Annual Report 2004
Financial Section
For the year ended March 31, 2004

Consolidated Financial Statements
Shibaura Mechatronics Corporationand Subsidiaries
Years ended March 31, 2004 and 2003
with Report of Independent Auditors

Contents
Consolidated Balance Sheets ……………………………………………… 1
Consolidated Statements of Operations …………………………………… 3
Consolidated Statements of Shareholders’ Equity ………………………… 4
Consolidated Statements of Cash Flows …………………………………… 5
Notes to Consolidated Financial Statements ……………………………… 7
Report of Independent Auditors …………………………………………… 16
Supplemental Information …………………………………………………… 17

Shibaura Mechatronics Corporation and Subsidiaries

Consolidated Balance Sheets

March 31,2004

March 31,
2004

2003
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

AssetsCurrent assets:¥ 4,506¥ 3,343$ 42,633

Short-term investments

14

70

138

Marketable securities (Note 3)

–

11

–

23,176

19,025219,281

(211)

(103)

(2,000)Inventories (Note 4)

18,62815,181

176,252

Deferred tax assets

1,779

950

16,835

Other current assets

982

830

9,288

48,87439,307462,427

299

305

2,827

Buildings and structures

27,821

28,125263,234

Machinery and equipment

1,399

8,887

13,235Construction in progress

341

60

3,227

Total

29,86037,377

282,523

Accumulated depreciation(13,037)(18,245)(123,352)

Property, plant and equipment, net

16,823

19,132

159,171

498

538

4,711

2,236

3,614

21,155

Other assets

814

1,025

7,710

Allowance for doubtful accounts

(–)

(1)

(–)

Total investments and other assets

3,548

5,176

33,576¥ 69,245¥ 63,615$ 655,174

Cash and bank deposits

Notes and accounts receivable, trade
Allowance for doubtful accounts

Total current assets

Property, plant and equipment:
Land

Investments and other assets:
Investment securities (Note 3)
Deferred tax assets

Total assets

1March 31,
2004

March 31,
2004

2003
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

Liabilities and shareholders’ equity
Current liabilities:¥ 1,914¥ 7,289$ 18,112

670

4,681

6,345

Notes and accounts payable, trade

22,023

16,703208,372

Accrued expenses

3,672

2,864

34,742

Accrued income taxes (Note 7)

377

372

3,572

Accrued consumption tax

82

81

772

2,625

1,611

24,83331,36333,601

296,748

Long-term debt (Note 5)

11,828

4,921

111,910

Allowance for retirement benefits (Note 8)

4,488

4,611

42,460

142

116

1,349

3,333

3,300

31,53919,791

12,948187,258

5,868

5,868

55,521

Additional paid-in capital (Note 9)

9,848

9,848

93,175Retained earnings (Note 9)

2,531

1,552

23,948Net unrealized holding gain on other securities

48

(19)

459

Foreign currency translation adjustments

(20)

(2)

(192)

Less treasury stock, at cost

(184)

(181)

(1,743)18,091

17,066

171,168¥ 69,245¥ 63,615$ 655,174

Short-term bank loans (Note 5)
Current portion of long-term debt (Note 5)

Other current liabilities
Total current liabilities

Long-term liabilities:

Directors’ retirement benefits
Other long-term liabilities
Total long-term liabilities

Contingent liabilities (Note 12)

Shareholders’ equity:
Common stock:
Authorized: 100,000,000 shares
Issued:50,033,312 shares at March 31, 2004 and 2003

Total shareholders’ equity
Total liabilities and shareholders’ equity

The accompanying notes are an integral part of the consolidated financial statements.

2

Shibaura Mechatronics Corporation and Subsidiaries

Consolidated Statements of Operations

Year ended
March 31,

Year ended March 31,
2004

2004

2003
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

¥ 67,521¥ 54,761$ 638,857

54,30845,428513,843

13,2139,333

125,014

10,045

10,835

95,0403,168(1,502)

29,974

7

7

66

(179)

(178)

(1,690)Equity in earnings of affiliates

96

21

909

Gain on sale of land

119

–

1,126

(226)

–

(2,143)(1,027)(520)(9,718)

1,958(2,172)

18,524Current

462

344

4,371

Deferred517(1,100)

4,888

979

(756)

9,259

979

¥ (1,416)

Net sales
Cost of sales
Gross profit

Selling, general and administrative expenses
Operating income (loss)

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

Loss on devaluation of investment inunconsolidated subsidiary
Other, net
Income (loss) before income taxes

Income taxes (Note 7):¥

Net income (loss)

The accompanying notes are an integral part of the consolidated financial statements.

3

$

9,265

Shibaura Mechatronics Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Balance as of March 31, 2002
Net loss
Bonuses to directors and statutory auditors
Net change
Foreign currency translation adjustments
Net increase in treasury stock
Balance as of March 31, 2003
Net income
Net change
Foreign currency translation adjustments
Net increase in treasury stock
Balance as of March 31, 2004

Balance as of March 31, 2003
Net loss
Net change
Foreign currency translation adjustments
Net increase in treasury stock
Balance as of March 31, 2004

Net
unrealized
holding
Foreign
gains oncurrency
othertranslation Treasury
securities adjustments
stock

Number ofshares ofcommonstock

Commonstock

Additional
paid-in
capital50,033,312
–
–
–
–
–
50,033,312––––
50,033,312¥ 5,868
–
–
–
–
–
5,868
–
–
–
–
¥ 5,868(Millions of yen)
¥ 9,848¥ 2,969¥–(1,416)
–
(1)
–
–
–
–
–
–
9,848
1,552
–
979
–
–
–
–
–
–
¥ 9,848¥ 2,531¥$ 55,521––––$ 55,521(Thousands of U.S. dollars) (Note 1)$ 93,175$ 14,683$ (178)$ (18)
–
9,265
–
–
–
–
637
–
–
–
–
(174)
–
–
–
–
$ 93,175$ 23,948$ 459$ (192)Retainedearnings

The accompanying notes are an integral part of the consolidated financial statements.

4

1
–
–
(20)
–
–
(19)
–
67
–
–
48

¥

¥

5
–
–
–
(7)
–
(2)
–
–
(18)
–
(20)

¥

¥

(177)
–
–
–
–
(4)
(181)
–
–
–
(3)
(184)

$ (1,713)
–
–
–
(30)
$ (1,743)

Shibaura Mechatronics Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Year ended
March 31,

Year ended March 31,
2004

2004

2003
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

Operating activities¥(2,172)$ 18,524

1,756

2,080

16,618(Reversal of) provision for doubtful accounts

(18)

5

(166)

Reversal of allowance for employees’ retirement benefits

(97)

(857)

(918)

Interest and dividend income

(7)

(6)

(66)

Interest expense

179

178

1,689

(Gain) loss on sales of property and equipment

(71)

22

(674)

Loss on disposal of property and equipment

84

58

799

–

30

–

–

10

–

226

–

2,143

1

3

12

(96)

(21)

(909)

–

(1)

–

1,242

355

11,749and accounts receivable, trade(4,150)1,219(39,270)(Increase) decrease in inventories(3,447)

2,327(32,618)

Increase in notes and accounts payable, trade

5,995

1,847

56,723

Other, net

(252)

98

(2,381)

Subtotal

3,303

5,175

31,25586

4815Interest paid

(178)

(175)

(1,688)

Income taxes paid

(456)

(72)

(4,319)Net cash provided by operating activities

2,755

4,932

26,063

Income (loss) before income taxes
Depreciation and amortization

1,958

¥

Loss on revaluation of marketable andinvestment securities
Loss on sales of investment securities
Loss on devaluation of investment inunconsolidated subsidiary
Translation loss
Equity in earnings of unconsolidated subsidiaries
and affiliates
Bonuses to directors and statutory auditors
Increase in advances received(Increase) decrease in notes

Interest and dividends received

5

Year ended
March 31,

Year ended March 31,
2004

2004

2003
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

Investment activities
Payments for time deposits

(35)

(69)

(328)

Proceeds from time deposits

90

74

848

Proceeds from redemption of bonds

11

–

104

Purchases of property, plant and equipment

(990)

(475)

(9,364)

Proceeds from sales of property, plant and equipment

1,983

143

18,763Purchases of intangible fixed assets

(28)

(81)

(268)

Purchases of investment securities

(1)

(15)

(9)

Proceeds from sales of investment securities

–

43

–

Increase in short-term loans receivable

(184)

–

(1,740)

Increase in long-term loans receivable

(132)

(132)

(1,245)

Collection of long-term loans receivable

138

4

1,305

Decrease in other assets

63

39

592

Net cash provided by (used in) investing activities

915

(469)

8,658

Decrease in short-term bank loans(5,375)(6,198)(50,857)

Proceeds from long-term debt

2,600

2,000

24,600

Repayment of long-term debt

(1,883)(171)(17,821)

4,975–

47,075(2,820)–(26,682)

(3)

(4)

(29)

(2,506)(4,373)(23,714)and bank deposits

(1)

(3)

(12)

Net increase in cash

1,163

87

10,995

Cash and bank deposits at beginning of the year

3,343

3,256

31,6383,343$ 42,633

Financing activities

Proceeds from issuance of Zero Coupon Japanese yen
convertible notes
Redemption of non-interest-bearing convertible bonds
Purchases of treasury stock
Net cash used in financing activities
Effect of exchange rate changes on cash¥

Cash and bank deposits at end of the year

4,506

The accompanying notes are an integral part of the consolidated financial statements.

6¥

Shibaura Mechatronics Corporation and Subsidiaries

Notes to Consolidated Financial Statements
March 31, 2004

1. Basis of Presenting Financial Statements

transactions have been eliminated in consolidation.

Shibaura Mechatronics Corporation (the “Company”) and its

The investments in unconsolidated subsidiaries which are notconsolidated subsidiaries (collectively the “Companies”)

deemed material to the consolidated financial statements aremaintain their accounting records and prepare their financial

stated at cost, except for one subsidiary which is accounted

statements in accordance with accounting principles

for by the equity method.

generally accepted in Japan.

The accompanying

consolidated financial statements have been prepared from(b) Foreign currency translation

the financial statements filed with the Ministry of Finance as

The revenue and expense accounts of the foreign

required by the Securities and Exchange Law of Japan.

consolidated subsidiaries are translated into yen at the rate of

Accordingly, the consolidated financial positions, results of

exchange in effect at the balance sheet date. The balance

operations and cash flows presented in the accompanying

sheet accounts, except for the components of shareholders’financial statements are different in certain respects as toequity, are also translated into yen at the rate of exchange inapplication and disclosure requirements of International

effect at the balance sheet date. The components ofFinancial Reporting Standards, and are compiled from theshareholders’ equity are translated at their historical exchange

consolidated financial statements prepared by the Company

rates. The differences arising from translation when two

as required by the Securities and Exchange Law of Japan.

exchange rates have been used are presented as translation

For the purposes of this document, certain reclassifications

adjustments, a component of shareholders’ equity in thehave been made to present the accompanying consolidated

accompanying consolidated financial statements.

financial statements in a format which is familiar to readers
All monetary assets and liabilities of the Company and its

outside Japan.

domestic consolidated subsidiaries denominated in foreign
The accompanying consolidated financial statements are

currencies are translated at the current exchange rates instated in yen, the currency of the country in which theeffect at each balance sheet date. Gains and losses resulting

Company is incorporated and operates. The translation of

from the settlement of these items are credited or charged

yen amounts into U.S. dollar amounts has been included

currently to income.

solely for the convenience of readers outside Japan. The
translation has been made at the rate of ¥105.69 = U.S.$1.00,(c) Cash and cash equivalents

the approximate rate of exchange in effect on March 31,

The Company and its subsidiaries substantially consider all

2004. This translation should not be construed as ahighly liquid investments with a maturity of three months or

representation that yen could be converted into U.S. dollars at

less from the purchase dates to be cash equivalents.

the above or any other rate.
(d) Securities
2. Summary of Significant Accounting Policies

Other securities with determinable market prices are carriedat market value. The difference between the acquisition cost(a) Scope of consolidationand the carrying value of other securities, including unrealized

The accompanying consolidated financial statements include

gains and losses, is recognized as a component of

the accounts of Shibaura Mechatronics Corporation and five

shareholders’ equity under “Net unrealized holding gain on

subsidiaries over which the Company exerts substantial

other securities.” The cost of other securities sold is computed

control either through majority ownership of voting stock

based on the moving average method. Other securities

and/or by other means. All assets and liabilities of the

without determinable market prices are stated at cost, based

subsidiaries are revalued at fair value on acquisition, if

on the moving average method.

applicable. All significant intercompany balances and7(e) Derivatives

is determined based on the historical experience with write-

Derivatives are stated at fair market value.

offs plus an estimate of specific probable doubtful accounts
based on a review of the collectibility of the individual
receivables.

(f) Inventories
Inventories of the Company and its consolidated subsidiaries
are stated at cost, determined principally by the following(i) Severance benefits and pension plans

methods:

The allowance for employees’ retirement benefits has been
provided based on the projected retirement benefit obligationand the pension fund assets. Actuarial gain or loss is

Finished goods, raw materials and supplies-- Primarily by the moving average method

amortized in the year following the year in which the gain orloss is recognized by the straight-line method over a period of

Semi-finished goods-- Primarily by individual cost method

10 years, which is shorter than the average remaining years ofservice of the employees.

Work in process-- Primarily by individual cost method

The Companies also provide for retirement benefits to(g) Depreciation and amortization

directors and statutory auditors, based on the Companies’

Depreciation of property, plant and equipment is generallyinternal rules at the amount which would be required to becomputed by the declining-balance method, based on thepaid if all directors and statutory auditors retired or resigned

estimated useful lives of the respective assets. The straight-

at the balance sheet date.

line method is adopted for a certain building acquired during
the year ended March 31, 1995, and to all buildings acquired(j) Accrual for periodic repairs

since April 1, 1998. The following summarizes the estimatedA certain building acquired in the year ended March 31, 1995,

useful lives of property, plant and equipment by major

requires periodic repairs. An accrual for repair expenses iscategory:

recorded based on the current portion of the total expenses
estimated for such repairs.

Buildings and structures

3 – 60 years(k) Leases

Machinery and equipment 2 – 17 years

Finance leases other than those which are deemed to transfer
Intangible assets are amortized by the straight-line method.

the ownership of the leased assets to the lessee are not

Development costs for software intended for internal use arecapitalized, but are accounted for by a method similar to thatamortized by the straight-line method over a period of 5 years,

applicable to operating leases.

based on the estimated useful life of the software.
(l) Research and development expenses
Development costs for software intended to be sold are

Research and development expenses are charged to income

amortized by the straight-line method over a period of 3 years

when incurred.

(the estimated number of salable years) or at the percentageof the actual annual volume of sales to the estimated(m) Income taxes

maximum volume of sales, whichever is higher.

Deferred tax assets and liabilities are determined based on
the differences between financial reporting and tax-based(h) Allowance for doubtful accounts

reporting of the assets and liabilities and are measured using

The allowance for doubtful accounts is provided at an amountthe statutory tax rates which will be in effect when thesufficient to cover possible losses on the collection ofdifferences are expected to be realized.

receivables. For the Companies, the amount of the allowance8

3. Securities
At March 31, 2004 and 2003, securities with determinable market prices classified as other (available-for-sale) securities are summarized asfollows:

March 31,

Acquisition
costs

2004

2003

Amountrecorded in
the balance
sheet

Amountrecorded in
the balance
sheet

Difference

Acquisition
costs(Millions of yen)

Other securities whose market values
recorded in the balance sheet exceed
their acquisition costs:
Equity securities
Debt securities
Other
Subtotal
Other securities whose market values
recorded in the balance sheet do not
exceed their acquisition costs:
Equity securities
Debt securities
Other
Subtotal
Total

March 31,2004

Difference(Millions of yen)Amountrecorded in
Acquisition the balance
costs
sheet

Difference(Thousands of U.S. dollars)

¥ 141
–
–
141

¥ 238
–
–
238

¥ 97
–
–
97

¥ 49
11
–
60

¥ 66
11
–
77

¥ 17
0
–
17

$1,336––
1,336$2,250
–
–
2,250

$ 914
–
–
914

–
–
–
–
¥ 141

–
–
–
–
¥ 238

–
–
–
–
¥ 97

122
–
–
122
¥ 182

69
–
–
69
¥ 146

(53)
–
–
(53)
¥ (36)––––$1,336––––$2,250

–
–
–
–
$ 914

At March 31, 2004 and 2003, other securities without determinable market prices are summarized as follows:
March 31,
2004
2003
(Millions of yen)March 31,
2004
(Thousands of
U.S. dollars)

Investments in subsidiaries and affiliates:
Unlisted equity securities other than those traded on
the over-the-counter market

¥ 221

¥ 361

$ 2,089

Other unlisted securities other than those traded on
over-the-counter market

39

42

372

5. Short-Term Bank Loans and Long-Term Debt

4. Inventories
Inventories at March 31, 2004 and 2003 are summarized as follows:

Finished products
Raw materials
Work in process
Total

March 31,
2004
2003

March 31,
2004

(Millions of yen)(Thousands of
U.S. dollars)¥ 8,555203
9,870¥18,628¥ 4,660
77
10,444¥15,181

The annual interest rates of the Companies’ short-term bankloans ranged principally from 0.60 percent to 3.25 percent at
March 31, 2004, and from 0.49 percent to 3.00 percent at
March 31, 2003.

$ 80,943
1,917
93,392$176,252

A summary of long-term debt at March 31, 2004 and 2003 is
as follows:

9

2004

March 31,
2003

(Millions of yen)Unsecured:Non-interest-bearing
convertible bonds
due March 2004¥–
Zero Coupon Japanese yen
convertible notes (notes
with stock acquisitionrights)5,000
0.90 percent to 2.10 percent
loans from banks andinsurance companies due
2004 – 2008
7,493
Loans from Pension Welfare
Service Public Corporationdue 2004 – 2034
5
Total
12,498Current portion(670)
Long-term debt less current
portion¥11,828

March 31,2004

At March 31, 2004, the Company has unused committed lines of(Thousands of
U.S. dollars)

operating funds aggregating ¥10,000 million ($94,616 thousand).

credit with 5 banks for efficient financial arrangements for
These lines of credit have commitment fee requirements.
6. Research and Development Expenses$¥ 2,820–

Research and development expenses charged to income forthe years ended March 31,2004 and 2003 were as follows:Year ended
Year ended March 31, March 31,
2004
2003
2004

47,308–(Millions of yen)

6,771

70,89811
9,602(4,681)

49
118,255(6,345)¥ 4,921$111,910¥1,415¥1,409(Thousands of
U.S. dollars)$13,387

7. Income Taxes
Income taxes applicable to the Company and its domestic
subsidiaries comprised corporation, inhabitants’ and enterprise
tax which, in the aggregate, resulted in a statutory tax rate of
41.7 percent for 2004 and 2003. Income taxes of the foreignsubsidiaries are based generally on the tax rates applicable inLoans from the Pension Welfare Service Public Corporation

their countries of incorporation. Current income tax expense

represent financing housing loans to the Company’s

for the year ended March 31 2004 includes income tax refunds

employees, and the same amount is stated as a portion ofof ¥ 60 million ($569 thousand).

other assets (loans to employees). The Company pays theinterest on such loans to the lender and collects the same

The major components of deferred tax assets and liabilities asamount from the employees as the borrowers.

of March 31, 2004 and 2003 are summarized as follows:
On March 8, 2004, the Company issued JPY 5,000 million
Zero Coupon Japanese yen convertible notes (notes withstock acquisition rights) due March 8, 2009. The convertible
notes are convertible during the period from March 22, 2004,
common stock at a price of ¥ 943 per share, subject toadjustment in specific circumstances.
The long-term debt subsequent to March 31, 2004, issummarized by maturity as follows:
March 31, 2004

2005
2006
2007
2008 and thereafter
Total

¥

670
1,953
2,670
7,205
¥12,498

March 31,
2004

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

Deferred tax assets:
Employees’ retirement
benefits¥1,783
Accrued employees’ bonuses
607
Accrual for periodic repairs
135Enterprise tax payable50
Net loss carried forward
1,150
Other
466
Gross deferred tax assets
4,191
Valuation allowance(137)
Total deferred tax assets
4,054
Deferred tax liabilities:
Unrecognized holding
gain on other securities(39)
Total deferred tax liabilities(39)
Deferred tax assets, net¥4,015to February 20, 2009, at the option of the holder into shares of(Millionsof yen)March 31,
2004
2003

(Thousands of
U.S. dollars)

$

6,345
18,47725,26368,171$118,255

10¥1,915
427
122
30
1,861
300
4,655
(85)
4,570

$16,869
5,748
1,281
473
10,878
4,412
39,661(1,300)38,361(6)(6)¥4,564(371)(371)$37,990

The effective tax rates reflected in the accompanying
consolidated statements of operations for the year ended
March 31 2004 differ from the statutory tax rates for thefollowing reasons;Components of net periodic pension cost:
Year ended
Year ended March 31, March 31,
2004
2003
2004
(Millions of yen)

Statutory tax rate
Effect of;
Non-deductible expenses such as entertainment
expenses
Per capita levy of inhabitants’ tax and others
Changes in valuation allowance
Correction of decrease of deferred tax assets
due to change of tax rate
Other net
Effective tax rate

41.7%
Service cost - benefits earned
during the year
¥ 489
Interest cost on projected
benefit obligation
240
Expected return on plan assets(90)
Amortization of actuarial loss
284
Net periodic pension cost
¥ 923

1.9
1.0
2.8
2.0
0.6
50.0%

(Thousands of
U.S. dollars)¥471$ 4,627

¥

296
(86)
221
902

2,269
(854)
2,690
$ 8,732

The allowance for retirement benefits was determined by thesimplified method by the consolidated subsidiaries and has

8. Retirement Benefits

been included in service cost – benefits earned during theyear.

The Companies have defined benefit pension plans andMarch 31,
2004
2003
Assumptions used in the actuarial calculation:
Actuarial cost method
Projected unit credit method
Discount rate
2.5% per annum 2.5% per annum
Expected rate of return onplan assets
3.5% per annum 3.5% per annum
Amortization period for
actuarial loss
10 years (within the employees’
average remaining years of service)

lump-sum retirement payment plans which cover substantiallyall employees who terminate their employment with theCompanies. In addition, an employee, if eligible, may receive
additional payments under the plans.
The following is a summary of the plans:
Retirement benefit obligation:
2004

March 31,
2003

(Millions of yen)

Projected benefit obligation¥(9,191)
Fair value of plan assets
3,127
Funded status(6,064)
Unrecognized actuarial loss
1,576
Obligation recognized in the
consolidated balance sheet (4,488)
Allowance for retirement
benefits¥(4,488)

March 31,2004

9. Legal Reserve and Additional Paid-In Capital(Thousands of
U.S. dollars)¥(9,731)
2,579(7,152)2,541$(86,958)
29,582(57,376)
14,916(4,611)(42,460)¥ (4,611)$(42,460)

The Commercial Code of Japan (the “Code”) provides that an
amount equal to at least 10 percent of the amount to be
disbursed as a distribution of earnings shall be appropriated to
the legal reserve until such reserve and the amount of additional
paid-in capital equals 25 percent of the common stock account.
The Code also provides that if the sum of the additional paid-in
capital account and the legal reserve exceeds 25 percent of thecommon stock account, then the amount of the excess (if any) is

The consolidated subsidiaries have adopted a simplified

available for appropriations by resolution of the shareholders.

method, as permitted, to calculate the projected benefit
obligation.

The retained earnings account in the accompanying
consolidated financial statements at March 31, 2004, included
a legal reserve of ¥2,531 million ($23,948 thousand).

11

10. Stock Option Plan

12. Contingent Liabilities

On June 15, 2000, the shareholders approved a stock option

The Company had the following contingent liabilities:

plan for directors and key employees to purchase shares ofMarch 31, 2004

the Company’s common stock which had been purchased by
the Company on stock exchanges in accordance with Clause
2 of Article 210-2 of the former Commercial Code of Japan.

As guarantor for housing
loans of employees

Under this plan, a maximum of 104,000 shares may be(Millions(Thousands ofof yen)U.S. dollars)

¥

$ 851

90

granted to directors and 51,000 shares to key employees.
13. Derivatives and Hedging Activities
The exercise price is ¥1,320.
The Company has entered into interest rate swap contracts to
The stock options are exercisable during the period from July

reduce the cost of borrowing. The Company uses these

1, 2002, to June 30, 2004.

contracts to manage its exposure to interest rate risk. As amatter of policy, the Company does not speculate in

11. Leases

derivative transactions. The Company does not anticipate
nonperformance by any of the counterparties to the above(1) Finance leases

transactions, all of whom are domestic financial institutions

Non-cancelable lease transactions are primarily accountedwith high credit ratings.

for as operating leases (regardless of whether such leases
are classified as operating or finance leases) except that

In accordance with the Company’s policy, derivative

lease agreements which stipulate the transfer of ownershiptransactions are entered into under the decision-making rulesof the leased assets to the lessee are accounted for as

approved by the Management Strategy Committee of thefinance leases. Lease expenses related to finance leases

Company. The department which has the responsibility to

accounted for as operating leases amounted to ¥533 million

enter into such contracts controls the risk and performance on($5,045 thousand) for the year ended March 31, 2004, anda daily basis and reports these to management of the¥515 million for the year ended March 31, 2003.

Company, if and when necessary.

Future minimum lease payments subsequent to March 31,

As of March 31, 2004 and 2003, fair value information for

2004, for finance lease transactions accounted for asderivatives has not been presented, since all derivatives haveoperating leases are summarized as follows:

been accounted for as hedges.

March 31, 2004
(Millions(Thousands ofof yen)U.S. dollars)

Due within one year

¥ 604

$ 5,710Due after one year

1,245

11,784

Total¥1,849$17,494(2) Operating leases
March 31, 2004
(Millionsof yen)Due within one year

¥

8

¥

30

Due after one year
Total

(Thousands of
U.S. dollars)

$

74

$

288

22

214

12

14. Segment Information
The business segment information of the Companies for the years ended March 31, 2004 and 2003 is summarized as follows:Business segments
Year ended March 31, 2004
Automation
systemsFine& vacuummechatronics equipment

Vending
machines& systems

Real estateleasing

Total

Eliminations
orunallocated Consoliamounts
dated(Millions of yen)

I. Sales and operating income
Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income (loss)¥45,084–¥45,084
43,354¥ 1,730¥14,844–¥14,844
14,408¥ 436¥5,501–¥5,501
5,056¥ 445¥ 2,092–¥ 2,092
1,269
¥ 823

¥67,521–¥67,52164,087¥ 3,434

¥

–
(–)
¥
–
266
¥ (266)¥67,521–¥67,52164,353¥ 3,168

II. Total assets, depreciation and capital expenditures
Total assets¥38,587
Depreciation
737
Capital expenditures608¥11,379
339
261¥4,58881
98¥10,944599
1¥65,498
1,756
968¥3,747––¥69,245
1,756
968

Year ended March 31, 2003
Automation
systemsFine& vacuummechatronics equipment

Vending
machines& systems

Real estateleasing

Total

Eliminations
orunallocated Consoliamounts
dated(Millions of yen)

I. Sales and operating income
Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income (loss)¥35,651–¥35,651
36,301¥ (650)¥11,260–¥11,260
12,774¥ (1,514)¥5,705–¥5,705
5,467¥ 238¥ 2,145–¥ 2,145
1,376
¥ 769

¥54,761–¥54,761
55,918¥ (1,157)

¥

–
(–)
¥
–
345
¥ (345)¥54,761–¥54,761
56,263¥ (1,502)

II. Total assets, depreciation and capital expenditures
Total assets¥29,460
Depreciation
883
Capital expenditures
415¥15,052437
137¥5,499120
84¥11,517640
1¥61,528
2,080
637¥2,087––¥63,615
2,080
637

13

Year ended March 31, 2004
Automation
systemsFine& vacuummechatronics equipment

Vending
machines& systems

Real estateleasing

Total

Eliminations
orunallocated Consoliamounts
dated(Thousands of U.S. dollars)

I. Sales and operating income
Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income (loss)$426,571–$426,571
410,200$ 16,371$140,453–$140,453
136,328$ 4,125$52,042–$52,042
47,834$ 4,208$ 19,791–$ 19,791
12,005$ 7,786$638,857–$638,857
606,367$ 32,490

$

–
–
$
–
2,516
$ (2,516)$638,857–$638,857
608,883$ 29,974

II. Total assets, depreciation and capital expenditures
Total assets$365,094
Depreciation
6,978
Capital expenditures
5,750$107,661
3,212
2,474

$43,416763
926$103,550
5,665
13$619,721
16,6189,163$35,453––$655,174
16,618
9,163

Notes:

automation equipment, vacuum pumps, and othera) Basis of segmentation
Business segments are divided into product categories by(3) Vending machines & systems

the same criteria as applied for internal control purposes.

Vending machines, ticket vending machines, and others.

b) Major products in each business segment(4) Real estate leasing
Real estate leasing and management and other(1) Fine mechatronics

business.

FPD manufacturing equipment (wet cleaning equipment,
stripping equipment, etching equipment, developingc) Included in eliminations or unallocated amounts ofequipment, PI ink jet coater, cell assembly equipment,

operating expenses are unallocable amounts relating toouter lead bonder), semiconductor manufacturing

development expenses incurred for the entire company as

equipment (wet cleaning equipment, etching equipment,

part of the Company’s research and development costs.

ashing equipment, die bonder, wire bonder, inner leadbonder, flip chip bonder), the non-destructive inspectiond) Included in the eliminations or unallocated amounts of totalbusiness, equipment for railroad maintenance, and otherassets were unallocable amounts totaling ¥6,980 million

items($66,039 thousand) for the year ended March 31, 2004 and(2) Automation systems & vacuum equipment¥6,229 million for the year ended March 31, 2003, which

Laser processing equipment, microwave processing

primarily consisted of surplus funds (cash and bankequipment, media device manufacturing equipment

deposits), investment funds (investment securities) of the(sputtering equipment, vacuum bonding equipment),

Company and deferred tax assets.

industrial vacuum plating equipment, rechargeable
battery manufacturing equipment, precision partse) Included in depreciation and capital expenditures were

manufacturing equipment, cartesian robots, otheramortization of and additions to long-term prepaid expenses.

14

Geographical segments

15. Per Share Information

No information by geographical segment for the years ended

Basic net income per share is computed based on the net

March 31, 2004, and 2003 has been presented, due to theincome available for distribution to shareholders of common

fact that the net sales and total assets of operations in Japan

stock and the weighted average number of shares of common

exceeded 90 percent of those in all segments.

stock outstanding during each year. Diluted net income pershare is computed based on the net income available forOverseas sales

distribution to the shareholders and the weighted average
number of shares of common stock outstanding during eachYear ended March 31, 2004

year, assuming full dilution by common stock equivalents.

Northeastern
Asia

Other

Net assets per share is computed based on the weighted

Total(Millions of yen)

I. Overseas sales¥30,912
II. Consolidated net sales
III. % of consolidated net sales
45.8%

average number of shares of common stock outstanding¥2,027¥32,939
67,5213.0%
48.8%

during each balance sheet date.

Year ended
Year ended March 31, March 31,
2004
2003
2004

Year ended March 31, 2003
Northeastern
Asia

(yen)

Other

Total

Net income (loss):– Basic– Diluted
Net assets(Millions of yen)

I. Overseas sales¥23,231
II. Consolidated net sales
III. % of consolidated net sales
42.4%¥3,339¥26,570
54,761
6.1%
48.5%¥ (28.40)–
342.24$ 0.170.16
3.42

Per share amounts assuming full dilution have not been

Year ended March 31, 2004

presented because the Company recorded net operating

Northeastern
Asia¥ 18.8817.59
362.07( U.S. dollars)

Otherlosses for the year ended March 31, 2003.

Total(Thousands of U.S. dollars)

I. Overseas sales$292,473$19,181 $311,654
II. Consolidated net sales
638,857
III. % of consolidated net sales
45.8%
3.0%
48.8%

Notes:a) Overseas sales are those of the Company and its
consolidated subsidiaries in countries or regions other thanJapan.
b) The division of overseas sales into countries or regions
and the names of such countries or regions are as follows:(1)Overseas sales by country or region:
Geographical areas are divided into categories based on
their geographical proximity.
(2)Major countries or regions included in eachgeographical area:
Northeastern Asia–

Korea, Taiwan

Other

–

U.S.A., Malaysia

15

Shibaura Mechatronics Corporation and Subsidiaries

Report of Independent Auditors

Certified Public Accountants
Hibiya Kokusai Bldg.
2-2-3, Uchisaiwai-cho,
Chiyoda-ku, Tokyo, 100-0011
C.P.O. Box 1196, Tokyo 100-8641

Phone:03-3503-1100
Fax: 03-3503-1197

The Board of Directors
Shibaura Mechatronics Corporation

We have audited the accompanying consolidated balance sheets of Shibaura Mechatronics Corporation and consolidated
subsidiaries as of March 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity, andcash flows for the years then ended, all expressed in yen. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial positionof Shibaura Mechatronics Corporation and consolidated subsidiaries at March 31, 2004 and 2003, and the consolidated resultsof their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted inJapan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2004
are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements.

June 17, 2004

16

Supplemental Information
Shibaura Mechatronics Corporation

Non-Consolidated Balance Sheets

March 31,2004

March 31,
2004

2003
(Millions of yen)(Thousands of
U.S. dollars)

AssetsCurrent assets:¥ 2,837¥ 1,721$ 26,844

–

11

–

357

1,949

3,378

19,037

13,529180,121

(173)

(58)

(1,636)Inventories

16,997

13,590160,817

Deferred tax assets

1,415

662

13,388Other current assets

1,215

2,440

11,494

41,68533,844394,406

99

105

935

Buildings and structures

27,49527,864

260,147

Machinery and equipment

825

8,390

7,806

Construction in progress

341

58

3,227

Total

28,76036,417272,115

Accumulated depreciation(12,459)(17,790)(117,880)

Property, plant and equipment, net

16,301

18,627

154,235

Investment securities

265

166

2,506

Investments in subsidiaries and affiliates

691

831

6,542

1,927

3,356

18,230

Other assets

651

823

6,165

Allowance for doubtful accounts

(–)

(1)

(–)

Total investments and other assets

3,534

5,175

33,443¥ 61,520¥ 57,646$ 582,084

Cash and bank deposits
Marketable securities
Notes and accounts receivable, trade:
Notes
Accounts
Allowance for doubtful accounts

Total current assets

Property, plant and equipment:
Land

Investments and other assets:

Deferred tax assets

Total assets

17March 31,
2004

March 31,
2003

(Millions of yen)

2004
(Thousands of
U.S. dollars)

Liabilities and shareholders’ equity
Current liabilities:¥

560¥ 6,010

620

4,410

5,868

Notes

3,614

2,263

34,193

Accounts

15,13912,487143,2371

20

12Advances from customers

1,788

509

16,922

Accrued expenses

3,322

3,144

31,433

Accrued income taxes

65

70

615

Other current liabilities

138

164

1,305

25,247

29,077

238,883

Long-term debt

11,795

4,921

111,600

Allowance for retirement benefits

4,325

4,475

40,919Directors’ retirement benefits

113

88

1,066

Accrual for periodic repairs

333

300

3,154

Other long-term liabilities

3,000

3,000

28,385

19,566

12,784

185,124

and 2002

5,868

5,868

55,521

Additional paid-in capital

9,848

9,848

93,175

Legal reserve

353

353

3,340

Retained earnings

774

(85)

7,330

Net unrealized holding gain on other securities

48

(18)

453

(184)

(181)

(1,742)

Total shareholders’ equity

16,707

15,785

158,077

Total liabilities and shareholders’ equity¥61,520¥57,646$582,084

Short-term bank loans
Current portion of long-term debt

$

5,298

Notes and accounts payable:

Other

Total current liabilities
Long-term liabilities:

Total long-term liabilities
Shareholders’ equity:
Common stock:
Authorized: 100,000,000 shares
Issued:50,033,312 shares at March 31, 2003

Less treasury stock, at cost18

Supplemental Information
Shibaura Mechatronics Corporation

Non-Consolidated Statements of Operations

Year ended
March 31,

Year ended March 31,
2004

2004

2003
(Millions of yen)(Thousands of
U.S. dollars)

Net sales¥56,108¥ 43,754$530,876

Cost of sales

47,91338,912

453,338

8,195

4,842

77,538

6,103

6,584

57,745

2,092(1,742)

19,793

Interest and dividend income

377

10

3,566

Interest expense

(156)

(160)

(1,477)

Gain on sale of land

119

–

1,126

Loss on disposal of inventories

(226)

–

(2,143)

Other, net

(737)

(359)

(6,969)1,469(2,251)

13,896

Current

(34)

20

(327)

Deferred

644

(816)

6,096

610

(796)

5,769

859

¥ (1,455)

Gross profit

Selling, general and administrative expenses
Operating income (loss)

Other income (expenses):

Income (loss) before income taxes

Income taxes:¥

Net income (loss)

(Yen)

$

8,127

(U.S. dollars)

Per share of common stock:
Net income (loss)
Cash dividends applicable to the year19

¥ 16.62¥ (29.19)

5.00

0.00

$

0.15
0.04

2-5-1, Kasama, Sakae-ku, Yokohama 247-8610, Japan
TEL : +81-45-897-2421
http://www.shibaura.co.jp/

FAX : +81-45-897-2470
Printed on Recycled Paper

SEA0305A 1T 0408 03101