ANNUAL REPORT 2003
Financial Section

For the year ended March 31, 2003

Consolidated Financial Statements
Shibaura Mechatronics Corporationand Subsidiaries
Years ended March 31, 2003 and 2002
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 31,2003

March 31,
2003

2002
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

AssetsCurrent assets:¥ 3,343¥ 3,256$ 27,818

Short-term investments

70

75

579

Marketable securities (Note 3)

11

–

92

19,025

20,245

158,280

(103)

(98)

(857)

Inventories (Note 4)

15,181

17,507

126,295

Deferred tax assets

950

425

7,906

Other current assets

830

523

6,901

39,30741,933

327,014

305

335

2,536

Buildings and structures

28,125

28,103233,990

Machinery and equipment

8,887

11,21773,940Construction in progress

60

127

500

Total

37,37739,782

310,966

Accumulated depreciation(18,245)(18,734)(151,794)

Property, plant and equipment, net

19,132

21,048159,172

538

632

4,477

Deferred tax assets

3,614

3,044

30,066

Other assets

1,025

990

8,523

Allowance for doubtful accounts

(1)

(–)

(8)

Total investments and other assets

5,176

4,666

43,058¥ 63,615¥ 67,647$ 529,244

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)

Total assets

1March 31,
2003

March 31,
2003

2002
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

Liabilities and shareholders’ equity
Current liabilities:¥ 7,289¥ 13,488$ 60,643

Current portion of long-term debt (Note 5)

4,681

224

38,944

Notes and accounts payable, trade

16,703

14,260138,963

Accrued expenses

2,864

3,651

23,829Accrued income taxes (Note 7)

372

100

3,095

Accrued consumption tax

81

62

676

1,611

951

13,39433,601

32,736

279,544

Long-term debt (Note 5)

4,921

7,548

40,938

Allowance for retirement benefits (Note 8)

4,611

5,443

38,366

116

142

962

3,300

3,264

27,456

12,94816,397

107,722

5,868

5,868

48,819Additional paid-in capital (Note 9)

9,848

9,848

81,927Retained earnings (Note 9)

1,552

2,969

12,911

Net unrealized holding gain on other securities

(19)

1

(157)

Foreign currency translation adjustments

(2)

5

(16)

(181)

(177)

(1,506)

17,066

18,514

141,978¥ 63,615¥ 67,647$ 529,244

Short-term bank loans (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, 2003and 2002

Less treasury stock, at cost
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
Year ended March 31,
2003

March 31,
2003

2002
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

¥ 54,761¥ 54,917$ 455,589

45,42844,519377,940

9,333

10,39877,64910,835

11,934

90,149(1,502)(1,536)(12,500)

7

5

56

(178)

(162)

(1,482)Equity in earnings of affiliates

21

104

181

Gain on sale of land

–

482

–

Loss on disposal of inventories

–

(359)

–

(520)

(344)

(4,326)(2,172)(1,810)(18,071)

Current

344

114

2,866

Deferred(1,100)(806)(9,156)

(756)

(692)

(6,290)¥ (1,416)¥ (1,118)$ (11,781)

Net sales
Cost of sales
Gross profit

Selling, general and administrative expenses
Operating loss

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

Other, net
Loss before income taxes

Income taxes (Note 7):

Net loss

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

3

Shibaura Mechatronics Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Balance as of March 31, 2001
Net loss
Increase in earnings arising from
inclusion of consolidated subsidiaries
Increase in earnings arising from
inclusion of affiliates
Cash dividends paid
Bonuses to directors and statutory auditors
Net change
Foreign currency translation adjustments
Net increase in treasury stock
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

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
unrealized
holding
Foreign
gains oncurrency
othertranslation Treasury
securities adjustments
stock

Number ofshares ofcommonstock

Commonstock

Additional
paid-in
capital50,033,312–¥ 5,868–(Millions of yen)
¥ 9,848¥ 4,149–(1,118)

–

–

–

53

–

–

–

–
–
–
–
–
–
50,033,312
–
–
–
–
–
50,033,312

–
–
–
–
–
–
5,868
–
–
–
–
–
¥ 5,868

–
–
–
–
–
–
9,848
–
–
–
–
–
¥ 9,848

41
(150)
(6)
–
–
–
2,969
(1,416)(1)–––¥ 1,552

–
–
–
(15)
–
–
1
–
–
(20)
–
–
(19)

–
–
–
–
5
–
5
–
–
–
(7)
–
(2)

–
–
–
–
–
(0)
(177)
–
–
–
–
(4)
(181)

$ 48,819–––––$ 48,819(Thousands of U.S. dollars) (Note 1)$ 81,927$ 24,703
$
12
$
48
–
(11,781)
–
–
–
(11)
–
–
–
–
(169)
–
–
–
–
(64)
–
–
–
–
$ 81,927$ 12,911$ (157)$ (16)

Retainedearnings

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

4

¥

¥

16
–

¥

¥

–
–

¥

¥

(177)
–

$ (1,478)
–
–
–
–
(28)
$ (1,506)

Shibaura Mechatronics Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Year ended
Year ended March 31,
2003

March 31,
2003

2002
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

Operating activities¥ (2,172)¥ (1,810)$ (18,071)

2,080

2,144

17,310

5

(7)

42

(857)

(888)

(7,136)

(6)

(5)

(56)

Interest expense

178

162

1,482

Loss (gain) on sale of property and equipment

22

(482)

183

Loss on disposal of property and equipment

58

11

484

30

26

253

Loss (gain) on sale of investment securities

10

(0)

83

Translation loss (gain)

3

(1)

26

(21)

(78)

(180)

Bonuses to directors and statutory auditors

(1)

(6)

(10)

Increase (decrease) in advances received

355

(22)

2,957

Decrease in notes and accounts receivable, trade

1,219

3,067

10,146

Decrease in inventories

2,327

3,956

19,361

1,847(8,293)

15,372Other, net

98

14

814

Subtotal

5,175(2,212)43,0604534Interest paid

(175)

(174)

(1,461)

Income taxes paid

(72)

(796)

(601)

4,932

(3,177)41,032

Loss before income taxes
Depreciation and amortization
Provision for (reversal of) doubtful accounts
Reversal of allowance for employees’
retirement benefits
Interest and dividend income

Loss on revaluation of marketable and investment
securities

Equity in earnings of unconsolidated subsidiaries
and affiliates

Increase (decrease) in notes and accounts
payable, trade

Interest and dividends received

Net cash provided by (used in) operating activities

5Year ended
Year ended March 31,
2003

March 31,
2003

2002
(Millions of yen)(Thousands of
U.S. dollars)(Note 1)

Investment activities¥

Payments for time deposits

(69)

¥

(80)

$

(579)

74

74

620

(475)

(1,166)(3,955)

143

383

1,196

Purchases of intangible fixed assets

(81)

(274)

(679)

Purchases of investment securities

(15)

(16)

(125)

Proceeds from sale of investment securities

43

21

361

Increase in long-term loans receivable

(132)

–

(1,098)

Collection of long-term loans receivable

4

–

34

Decrease in other assets

39

63

323

(469)

(995)

(3,902)(Decrease) increase in short-term bank loans(6,198)

2,942(51,563)

Proceeds from long-term debt

2,000

2,850

16,638

Repayment of long-term debt

(171)

(2,522)(1,421)

Purchases of treasury stock

(4)

(1)

(28)

Cash dividends paid

–

(149)

–

(4,373)

3,120(36,374)

(3)

1

(27)

87

(1,051)

729

3,256

4,233

27,089–74–¥ 3,343¥ 3,256$ 27,818

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

Net cash used in investing activities
Financing activities

Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash andbank deposits
Net increase (decrease) in cash
Cash and bank deposits at beginning of the year
Increase arising from inclusion of subsidiaries in
consolidation
Cash and bank deposits at end of the year

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, 2003

1. Basis of Presenting Financial Statements(b) Foreign currency translation
The revenue and expense accounts of the foreign

Shibaura Mechatronics Corporation (the “Company”) and its

consolidated subsidiaries are translated into yen at the rate of

consolidated subsidiaries (collectively the “Companies”)

exchange in effect at the balance sheet date. The balance

maintain their accounting records and prepare their financial

sheet accounts, except for the components of shareholders’statements in accordance with accounting principles andequity, are also translated into yen at the rate of exchange inpractices generally accepted and applied in Japan. The

effect at the balance sheet date. The components ofaccompanying consolidated financial statements have beenshareholders’ equity are translated at their historical exchange

prepared from the financial statements filed with the Ministry

rates. The differences arising from translation when twoof Finance as required by the Securities and Exchange Law of

exchange rates have been used are presented as translation

Japan. Accordingly, the consolidated financial positions,adjustments, a component of shareholders’ equity in the

results of operations and cash flows presented in theaccompanying consolidated financial statements.

accompanying financial statements may differ in certain

All monetary assets and liabilities of the Company and its

material respects from accounting principles and practices

domestic consolidated subsidiaries denominated in foreign

generally accepted in countries and jurisdictions other thancurrencies are translated at the current exchange rates inJapan.

For the purposes of this document, certain

effect at each balance sheet date. Gains and losses resulting

reclassifications have been made to present thefrom the settlement of these items are credited or charged

accompanying consolidated financial statements in a format

currently to income.

which is familiar to readers outside Japan.
(c) Cash and cash equivalents
The accompanying consolidated financial statements are

The Company and its subsidiaries substantially consider allstated in yen, the currency of the country in which thehighly liquid investments with a maturity of three months or

Company is incorporated and operates. The translation ofless from the purchase dates to be cash equivalents.

yen amounts into U.S. dollar amounts has been included
solely for the convenience of readers outside Japan. The(d) Securities

translation has been made at the rate of ¥120.20 = U.S.$1.00,

Held-to-maturity securities are either amortized or

the approximate rate of exchange in effect on March 31,

accumulated to face value. Other securities with quoted

2003. This translation should not be construed as amarket prices are carried at market value. The difference

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

between the acquisition cost and the carrying value of otherthe above or any other rate.

securities, including unrealized gains and losses, isrecognized as a component of shareholders’ equity under

2. Summary of Significant Accounting Policies“Net unrealized holding gain on other securities”. The cost ofother securities sold is computed based on the moving(a) Scope of consolidation

average method. Other securities without quoted market

The accompanying consolidated financial statements include

prices are stated at cost, based on the moving average

the accounts of Shibaura Mechatronics Corporation and fivemethod.

subsidiaries over which the Company exerts substantial
control either through majority ownership of voting stock(e) Derivatives

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

Derivatives are stated at fair market value.

subsidiaries are revalued at fair value on acquisition, if
applicable. All significant intercompany balances and(f) Inventories

transactions have been eliminated in consolidation.

Inventories of the Company and its consolidated subsidiaries

The investments in unconsolidated subsidiaries which areare stated at cost, determined principally by the following

not deemed material to the consolidated financial statements

methods:

are stated at cost, except for one subsidiary which is

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

accounted for by the equity method.

7

Semi-finished goods

the year ended March 31, 2002.

-- Primarily by individual cost method

The Companies also provide for retirement benefits toWork in process

directors and statutory auditors, based on the Companies’-- Primarily by individual cost methodinternal rules at the amount which would be required to be
paid if all directors and statutory auditors retired or resigned(g) Depreciation and amortization

at the balance sheet date.

Depreciation of property, plant and equipment is generally
computed by the declining-balance method, based on the(j) Accrual for periodic repairs

estimated useful lives of the respective assets. The straight-

A certain building acquired in the year ended March 31, 1995,

line method is adopted for a certain building acquired during

requires periodic repairs. An accrual for repair expenses is

the year ended March 31, 1995, and to all buildings acquired

recorded based on the current portion of the total expenses

since April 1, 1998. The following summarizes the estimatedestimated for such repairs.

useful lives of property, plant and equipment by major(k) Leases

category:
Buildings and structures

3 – 60 years

Finance leases other than those which are deemed to transfer

Machinery and equipment 2 – 22 years

the ownership of the leased assets to the lessee are not

Intangible assets are amortized by the straight-line method.

capitalized, but are accounted for by a method similar to that

Development costs for software intended for internal use areapplicable to operating leases.

amortized by the straight-line method over a period of 5 years,(l) Research and development expenses

based on the estimated useful life of the software.
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 allowanceis determined based on the historical experience with write-(n) Accounting method for treasury stock and reduction of legal

offs plus an estimate of specific probable doubtful accounts

reserves

based on a review of the collectibility of the individual

Effective the year ended March 31, 2003, the Company

receivables.

adopted a new accounting standard for treasury stock andreduction of legal reserves (“Accounting Standards for(i) Severance benefits and pension plans

Treasury Stocks and Reduction of Legal Reserves”).

The allowance for employees’ retirement benefits has been

Adoption of this new standard had no impact on theprovided based on the projected retirement benefit obligation

Company’s results of operations and financial position.

and the pension fund assets. Actuarial gain or loss isamortized in the year following the year in which the gain or(o) Per share information

loss is recognized by the straight-line method over a period of

Effective the year ended March 31, 2003, the Company adopted

10 years, which is shorter than the average remaining years ofa new accounting standard for per share information

service of the employees. Prior service cost of ¥23 million in(“Accounting Standard for Earnings per Share” andthe aggregate with respect to the revision of the lump-sum“Implementation Guidance for Application of Accounting

retirement payment plan and the funded non-contributoryStandard for Earnings per Share”). See Note 15.

pension plan has been charged to income as other income for8

3. Securities
At March 31, 2003 and 2002, securities with quoted market prices classified as other (available-for-sale) securities are summarized as follows:
March 31,

Acquisition
costs

2003

2002

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 31,2003

Difference

Amountrecorded in
Acquisition the balance
costs
sheet

(Millions of yen)

Difference(Thousands of U.S. dollars)

¥ 49
11
–
60

¥ 66
11
–
77

¥ 17
0
–
17

¥ 52
10
–
62

¥ 79
10
–
89

¥ 27
0
–
27

$ 409
91
–
500

$ 549
92
–
641

$ 140
1
–
141

122
–
–
122
¥182

69
–
–
69
¥146

(53)
–
–
(53)
¥(36)

145
1
–
146
¥208

96
1
–
97
¥186

(49)
(0)
–
(49)
¥(22)

1,015
–
–
1,015
$1,515573––
573$1,214

(442)
–
–
(442)
$(301)At March 31, 2003 and 2002, other securities without

4. Inventories

quoted market prices are summarized as follows:

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

March 31,
2003
2002

March 31,
2003

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

¥361

¥347

$3,005

42

100

349

Inventories at March 31, 2003 and 2002 are summarized as follows:
March 31,2002

March 31,
2003

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

2003

Finished products
Raw materials
Work in process
Total¥ 4,660
77
10,444¥15,181¥ 6,836
77
10,594¥17,507$ 38,768
642
86,885$126,295

5. Short-Term Bank Loans and Long-Term Debt
The annual interest rates of the Companies’ short-term bankloans ranged principally from 0.49 percent to 3.00 percent at
March 31, 2003, and from 0.48 percent to 2.30 percent at
March 31, 2002.
A summary of long-term debt at March 31, 2003 and 2002
is as follows:

9

2003

March 31,2002

(Millions of yen)Unsecured:Non-interest-bearing
convertible bonds
due March 2004
¥ 2,820
1.25 percent to 2.40 percent
loans from banks andinsurance companies due
2003 – 2007
6,771
Loans from Pension Welfare
Service Public Corporationdue 2003 – 2035
11
Total
9,602
Current portion(4,681)Long-term debt less current
portion¥ 4,921

March 31,
2003

These lines of credit have commitment fee requirements.

(Thousands of
U.S. dollars)

6. Research and Development Expenses
Research and development expenses charged to income forthe years ended March 31,2003 and 2002 were as follows:¥ 2,820$ 23,461

4,939

56,328Year ended
Year ended March 31, March 31,
2003
2002
2003
(Millions of yen)

¥1,409
13
7,772
(224)

93
79,882(38,944)¥ 7,548$ 40,938¥2,313(Thousands of
U.S. dollars)$11,719

7. Income Taxes
Income taxes applicable to the Company and its domestic
subsidiaries comprised corporation tax, inhabitants’ taxes andenterprise tax which, in the aggregate, resulted in a statutory
tax rate of approximately 42 percent for 2003 and 2002.Income

Loans from the Pension Welfare Service Public Corporation

taxes of the foreign subsidiaries are based generally on the tax

represent financing housing loans to the Company’s

rates applicable in their countries of incorporation. The

employees, and the same amount is stated as a portion ofeffective tax rates reflected in the accompanying consolidated

other assets (loans to employees). The Company pays thestatements of operations differ from the statutory tax rates

interest on such loans to the lender and collects the same

primarily due to the effect of permanent nondeductible

amount from the employees as the borrowers.

expenses for income tax purposes.

On February 7, 2000, the Company issued Euro yen 7,000

The major components of deferred tax assets and liabilities

million non-interest-bearing convertible bonds due March

as of March 31, 2003 and 2002 are summarized as follows:2004 without security. The convertible bonds are convertible
during the period from February 21, 2000, to March 24, 2004,
into shares of common stock of the Company at ¥803 per

March 31,
2003
2002

March 31,
2003

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

share, which was adjusted from ¥1,003 per share on February
Deferred tax assets:
Employees’ retirement
benefits¥1,915
Accrued employees’ bonuses
427
Accrual for periodic repairs
122Enterprise tax payable30
Net loss carried forward
1,861
Other
300
Gross deferred tax assets
4,655
Valuation allowance(85)
Total deferred tax assets
4,570
Deferred tax liabilities:
Deferred gain on sale ofproperties(6)
Total deferred tax liabilities(6)
Deferred tax assets, net¥4,56426, 2001, subject to certain adjustments.
The long-term debt subsequent to March 31, 2003, issummarized by maturity as follows:
March 31, 2003
(Millionsof yen)

2004
2005
2006
2007 and thereafterTotal¥ 4,681
500
1,801
2,620
¥ 9,602(Thousands of
U.S. dollars)$ 38,944
4,163
14,97921,796$ 79,882

At March 31, 2003, the Company has unused committed linesof credit with 5 banks for efficient financial arrangements for
operating funds aggregating ¥10,000 million ($83,195 thousand).

10¥2,308
254
110
12
590
267
3,541
(71)
3,470

$15,936
3,553
1,014
249
15,486
2,496
38,734(711)
38,023––¥3,470(51)(51)$37,972

March 31,
2003
2002
Assumptions used in the actuarial calculation:
Actuarial cost method
Projected unit credit method
Discount rate
2.5% per annum 3.0% per annum
Expected rate of return onplan assets
3.5% per annum 3.5% per annum
Amortization period for prior
1 yearservice cost–

8. Retirement Benefits
The Companies have defined benefit pension plans andlump-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:

Amortization period for
actuarial loss

Retirement benefit obligation:
March 31,
2003
2002

March 31,
2003

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

Projected benefit obligation¥(9,731)
Fair value of plan assets
2,579
Funded status(7,152)
Unrecognized actuarial loss
2,540
Obligation recognized in the
consolidated balance sheet (4,612)
Allowance for retirement
benefits¥(4,612)

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

9. Legal Reserve and Additional Paid-In capital¥(10,031)
2,460(7,571)2,128$(80,954)
21,454(59,500)
21,134On October 1, 2001, an amendment (“Amendment”) to the(5,443)(38,366)

outstanding shares, which results in all outstanding shares

Commercial Code of Japan (the “Code”) became effective. The
Amendment eliminates the stated par value of the Company’s
having no par value as of October 1, 2001. The Amendment¥ (5,443)

also provides that share issuances after September 30, 2001,$(38,366)

will be of shares with no par value. Before the amendment, theCompany’s share had par value of ¥50 per share.

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

The Code provides that an amount equal to at least 10

obligation.

percent of the amount to be disbursed as a distribution of
earnings shall be appropriated to the legal reserve until such

Components of net periodic pension cost:reserve and the amount of additional paid-in capital equals 25

Year ended
Year ended March 31, March 31,
2003
2002
2003
(Millions of yen)

Service cost - benefits earned
during the year
¥ 471
Interest cost on projected
benefit obligation
296
Expected return on plan assets(86)
Amortization of prior service cost–
Amortization of actuarial loss
221
Net periodic pension cost
¥ 902

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 the(Thousands of
U.S. dollars)¥405$ 3,921

¥

273
(74)
23
81
708

2,466
(717)
–
1,838
$ 7,508

common stock account, then the amount of the excess (if any)
is available for appropriations by resolution of theshareholders.
The retained earnings account in the accompanying
consolidated financial statements at March 31, 2003, included
a legal reserve of ¥1,552 million ($12,911 thousand).
10. Stock Option Plan

(1)Prior service cost of ¥23 million was recognized as otherincome for the year ended March 31, 2002.

On June 15, 2000, the shareholders approved a stock option
plan for directors and key employees to purchase shares of(2)The allowance for retirement benefits was determined by

the Company’s common stock which had been purchased by

the simplified method by the consolidated subsidiaries andthe Company on stock exchanges in accordance with Clausehas been included in service cost – benefits earned during

2 of Article 210-2 of the former Commercial Code of Japan.

the year.

Under this plan, a maximum of 104,000 shares may be

11granted to directors and 51,000 shares to key employees.

transactions, all of whom are domestic financial institutions
with high credit ratings.

The exercise price is ¥1,320.
In accordance with the Company’s policy, derivative
The stock options will become exercisable during thetransactions are entered into under the decision-making rules

period from July 1, 2002, to June 30, 2004.

approved by the Management Strategy Committee of theCompany. The department which has the responsibility to

11. Leases

enter into such contracts controls the risk and performance ona daily basis and reports these to management of theNon-cancelable lease transactions are primarily accounted for

Company, if and when necessary.

as operating leases (regardless of whether such leases are
Interest-rate-related transactionsclassified as operating or finance leases) except that leaseagreements which stipulate the transfer of ownership of the

March 31, 2002leased assets to the lessee are accounted for as financeleases. Lease expenses related to finance leases accounted

Contract
amounts

for as operating leases amounted to ¥515 million ($4,281
thousand) for the year ended March 31, 2003, and ¥475

Future minimum lease payments subsequent to March 31,
2003, for finance lease transactions accounted for as

Unrealized
loss

¥ 500

¥ (–)

¥ (2)

¥ (2)

The contract amounts in the above table do not fully

operating leases are summarized as follows:

represent the extent of the market risk relating to the derivative
March 31, 2003

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

¥ 519
1,067
¥1,586$ 4,318
8,874$13,192

positions.
As of March 31, 2003, fair value information for derivatives
has not been presented, since all derivatives have beenaccounted for as hedges.

12. Contingent Liabilities

The Company had the following contingent liabilities:
March 31, 2003

As guarantor for housing
loans of employees

Fair
value

(Millions of yen)Interest rate swaps:
Receive floating/pay fixed

million for the year ended March 31, 2002.

Due within one year
Due after one year
Total

(Including
portion inexcess of
one year)(Millions(Thousands ofof yen)U.S. dollars)

¥ 100

$ 828

13. Derivatives and Hedging Activities
The Company has entered into interest rate swap contracts to
reduce the cost of borrowing. The Company uses thesecontracts to manage its exposure to interest rate risk. As amatter of policy, the Company does not speculate inderivative transactions. The Company does not anticipate
nonperformance by any of the counterparties to the above1214. Segment Information
The business segment information of the Companies for the years ended March 31, 2003 and 2002 is summarized as follows:Business segments
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––¥63,6152,080
637

Year ended March 31, 2002
Automation
systemsFine& vacuummechatronics equipment

Vending
machines& systems

Real estateleasing

Total

Eliminations
orunallocated Consolidated
amounts(Millions of yen)

I. Sales and operating income
Sales to external customers
Intersegment sales or transfers
Total sales
Operating expenses
Operating income¥35,552–
35,55235,335¥ 217¥11,150–
11,15013,237¥ (2,087)¥6,071
–
6,071
6,086
¥ (15)¥ 2,144
–
2,144
1,302
¥ 842

¥54,917–54,91755,960¥ (1,043)

¥

–
(–)
–
493
¥ (493)¥54,917–54,91756,453¥ (1,536)

II. Total assets, depreciation and capital expenditures
Total assets¥32,225
Depreciation
897
Capital expenditures788¥15,559470
338¥5,751
128
123¥12,129649
23¥36,664
2,144
1,272

¥1,983––¥67,647
2,144
1,272

13

Year ended March 31, 2003
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$296,598–$296,598
302,007$ (5,409)$ 93,677–$ 93,677
106,271$ (12,594)$47,466–$47,466
45,488$ 1,978$17,848–$17,848
11,453$ 6,395$455,589–$455,589
465,219$ (9,630)

$

–
–
$
–
2,870
$ (2,870)$455,589–$455,589
468,089$ (12,500)

II. Total assets, depreciation and capital expenditures
Total assets$245,092
Depreciation
7,343
Capital expenditures
3,452$125,221
3,637
1,143

$45,747
1,002
699$95,8185,327
12$511,878
17,3095,306$17,366––$529,244
17,3095,306

Notes:(3) Vending machines & systemsa)Basis of segmentation

Vending machines, ticket vending machines, and others

Business segments are divided into product categories by thesame criteria as applied for internal control purposes.

(4) Real estate leasing
Real estate leasing and management and other businessb)Major products in each business segmentc) Included in eliminations or unallocated amounts of(1) Fine mechatronics

operating expenses are unallocable amounts relating to

FPD manufacturing equipment (wet cleaning equipment,

development expenses incurred for the entire company as

stripping equipment, etching equipment, developing

part of the Company’s research and development costs.

equipment, cell assembly equipment, outer lead bonding
equipment), semiconductor manufacturing equipment (wetd) Included in the eliminations or unallocated amounts of total

cleaning equipment, etching equipment, ashing equipment,

assets were unallocable amounts totaling ¥6,229 million

die-bonding equipment, wire-bonding equipment, inner($51,820 thousand) million for the year ended March 31, 2003

lead bonding equipment, flip chip bonding equipment, autoand ¥5,502 million for the year ended March 31, 2002, whichmolding equipment), the non-destructive inspection

primarily consisted of surplus funds (cash and marketablebusiness, equipment for railroad maintenance, and othersecurities) of the Company.

itemse) Included in depreciation were amortization of and additions(2) Automation systems & vacuum equipment

to long-term prepaid expenses.

Rechargeable battery manufacturing equipment, precisionparts manufacturing equipment, other automatic devices

Geographical segments

laser applied processing equipment, microwave applied

For the consolidated fiscal years ended March 31, 2003 andequipment, cartesian robots, media devices manufacturing

2002, there are no statements to be made because there

equipment (sputtering equipment, vacuum bonding

were no consolidated subsidiaries or important overseas

equipment), industrial vacuum plating equipment, vacuum

branches in countries or territories other than Japan.

pumps, and other items

1415. Per Share Information

Overseas sales
Year ended March 31, 2003

In accordance with a new accounting standard for earnings

Northeastern
Asia

Other

per share which became effective April 1, 2002, basic net

Total(Millions of yen)

I. Overseas sales¥23,231
II. Consolidated net sales
III. % of consolidated net sales
42.4%

income per share is computed based on the net income¥3,339¥26,570
54,761
6.1%
48.5%

available for distribution to shareholders of common stock andthe weighted average number of shares of common stock
outstanding during each year. Diluted net income per share iscomputed based on the net income available for distribution

Year ended March 31, 2002

to the shareholders and the weighted average number ofNortheastern
Asia

Other

shares of common stock outstanding during each year,

Total(Millions of yen)assuming full dilution by common stock equivalents. Net¥6,302

assets per share is also computed based on the weighted

I. Overseas sales¥17,722
II. Consolidated net sales
III. % of consolidated net sales
32.3%¥24,024
54,917
11.5%
43.7%

average number of shares of common stock outstanding
during each year.
Net loss and net assets per share for the year ended March

Year ended March 31, 2003

31, 2002, have been recomputed based on this new

Northeastern
Asia

Other

Total

accounting standard and are restated in the accompanying(Thousands of U.S. dollars)

financial statements.

I. Overseas sales$193,268$27,778 $221,046
II. Consolidated net sales
455,589
III. % of consolidated net sales
42.4%
6.1%
48.5%

Notes:Net loss
Net assetsa) Overseas sales are those of the Company and its

Year ended
March 31,
2003
2002

Year ended
March 31,
2003

(yen)

( U.S. dollars)¥ 28.40
342.24¥ 22.46371.19$ 0.242.85

consolidated subsidiaries in countries or regions other thanJapan.
Per share amounts assuming full dilution have not beenb) The division of overseas sales into countries or regions andpresented because the Company recorded net operating

the names of such countries or regions are as follows:

losses for the years ended March 31, 2003 and 2002.

(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., Singapore

15

Shibaura Mechatronics Corporation and Subsidiaries

Report of Independent Auditors

Phone:03-3503-1100
Certified Public Accountants
Fax: 03-3503-1197
Hibiya Kokusai Bldg.
2-2-3, Uchisaiwai-cho,
Chiyoda-ku, Tokyo, 100-0011
C.P.O. Box 1196, Tokyo 100-8641

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, 2003 and 2002, 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 independently express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards, procedures and practices generally accepted and applied inJapan. Those standards, procedures and practices require that we plan 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
position of Shibaura Mechatronics Corporation and consolidated subsidiaries at March 31, 2003 and 2002, and the consolidated
results of their operations and their cash flows for the years then ended in conformity with accounting principles and practices
generally accepted in Japan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31,
2003 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 12, 2003
See Note 1 to the consolidated financial statements which explains the basis of preparation of the consolidated financial
statements of Shibaura Mechatronics Corporation and consolidated subsidiaries under Japanese accounting principles andpractices.

16

Supplemental Information
Shibaura Mechatronics Corporation

Non-Consolidated Balance Sheets

March 31,2003

March 31,
2003

2002
(Millions of yen)(Thousands of
U.S. dollars)

AssetsCurrent assets:¥ 1,721¥ 1,757$ 14,316

11

–

92

Notes

1,949

966

16,215

Accounts

13,52915,932

112,549

(58)

(83)

(483)

13,59016,128113,060

Deferred tax assets

662

213

5,507

Other current assets

2,440

1,579

20,30333,84436,492

281,559

105

135

873

Buildings and structures

27,86427,859231,814

Machinery and equipment

8,390

10,76569,801

Construction in progress

58

127

482

Total

36,41738,886302,970

Accumulated depreciation(17,790)(18,373)(148,000)

Property, plant and equipment, net

18,627

20,513

154,970

Investment securities

166

267

1,385

Investments in subsidiaries and affiliates

831

796

6,910

3,356

2,994

27,920

823

820

6,849

Allowance for doubtful accounts

(1)

(–)

(8)

Total investments and other assets

5,175

4,877

43,056¥ 57,646¥ 61,882$ 479,585

Cash and bank deposits
Marketable securities
Notes and accounts receivable, trade:

Allowance for doubtful accounts
Inventories

Total current assets

Property, plant and equipment:
Land

Investments and other assets:

Deferred tax assets
Other assets

Total assets

17March 31,
2003

March 31,
2003

2002
(Millions of yen)(Thousands of
U.S. dollars)

Liabilities and shareholders’ equity
Current liabilities:¥ 6,010¥12,210$ 50,0004,410

036,692

Notes

2,263

4,041

18,828

Accounts

12,487

8,653

103,883

20

6

166

509

196

4,237

3,144

3,316

26,161

Accrued income taxes

70

46

579

Other current liabilities

164

151

1,362

29,07728,619241,908

Long-term debt

4,921

7,332

40,938

Allowance for retirement benefits

4,475

5,292

37,224

Directors’ retirement benefits

88

111

735

Accrual for periodic repairs

300

264

2,497

Other long-term liabilities

3,000

3,000

24,95812,784

15,999106,352

5,868

5,868

48,819

9,848

9,848

81,927

Legal reserve

353

553

2,936

Retained earnings

(85)

1,171

(700)

Net unrealized holding gain on other securities

(18)

1

(151)

Less treasury stock, at cost

(181)

(177)

(1,506)

Total shareholders’ equity

15,785

17,264

131,325

Total liabilities and shareholders’ equity¥57,646¥61,882$479,585

Short-term bank loans
Current portion of long-term debt
Notes and accounts payable:

Other
Advances from customers
Accrued expenses

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
and 2002
Additional paid-in capital

18

Supplemental Information
Shibaura Mechatronics Corporation

Non-Consolidated Statements of Operations

Year ended
Year ended March 31,
2003

March 31,2002
(Millions of yen)

2003
(Thousands of
U.S. dollars)

Net sales¥43,754¥45,406$364,010

Cost of sales

38,91239,891

323,729

4,842

5,515

40,281

6,584

7,194

54,778(1,742)(1,679)(14,497)

10

56

84

(160)

(149)

(1,332)Gain on sale of land

–

481

–

Loss on disposal of inventories

–

(359)

–

(359)

(245)

(2,987)(2,251)(1,895)(18,732)

Current

20

20

166

Deferred

(816)

(747)

(6,788)

(796)

(727)

(6,622)¥ (1,455)¥ (1,168)$ (12,110)

Gross profit

Selling, general and administrative expenses
Operating loss

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

Other, net
Loss before income taxes

Income taxes:

Net loss(Yen)(U.S. dollars)

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

¥ 29.19¥ 23.42

0.00

0.00

$

0.24
0.00

2-5-1, Kasama, Sakae-ku,
Yokohama, Japan, 247-8610
PHONE : +81-45-897-2421
FAX : +81-45-897-2470
http://www.shibaura.co.jp/
Printed on Recycled Paper
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