirement benefit obligations and plan assets to net
defined benefit liability (asset)
Millions of yen
2017
2016

Thousands of
U.S. dollars(Note 1)
2017

Funded retirement benefit obligations��������������� ¥6,174 ¥6,140
Plan assets����������������������������������������������������� (4,329) (4,128)$55,031(38,586)

1,845
Unfunded retirement benefit obligations����������� 1,321 Net defined benefit liability at end of year����� 3,167

2,012
1,325
3,337

16,445
11,77428,228Net defined benefit liability�������������������������� 3,257
3,452
Net defined benefit asset�����������������������������
(90)
(115)
 Net defined benefit liability at end of year����� ¥3,167 ¥3,337

29,031(802)$28,228(4) Retirement benefit costs
Millions of yen
2017
2016

Service cost���������������������������������������������������������� ¥175 ¥283
Interest cost��������������������������������������������������������� 174
215
Expected return on plan assets������������������������������ (259) (273)Amortization of actuarial losses (gains)������������������� 129
90
Others������������������������������������������������������������������ —0
Total retirement benefit costs
for the fiscal year������������������������������������������������ ¥219 ¥316

Thousands of
U.S. dollars(Note 1)2017

$1,5591,550(2,308)
1,149—$1,952

Note: In addition to the above retirement benefit costs, additional severance payments for early retirement of ¥1,987 million ($17,711 thousand) were made,which were charged to the consolidated statements of operations as part of“Structure reform cost” in other expenses for the year ended March 31, 2017.
(5) Remeasurements of defined benefit plans, before tax

Millions of yen
2017
2016

Actuarial gains (losses)������������������������������������ ¥280
Total balance at end of year����������������������������� ¥280

¥349
¥349

Thousands of
U.S. dollars(Note 1)2017

$2,495$2,495(6) Accumulated remeasurements of defined benefit plans, before tax

Millions of yen
2017
2016

Actuarial gains (losses) that are yet
to be recognized������������������������������������������� ¥(1,019) ¥(1,299)
Total balance at end of year ���������������������������� ¥(1,019) ¥(1,299)

Thousands of
U.S. dollars(Note 1)
2017$(9,082)$(9,082)$38,586
Sanden Holdings Corporation 29

(7) Plan assets
a. Plan assets comprise:
2017

2016

44%
49
2
4

53%
41
4
2

Total����������������������������������������������������������������������������������� 100%100%

Bonds���������������������������������������������������������������������������������
Equity securities�������������������������������������������������������������������Cash and time deposits��������������������������������������������������������
Others���������������������������������������������������������������������������������

b. Long-term expected rate of return
Current and estimated asset allocations and current and long-term expected
returns on various categories of plan assets have been considered in d­ etermining
the long-term expected rate of return.
(8) Actuarial assumptions
The principal actuarial assumptions at March 31, 2017 and 2016:
2017

2016

Discount rate���������������������������������������������������������� 0.3%–3.8% 0.3%–5.8%
Long-term expected rate of return���������������������������� 0.3%–7.5% 0.3%–7.5%
3. Defined contribution plans
Contributions to defined contribution plans of the Company and its consolidated
subsidiaries were ¥2,411 million ($21,490 thousand) and ¥2,382 million for the
fiscal years ended March 31, 2017 and 2016, respectively.
4. Assets not transferred to the defined contribution pension plan
Assets of ¥1,229 million, which had not yet been transferred to the defined contribution pension plan at March 31, 2016, were recorded in other accounts payable(current liabilities). The assets have been transferred to the defined contribution
pension plan by March 31, 2017.
9. Short-Term Borrowings, Long-Term Debt and Lease Obligations
Short-term bank loans bore weighted-average interest rates of 1.47% and 1.58%
at March 31, 2017 and 2016, respectively.
Long-term debt at March 31, 2017 and 2016 consisted of the following:

Millions of yen
2017
2016

Loans from banks, insurance companies and agricultural cooperatives, bearing
weighted-average rates of 1.36% and1.56% at March 31, 2017 and 2016,
respectively��������������������������������������������� ¥73,970
73,970Less: Amount due within one year�������������� 29,789
Amount due after one year������������������������� ¥44,181

Thousands of
U.S. dollars(Note 1)
2017

¥76,069$659,327

76,06920,447659,327
265,522¥55,621$393,805

The aggregate annual maturities of long-term debt at March 31, 2017 were as
follows:

Millions of yen

Thousands of
U.S. dollars(Note 1)2018 ���������������������������������������������������������������������� ¥29,789
2019 ���������������������������������������������������������������������� 16,625
2020 ���������������������������������������������������������������������� 13,641
2021 ����������������������������������������������������������������������
9,857
2022 ����������������������������������������������������������������������
3,521
2023 and thereafter��������������������������������������������������
534$265,522
148,186
121,588
87,85931,384
4,759

Year ending March 31,

The Company had entered into syndicated-loan contracts with several financial
institutions. Financial covenants included in the contracts were as f­ollows:
For the year ended March 31, 2016
Contracts dated September 16, 2011 (¥10.0 billion of long-term debt due within
one year at March 31, 2016)
30 Annual Report 2017(1) The amount of total net assets (excluding foreign currency translation adjustments) on the consolidated balance sheet at the end of each fiscal year andthe interim period shall be over ¥39.5 billion and 70% compared with the­latest period; and(2) Ordinary losses on the consolidated statements of operations for each fiscal
year (after fiscal year ended March 31, 2012) shall not be recorded for threeconsecutive years.
The amount of total net assets on the consolidated balance sheet as well as
ordinary losses on the consolidated statements of operations mentioned above,
to be referred to for the financial covenants, are those in consolidated financial
statements of the Company which are prepared and presented in accordancewith Japanese GAAP.
The Sanden Group continued to meet these financial covenants at March 31,
2016.
For the year ended March 31, 2017
The Company does not have any loan contracts with financial covenants at March
31, 2017.
The following assets were pledged as collateral for short-term bank loans of¥2,296 million ($20,465 thousand) and long-term debt of ¥1,616 million($14,404 thousand) at March 31, 2017 and short-term bank loans of ¥1,624 million and long-term debt of ¥2,853 million at March 31, 2016:

Millions of yen
2017
2016

Inventories and other��������������������������������������� ¥3,765
Land and buildings and structures,
machinery and equipment, etc., net��������������� 5,309
Total�������������������������������������������������������������� ¥9,074

Thousands of
U.S. dollars(Note 1)
2017

¥3,469$33,559

5,899

47,321¥9,369$80,880

The aggregate annual maturities of lease obligations at March 31, 2017 wereas follows:Year ending March 31,2018 ����������������������������������������������������������������������
2019 ����������������������������������������������������������������������
2020 ����������������������������������������������������������������������
2021 ����������������������������������������������������������������������
2022 ����������������������������������������������������������������������
2023 and thereafter��������������������������������������������������

Millions of yen

Thousands of
U.S. dollars(Note 1)

¥1,900
1,595
1,332
1,040
809
470

$16,935
14,216
11,872
9,269
7,210
4,189

10. Net Assets
Under the Companies Act of Japan (the “Act”), the entire amount paid for new
shares is required to be designated as common stock. However, a company may,by a resolution of the Board of Directors, designate an amount not exceeding onehalf of the amount paid of the new shares as additional paid-in capital, which isincluded in capital surplus.
The Act provides that a 10% dividend shall be appropriated as additional paidin capital or legal earnings reserve until the aggregate amount of additional paidin capital and the legal earnings reserve equals 25% of common stock. The legal
earnings reserve is included in retained earnings in the accompanying consolidated balance sheets. Under the Act, the legal earnings reserve and additional paid-in
capital could be used to eliminate or reduce a deficit by a resolution at the shareholders’ meeting. Additional paid-in capital and the legal earnings reserve may not
be distributed as dividends. However, all additional paid-in capital and the entire
legal earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company inaccordance with the Act. No distribution of dividends has been proposed to theannual shareholders’ meeting for the year ended March 31, 2017.

11. Comprehensive Income (Loss)
Amounts reclassified to net income in the current year that were recognized inother comprehensive income for the years ended March 31, 2017 and 2016 andtax effects for each component of other comprehensive income are as follows:

Millions of yen
2017
2016

Net unrealized gains (losses) on securities,
net of taxes:
Increase (decrease) during the year������������� ¥ 1,540 ¥(1,539)
Reclassification adjustments������������������������
(38) (1,531)
Sub-total, before tax����������������������������������� 1,501 (3,071)
Tax (expense) or benefit������������������������������ (384)960

Thousands of
U.S. dollars(Note 1)
2017

$ 13,726(338)
13,379(3,422)

Total, net of tax������������������������������������������

1,116(2,111)

9,947

Unrealized gains (losses) on hedging
derivatives, net of taxes:
Increase (decrease) during the year�������������
Reclassification adjustments������������������������
Sub-total, before tax�����������������������������������Tax (expense) or benefit������������������������������

(706)
850

202
(285)

(6,292)
7,576

143
(12)

(82)
37

1,274
(106)

Total, net of tax������������������������������������������

131

(44)

1,167

Foreign currency translation adjustments:
Increase (decrease) during the year������������� (2,406)
Remeasurements of defined benefit plans,
net of taxes:
Increase (decrease) during the year�������������
Reclassification adjustments������������������������

(2,831)

207
143

1,417
1,069

280
(13)

349
(6)

2,495
(115)

266

343

2,370

Share of other comprehensive income ofaffiliates accounted for using equity method:
Increase (decrease) during the year������������� (1,490) (1,007)
Total other comprehensive income (loss)���������� ¥(2,381) ¥(5,652)(13,281)

Discounted notes������������������������������������������� ¥ —Guarantees or reservation of guarantees for loans of affiliated companies
from banks and other lenders����������������������� ¥911

15. Cash Flow Information
Cash and cash equivalents at March 31, 2017 and 2016 consisted of the­following:Thousands of
U.S. dollars(Note 1)
2017

¥ 34

$    —¥974$8,120For the year ended March 31, 2017
In connection with a plea agreement with the U.S. Department of Justice forbreaches of antitrust law by the Company civil lawsuits (class action lawsuits)demanding compensation for damage from the breaches have been filed in North
America. The outcome of the lawsuits may affect the Sanden Group’s businessperformance, however, it is difficult to reasonably estimate their amount at thismoment, and their impacts on the Sanden Group’s operating results and financial
condition are unclear.

Thousands of
U.S. dollars(Note 1)
2017

Millions of yen
2017
2016

Cash and time deposits������������������������������ ¥14,040
Less: Time deposits with maturities morethan three months�����������������������������������—Cash and cash equivalents������������������������� ¥14,040¥17,491$125,144(9)—¥17,482$125,144

The Company newly consolidated Choon Tian Pte Ltd. and its subsidiary as well asGood Life Manufacturing Sdn. Bhd. through its acquisitions of shares in thosecompanies for the year ended March 31, 2017. Breakdowns of assets acquired
and liabilities assumed by the Company when starting consolidation of the subsidiaries as well as reconciliation between acquisition costs and net proceeds fromthe acquisitions were as follows:
1. Choo Tian Pte Ltd.
Millions of yen

Thousands of
U.S. dollars(Note 1)

Current assets����������������������������������������������������������
Non-current assets���������������������������������������������������
Goodwill�������������������������������������������������������������������
Current liabilities�������������������������������������������������������
Foreign currency translation adjustments��������������������

¥1,99822
20(1,988)(1)$17,809
196
178(17,719)(8)

Acquisition cost of shares������������������������������������������Cash and cash equivalents����������������������������������������
Proceeds from acquisition, net�����������������������������������

52
216

463
1,925

¥  164$ 1,461$(21,222)

12. Contingent Liabilities
At March 31, 2017 and 2016, the Company and its consolidated subsidiaries had
the following contingent liabilities:
Millions of yen
2017
2016

14. Leases
The Company and its consolidated subsidiaries account for finance leases that do
not transfer ownership in the same manner as usual acquisitions.
The leased assets consist of structures, machinery and equipment and furnitureand fixtures. Leased software is included as part of “intangible assets.” These
leased assets are mainly for the Automotive Systems Business and theCommercial Store Systems Business.

(21,445)

159
120

Sub-total, before tax�����������������������������������Tax (expense) or benefit������������������������������
Total, net of tax������������������������������������������

13. Environmental Matters
The Vendo Company, a consolidated subsidiary located in the United States ofAmerica, was notified of the contamination of groundwater discovered in areas
close to its manufacturing facility by the California State Regional Water Quality
Control Board. The Vendo Company entered into an agreement to compensate to
the cost for remedial activities. It also entered into a settlement agreement withneighboring landowners to pay a part of the remediation costs related to the contamination described above.
The Vendo Company provided for the liability based on the estimated obligation
relating to the costs for the remediation, which amounted to ¥360 million ($3,208
thousand) and ¥372 million at March 31, 2017 and 2016, respectively, and were
included in other non-current liabilities.

2. Good Life Manufacturing Sdn. Bhd.
Millions of yen

Thousands of
U.S. dollars(Note 1)

Current assets����������������������������������������������������������
Non-current assets���������������������������������������������������
Goodwill�������������������������������������������������������������������
Current liabilities�������������������������������������������������������
Long-term liabilities��������������������������������������������������
Foreign currency translation adjustments��������������������

¥312
516
52
(860)
(6)
(1)

$2,7804,599
463(7,665)(53)(8)

Acquisition cost of shares������������������������������������������Cash and cash equivalents����������������������������������������
Proceeds from acquisition, net�����������������������������������

13
15

115
133

¥  2

$   17

Sanden Holdings Corporation 31

16. Amounts per Share
Net assets and net income (loss) per share as at and for the years ended March
31, 2017 and 2016, respectively, are as follows:
U.S. dollars(Note 1)
2017

Yen
2017

2016

Net assets per share����������������������������������� ¥315.27 ¥507.56
Net income (loss) per share������������������������� (162.82)
50.43

$2.81
(1.45)

Basic and diluted net income (loss) per share of common stock for the years
ended March 31, 2017 and 2016 have been computed based on the following:
Number of shares
2017
2016

Weighted-average number of sharesof common stock����������������������������������������������� 138,121,055

138,114,721

Millions of yen
2017
2016

Thousands of
U.S. dollars(Note 1)
2017

Net income (loss) attributable to ownersof the parent�������������������������������������������� ¥(22,488)
Net income (loss) attributable to ownersof the parent relating to common stock����� (22,488)¥6,965$(200,445)

6,965(200,445)

2016

U.S. dollars(Note 1)
2017¥50.43$(1.45)

Yen
2017

Basic net income (loss) per share ofcommon stock����������������������������������������� ¥(162.82)

Diluted net income per common share for the year ended March 31, 2017 is
not presented as the Company recorded a net loss and did not have common
stock with potential dilutive effect. Diluted net income per common share for theyear ended March 31, 2016 is not presented as the Company did not have common stock with potential dilutive effect.
The Company has introduced the executive compensation BIP Trust (“BIP
Trust”) from the year ended March 31, 2016. The Company’s shares held by the
BIP Trust are recorded as treasury stock in shareholders’ equity which are deducted from the weighted-average number of shares outstanding during the year forthe purpose of calculating net income (loss) per share.
The weighted-average number of shares held by the BIP Trust was 815,476
shares and 488,887 shares for the years ended March 31, 2017 and 2016,
respectively. The total number of shares held by the BIP Trust at the balance sheet
date was 797,707 shares and 837,411 shares as of March 31, 2017 and 2016,
respectively.
17. Business Combination
For the year ended March 31, 2017
Transaction under common control
Merger among consolidated subsidiaries
1. Outline of the transaction(1) Name and business of the company under the transaction
Acquirera Sanwa Co., Ltd.

AcquireeMain business

Sanwa Altech Co., Ltd.
Sanwa Precision Co., Ltd.
Sanwa Tech Co., Ltd.
Mitsukura Tex Co., Ltd.

Manufacturing of
automotive components
and devices

b Sanwa Fabtech Co., Ltd. Sanden Denso Co., Ltd.
Manufacturing of
Sanwa Thermotech Co., Ltd. commercial store
system components

32 Annual Report 2017(2) D ate of the transaction
January 1, 2017(3) Legal form of the transactiona) Absorption-type merger where Sanwa Co., Ltd. is a surviving company and
Sanwa Altech Co., Ltd., Sanwa Precision Co., Ltd., Sanwa Tech Co., Ltd. and
Mitsukura Tex Co., Ltd. are absorbed companies.
b) Absorption-type merger where Sanwa Fabtech Co., Ltd. is a surviving company and Sanden Denso Co., Ltd. and Sanwa Thermotech Co., Ltd. areabsorbed companies.
(4) N ame after the transactiona) Sanwa Co., Ltd.
b) Sanwa Fabtech Co., Ltd.
(5) O ther matters related to the transaction
As part of the Sanden Group’s drastic structural reform for further enforcementof its global business competitiveness, the transactions aim to consolidate
management resources in Japan.
2. Outline of accounting policy applied
The Company accounted for the mergers as transactions under common control
in compliance with the “Accounting Standard for Business Combinations”(Accounting Standards Board of Japan (“ASBJ”) Statement No. 21, September 13,2013) and the “Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures” (ASBJ Guidance No. 10,
September 13, 2013).
For the year ended March 31, 2016
Transaction under common control
Additional acquisition of shares in subsidiary
1. Outline of the transaction(1) Name and business of the company under the transaction
Sanden Shanghai Refrigeration Co., Ltd.
(2) Date of the transaction
September 30, 2015 (deemed acquisition date)(3) Legal form of the transaction
Acquisition of shares from non-controlling shareholders(4) Name after the transaction
Unchanged(5) Other matters related to the transaction
The percentage of voting rights of shares additionally acquired was 49.0% and theownership percentage of the Company after the acquisition became 100.0%. The
purpose of this additional acquisition was to establish bases for expanding sales
and production of Commercial Store Systems Business in China.
2. Outline of accounting policy applied
The Company accounted for the acquisition as a transaction with non-controllingshareholders within a transaction under common control in compliance with ASBJ
Statement No. 21 and the “Revised Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business Divestitures” (ASBJ
Guidance No. 10, September 13, 2013).
3. Additional acquisition of shares in subsidiary
Acquisition cost and consideration paid
Cash ¥645 million
4. Changes in the portion held by the Company in connection with thetransactions with non-controlling shareholders(1) Major reasons for changes in capital surplus
Additional acquisition of the subsidiary’s share(2) D ecreases in capital surplus due to transactions with non-controlling shareholders¥731 million

18. Related Party Transactions
1. Major transactions between the Company and the Company’s directors, certain companies owned by the Company’s directors or affiliates for the year ended March 31,2017 are as follows:
Company name or Name of director

Type of business or Occupation

Sanden Kankyo Mirai Zaidan(Sanden Environmental Future Foundation)*1

Ushikubo-Amada Ikuei Zaidan(Ushikubo-Amada Scholarship Foundation)*2

Sanden Al Salam LLC.

Sales of automotive air-conditioning

Ownership of
the Company (%)

Nature of transaction or
account balance

Millions of yen

Thousands of
U.S. dollars(Note 1)—

Donation����������������������������

¥    20$    178—

Donation����������������������������

30

267

43.0

Sales����������������������������������

8,845

78,839Receivable��������������������������
Other investments*3������������

17,801

158,668

3,836

34,191

Sales����������������������������������
Receivable��������������������������

15,859141,358

5,212

46,456—
Sanden Huayu Automotive Air-Conditioning Co., Ltd.

Sales of automotive air-conditioning

43.0

Donation — Donations contributed to the foundation are determined based on approval of the Board of Directors.
Sales — The terms and conditions applicable to the above material transactions have been determined on an arm’s length basis and by reference to the normal market price.
*1: The objectives of Zaidan’s activities are to develop the people’s consciousness and to create new ideas for the environment.
*2: The objective of Zaidan’s activities is to provide scholarships for developing promising human resources in the next generation.
*3: An allowance for doubtful accounts of ¥3,106 million ($27,685 thousand) was provided for other investments to Sanden Al Salam LLC.
2. Major transactions between the Company and the Company’s directors, certain companies owned by the Company’s directors or affiliates for the year ended March 31,
2016 are as follows:
Company name or Name of director

Sanden Kankyo Mirai Zaidan(Sanden Environmental Future Foundation)
Sanden Al Salam LLC.

Type of business or Occupation*1
Sales of automotive air-conditioning

Ownership of
the Company (%)

Nature of transaction or
account balance

Millions of yen—

Donation����������������������������

¥    20

43.0

Sales����������������������������������
Receivable*2�����������������������

19,023

6,474

Donation — Donation contributed to the foundation is determined based on approval of the Board of Directors.
Sales — The terms and conditions applicable to the above material transactions have been determined on an arm’s length basis and by reference to the normal market price.
*1: The objectives of Zaidan’s activities are to develop the people’s consciousness and to create new ideas for the environment.
*2: An allowance for doubtful accounts of ¥1,429 million was provided for account receivables to Sanden Al Salam LLC.
3.The summaries of financial statements of the two significant affiliates for the fiscal years ended March 31, 2017 and 2016 are as follows:
Millions of yen
2017
2016
Sanden Huayu
Sanden Huayu
Automotive
Automotive
Air-Conditioning
Sanden Al
Air-Conditioning
Sanden Al
Co., Ltd.
Salam LLC.
Co., Ltd.
Salam LLC.

Thousands of U.S. dollars (Note 1)
2017
Sanden Huayu
Automotive
Air-Conditioning
Sanden Al
Co., Ltd.
Salam LLC.

Total current assets������������������������������������������������������������������������������������
Total non-current assets������������������������������������������������������������������������������

¥44,960
21,297¥37,646
3,972¥43,300
21,472¥41,766
1,460$400,748
189,829$335,555
35,404

Total current liabilities���������������������������������������������������������������������������������
Total long-term liabilities�����������������������������������������������������������������������������
Total net assets������������������������������������������������������������������������������������������

33,230724

33,67913

36,182798

31,437340

296,193
6,453

300,196115

32,302

7,925

27,792

11,448287,922

70,639

Sales����������������������������������������������������������������������������������������������������������

74,804

28,81381,003

26,178

666,761

256,823

Income before income taxes������������������������������������������������������������������������
Net income�������������������������������������������������������������������������������������������������

7,214

682

8,177

700

64,301

6,078¥ 6,062¥   666¥ 6,899¥   700$ 54,033$  5,936

19. Segment Information
1. Summary of reporting segment(1) Reporting segments
Our reporting segments are constituent units whose segregated financial information is available and reviewed by the Board of Directors for making decisions in the allocation of operating resources and evaluating the operating performance regularly.
The Company plans the comprehensive strategies and extends business activities for each product, system and service globally.
Therefore, the Company has designated these reporting segments: the “Automotive Systems Business” and the “Commercial Store Systems Business.”
Segment division

Main product, system, service

Automotive Systems Business

Automotive air-conditioning systems and air-conditioner compressors

Commercial Store Systems Business

Automatic vending machines, commercial freezers and refrigerated showcases
Sanden Holdings Corporation 33

(2) Method of measurement of sales, profit (loss), assets, and other items for each reporting segment
The accounting policies of the reportable segment are consistent with the description of the accounting policies.
Information by reporting segment for the years ended March 31, 2017 and 2016 is summarized as follows:
Millions of yen
2017
Automotive
Systems BusinessNet sales:
Outside customers���������������������������������������������������������������������������������������� ¥199,180
Operating income (loss)��������������������������������������������������������������������������������� ¥  4,418
Total assets�������������������������������������������������������������������������������������������������� ¥206,262
Depreciation and amortization������������������������������������������������������������������������
Amortization of goodwill��������������������������������������������������������������������������������
Equity in earnings of affiliates������������������������������������������������������������������������
Impairment loss��������������������������������������������������������������������������������������������
Investments in equity-method companies�������������������������������������������������������
Increase in property, plant and equipment and intangible assets����������������������

Reporting segment
Commercial Store
Systems Business

Total

OthersTotal
consolidated¥71,311¥270,492¥11,569¥282,061¥  (370)¥  4,048¥ (2,466)¥  1,582¥60,357¥266,620¥13,574¥280,194

1,786
213
319
723
4,652
1,185

11,607
283
3,385
4,316
22,29812,387

469
—
—
54
—
585

12,076
283
3,385
4,371
22,298
12,973

9,821
70
3,066
3,593
17,646
11,201Millions of yen
2016
Automotive
Systems BusinessNet sales:
Outside customers���������������������������������������������������������������������������������������� ¥198,385
Operating income (loss)��������������������������������������������������������������������������������� ¥  6,523
Total assets�������������������������������������������������������������������������������������������������� ¥215,933
Depreciation and amortization������������������������������������������������������������������������
Amortization of goodwill��������������������������������������������������������������������������������
Equity in earnings of affiliates������������������������������������������������������������������������
Investments in equity-method companies�������������������������������������������������������
Increase in property, plant and equipment and intangible assets����������������������

9,992
64
3,200
17,067
12,668

Reporting segment
Commercial Store
Systems Business

Total

OthersTotal
consolidated¥83,988¥282,373¥11,863¥294,237¥ 1,894¥  8,417¥ (2,922)¥  5,494¥71,581
2,013
101
946
4,007
1,816

¥287,515
12,005
166
4,147
21,074
14,485¥13,809
369
—
—
—
610

¥301,325
12,374166
4,147
21,07415,095

OthersTotal
consolidated

Note: “Others” include household equipment, car sales and bicycle accessories, etc.

Automotive
Systems BusinessNet sales:
Outside customers�������������������������������������������������������������������������������� $1,775,381
Operating income (loss)������������������������������������������������������������������������� $   39,379
Total assets������������������������������������������������������������������������������������������ $1,838,506
Depreciation and amortization����������������������������������������������������������������
Amortization of goodwill������������������������������������������������������������������������
Equity in earnings of affiliates����������������������������������������������������������������
Impairment loss������������������������������������������������������������������������������������
Investments in equity-method companies�����������������������������������������������
Increase in property, plant and equipment and intangible assets��������������

87,538623
27,32832,026
157,286
99,839Thousands of U.S. dollars (Note 1)
2017
Reporting segment
Commercial Store
Systems Business
Total$635,627$2,411,017$103,119$2,514,136$  (3,297)$   36,081$ (21,980)$   14,101$537,989$2,376,504$120,991$2,497,495

15,919
1,898
2,843
6,444
41,465
10,562

103,458
2,522
30,17238,470198,752
110,410

4,180
—
—
481
—
5,214

107,638
2,522
30,17238,960198,752
115,634

2. Geographic information
Information about geographical areas for the year ended March 31, 2017(1) Sales
Millions of yen
2017
Asia
Japan

thereof
China

EuropeNorth
America

Total
consolidated

Net sales:
Outside customers������������� ¥88,484 ¥95,758 ¥53,583 ¥65,998 ¥31,819 ¥282,061

34 Annual Report 2017

Japan

Thousands of U.S. dollars (Note 1)
2017
Asia
thereofNorth
China
EuropeAmerica

Total
consolidated$788,697 $853,534 $477,609 $588,269 $283,617 $2,514,136

(2) Property, plant and equipment
Millions of yen
2017
Asia
Europethereof
thereof
China
PolandJapan

Property, plant andequipment ���������� ¥38,664 ¥18,632 ¥11,219

North
Total
America consolidated¥17,946 ¥11,086 ¥6,006 ¥81,250

Japan

Thousands of U.S. dollars (Note 1)
2017
Asia
Europethereof
thereof
China
PolandNorth
Total
America consolidated$344,629 $166,075 $100,000 $159,960 $98,814 $53,534 $724,217

Information about geographical areas for the year ended March 31, 2016
(1) Sales
Millions of yen
2016
Asia
thereof
China

Japan

EuropeNorth
America

Total
consolidated

Net sales:
Outside customers����������� ¥96,089 ¥90,130 ¥48,216 ¥70,292 ¥37,724 ¥294,237(2) Property, plant and equipment

Japan

Millions of yen
2016
Asia
Europethereof
thereof
China
PolandProperty, plantand equipment���� ¥42,900 ¥17,811 ¥10,191

North
Total
America consolidated¥20,499 ¥11,788 ¥8,344 ¥89,555

20. Supplementary Information
The main items of selling, general and administrative expenses for the years
ended March 31, 2017 and 2016 in the accompanying consolidated statementsof operations were as follows:

Millions of yen
2017
2016

Employees’ salaries and bonuses��������������� ¥17,491
Freight����������������������������������������������������� 3,652
Depreciation��������������������������������������������� 2,448
Provision for:
Employees’ bonuses�����������������������������
Warranty liabilities��������������������������������
Retirement benefit costs����������������������������

1,605
1,945
829

Thousands of
U.S. dollars(Note 1)
2017

¥18,024
4,585
2,512

$155,905
32,551
21,820

1,698
980
788

14,306
17,336
7,389

Research and development expenses are recognized as incurred. Research anddevelopment expenses charged to general and administrative expenses or total
manufacturing cost for the years ended March 31, 2017 and 2016 were ¥7,910
million ($70,505 thousand) and ¥6,771 million, respectively.
21. Extraordinary Product Warranty Cost
For the year ended March 31, 2017, the Company decided to collect certain products
from markets that were manufactured and already sold in the past in Automotive
Systems Business and Commercial Store Systems Business, which could have defects
or potential defects. Costs for inspections and replacements of the collected products
reasonably estimated were charged to the consolidated statements of operations as
extraordinary product warranty costs in other expenses for the period.

and (3) improvement of investment efficiency through selection and concentration.
As a result of implementations of the measures, in the Automotive Systems
Business, the Commercial Store Systems Business and Other Business, additional
severance payment for early retirement of ¥1,987 million ($17,711 thousand),
impairment loss on long-lived assets of ¥4,371 million ($38,960 thousand) andother losses of ¥1,443 million ($12,862 thousand) including loss on valuation of
inventories were charged to the consolidated statements of operations as structure reform costs in other expenses for the year ended March 31, 2017.
24. Impairment Loss
For the year ended March 31, 2017, the Company recorded impairment losses on
asset groups detailed below, which were included in “Structure reform cost” inother expenses.
1. Details of asset groups impaired
Location

Purpose of use

Type of assets

Tinteniac, France

Automotive Systems
Business

Machinery and equipment andothersWylie, Texas, U.S.A.

Automotive Systems
Business

Machinery and equipment andothers

Saltillo Coahuila, Mexico Automotive Systems
Business

Machinery and equipment, landand others

Pasir Gudang Johore,
Malaysia

Machinery and equipment,
furniture and fixtures and others

Automotive Systems
Business

Kiryu-shi, Gunma, Japan Automotive Systems
Business

Land, buildings and others

Maebashi-shi, Gunma,Japan

Commercial Store
Systems Business

22. Loss related to Antitrust Law
Loss related to antitrust law represents fines imposed on violations of European
Union competition law with regard to certain automotive systems business.

Machinery and equipment,
lease assets (machinery andequipment), furniture andfixtures and others

Casale Monferrato, Italy

Commercial Store
Systems Business

Machinery and equipment,
buildings and others

Other Business23. Structure Reform Cost
As part of measures for the Sanden Group’s structural reforms resolved by the
Board of Directors meeting of the Company held on August 5, 2016, the Company
and its consolidated subsidiaries have been working on (1) focus of investment for
growth driver through extensive review of the overall business portfolio, (2) rationalization through integration and consolidation of operations and organizations

Maebashi-shi, Gunma,Japan

Machinery and equipment andothers

2. Method of asset grouping
The Company and its consolidated subsidiaries classify long-lived assets into
groups with reference to units set out for management accounting at which operational results of the Group are regularly reviewed by management.
Sanden Holdings Corporation 35

3. Events and circumstances that led to recognition of impairment loss
As part of measures for the Sanden Group’s structural reforms resolved by the
Board of Directors meeting of the Company held on August 5, 2016, the Company
and its consolidated subsidiaries have been working on (1) concentration of
investment into growing business through review of the business portfolio, (2)rationalization through integration and consolidation of operations and organizations and (3) improvement of investment efficiency through selection and­concentration. As a result of changes in the Group’s production frameworks, theconsolidations or reorganizations in the Group, and the selections and concentrations of further assets investments, production facilities in the asset groups
described in 1. Details of asset groups impaired above became excessive or nolonger recoverable, in terms of costs, within remaining useful lives of major assets
in the groups, resulting in written down of carrying amounts of the assets to theirrecoverable amounts.
4. Method of determining recoverable amountThe recoverable amount of the asset group was measured as the higher of net
selling value and value in use. Net selling values are primarily based on appraisal
values obtained from real estate appraisers.
Values in use are calculated by discounting future cash flows at rates from
6.5% to 7.5%. Business assets that are not expected to generate future cash
flows from their use, or to be sold at values exceeding costs for its disposition, arevalued at nominal values.
5. Amount of impairment loss
Amounts of impairment loss by categories of long-lived assets were as follows:

Millions of yen

Thousands of
U.S. dollars(Note 1)

Buildings and structures��������������������������������������������
Machinery and equipment�����������������������������������������
Furniture and fixtures������������������������������������������������
Land������������������������������������������������������������������������
Others����������������������������������������������������������������������

¥  136
3,280
176
203
575

$ 1,212
29,236
1,568
1,809
5,125

Total������������������������������������������������������������������������

¥4,371$38,960

25. Subsequent Events
At the Board of Directors meeting held on May 19, 2017, the Company resolved
to submit a proposal for change in the number of shares constituting one trading
unit and consolidation of shares to the 91st annual general shareholders’ meeting
held on June 22, 2017. The proposal has been resolved as proposed at the­shareholders’ meeting.
1. Change in the number of shares constituting one trading unit
(1) Reason for change
Japanese stock exchanges have been working to promote standardization of
one trading unit for domestic listed companies (number of shares constituting
one trading unit) into a unit of 100 shares based on the “Action Plan for
Consolidating Trading Units” in order to improve convenience for investors andother market participants. The Company decided to change one trading unit of
the Company shares to 100 shares, giving respect to objectives of the actionplan.
(2) Details of change
The Company changes its number of shares constituting one trading unit of
the Company’s common stock from 1,000 shares to 100 shares effective
October 1, 2017.
2. Consolidation of shares(1) Purpose of consolidation
As stated in 1. Change in the number of shares constituting one trading unit
above, the Company decided to change its number of shares constituting one
trading unit from 1,000 shares to 100 shares. At the same time, considering
mid- to long-term fluctuation in the Company’s stock prices, the Company has
decided to consolidate its shares at a ratio of one share for every five shares inorder to adjust the level of the investment unit to be regarded as appropriate
by Japanese stock exchanges.
36 Annual Report 2017(2) D etails of consolidation
a. Type of shares subject to the consolidation   Common stockb. Ratio of the consolidation
The consolidation of shares shall be executed on October 1, 2017, at a ratioof one share for each five shares owned by shareholders who are recordedin the shareholder register as of the close of September 30, 2017.
c. Number of shares to be reduced due to the consolidation
Total number of issued shares before the consolidation (as of March 31, 2017)
140,331,565 shares
Number of shares to be reduced due to the consolidation
112,265,252 shares
Total number of issued shares after the consolidation

28,066,313 shares
Note: The number of shares to be reduced due to the consolidation and total
number of issued shares after the consolidation are theoretical numbers calculated using the total number of issued shares before the consolidation multiplied by
the ratio of the consolidation of shares.
(3) Treatment for fractional shares less than one share
Fractional shares less than one share resulting from the consolidation ofshares shall be subject to a bulk sale in accordance with Article 235 of theCompanies Act of Japan. The proceeds from the bulk sale shall be distributed
to holders of the fractional shares in proportion to the respective number of
their fractional shares.
3. Effect on per share information
Assuming the consolidation of shares were made on April 1, 2015, per share
information as of and for the years ended March 31, 2017 and 2016 is as­follows:

2016

U.S. dollars(Note 1)2017

¥2,537.79$14.05252.15(7.25)Yen
2017

Net assets per share ofcommon stock�������������������������������� ¥1,576.34
Basic net income (loss) per share ofcommon stock�������������������������������� (814.10)

Note: Diluted net income per common share is not presented for the years
ended March 31, 2017 and 2016 as the Company did not have common
stock with potential dilutive effect for the periods.

Independent Auditor’s Report

Sanden Holdings Corporation 37

Corporate Data
Name

SANDEN HOLDINGS CORPORATION

Representative

Kin-ei Kanda,
Director & President

Established

July 30, 1943

Capital (As of March 31, 2017)¥11,037 million

Net sales (Fiscal year ended March 31, 2017)¥282,061 million

Number of employees (As of March 31, 2017)13,398 (consolidated)

Address

Headquarters

Tokyo Headquarters

20 Kotobuki-cho, Isesaki-shi, Gunma, Japan 372-8502
TEL +81-(0)270-24-1211
Akihabara Daibiru Building,
1-18-13 Soto Kanda, Chiyoda-ku, Tokyo, Japan 101-8583
TEL +81-(0)3-5209-3231

Group companies (As of May 31, 2017)

Japan

Overseas

38 Annual Report 2017

Sanden Automotive Climate Systems Corporation

Isesaki, Gunma

Sanden Automotive Components Corporation

Isesaki, Gunma

Sanden Retail Systems Corporation

Isesaki, Gunma

Sanden Living & Environmental Systems Corporation

Isesaki, Gunma

Sanden Environmental Products Corporation

Isesaki, Gunma

Sanden Advanced Technology Corporation

Isesaki, Gunma

Sanden Business Expert Corporation

Isesaki, Gunma

Sanwa Corporation

Isesaki, Gunma

Sanwa Fabtech Corporation

Maebashi, Gunma

SD Maintenance Corporation

Kita-ku, Tokyo

Sanden System Engineering Corporation

Isesaki, Gunma

Sanden Logistics Corporation

Isesaki, Gunma

Sanden Facility Corporation

Maebashi, Gunma

Sanden Real Estate Corporation

Isesaki, Gunma

Honda Cars Takasaki Corporation

Takasaki, Gunma

Sankyo Kosan Corporation

Isesaki, Gunma

Asahi Sangyo Co., Ltd.

Honjyo, Saitama

Sanwa Coatex Corporation

Isesaki, Gunma

Sanden Bright Partner Corporation

Isesaki, Gunma

Sanden International (U.S.A.), Inc.

Wylie, Texas, U.S.A.

SandenVendo America Inc.

Dallas, Texas, U.S.A.

Sanden of America Inc.

Wylie, Texas, U.S.A.

Sanden Manufacturing Mexico S.A. de C.V.

Ramos Arizpe Coah. CP, Mexico

Sanden International (Europe) Ltd.

Basingstoke, Hampshire, UK

Sanden Manufacturing Europe S.A.S.

Tinteniac, France

Sanden Manufacturing Poland SP.z o.o.

Polkowice, Poland

SandenVendo Europe S.p.A.

Casale Monferrato, Italy

Sanden International (Singapore) Pte. Ltd.

Singapore

Sanden Airconditioning (Malaysia) Sdn. Bhd.

Selangor Darul Ehsan, Malaysia

Sanden Intercool (Thailand) Public Co., Ltd.

Singburi, Thailand

Sanden Huayu Automotive Air-Conditioning Co., Ltd.

Shanghai, The People’s Republic of China

Sanden Shanghai Refrigeration Co., Ltd.

Shanghai, The People’s Republic of China

Stock Information
Securities code

6444

Stock exchange listingFirst Section, Tokyo Stock Exchange

Shareholder registryadministrator

Sumitomo Mitsui Trust Bank, Ltd.

Total number of shares
outstanding (As of March 31, 2017)

140,331,565 shares

Trading unit of shares (As of March 31, 2017)

1,000 shares

1-4-1, Marunouchi, Chiyoda-ku, Tokyo*As of October 1, 2017, the Company has changed the number of shares per trading unit from
1,000 to 100.

9,625

Number of shareholders (As of March 31, 2017)

Major shareholders (Top 10) (As of March 31, 2017)

Distribution of shares by type of shareholder(As of March 31, 2017)

Name of shareholders

Number ofshares(Thousands)

Percentage ofvoting rights

1

Sanden’s Customers Share Holding Association

7,589

5.46

2

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

6,500

4.68

3

Mizuho Corporate Bank, Ltd.

5,088

3.66

4

The Gunma Bank, Ltd.

5,087

3.66

5

Japan Trustee Services Bank, Ltd. (Trust Account)

4,844

3.48

6

Daido Life Insurance Co., Ltd.

3,471

2.49

7

Sanden’s Employee Share Holding Association

3,074

2.21

8

DFA INTL SMALL CAP VALUE PORTFOLIO

2,714

1.95

9

BNP PARIBAS SECURITIES SERVICESLUXEMBOURG/JASDEC/FIM/LUXEMBOURG
FUNDS/UCITS ASSETS

2,500

1.80

Japan Trustee Services Bank, Ltd. (Trust Account 5)

2,242

1.61

10

Government andLocal Public Bodies

Financial Institutions

0.00%

33.70%

Individuals andOthersFinancial
Instruments
Business
Operators

36.77%

Foreign Entities,
etc. (individuals)

0.99%

0.02%

Foreign Entities, etc.
(Other than individuals)

Other Corporate
Entities18.12%

10.40%

Note: 805 shares held in the name of the Company are included in “Individual
and Others” in the graph above.

Note: Treasury stock is not included in the major shareholders shown above.

Stock price trends and trading volume
Stock price (Yen)

800
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00
Trading volume (thousand shares)

50,00050,00040,00040,00030,00030,00020,00020,00010,00010,000
00

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Sanden Holdings Corporation 39

Akihabara Daibiru Building,1-18-13 Soto Kanda,
Chiyoda-ku, Tokyo, Japan 101-8583
Phone: +81-(0)3-5209-3231
URL: http://www.sanden.co.jp/english/index.html

Printed in Japan