Financial Section
Annual Report 2007

Year ended March 31, 2007

Contents

01

Report of Independent Auditors

02

Consolidated Balance Sheets

04

Consolidated Statements of Operations

05

Consolidated Statements of Changes in Net Assets

06

Consolidated Statements of Cash Flows08

Notes to Consolidated Financial Statements

21

Supplemental Information

Report of Independent Auditors

01
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Consolidated Balance Sheets
Shibaura Mechatronics Corporation and Subsidiaries
March 31,2007

March 31,2006

March 31,
2007
(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)

AssetsCurrent assets :8,211¥ 14,337

388

222

3,285

25,532

24,734

216,280

(46)

(67)

(392)

Inventories (Note 4)

15,91915,700134,848

Deferred tax assets (Note 7)

1,581

1,042

13,396

Other current assets

1,182

636

10,01452,76756,604446,986

Cash and bank deposits (Note 10)
Short-term investments
Notes and accounts receivable, trade
Allowance for doubtful accounts

Total current assets¥$

69,555

Property, plant and equipment :
Land

197

162

1,670

Buildings and structures (Note 10)29,33927,812

248,535

Machinery and equipment

1,184

1,167

10,029

192

125

1,624

Total

30,912

29,266

261,858

Accumulated depreciation(14,448)(14,067)(122,388)

Property, plant and equipment, net

16,464

15,199139,470

Construction in progress

Investments and other assets :Investments in securities (Note 3)
Deferred tax assets (Note 7)
Other assets

371

401

3,142

2,793

2,096

23,662
6,837

807

851

Allowance for doubtful accounts

(5)

-

(48)

Total investments and other assets

3,966

3,348

33,593¥ 73,197¥ 75,151$ 620,049

Total assets

02
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Consolidated Balance Sheets

March 31,2007

March 31,2006

March 31,
2007
(Thousands of
U.S. dollars)(Note 1)

(Millions of yen)

Liabilities and net assets
Current liabilities :Short-term bank loans (Note 5)
Current portion of long-term debt (Note 5)
Notes and accounts payable, trade
Allowance for bonuses to directors and statutory auditors

¥

1,146

¥

793

$

9,706

0

2,670

1

21,683

21,628

183,675

13

-

108

373

-

3,160

3,321

3,355

28,132

Accrued income taxes (Note 7)

354

964

2,997

Accrued consumption taxes

97

79

824

2,433

2,560

20,612

29,42032,049249,215

Long-term debt (Note 5)

10,2206,420

86,569Retirement benefits (Note 8)

4,779

4,836

40,486

Directors' retirement benefits

159

151

1,345

Reserve for repair and maintenance

296

398

2,511

Negative goodwill

239

299

2,025

3,000

3,000

25,413

18,693

15,104

158,349

Provision for contract losses
Accrued expenses

Other current liabilities
Total current liabilities
Long-term liabilities :Other long-term liabilities
Total long-term liabilities
Contingent liabilities (Note 11)
Net assets :Shareholders' equity :Common stock :Authorized : 100,000,000 shares

6,762

6,762

57,276

Additional paid-in capital

10,73910,73990,971Retained earnings

8,769

10,22474,284

Issued: 51,926,194 shares at March 31, 2007 and 2006

Less treasury stock, at cost

(1,715)(215)(14,526)

24,55527,510208,005

Net unrealized holding gains on other securities

129

125

1,095

Foreign currency translation adjustments

99

35

833

228

160

1,928

301

328

2,552

25,08427,998212,485¥ 73,197¥ 75,151$ 620,049

Total shareholders' equity
Valuation and translation adjustments :Total valuation and translation adjustments
Minority interest in consolidated subsidiaries
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of the consolidated financial statements.

03
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Consolidated Statements of Operations
Shibaura Mechatronics Corporation and Subsidiaries
Year ended
March 31,2007

Year ended
March 31,
2006

(Millions of yen)

Net sales
Cost of sales
Gross profit

Selling, general and administrative expenses
Operating income (loss)

Year ended
March 31,
2007
(Thousands of
U.S. dollars)(Note 1)

¥ 74,663¥ 74,913$ 632,466

65,32258,015553,340

9,341

16,89879,126

10,971

11,71892,934(1,630)5,180(13,808)

Other income (expenses) :Interest and dividend income

43

28

359

Interest expense

(121)

(117)

(1,028)Foreign exchange gain, net

118

132

1,001

-

955

-

Gain on sale of land
Amortization of negative goodwill

60

-

506

(196)

(338)

(1,657)

Loss on impairment of fixed assets

-

(111)

-

Other, net

(1)

23

(6)

(1,727)

5,752(14,633)

Current

540

2,268

4,577

Deferred(1,202)

125(10,183)

(662)

2,393

(5,606)(1,065)3,359(9,027)

Loss on disposal of inventory

Income (loss) before income taxes and minority interest

Income taxes (Note 7) :Income (loss) before minority interest

Minority interest in losses of consolidated subsidiaries
Net income (loss)

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

04
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

(156)

(34)

(18)
¥ (1,047)

¥

3,393

$

(8,871)

Consolidated Statements of changes in Net Assets
Shibaura Mechatronics Corporation and Subsidiaries
Shareholders' equity
Number ofshares ofcommonstock

Commonstock

Balance as of March 31, 2005

50,033,312¥ 5,868

Stock acquisition rights exercised

1,892,882

Additional
paid-in
capitalValuation and translation adjustments
Net
unrealized Foreign
Minority
currency interest in
holding
gains on translation consolidated
otheradjustments subsidiaries
securities

Total(Millions of yen)

(Millions of yen)

Retainedearnings

Treasurystock¥ 9,848¥ 7,228¥ (193)

894

891

-

-

-

-

-

-

3,393

-

(Millions of yen)

Net income (loss)¥-¥ 22,791

-

-

1,785

-

-

-

3,393

60

¥

(20)

¥

Addition to retained earnings
-

-

-

34

-

-

-

-

34

Cash dividends

-

-

-

(376)

-

-

-

-

(376)

Bonuses to directors and statutory auditors

-

-

-

(55)

-

-

-

-

(55)

-

-

-

-

-

65

-

-

65

Foreign currency translation adjustments

-

-

-

-

-

-

55

-

55

Net change during the year

-

-

-

-

-

-

-

328

328

upon consolidation of subsidiaries

Net increase in unrealized holding gains
on other securities

Net increase in treasury stock

-

-

-

-

(22)

-

-

-

(22)

Balance as of March 31, 2006

51,926,194

6,762

10,73910,224

(215)

125

35

328

27,998Net income (loss)

-

-

-

(1,047)

-

-

-

-

(1,047)

Cash dividends

-

-

-

(363)

-

-

-

-

(363)

Bonuses to directors and statutory auditors

-

-

-

(45)

-

-

-

-

(45)

Net change during the year

-

-

-

-

-

4

64

(27)

41

Net increase in treasury stock

-

-

-

-

(1,500)---(1,500)Net decrease in treasury stock

-

-

(0)

-

0

-

-

-

0

Balance as of March 31, 2007

51,926,194¥ 6,762¥10,739¥ 8,769¥(1,715)

¥ 129

99

¥ 301

¥ 25,084

Shareholders' equity

Commonstock

Additional
paid-in
capitalRetainedearnings

Treasurystock(Thousands of U.S. dollars) (Note 1)¥

Valuation and translation adjustments
Net
unrealized Foreign
Minority
currency interest in
holding
gains on translation consolidated
otheradjustments subsidiaries
securities

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

$ 1,061$ 293$ 2,782$ 237,171

Net income (loss)--(8,871)

-

-

-

-

(8,871)

Cash dividends--(3,068)

-

-

-

-

(3,068)Bonuses to directors and corporate auditors

-

-

(382)

-

-

-

-

(382)

Net change during the year

-

-

-

-

34

540

(230)

344

Net increase in treasury stock

-

-

-

(12,713)---(12,713)Net decrease in treasury stock

-

(1)

-

5

-

-

-

4

$ 57,276 $ 90,971 $ 74,284 $(14,526)$ 1,095$ 833$ 2,552$ 212,485

Balance as of March 31, 2006

Balance as of March 31, 2007

$ 57,276 $ 90,972 $ 86,605 $ (1,818)

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

05
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Consolidated Statements of Cash Flows
Shibaura Mechatronics Corporation and Subsidiaries
Year ended
March 31,2007

Year ended
March 31,
2006

(Millions of yen)

Year ended
March 31,
2007
(Thousands of
U.S. dollars)(Note 1)

Operating activities :5,752$ (14,633)

1,165

1,133

9,870

Loss on impairment of fixed assets

-

111

-

Amortization of negative goodwill

(60)

-

(506)

Allowance for doubtful accounts

(17)

(27)

(142)

(Decrease) increase provision for retirement benefits

(58)

201

(494)

Interest and dividend income

(43)

(28)

(359)

Interest expense

121

117

1,028

Income (loss) before income taxes and minority interest
Depreciation and amortization¥ (1,727)

¥

-

(955)

-

Loss on disposal of property, plant and equipment

38

79

319

Gain on sale of investment securities

(9)

(60)

(75)

Gain translation

(7)

(1)

(61)

Bonuses to directors and corporate auditors

(45)

(53)

(382)

(Increase) decrease in notes and accounts receivable, trade

(700)

2,947

(5,926)(Increase) decrease in inventories

(174)

1,963

(1,477)

Decrease in notes and accounts payable, trade(80)(2,002)(674)

Increase (decrease) in accrued consumption taxes

19

(126)

157

(902)

786

(7,645)Gain on sale of land

(Decrease) increase in advances received
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities

06
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

(712)

100

(6,035)(3,191)

9,937(27,035)

41

28

347

(123)

(117)

(1,038)(1,100)¥ (4,373)¥(3,682)(9,318)6,166$ (37,044)

Consolidated Statements of Cash Flows

Year ended
March 31,2007

Year ended
March 31,
2006

(Millions of yen)

Year ended
March 31,
2007
(Thousands of
U.S. dollars)(Note 1)

Investment activities :Payments for time deposits¥

Proceeds from time deposits
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment

(308)

¥

(309)

$

(2,607)

150

277

1,275

(1,646)(958)(13,941)

474

1,784

4,017

-

(246)

-

10

114

82

Proceeds from acquisition of investment in an affiliate, net of cash acquired

-

385

-

Increase in long-term loans receivable

-

(1)

-

Collection of long-term loans receivable

1

1

10

(43)

8

(368)

(1,362)

1,055(11,532)

340

(97)

2,875

Payments for acquisition of business, net of cash acquired
Proceeds from sale of investment securities

Other, net
Net cash provided by (used in) investing activities

Financing activities :Increase (decrease) in short-term bank loans
Proceeds from long-term debt

3,800

1,000

32,190

Repayment of long-term debt

(2,670)(1,953)(22,617)

Purchases of treasury stock(1,500)(22)(12,713)

0

-

4

(363)

(377)

(3,068)Proceeds from sale of treasury stock
Cash dividends paid
Cash dividends paid to minority interest

(22)

-

(187)

Net cash used in financing activities(415)(1,449)(3,516)

24

104

200

Net increase (decrease) in cash and cash equivalents(6,126)

5,876(51,892)

Cash and cash equivalents at beginning of year

14,337

7,455

121,447

Effect of exchange rate changes on cash and cash equivalents

Increase arising from inclusion of subsidiaries in consolidation
Cash and cash equivalents at end of year

¥

-

1,006

8,211

¥ 14,337$

69,555The accompanying notes are an integral part of the consolidated financial statements.

07
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements
Shibaura Mechatronics Corporation and Subsidiaries
March 31, 2007

1. Basis of Presentation

Investments in unconsolidated subsidiaries that are notdeemed material to the consolidated financial statements are

Shibaura Mechatronics Corporation (the "Company") and its con-stated at cost.

solidated subsidiaries (collectively, the "Companies") maintaintheir accounting records and prepare their financial statements in(b) Foreign currency translationaccordance with accounting principles generally accepted in

The revenue and expense accounts of the overseas consoli-

Japan. The accompanying consolidated financial statements

dated subsidiaries are translated into yen at the rates ofhave been prepared in accordance with accounting principles

exchange in effect at the average exchange rate during thegenerally accepted in Japan, which differ in certain respects

yen. The balance sheet accounts, except for the compo-

from the application and disclosure requirements of International

nents of net assets, are also translated into yen at the rate of

Financial Reporting Standards, and have been compiled from theexchange in effect at the balance sheet date. The compo-

consolidated financial statements prepared by the Company as

nents of net assets are translated at their historical exchange

required by the Securities and Exchange Law of Japan. Certain

rates. Differences arising from translations where tworeclassifications have been made to present the accompanying

exchange rates have been used are presented as "Foreign

consolidated financial statements in a format that is familiar tocurrency translation adjustments", a component of net assets

readers outside Japan. In addition, the notes to the consolidated

in the accompanying consolidated financial statements.

financial statements include non-consolidated financial statements as supplemental information.

Foreign currency monetary assets and liabilities are translated into Japanese yen at the translation gains exchange rates

The accompanying consolidated financial statements are statedin effect at each balance sheet date and the resulting or loss-

in yen, the currency of the country in which the Company is incor-

es are credited or charged currently to income.

porated and operates. The translation of yen amounts into U.S.
dollar amounts has been included solely for the convenience of(c) Cash and cash equivalents

readers outside Japan. The translation has been made at the

The Company and its subsidiaries substantially consider all

rate of ¥118.05 = U.S.$1.00, the approximate rate of exchange inhighly liquid investments with a maturity of three months oreffect on March 31, 2007. This translation should not be con-less from their purchase dates to be cash equivalents.

strued as a representation that yen could be converted into U.S.
dollars at the above or any other rate.

(d) Securities
Marketable securities categorized as other securities are carried at fair value with unrealized holding gain and loss, net of
applicable income taxes, accounted for as a separate com-

2. Summary of Significant Accounting Policies

ponent of net assets. Non-marketable securities classified
as other securities are stated at cost. Cost of securities sold(a) Basis of consolidationis computed based on the moving average method.

The accompanying consolidated financial statements include
the accounts of Shibaura Mechatronics Corporation andseven subsidiaries over which the Company exerts substantial control, either through majority ownership of voting stock
and/or by other means. All assets and liabilities of the subsidiaries are revalued at fair value on acquisition, if applicable. All significant intercompany balances and transactions
have been eliminated in consolidation.

08
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION(e) Derivatives
All derivatives are carried at fair value.

Notes to Consolidated Financial Statements(j) Provision for contract losses(f) Inventories
Inventories are stated at cost, determined principally by theProvision for contract losses is provided at an amount consid-

following methods :ered to cover the estimated possible losses involved in

Finished goods and raw materials- moving average method
Semi-finished goods and work in processorders for which loss occurrence is highly anticipated where
the loss amount can be reasonably estimated at the balance
sheet date for all orders.

- individual cost method(k) Retirement benefits and pension plans
An allowance for employees' retirement benefits has been(g) Depreciation and amortization
Depreciation of property, plant and equipment is generally

provided, based on the projected retirement benefit obliga-

computed by the declining-balance method, based on thetion and the pension fund assets. Actuarial gain or loss isestimated useful lives of the respective assets. The straight-

amortized effective the year subsequent to the year in whichline method is applied to a certain research facility acquired

they arise by the straight-line method over a period of 10

during the year ended March 31, 1995, and buildings

years, which is shorter than the average remaining years ofacquired after April 1, 1998. Foreign consolidated sub-service of the employees.

sidiaries compute depreciation primarily using the straightline method. The following summarizes the estimated useful

The Companies also provide for retirement benefits to direc-

lives of property, plant and equipment by major category :tors and corporate auditors, based on the Companies' internal rules, at the amount that would be required to be paid if

Buildings and structures

3 - 60 years

all directors and corporate auditors retired or resigned at theMachinery and equipment

2 - 17 years

balance sheet date.

Intangible assets are amortized by the straight-line method.

(l) Reserve for repair and maintenanceCapitalized software for internal use is amortized by the

A certain research facility acquired during the year ended

straight-line method over a period of 5 years, based on the

March 31, 1995 requires periodic repairs and maintenance.

estimated useful life of the software.

An accrual for these repair expenses is recorded based on
the current portion of the total expenses estimated for such

The Company amortizes negative goodwill over an estimatedrepairs.

useful life of 5 years by the straight-line method.
(m) Leases(h) Allowance for doubtful accounts

Finance leases other than those deemed to transfer the title of

The allowance for doubtful accounts is provided at an amountthe leased assets to the lessee are not capitalized, but are

sufficient to cover possible losses on the collection of receiv-

accounted for by a method similar to that applicable to oper-

ables. The amount of the allowance is determined based on

ating leases.

their historical experience with write-offs, plus an estimate ofspecific probable doubtful accounts based on a review of thecollectibility of individual receivables.

(n) Hedging accounting
Interest rate swaps which meet specific hedge criteria andqualify for special hedge accounting treatment are not(i) Allowance for bonuses to directors and corporate auditors

remeasured at fair value.

To provide for the payment of bonuses to directors and corporate auditors, an allowance is made based on projectedamount.

09
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements(o) Research and development costs

accounting standard for presentation of net assets in the bal-

Research and development costs are expensed as incurredance sheet. The amount corresponding to total net assets forand included in cost of sales and selling, general and admin-the year ended March 31, 2007 under the previous standards

istrative expenses.

were ¥24,783 million (U.S.$209,933 thousand).

(p) Income taxes(r) Accrued bonuses to directors and corporate auditors

Deferred tax assets and liabilities are determined based on

Effective the year ended March 31, 2007, the Company andthe differences between financial reporting and tax-based

domestic consolidated subsidiaries have adopted anreporting of the assets and liabilities, and are measured using

accounting standard for directors' bonuses. The standard

the statutory tax rates which will be in effect when the differ-requires that directors' bonuses be accounted for as anences are expected to be realized.

expense of the accounting period in which such bonuses
were accrued. The adoption of this standard had no material(q) Presentation of net assets in the balance sheet

effect on the statement of income for the year ended March

Effective the year ended March 31, 2007, the Company and31, 2007.

its domestic consolidated subsidiaries have adopted an

3. Securities
At March 31, 2007 and 2006, marketable securities classified as other (available-for-sale) securities are summarized as follows :March 31,2007

March 31,2006

March 31,
2007

AmountAmountAcquisition recorded in
Acquisition recorded incosts
the balance Difference
costs
the balance Difference
sheet
sheet
(Millions of yen)

(Millions of yen)AmountAcquisition recorded incosts
the balance Difference
sheet(Thousands of U.S. dollars)

Other securities whose market
value recorded in
the balance sheet exceed
their acquisition costs :Equity securities

¥ 138

¥ 318

¥ 180

¥ 139

¥ 348

¥ 209

$ 1,169$ 2,696$ 1,527

Debt securities

–

–

–

–

–

–

–

–

–

Other

–

–

–

–

–

–

–

–

–

¥ 138

¥ 318

¥ 180

¥ 139

¥ 348

¥ 209

$ 1,169$ 2,696$ 1,527

Total

Marketable securities classified as other (available-for-sale) securities sold for the year ended March 31, 2007 are summarized as follows :Year ended March 31, 2007

Sales
Total of gain on sale of marketable securities

10
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION(Millions of yen)(Thousands of
U.S. dollars)

¥ 10

$ 82

9

75

Notes to Consolidated Financial Statements

At March 31, 2007 and 2006, non-marketable securities carried at cost are summarized as follows :March 31,2007

March 31,2006

March 31,
2007
(Thousands of
U.S. dollars)(Millions of yen)

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

¥ 52

¥ 52

$ 441

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

1

1

5

4. Inventories
Inventories at March 31, 2007 and 2006 are summarized as follows :March 31,2007

March 31,
2006

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

¥

6,455

¥

March 31,
2007

6,034

$

54,681

Raw materials

149

147

1,263

Work in process

9,315

9,519

78,904¥ 15,919¥ 15,700$ 134,848

Total

5. Short-Term Bank Loans and Long-Term Debt
The annual interest rates of the Companies' short-term bank loans ranged principally from 0.50 percent to 5.99 percent at March 31, 2007,
and from 0.50 percent to 2.50 percent at March 31, 2006.
Long-term debt at March 31, 2007 and 2006 are summarized as follows :March 31,2007

March 31,2006

March 31,
2007
(Thousands of
U.S. dollars)(Millions of yen)Unsecured :Zero coupon Japanese yen convertible notes
3,215¥ 3,215$ 27,234

7,000

5,870

59,2975

5

39

10,2209,090

86,570Less current portion(0)(2,670)(1)

Long-term debt, net¥ 10,220¥ 6,420$ 86,569(notes with stock acquisition rights)
1.30 percent to 2.10 percent loans from banks due 2008 - 2010
Loans from Pension Welfare Service Public Corporation due 2008 - 2034
Total

¥

11
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

Loans from the Pension Welfare Service Public Corporation rep-

On March 8, 2004, the Company issued ¥5,000 million zero

resent financing for housing loans to the Company's employees,

coupon Japanese yen convertible notes (notes with stock acqui-and the same amount is stated as a portion of other assets (loans

sition rights) due March 8, 2009. These notes are convertible

to employees). The Company pays the interest on such loans toduring the period from March 22, 2004 to February 20, 2009, atthe lender and collects the same amount from the employees as

the option of the holder, into shares of common stock at a pricethe borrowers.

of ¥943 per share, subject to adjustment in specific circumstances.

Aggregate annual maturities of long-term debt at March 31,2007 are summarizes as follows :March 31, 2007
(Millions of yen)

¥

2008

0

(Thousands of
U.S. dollars)

$

1

2009

6,416

54,343

2010

3,800

32,191

4

35¥ 10,220$ 86,570

2011 and thereafter
Total

At March 31, 2007, the Company had unused committed lines of credit with seven banks for efficient financial arrangements for operating
funds aggregating ¥10,000 million ($84,710 thousand). These lines of credit have fee commitment requirements.

6. Research and Development Expenses
Research and development expenses charged to income for the years ended March 31, 2007 and 2006, respectively, are as follows :Year ended
March 31,2007

Year ended
March 31,
2006

(Millions of yen)

¥ 2,713

12
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION¥ 2,851

Year ended
March 31,
2007
(Thousands of
U.S. dollars)$ 22,984

Notes to Consolidated Financial Statements

7. Income Taxes
Income taxes applicable to the Company and its domestic sub-for the years ended March 31, 2007 and 2006. Income taxes ofsidiaries comprise corporation, inhabitants' and enterprise taxes

the overseas subsidiaries are based on the tax rates applicablewhich, in the aggregate, resulted in a statutory tax rate of 40.6%

in their countries of incorporation.

The major components of deferred tax assets and liabilities as of March 31, 2007 and 2006 are summarized as follows :March 31,2007

March 31,
2006

(Millions of yen)March 31,
2007
(Thousands of
U.S. dollars)

Deferred tax assets :Employees' retirement benefits¥ 1,887¥ 1,917$ 15,989

Accrued employees' bonuses

542

623

4,592

Provision for contract losses

151

-

1,283

Accrual for periodic repairs

120

161

1,020

Enterprise tax payable

43

133

356

Tax loss carried forward

1,360

41

11,517

Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets

414

482

3,508

4,517

3,357

38,265

(91)

(134)

(768)

4,426

3,223

37,497

(52)

(85)

(439)

(52)

(85)

(439)

¥ 4,374¥ 3,138$ 37,058

Deferred tax liabilities :Unrecognized holding gain on other securities
Total deferred tax liabilities
Net deferred tax assets

The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2006 differ from the statutory tax
rate for the following reasons :Year ended
March 31,2006
Statutory tax rate

40.6 %

Effect of :Tax non-deductible expenses such as entertainment expenses

0.8

Per capita levy of inhabitants' taxes and other

0.4

Changes in valuation allowance

0.7

Tax-deductible R&D credits(3.5)

Other, net

2.6

Effective tax rates

41.6 %The reconciliation in 2007 is omitted since loss before income taxes and minority interests was recorded for the year ended March 31,
2007.

13
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

8. Retirement Benefits
The Companies have defined benefit pension plans and lump-sum retirement payment plans which cover substantially all employees who
retire from the Companies. Eligible employees may also receive additional payments under the plans.
The following is a summary of the plans :March 31,2007

March 31,
2006

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

Projected benefit obligation¥ (9,997)

March 31,2007

¥ (9,761)$ (84,686)

Fair value of plan assets

3,630

3,339

30,749Funded status(6,367)(6,422)(53,937)

Unrecognized actuarial loss
Allowance for retirement benefits

1,588

1,586

13,451¥ (4,779)¥ (4,836)$ (40,486)

The consolidated subsidiaries have adopted a simplified method, as permitted, to calculate the projected benefit obligation.

Components of net periodic pension cost for the years ended March 31, 2007 and 2006 are summarized as follows :Year ended
March 31,2007

Year ended
March 31,
2006

(Millions of yen)

Year ended
March 31,
2007
(Thousands of
U.S. dollars)

¥ 464

¥ 431

$ 3,930

Interest cost on projected benefit obligation

182

168

1,541

Expected return on plan assets

(117)

(98)

(990)

Amortization of actuarial loss

345

207

2,924

¥ 874

¥ 708

$ 7,405

Service cost

Net periodic pension cost

The allowance for retirement benefits was determined by the simplified method by the consolidated subsidiaries and has been included inservice cost.

Assumptions used in the actuarial calculation for the years ended March 31, 2007 and 2006 are summarized as follows :Actuarial cost method

March 31,
March 31,
2007
2006
Projected unit credit method

Discount rate

2.0% per annum

2.0% per annum

Expected rate of return on plan assets

3.5% per annum

3.5% per annum

Amortization period for actuarial loss

10 years (within the employees'
average remaining years of service)

14
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

9. Leases(1) Finance leases
Leased property under finance leases that do not transfer the title of the leased property to the lessee on an as-if-capitalized-basis for theyears ended March 31, 2007 and 2006 are as follows :March 31,2007

March 31,2006

March 31,
2007
(Thousands of
U.S. dollars)(Millions of yen)

Machinery, equipment and other assets :¥ 3,966

Acquisition cost
Accumulated depreciation
Net leased property¥ 3,778$ 33,594

1,826

1,459

15,470¥ 2,140¥ 2,319$ 18,124

Non-cancelable lease transactions are primarily accounted for as

expenses relating to finance leases accounted for as operating

operating leases (regardless of whether such leases are classi-

leases amounted to ¥1,012 million ($8,575 thousand) and ¥743

fied as operating or finance leases) except that lease agree-

million for the years ended March 31, 2007 and 2006, respective-ments which stipulate the transfer of the title of the leased assetly.

to the lessee are accounted for as finance leases. Lease

Future minimum lease payments subsequent to March 31, 2007 for finance lease transactions accounted for as operating leases are summarized as follows :March 31, 2007
(Millions of yen)

Due within one year
Due after one year
Total

¥

805

(Thousands of
U.S. dollars)

$

6,815

1,390

11,778¥ 2,195$ 18,593(2) Operating leases
March 31, 2007

Due within one year
Due after one year
Total

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

¥ 7

$ 61

6

52

¥ 13

$ 113

15
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

10. Pledged assets
Assets pledged as collateral as of March 31, 2007 are summarized as follows :March 31, 2007
(Millions of yen)

¥ 14

Bank deposits
Buildings and structures
Total(Thousands of
U.S. dollars)

$

114

567

4,805

¥ 581

$ 4,919

11. Contingent Liabilities
The Company had the following contingent liability :March 31, 2007

As guarantor for housing loans of employees(Millions of yen)(Thousands of
U.S. dollars)

¥ 58

$ 492

12. Derivatives and Hedging Activities
The Company has entered into interest-rate swap contracts toa daily basis and reports these to management of the Company,

reduce the cost of borrowing. The Company uses these con-if and when necessary.

tracts to manage its exposure to interest-rate risk for hedge purposes. As a matter of policy, the Company does not enter into

In accordance with the special hedge accounting under thederivative transactions for trading purposes. The Company does

Accounting Standard for Financial Instruments, the Company

not anticipate nonperformance by any of the counterparties to thedoes not record certain interest swap arrangements at fair value

above transactions, all of whom are domestic financial institutions

but charges or credits the net cash flows from the swap arrange-

with high credit ratings.

ments to the interest arising from the hedged borrowing, as longas these arrangements meet the specific criteria under the stan-In accordance with the Company's policy, derivative transactions

dard.

are entered into under the decision-making rules approved by
the Management Strategy Committee of the Company. The

At March 31, 2007 and 2006, the fair value information for deriva-

department which has the responsibility to enter into such con-tives was not presented, since all derivatives were accounted for

tracts monitors and controls the inherent risk and performance on

as hedges.

16
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

13. Segment Information
The business segment information of the Companies for the years ended March 31, 2007 and 2006 is summarized as follows :Business segments
Year ended March 31, 2007
Fine
mechatronics

Electronic&
vacuumsystems

Vending
machines&
systems

Real estateleasing

Eliminations
orunallocatedamounts

Total

Consolidated(Millions of yen)

I. Sales and operating income
Sales to external customers¥ 59,118¥ 9,528¥ 4,193¥ 1,824¥ 74,663

131

131

-

-

262

(262)

-

Total sales

59,249

9,659

4,193

1,824

74,925(262)

74,663Operating expenses

61,629

9,339

4,090

1,102

76,160133

76,293722¥ (1,235)

¥

(395)

¥ (1,630)

Intersegment sales or transfers

Operating income (loss)¥ (2,380)

¥

320

¥

103

¥

¥

-

¥ 74,663

II. Total assets, depreciation and capital expenditures
Total assets¥ 44,567¥ 8,124¥ 3,435¥ 9,235¥ 65,361¥ 7,836¥ 73,197

Depreciation

423

93

85

564

1,165

-

1,165

2,439

15

88

5

2,547

-

2,547

Eliminations
orunallocatedamounts

Consolidated

Capital expenditures

Year ended March 31, 2006
Fine
mechatronics

Electronic&
vacuumsystems

Vending
machines&
systems

Real estateleasing

Total(Millions of yen)

I. Sales and operating income
Sales to external customers¥ 53,826¥ 12,155¥ 7,054¥ 1,878¥ 74,913

-

-

-

-

-

Intersegment sales or transfers¥-¥ 74,913(-)-

Total sales

53,826

12,155

7,054

1,878

74,913-74,913Operating expenses

50,49811,458

5,959

1,200

69,115618

69,733697¥ 1,095¥678¥ 5,798¥(618)¥ 5,180

Operating income (loss)

¥

3,328

¥

II. Total assets, depreciation and capital expenditures
Total assets¥ 42,994¥ 7,648¥ 3,072¥ 9,724¥ 63,438¥11,713¥ 75,151

Depreciation

353

103

101

576

1,133

-

1,133

Capital expenditures

531

69

100

8

708

-

708

17
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

Year ended March 31, 2007
Fine
mechatronics

Electronic&
vacuumsystems

Vending
machines&
systems

Real estateleasing

Total

Eliminations
orunallocatedamounts

Consolidated$$ 632,466(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)$ 500,792$ 80,709$ 35,516$ 15,449$ 632,466

1,111

1,107

-

-

2,218

(2,218)-501,90381,81635,516

15,449634,684(2,218)632,466

522,056$ (20,153)

79,109$2,707

34,651
$

865

$

-

9,335

645,151

1,123

646,274

6,114$ (10,467)$ (3,341)$ (13,808)$ 620,049

II. Total assets, depreciation and capital expenditures
Total assets$ 377,529$ 68,814$ 29,095$ 78,232$ 533,670$ 66,379

Depreciation

3,585

787

721

4,777

9,870

-

9,870

Capital expenditures

20,658

129

750

42

21,579-21,579Notes :a) Basis of segmentation
Business segments are divided into product categories by(3) Vending machines & systems
Vending machines, ticket vending machines, and others.

the same criteria as applied for internal control purposes.
(4) Real estate leasingb) Major products in each business segment(1) Fine mechatronics

Real estate leasing and management, and other businesses.

FPD manufacturing equipment (wet cleaning equipment,
stripping equipment, etching equipment, developingc) Included in eliminations or unallocated amounts of operating

equipment, PI inkjet coater, cell assembly equipment,

expenses are unallocable amounts relating to research andouter lead bonders), semiconductor manufacturing equip-

development expenses incurred over the entire Group as part

ment (wet cleaning equipment, etching equipment, ash-of the Company's research and development activities.

ing equipment, die bonders, inner lead bonders, flip chipbonders, wafer inspection equipment), railroad mainte-d) Included in the eliminations or unallocated amounts of totalnance equipment, non-destructive inspections, and otherassets were unallocable amounts totaling ¥7,836 million

items.

($66,379 thousand) and ¥11,713 million for the years ended
March 31, 2007 and 2006, respectively, which primarily con-(2) Electronic & vacuum systems

sisted of surplus funds (cash and bank deposits), investment

Laser equipment, microwave equipment, media device

funds (investment securities) of the Company and deferredmanufacturing equipment (sputtering equipment, vacuum

tax assets.

bonding equipment), industrial vacuum evaporationequipment, rechargeable battery manufacturing equipment, precision parts manufacturing equipment, otherautomation equipment, vacuum pumps, and other items.

18
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

Geographical segments
No information by geographical segment for the years ended March 31, 2007 and 2006 has been presented, due to the fact that the net
sales and total assets of the operations in Japan constituted more than 90% of the respective totals for all segments.
Overseas sales
Year ended March 31, 2007
Northeastern
Asia

Other

Total

(Millions of yen)I.

Overseas sales¥ 27,954¥ 4,333¥ 32,287

II. Consolidated net sales

74,663

III. % of consolidated net sales

37.4%

5.8%

43.2%

Year ended March 31, 2006
Northeastern
Asia

Other

Total

(Millions of yen)I.

Overseas sales¥ 26,079¥ 3,547

34.8%

4.7%

¥ 29,626

II. Consolidated net sales

74,913

III. % of consolidated net sales

39.5%

Year ended March 31, 2007
Northeastern
Asia

Other

Total

(Thousands of U.S. dollars)

I.

Overseas sales$ 236,795$ 36,704

37.4%

5.8%

II. Consolidated net sales$ 273,499
632,466

III. % of consolidated net sales

43.2%

Notes :a) Overseas sales are sales recorded by the Company and its
consolidated subsidiaries in countries or regions other thanJapan.

(2) Major countries or regions included in each geographicalarea :
Northeastern Asia -Taiwan, Korea, China

Other

U.S.A., Poland-b) The division of overseas sales into countries or regions isdetermined as follows :(1) Overseas sales by country or region :Geographical areas are defined based on geographicalproximity.

19
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Notes to Consolidated Financial Statements

14. Related Party Transactions
Toshiba Corporation held 39.1% of the Company's voting rights¥3,981 million ($33,722 thousand) and ¥3,675 million for theas of March 31, 2007.

years ended March 31, 2007 and 2006, respectively.

The Company sold semiconductor manufacturing equipment to

The Company purchased material from Toshiba Corporation

Toshiba Corporation and received rent revenue from Toshiba

totaling ¥65 million ($548 thousand) and ¥132 million for the

Corporation. The aggregate amounts of these transactions wereyears ended March 31, 2007 and 2006, respectively.

Amounts due from and to Toshiba Corporation at March 31, 2007 and 2006 were as follows :March 31,2007

March 31,
2006

(Thousands of
U.S. dollars)(Millions of yen)Due from Toshiba Corporation
Due to Toshiba Corporation

¥

104

¥

3,229

March 31,
2007

149

$

3,159

879
27,356

15. Per Share Information
Basic net income per share is computed based on the net

bution to the shareholders and the weighted-average number ofincome available for distribution to shareholders of commonshares of common stock outstanding during each year, assuming

stock and the weighted-average number of shares of common

full dilution of common stock equivalents. Net assets per share isstock outstanding during each year. Diluted net income percomputed based on the weighted-average number of shares ofshare is computed based on the net income available for distri-common stock outstanding at each balance sheet date.

Year ended
March 31,2007

Year ended
March 31,2006

Year ended
March 31,
2007
(U.S. dollars)(Yen)

Net income (loss) :- Basic¥ (20.60)- Diluted

-

62.30

-

501.41534.03

4.25

Net assets¥ 66.52$

Notes :The information regarding diluted net income per share in 2007 is omitted because of net loss for the year ended March 31, 2007.

20
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION(0.17)

Supplemental Information

Non-Consolidated Balance Sheets

March 31,2007

March 31,
2006

(Millions of yen)

AssetsMarch 31,
2007
(Thousands of
U.S. dollars)

Current assets :Cash and bank deposits

¥

3,806

¥

9,053

$

32,241

Notes and accounts receivable, trade :Notes
Accounts

106

132

896

21,18919,784

179,489

(21)

(24)

(181)

Inventories

12,823

13,353

108,626

Deferred tax assets

1,229

553

10,415

Other current assets

1,068

564

9,045

40,20043,415

340,531

Allowance for doubtful accounts

Total current assets

Property, plant and equipment :
68

68

582

Buildings and structures

27,556

26,874

233,424

Machinery and equipment

590

681

4,996

Construction in progress

183

125

1,552

Total

28,397

27,748240,554

Accumulated depreciation(13,802)(13,500)(116,918)

Property, plant and equipment, net

14,595

14,248

123,636

290

328

2,456

Investments in subsidiaries and affiliates

1,416

1,415

11,989Deferred tax assets

2,565

1,836

21,729

886

785

7,507

Allowance for doubtful accounts

(6)

-

(48)

Total investments and other assets

5,151

4,364

43,633¥ 59,946¥ 62,027$ 507,800

Land

Investments and other assets :Investments in securities

Other assets

Total assets

21
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

Non-Consolidated Balance Sheets

March 31,2007

March 31,
2006

(Millions of yen)

Liabilities and net assets

March 31,
2007
(Thousands of
U.S. dollars)

Current liabilities :Current portion of long-term debt

¥

-

¥

2,670

$

-

Notes and accounts payable :
Notes

3,565

3,200

30,199Accounts

12,78013,158108,256

Advances from customers

219

1,016

1,855

Allowance for bonuses to directors and corporate auditors

10

-

83

Provision for contract losses

373

-

3,160
32,996

3,895

2,923

Accrued income taxes

46

517

389

Other current liabilities

240

66

2,031

21,12823,550178,969

Long-term debt

10,2196,420

86,569Allowance for retirement benefits

Accrued expenses

Total current liabilities

Long-term liabilities :
4,139

4,173

35,058

Directors' retirement benefits

123

126

1,039

Accrual for periodic repairs

296

398

2,511

Other long-term liabilities

3,000

3,000

25,413

17,777

14,117

150,590

Total long-term liabilities

Net assets :Shareholders' equity :Common stock :Authorized : 100,000,000 shares
6,762

6,762

57,276

Additional paid-in capital

10,73910,73990,971Retained earnings

5,139

6,957

43,534

Less treasury stock, at cost

(1,715)(215)(14,526)

20,92524,243

177,255

Issued: 51,926,194 shares at March 31, 2007 and 2006

Total shareholders' equity
Valuation and translation adjustments :Net unrealized holding gain on other securities
Total net assets
Total liabilities and net assets

22
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

116

117

986

21,041

24,360178,241¥ 59,946¥ 62,027$ 507,800

Supplemental Information

Non-Consolidated Statements of Income
Year ended
March 31,2007

Year ended
March 31,
2006

(Millions of yen)

Net sales
Cost of sales
Gross profit

Year ended
March 31,
2007
(Thousands of
U.S. dollars)¥ 58,144¥ 58,663$ 492,534

54,11648,491

458,412

4,028

10,172

34,122

7,435

7,721

62,984(3,407)

2,451(28,862)Interest and dividend income

805

1,470

6,823

Interest expense

(105)

(105)

(889)

-

955

-

(57)

3

(486)

(2,764)

4,774(23,414)

Current

25

1,226

212

Deferred(1,369)112(11,601)(1,344)

1,338(11,389)

3,436$ (12,025)

Selling, general and administrative expenses
Operating income (loss)

Other income (expenses) :Gain on sale of land
Other, net
Income (loss) before income taxes

Income taxes :Net income (loss)¥¥ (1,420)(Yen)(U.S. dollars)

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

¥ (27.93)¥ 67.58

7.00

7.00

$

(0.24)
0.06

23
Annual Report 2007 Financial Section
SHIBAURA MECHATRONICS CORPORATION

5-1, Kasama 2-chome, Sakae-ku, Yokohama,
Kanagawa Pref. 247-8610, Japan
TEL : +81-45-897-2421
FAX : +81-45-897-2470
http://www.shibaura.co.jp/

SEA0308A 00 0710
07031