Annual Business Report

April 1, 2018 through March 31, 2019

NIPPON SHARYO, LTD. and Consolidated Subsidiaries

Financial Highlights
Comparison of Sales by Segment(Unit: millions of yen)

190th period(2018-2019)

Business Segment

189th period(2017-2018)

Railway rolling stock

38,04941.7

Transportation equipment
and Steel structure

21,794

Construction equipment%

Increase/(Decrease)

41,45543.5

23.9

22,47525,167

27.6

6,006

Other
Total

Engineering%%(3,406)

(8.2)

23.6

(681)

(3.0)

24,573

25.8

594

2.4

6.6

6,560

6.9

(554)

(8.4)

163

0.2

248

0.2

(85)

(34.3)

91,179100.0

95,311

100.0(4,132)(4.3)

Change in Operating Performance and Asset Status(Unit: millions of yen except Net income per share)

190th period(2018-2019)

189th period(2017-2018)

188th period(2016-2017)

91,17995,311

101,094

Ordinary income (loss)

8,862

7,315

(5,149)Net income (loss) attributableto owners of the parent

9,199(8,271)(5,124)

Net income per share (loss)¥637.29(¥573.01)(¥35.50)

Total assets

134,194

127,413129,194

Total equity

32,446

20,954

28,109Titles of accountNet sales

Note: Effective October 1, 2018, the Company has implemented a 1-for-10 reverse stock split of common stock. Per share ofcommon stock is retroactively adjusted. Per share information is disclosed as if the reverse stock split had been effected at
the beginning of the fiscal year ended March 31, 2018.

Comparison of Sales by Segment(Millions of Yen)

140,000
Other

120,000

Engineering

100,000

Construction equipment

80,00060,000Transportation equipment
and Steel structure

40,000Railway rolling stock

20,0000190th period

189th period

188th periodaContents
Message from the President

2

Review by Segment

4

Investment in Plant and Equipment

6

Financing Activities

6

Consolidated Financial Statements and Independent Auditor's Report

7

Corporate Information

41

Directory

41

subway cars for Jakarta

1

Message from the President
Review of Business Operations
During the fiscal term under review, the Japanese economy had a continuous tendency to improvein capital investment, employment, etc., supported by the effect of various economic policies, as well as
gradual recovery of overseas business conditions. However, some weaknesses were found in productionand export.
Under this business environment, our performance for the year showed a decrease in sales of
the transportation equipment and steel structure business segment and our consolidated subsidiary
NIPPON SHARYO U.S.A., INC., totaling ¥91,179 million, was down 4.3% from the previous year. In
terms of profits, provisions for loss on order received recorded in the previous year did not arise, andother business segments showed healthy movement as in the previous year, while the reversal of theamount recorded as provisions for the large railway rolling stock project for the U.S.A. in the railway
rolling stock business in the previous year did not exist any longer. As a result, the operating profit
was ¥8,500 million, up 17.0%, and the ordinary profit ¥8,862 million, up 21.1% from the previous year.
We no longer had an extraordinary loss due to payment of the settlement money for the large railway
rolling stock project for the U.S.A. recorded in the previous year. Consequently, the net profit thatbelongs to the stockholders of the parent company was ¥9,199 million (¥8,271 million net loss in theprevious year).

The Outlook
Considering the downturn in recent years, losses recorded for four consecutive years until theprevious year, and an increasingly severe market environment, the Group will seek “enhancementof the operation control structure and human resources development” and promote “technology
and product development with exertion of our overall capabitilies” while securing the profit with“business development where we can exhibit our strengths.” Concretely, we will seek to enhance theoperation control structure including the quality, cost, and process with a focus on the railway rollingstock business, or our core business, exhibit our strengths in the strong area of each business segmentby providing products and service that match customer needs, and gain a competitive edge by cost
reductions to secure stable order receipt with all our strength. In such efforts, we will develop closer
cooperative ties with the parent company to contribute to improve the corporate value of the entire JR
Central Group as well as to develop our business.
In the railway rolling stock business, the environment will be continuously difficult in terms ofreceiving orders. In such a circumstance, we will continue to make efforts to gain a competitiveedge concerning various railway rolling stocks with a focus on high speed railways, by differentiating2

ourselves from competitors through technological developments as well as cost reductions throughimprovements in efficiency of production processes, etc. For projects with losses, we will make efforts
to improve the circumstances by reviewing the project promotion system, etc.
In the transportation equipment and steel structure business segment, the transportation equipment
business is facing difficulties of receiving orders. We will, however, make efforts to secure orders anddevelop new customers by developing products which promptly capture market trends and reducing
costs. Our efforts in the steel structure business will be focused on enhancing our ability to propose
technological solutions that match customer specifications in bridge construction work, etc. andreducing costs to secure orders. At the same time, we will expand our business to peripheral areas
such as repair/maintenance projects.
In the construction equipment business segment, we will capture business opportunities steadily
through maintenance/enhancement of the production system to meet the healthy domestic demandand by promoting flexible measures to meet the needs of each region in the overseas market with afocus on Asia.
In the engineering business segment, we will secure profits by proposing products that cater tomarket needs.
Concerning existence of events or conditions that may cast significant doubt on the entity’s ability
to continue as a going concern, the Group recorded net losses that belong to the stockholders of theparent company for four consecutive years until the previous year, however, we exhibited our strength
in the strong area of each business segment to deal with it and gained a competitive edge by promotionof cost reductions to secure stable order receipt with all our strength. Consequently, we recorded
quarterly net profits that belong to the stockholders of the parent company in succession from the firstquarter consolidated cumulative period, totaling ¥9,199
million net profit in this year.
For financing, we make efforts to stably secure funds
necessary for business activities and maintain liquidity
while keeping a sound financial balance and secure funds
that will fully meet the demand expected based on thefinancial plan.
Based on the above, we consider that events or conditions
that might cast significant doubt on the entity’s ability tocontinue as a going concern did not exist any longer in thefirst quarter consolidated accounting period.
Kazuhiro Igarashi
President and Chief Executive Officer
3

Review by Segment
Railway Rolling Stock BusinessIn the railway rolling stock business, we
had sales of trains for Odakyu Electric
Rai lway C o., Ltd., Nagoya Rai lroad
Co., Ltd., Tokyo Metro Co., Ltd., Keisei
Electric Railway Co., Ltd., Shin-Keisei
Electric Railway Co., Ltd., Indonesia,
etc. in addition to the N700A Shinkansen
trai ns for J R C entra l a nd J R West.

N700A Shinkansen trains for JR Central and JR West

Compared with the previous year, oursales of railway cars increased for the public and private
railways and overseas but decreased for JR Companies.
Consequently, our total sales for the railway rolling stockbusiness were ¥38,049 million, down 8.2% from theprevious year.
Series 2000 train for Tokyo Metro Co., Ltd.

Transportation Equipment and Steel Structure BusinessIn the transportation equipment business, we had sales of
LPG tank lorries, consumer-purpose LPG bulk tank lorries,
etc., however, the sales of container flat cars decreased
compared with the previous year. As a result, sales were
¥8,725 million, down 22.3% from the previous year.

LPG bulk tank lorry

In the steel structure business, sales
included Tokai-Kanjo Expressway
Takatomi IC East Main Line Bridge;
Higashi-Fukase Number 4 Viaduct;
Higashi-Isshiki Viaduct; Nagafuke

Tokai-Kanjo Expressway Nagafuke Number 4 Bridge4

Number 4 Bridge, Nishi-Zakura Number 2 Viaduct; as well as large-scale repair work for Tokaido
Shinkansen. Sales were up 16.2% from the previous year to ¥13,068 million.
In all, sales for the transportation equipment and steel structure businesses were ¥21,794 million,
down 3.0% from the previous year.

Construction Equipment BusinessIn the construction equipment business, domestic
sales continuously showed healthy movement
thanks to demands for reconstruction works fromthe Great East Japan Earthquake and construction
work related to the Tokyo Olympic Games. As aresult, sales in the construction equipment businessreached ¥25,167 million, up 2.4% from the previous
year.

Casing Rotator

Engineering BusinessOur main sales included; vehicle inspection/repair facilities for railway companies; mechanicalequipment for Maglev trains for JR Central; agricultural plants for Agricultural Cooperatives all overJapan; and paper-manufacturing equipment for household paper manufacturers. We had a decreasein sales for agricultural plants compared with the previous year. As a result, sales in the engineeringbusiness totaled ¥6,006 million, down 8.4% from the previous year.
The overseas sales for the year under review amount to ¥9,702 million, representing 10.6% of total
sales, which includes ¥6,483 million for the railway rolling stock business and ¥3,216 million for theconstruction equipment business.
The orders on hand at the end of the year underreview reached ¥78,049 million. These comprised¥48,218 million for the railway rolling stock business,¥25,015 million for the transportation equipment
and steel structure businesses (¥9,428 million for thetransportation equipment business, ¥15,586 million
for the steel structure business), ¥2,947 million for theconstruction equipment business, and ¥1,867 million for
the engineering business.

Wheelset lifting device

5Investment in Plant and Equipment
Plant and equipment investment during the year under review totaled ¥2,065 million. Investment
was mainly targeted at renewal of equipment necessary for production of construction machinery.
Investment was also made for renewal of equipment to maintain/improve the production capacity ateach plant.
On April 20, 2017, the Group transferred the plant property of Toyokawa Plant, Kinuura Plant,
and Narumi Plant to our parent company (Central Japan Railway Company). Since the relevanttransaction is a transaction with our parent company, and we concluded a lease contract with ourparent company and continuously use the transferred plant property as plants as before even after
transfer, we recorded the “land” and “buildings and structures” of this plant property as tangible fixed
assets instead of executing sales and purchase accounting. The relevant transaction is not a financelease transaction, so we recorded the transfer price of the plant property as a long-term debt (including
the long-term debt to be cleared within one year).
Therefore, equipment investment concerning the transferred plant property was also recorded as“buildings and structures” and “machinery and equipment”, and some of the equipment investment
amount as long-term debt (including the long-term debt to be cleared within one year).

Financing Activities
In this year, no major borrowing was made.

6

NIPPON SHARYO, LTD. ANDCONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2019AND
INDEPENDENT AUDITOR’S REPORT

7

INDEPENDENT AUDITOR’S REPORTTo the Board of Directors of NIPPON SHARYO, LTD.:
We have audited the accompanying consolidated balance sheet of NIPPON SHARYO, LTD. (the “Company”)
and its consolidated subsidiaries as of March 31, 2019, and the related consolidated statements of operations,comprehensive income, changes in equity, and cash flows for the year then ended, and a summary of significant
accounting policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparationand fair presentation of the consolidated financial statements in order to design audit procedures that are8

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of NIPPON SHARYO, LTD. and its consolidated subsidiaries as of March 31,
2019, and the consolidated results of their operations and their cash flows for the year then ended in accordancewith accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in accordance with the basis stated in Note 1 to the consolidated
financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

June 27, 2019

9

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2019
Thousands of
U.S. Dollars(Note 1)Millions of Yen
ASSETS

2019

2018

2019

CURRENT ASSETS:¥

Cash and cash equivalents (Notes 14 and 17)

12,721¥

15,837$

115,645

Notes and accounts receivable (Notes 3, 14 and 17)

29,75628,526

270,513Inventories (Notes 2.i and 4)

31,48426,705286,219

Other current assets (Note 9)

1,039

1,146

9,443

Total current assets

75,00072,214

681,820

Land (Note 9)

14,971

14,996

136,102

Buildings and structures (Note 9)27,43827,639249,432

Machinery and equipment

34,68634,860315,325

Construction in progress

846

35

7,694

77,941

77,530708,553(49,527)(48,966)(450,247)

28,41428,564

258,306

20,381

18,632

185,281

795

728

7,226

7,910

5,623

71,909

159

136

1,442

1,535

1,516

13,96830,78026,635279,826

PROPERTY, PLANT AND EQUIPMENT:

Total
Accumulated depreciation
Net property, plant, and equipment

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5, 9 and 14)
Investments in an unconsolidated subsidiary and associatedcompanies (Note 14)
Asset for employees’ retirement benefits (Note 8)
Deferred tax assets (Note 13)
Other assets (Note 9)
Total investments and other assets
¥

TOTAL

134,194¥

127,413$

1,219,952(Concluded)

10

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2019

Thousands of
U.S. Dollars(Note 1)
2019

Millions of Yen
LIABILITIES AND EQUITY

2019

2018

CURRENT LIABILITIES:¥Current portion of long-term debt (Notes 7, 14 and 17)
Current portion of lease obligations (Notes 11 and 14)

296

¥

287

$

2,688

678

748

6,168

Notes and accounts payable (Notes 6 and 14)

22,912

24,845208,287

Accrued expenses (Note 17)

5,422

5,003

49,291

Advances received

4,281

3,467

38,915

Income taxes payable (Note 14)

538

132

4,888

Allowance for work in process on construction contracts

176

36

1,600

Provision for loss on orders received (Note 2.n)

1,837

6,128

16,702Other current liabilities

1,158

1,408

10,53137,29842,054

339,070

55,21955,400501,996

292

273

2,656

Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 7, 9 14 and 17)
Liability for employees’ retirement benefits (Note 8)
Lease obligations (Notes 11 and 14)

1,650

1,725

14,996

Allowance for PCB disposal expenses

203

457

1,845

Provision for compensation for health damage from asbestos

87

99

791

6,048

6,233

54,980

Deferred tax liabilities (Note 13)
Other long-term liabilities
Total long-term liabilities

951

218

8,648

64,45064,405585,912

11,811

11,811

107,370

COMMITMENTS AND
CONTINGENT LIABILITIES (Notes 10 and 15)
EQUITY (Note 12):
Common stock,authorized, 32,800,000 and 328,000,000 shares;
issued, 14,675,012 and 146,750,129 shares in 2019 and 2018, respectively
Capital surplus-

12,045-

9,585(11,659)

87,141

(517)

(516)

(4,703)

8,919

7,708

81,082-(8)-Foreign currency translation adjustments(2,224)(2,191)(20,215)

Defined retirement benefit plans

4,754

3,661

43,216

Retained earnings
Treasury stock, at cost, 241,136 shares in 2019and 2,406,621 shares in 2018
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Deferred loss on derivatives under hedge accounting

Total accumulated other comprehensive income

11,4499,170

104,083

Noncontrolling interests

118

103

1,079

Total equity

32,446

20,954294,970¥

TOTAL

134,194¥

127,413$

Note: Effective October 1, 2018, the Company has implemented a 1-for-10 reverse stock split of common stock.
The numbers of authorized or issued shares are not retroactively adjusted.
See notes to consolidated financial statements.

11

1,219,952(Concluded)

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Operations
Year Ended March 31, 2019
Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019¥

NET SALES (Note 17)2018¥

91,1792019

95,311$

828,904

75,81680,897689,240

15,363

14,414

139,664

6,863

7,148

62,394

8,500

7,266

77,270Interest and dividend income (Note 17)

344

311

3,128

Interest expense (Note 17)

(344)

(212)

(3,130)Equity in earnings of associated companies

82

81

742

Gain on sales of investment securities, net (Note 5)

3

54

31

Loss on impairment of property, plant and equipment (Note 16)

(270)

(34)

(2,456)(Loss) gain on sales and disposals of property, plant and equipment, net

(52)

8,950

(470)

Loss on early repayment of long-term debt-

(1,077)-

Loss on payment for settlement-(26,445)

-

284

(134)

2,584

Other income (expenses) – net

47(18,506)

429

INCOME (LOSS) BEFORE INCOME TAXES

8,547(11,240)

77,699Current

543

105

4,939

Deferred(1,216)(3,089)(11,057)(673)(2,984)(6,118)9,220(8,256)

83,817NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

21

15

193

NET INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF THE PARENT ¥9,199

COST OF SALES (Notes 2.i, 2.m and 2.u)
Gross profit
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES (Note 2.u)Operating income
OTHER INCOME (EXPENSES)

Other – net

INCOME TAXES (Note 13):

Total income taxes
NET INCOME (LOSS)¥(8,271)

Yen$

83,624

U.S. Dollars

PER SHARE OF COMMON STOCK (Note 2.v):¥

Basic net income (loss)
Cash dividends applicable to the year

637.29-¥(573.01)
-

$

5.79
-

Note: Effective October 1, 2018, the Company has implemented a 1-for-10 reverse stock split of common stock. Per share ofcommon stock is retroactively adjusted. Per share information is disclosed as if the reverse stock split had been effected at the
beginning of the fiscal year ended March 31, 2018.
See notes to consolidated financial statements.

12

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2019
Thousands of
U.S. Dollars(Note 1)Millions of Yen
2019¥

NET INCOME (LOSS)

2018

9,220

¥

2019

(8,256)$

83,817OTHER COMPREHENSIVE INCOME (Note 18):
Unrealized gain on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive (loss) income in associated companies
Total other comprehensive income
COMPREHENSIVE INCOME (LOSS)

1,220

777

11,090

8

(5)

69

(33)

(105)

(301)

1,093

668

9,938

(9)

36

(81)

2,279

1,371

20,715¥

11,499¥(6,885)$

104,532¥

11,478¥(6,900)$104,339TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests

21

See notes to consolidated financial statements.

13

15

193

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2019
Millions of Yen
Number ofshares ofcommon stock
outstanding
BALANCE, APRIL 1, 2017

144,347,475

Commonstock¥

Capitalsurplus11,811¥Retainedearnings

12,045¥

Treasurystock(3,157)¥(515)

Net loss attributable to ownersof the parent

-

-

-

(8,271)-

Increase in treasury stock, net(3,967)

-

0

-

(1)

Change of scope of equity method

-

-

-

(231)

-

Net changes in the year

-

-

-

-

-

144,343,508

11,811

12,045(11,659)(516)

Disposition of deficit--(12,045)

12,045-

Net income attributable to ownersof the parent

-

-

-

9,199

-

Increase in treasury stock, net

(475)

-

0

-

(1)

Transfer to capital surplus fromretained earnings

-

-

0

(0)

-

Net changes in the year

(129,909,157)*

-

-

-

-

BALANCE, MARCH 31, 201914,433,876

BALANCE, MARCH 31, 2018¥

11,811

¥

-

¥

9,585

¥

(517)

Thousands of U.S. Dollars (Note 1)

Commonstock
BALANCE, MARCH 31, 2018$

Capitalsurplus107,370$

Retainedearnings

109,511$

Treasurystock(105,994)$(4,691)

Disposition of deficit-(109,511)

109,511-Net income attributable to ownersof the parent--

83,624-

Increase in treasury stock, net

-

0

-

(12)

Transfer to capital surplus fromretained earnings

-

0

(0)

-

Net changes in the year

-

-

-

-

BALANCE, MARCH 31, 2019$107,370$-$

87,141$*Effective October 1, 2018, the Company has implemented a 1-for-10 reverse stock split of common stock.
The number of shares of common stock outstanding is not retroactively adjusted.
See notes to consolidated financial statements.

14(4,703)

Millions of Yen
Accumulated other comprehensive income
Unrealized gain
on available-forsale securities

Deferred loss
on derivatives
under hedge
accounting

Foreigncurrencytranslation
adjustments

Definedretirement
benefit plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

¥

¥

¥

¥

¥

¥

¥

6,905

5

(2,068)

2,993

7,835

90

Total
equity¥28,109

-

-

-

-

-

-

(8,271)

-

-

-

-

-

-

(1)

-

5

(42)

-

(37)

-

(268)

803

(18)

(81)

668

1,372

13

1,385

7,708

(8)

(2,191)

3,661

9,170

103

20,954

-

-

-

-

-

-

-

-

-

-

-

-

-

9,199

-

-

-

-

-

-

(1)

-

-

-

-

-

-

-

1,211

8

(33)

1,093

2,279

15

2,294

8,919

¥

-

¥

(2,224)

¥

4,754

¥

11,449¥118¥

32,446

Thousands of U.S. Dollars (Note 1)

Unrealized gain
on available-forsale securities$$

70,073

Accumulated other comprehensive income
DeferredForeign
gain (loss) on
Definedcurrency
derivatives
retirementtranslation
under hedge
benefit plansadjustments
accounting
$

(69)

$

(19,914)$33,277

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests$$

83,367932

Total
equity$190,495

-

-

-

-

-

-

-

-

-

-

-

-

-

83,624

-

-

-

-

-

-

(12)

-

-

-

-

-

-

-

11,009

69

(301)

9,939

20,716

147

20,86381,082$-$(20,215)$

43,216

15$

104,083

$

1,079

$

294,970

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2019
Thousands of U.S.
Dollars(Note 1)

Millions of Yen
2019

2018

2019

OPERATING ACTIVITIES:¥

Income (loss) before income taxes

8,547

¥

(11,240)$

77,699Adjustments for:
Income taxes-paid(5)

Loss on early repayment of long-term debt
Loss on payment for settlement
Depreciation

(750)

(42)

-

1,077

-

-

26,445

-

2,370

2,728

21,549Loss on impairment of property, plant and equipment

270

34

2,456

Loss (gain) on sales and disposals of property, plant and equipment

21(9,067)

195

Gain on sales of investment securities

(3)

(54)

(31)

(Increase) decrease in trade notes and accounts receivable(1,029)3,367(9,352)(Increase) decrease in inventories(4,792)

3,248(43,561)(Decrease) increase in trade notes and accounts payable(2,053)

1,146(18,661)

140

(394)

1,272

Changes in assets and liabilities:

Increase (decrease) in allowance for work in process on construction contracts(4,248)(10,159)(38,616)(Decrease) increase in provision for compensation for health damage from asbestos

Decrease in provision for loss on orders received

(12)

7

(109)

Increase (decrease) in advances received

814(1,208)

7,401

Increase in liability for employees’ retirement benefits

20

14

178

(1,376)(4,308)(12,529)(1,336)886(12,151)

Other-net
Sub-total
Payments for loss on early repayment of long-term debt-

(1,077)-

Settlement paid-

(37,001)-(1,336)(37,192)(12,151)(1,235)(1,001)(11,224)

Proceeds from sales of property, plant and equipment

46

12,827417

Purchases of investment securities

(3)

(3)

(31)

Net cash used in operating activities
INVESTING ACTIVITIES:
Purchases of property, plant and equipment

Proceeds from sales of investment securities

11

100

99

Other-net

(66)

(130)

(593)

(1,247)

11,793(11,332)

Net cash(used in)provided by investing activities
FINANCING ACTIVITIES:-(1,595)

Proceeds from long-term debt

Net decrease in short-term borrowings

118

56,000

1,072

Repayments of long-term debt

(289)

(24,487)(2,631)Dividends paid
Other-net
Net cash (used in) provided by financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

-

(0)

(3)

(1)

(303)

(84)

(2,746)

(474)
(59)

29,831(308)(4,306)(542)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(3,116)

4,124(28,331)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

15,837

11,713

143,976¥

CASH AND CASH EQUIVALENTS, END OF YEAR

12,721¥

15,837$

115,645(Concluded)

See notes to consolidated financial statements.

16

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2019────────────────────────────────
1. BA SI S OF PR E SE N TAT ION OF CONS OL I DAT E D

the equity method of accounting had been applied to the

FINANCIAL STATEMENTS

investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.

The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in

All significant intercompany balances and transactions have

the Japanese Financial Instruments and Exchange Act andbeen eliminated in consolidation. All material unrealized profit

its related accounting regulations and in accordance withincluded in assets resulting from transactions within the Groupaccounting principles generally accepted in Japan (“Japaneseis also eliminated.

GA AP”), which are different in certain respects as to theapplication and disclosure requirements of International

The number of the consolidated subsidiaries, unconsolidated

Financial Reporting Standards (IFRS).

subsidiary, and associated companies for the years ended March
31, 2019 and 2018, was as follows:

In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theConsolidated subsidiaries
Unconsolidated subsidiary stated at cost
Associated companies accounted for by the equity method
Associated company stated at costconsolidated financial statements issued domestically in orderto present them in a form which is more familiar to readers
outside Japan. In addition, certain reclassifications have been

2019
6
1
2
1

2018
6
1
2
1

made in the 2018 consolidated financial statements to conformto the classifications used in 2019.

The fiscal year-end of NIPPON SHARYO U.S.A., INC. and its
subsidiaries, NIPPON SHARYO MANUFACTURING, LLC,

The consolidated financial statements are stated in Japaneseand NIPPON SHARYO ENGINEERING & MARKETING,

yen, the currency of the country in which NIPPON SHARYO,

LLC is December 31 and their financial statements with theLTD. (the “Company”) is incorporated and operates. The

closest closing date prior to that of the Company are used fortranslations of Japanese yen amounts into U.S. dollar amounts

consolidation purposes. Necessary adjustments for significant

are included solely for the convenience of readers outside Japantransactions from Januar y 1 to March 31 are made forand have been made at the rate of ¥110 to $1, the approximate

consolidation purposes.

rate of exchange at March 31, 2019. Such translations should not
be construed as representations that the Japanese yen amounts

For the equity method associated companies that have a

could be converted into U.S. dollars at that or any other rate.

different fiscal year from that of the Company, the associatedcompanies’ financial statements with the closest closing date────────────────────────────────

prior to that of the Company are used for consolidation

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

purposes.

a. Consolidationb. Unification of accounting policies applied to foreign subsidiaries

The consolidated financial statements as of March 31, 2019,

for the consolidated financial statements

include the accounts of the Company and its significant

Under Accounting Standards Board of Japan (“ASBJ”)

subsidiaries (together, the “Group”). Under the control andPractical Issues Task Force (“PIT F”) No. 18, “Practicalinfluence concepts, those companies in which the Company,

Solution on Unification of Accounting Policies Applied

directly or indirectly, is able to exercise control over operations

to Foreign Subsidiaries for the Consolidated Financial

are fully consolidated and those companies over which theStatements,” the accounting policies and procedures applied toGroup has the ability to exercise significant influence area parent company and its subsidiaries for similar transactions

accounted for by the equity method.

and events under similar circumstances should, in principle,
be unified for the preparation of the consolidated financial

Investment in associated companies are accounted for by thestatements. However, financial statements prepared by foreign

equity method. Investments in the remaining unconsolidated

subsidiaries in accordance with either IFRS or generally

subsidiar y and associated company are stated at cost. If

accepted accounting principles in the United States of America

17(Financial Accounting Standards Board Accounting Standards

e. Cash equivalents

Codification—“FASB ASC”) tentatively may be used for the

Cash equivalents are short-term investments that are readily

consolidation process, except for the following items thatconvertible into cash and exposed to insignificant risk ofshould be adjusted in the consolidation process so that net

changes in value.

income is accounted for in accordance with Japanese GAAP,
unless they are not material: (a) amortization of goodwill; (b)Cash equivalents include time deposits and Cash Management

scheduled amortization of actuarial gain or loss of pensions

System (“CMS”) funds due from Central Japan Railway

that has been recorded in equity through other comprehensive

Company (“CJR”) group, all of which mature or become due

income; (c) expensing capitalized development costs of researchwithin three months from the date of acquisition. CJR is theand development (R&D); and (d) cancellation of the fair value

parent company of the Company.

model of accounting for property, plant and equipment andinvestment properties and incorporation of the cost modelf. Investment securities

accounting.

Investment securities are classified and accounted for,depending on management’s intent, as follows:c. Unification of accounting policies applied to associatedcompanies for the equity method

Available-for-sale securities are reported at fair value, withASBJ Statement No. 16, “Accounting Standard for Equity

unrealized gains and losses, net of applicable taxes, reported in

Method of Accounting for Investments,” requires adjustments

a separate component of equity.

to be made to conform the associate’s accounting policies for
similar transactions and events under similar circumstances

Nonmarketable available-for-sale securities are stated at costto those of the parent company when the associate’s financial

determined by the moving-average method. For other-than-statements are used in applying the equity method, unless it is

temporary declines in fair value, investment securities are

impracticable to determine adjustments.

reduced to net realizable value by a charge to income.
g. Derivatives and hedging activities

d. Business combinations

The Group uses derivative financial instruments to manage its

Business combinations are accounted for using the purchaseexposures to fluctuations in foreign exchange and interest rates.

method. Acquisition-related costs, such as advisory fees or

Forward foreign currency contracts are utilized by the Group

professional fees, are accounted for as expenses in the periods

to reduce foreign currency exchange risks. The Group does notin which the costs are incurred. If the initial accounting for aenter into derivatives for trading or speculative purposes.

business combination is incomplete by the end of the reporting
period in which the business combination occurs, an acquirer

Der ivative f i nancial i nstr uments and foreig n cur renc yshall report in its financial statements provisional amounts fortransactions are classified and accounted for as follows: 1)

the items for which the accounting is incomplete. During the

all derivatives are recognized as either assets or liabilities

measurement period, which shall not exceed one year fromand measured at fair value and gains and losses on derivative

the acquisition, the acquirer shall retrospectively adjust thetransactions are recognized in the consolidated statement ofprovisional amounts recognized at the acquisition date to reflect

operations and 2) for derivatives used for hedging purposes, if

new information obtained about facts and circumstances thatsuch derivatives qualify for hedge accounting because of highexisted as of the acquisition date and that would have affected

correlation and effectiveness between the hedging instruments

the measurement of the amounts recognized as of that date.

and the hedged items, gains and losses on derivatives are

Such adjustments shall be recognized as if the accounting fordeferred until maturity of the hedged transactions.

the business combination had been completed at the acquisition
date. A parent’s ownership interest in a subsidiary might

The forward foreign currency contracts are utilized to hedgechange if the parent purchases or sells ownership interests in its

foreign currency exposures in sales of merchandise andsubsidiary. The carrying amount of noncontrolling interest isfinished goods to overseas customers and procurement ofadjusted to reflect the change in the parent’s ownership interest

raw materials from overseas suppliers. Trade receivables andin its subsidiary while the parent retains its controlling interest

payables denominated in foreign currencies are translated atin its subsidiary. Any difference between the fair value of thethe contracted rates if the forward contracts qualify for hedge

consideration received or paid and the amount by which theaccounting.

noncontrolling interest is adjusted is accounted for as capitalsurplus as long as the parent retains control over its subsidiary.

18

h. Allowance for doubtful accounts

as long-term debt (including the current portion), for the year

An allowance for doubtful accounts is provided for at theended March 31, 2019.

aggregate amount of estimated credit loss based on an
individual analysis of certain doubtful or troubled receivables

As a result, the relevant factory assets as of March 31, 2019,

and a general reserve for other receivables is calculated based

were recorded under property, plant and equipment in theon the historical loss experience.

carrying amount of ¥11,975 million ($108,867 thousand) as
land, of ¥3,827 million ($34,794 thousand) as buildings andi. Inventories

structures and ¥7 million ($68 thousand) as machinery andInventories are stated at the lower of cost, determined

equipment, while long-term debt (including the current portion)

pr i nc ipa l l y b y t he s p e c i f ic ident i f ic at ion met ho d for

was recorded in the carr ying amount of ¥20,515 million

merchandise, finished goods and work in process and by the($186,501 thousand) as of March 31, 2019. As of March 31,

moving-average method for semi-finished goods, raw materials,

2018, the relevant factory assets were recorded under property,

and supplies, or net selling value, which is defined as the selling

plant and equipment in the carrying amount of ¥11,975 million

price, less additional estimated manufacturing costs andas land and of ¥4,022 million as buildings (net), while long-estimated direct selling expenses. The replacement cost may beterm debt (including the current portion) was recorded in theused in place of the net selling value, if appropriate. Reversal ofcarrying amount of ¥20,687 million.

write-downs of inventories in the amounts of ¥(1,157) million($(10,521) thousand) and ¥(10,135) million for the years ended

k. Long-lived assets

March 31, 2019 and 2018, respectively, were included in cost of

T he Group reviews its long-lived assets for impairment

sales.

whenever events or changes in circumstance indicate thatthe carrying amount of an asset or asset group may not be

j. Property, plant and equipment

recoverable. An impairment loss is recognized if the carrying

Property, plant and equipment, including significant renewals

amount of an asset or asset group exceeds the sum of theand additions, are stated at cost and are depreciated principally

undiscounted future cash f lows expected to result fromby the straig ht-li ne method for bui ldi ngs and bui ldi ng

the continued use and eventual disposition of the asset or

improvements and structures acquired on or after April 1, 2016,

asset group. The impairment loss would be measured as theand by the declining-balance method for other property at rates

amount by which the carrying amount of the asset exceeds its

based on the estimated useful lives of the assets.

recoverable amount, which is the higher of the discounted cash
flows from the continued use and eventual disposition of theasset or the net selling value at disposition.

Depreciation of leased assets relating to financial leasetransactions without transfer of ownership is computed by thel. Intangible assets

straight-line method over the leased period.

Intangible assets that are included in other assets are amortized
The range of useful lives is principally from 10 to 60 years forby the straight-line method. Software costs are amortized overbuildings and structures and from six to 17 years for machinery

five years.

and equipment.
m. Allowance for work in process on construction contracts
The Company has transferred its factory assets of Toyokawa

An allowance for work in process on construction contracts

Plant, Kinuura Plant, and Narumi Plant to CJR on April 20,

is provided based on an estimate of the total loss in respect

2017. The transfer was not treated as a buying and sellingto construction projects on which eventual losses are deemedtransaction since the relevant factory assets were transferred toinevitable and the amounts of the loss can be reasonably

CJR and the Company continues to utilize these factory assets

estimated. Provisions and (reversal of provision) for work

as before based on a lease agreement concluded between thein process on construction contracts in the amounts of ¥140

Company and CJR. The relevant factory assets were therefore

million ($1,272 thousand) and ¥(394) million for the years

still recorded under property, plant and equipment of theended March 31, 2019 and 2018, respectively, were included inCompany. As the relevant transactions do not fall under acost of sales.

finance lease transaction, the total transfer price was recorded
as long-term debt (including the current portion). In addition,n. Provision for loss on orders received

capital expenditure related to the transferred factory assets was

A provision for loss on orders received, except for construction

recorded under “buildings and structures” and “machinery andcontracts, is recorded based on an estimate of the total loss

equipment,” and a part of the capital expenditure was recorded

in respect to contracts on which eventual losses are deemed19

inevitable and the amounts of the loss can be reasonably

subsidiaries are translated into Japanese yen at the current

estimated.

exchange rate as of the consolidated balance sheet date, except
for equity, which is translated at the historical rate. Revenue

o. Retirement and pension plans

and expense accounts of consolidated foreign subsidiaries

The Company has a lump-sum retirement benefit plan, aa re t ra n slate d i nto yen at t he average excha nge rate.

defined contribution pension plan and a defined benefit pension

Differences arising from such translation are shown as foreign

plan. The Company’s domestic consolidated subsidiaries havecurrency translation adjustments under accumulated othersimilar retirement benefit plans.

comprehensive income in a separate component of equity.

Liabilities for employees’ retirement benefits are calculated

u. R&D expenses

based on the projected benefit obligations and plan assets at

Expenses related to R&D activities are charged to income as

the consolidated balance sheet date. The projected benefit

incurred. R&D expenses amounted to ¥1,344 million ($12,214

obligations are attributed to periods on a benefit formula basis.

thousand) and ¥1,261 million for the years ended March

Prior service costs are amortized on a straight-line basis over31, 2019 and 2018, respectively, and are included in general

15 years, which is within the average remaining service period.

and administrative expenses and manufacturing costs in the

Actuarial gains and losses are amortized on a straight-line basis

accompanying consolidated statement of operations.

mainly over 15 years, which is within the average remaining
v. Per share information

service period in the following the fiscal year.

Basic net income (loss) per share is computed by dividing
p. Allowance for Polychlorinated Biphenyl (PCB) disposal expenses

net income (loss) attributable to common shareholders by

An allowance for PCB disposal expenses has been provided

the weighted-average number of shares of common stock

based on the published estimated disposal fee schedule issued

outstanding during the respective year. Weighted-averageby the Japan Environmental Safety Corporation.

number of shares of common stock for the years ended March
31, 2019 and 2018, were 14,434 thousand shares. Diluted net

q. Provision for compensation for health damage from asbestos

income (loss) per share for the years ended March 31, 2019

A provision for compensation for health damage from asbestosand 2018, was not applicable because the Company had nohas been recorded based on the estimated compensation

dilutive common shares. Cash dividends per share presented

amount for former employees who suffered health damage fromin the accompanying consolidated statement of operations areasbestos.

dividends applicable to the respective years, including dividends
to be paid after the end of the year.

r. Income taxes
The provision for income taxes is computed based on the pretax

Effective October 1, 2018, the Company has implemented

income included in the consolidated statement of operations.

a 1-for-10 reverse stock split of common stock. Per share of

T he a s set a nd l iabi l it y approach i s u sed to re c og n i ze

common stock is retroactively adjusted as if the reverse stockdeferred tax assets and liabilities for the expected future tax

split had been effected at the beginning of the fiscal year ended

consequences of temporary differences between the carrying

March 31, 2018.

amounts and the tax bases of assets and liabilities. Deferredtaxes are measured by applying currently enacted tax rates to

w. Construction contracts

the temporary differences.

Construction revenue and construction costs are recognizedby the percentage-of-completion method if the outcome of as. Foreign currency transactions

construction contract can be estimated reliably. When total

A ll short-term and long-term monetar y receivables andconstruction revenue, total construction costs and the stage ofpayables denominated in foreign currencies are translated

completion of the contract at the consolidated balance sheet

into Japanese yen at the exchange rates at the consolidated

date can be reliably measured, the outcome of a construction

balance sheet date. The foreign exchange gains and losses fromcontract is deemed to be estimated reliably. If the outcome

translation are recognized in the consolidated statement ofof a construction contract cannot be reliably estimated, theoperations to the extent that they are not hedged by forward

completed-contract method should be applied. When it isexchange contracts.

probable that the total construction costs will exceed total
construction revenue, an estimated loss on the contract shouldt. Foreign currency financial statements

be immediately recognized by providing for a loss on such

The balance sheet accounts of the consolidated foreign

construction contracts.

20

x. Accounting changes and error corrections(b) Effective date

Under ASBJ Statement No. 24, “Accounting Standard for

The above standard and guidance are scheduled to be applied

Accounting Changes and Error Corrections” and ASBJ

from the beginning of the fiscal year ending March 31, 2022.

Guidance No. 24, “Guidance on Accounting Standard for
Accounting Changes and Error Corrections,” accounting(c) Effects of application of the standards

treatments are required as follows: (1) Changes in Accounting

The effects of the application of the above standard andPolicies—When a new accounting policy is applied following

guidance on the consolidated financial statements are currently

revision of an accounting standard, the new policy is applied

being assessed.

retrospectively, unless the revised accounting standard includes
z. Change in presentation

specific transitional provisions, in which case the entity shallcomply with the specific transitional provisions. (2) Changes in
Presentation—When the presentation of financial statements

Application of “Partial Amendments to Accounting Standard foris changed, prior-period financial statements are reclassified

Tax Effect Accounting”

in accordance with the new presentation. (3) Changes in
Accounting Estimates—A change in an accounting estimate

On February 16, 2018, the ASBJ issued ASBJ Statement No. 28,

is accounted for in the period of the change if the change"Partial Amendments to Accounting Standard for Tax Effectaffects that period only, and is accounted for prospectively if

Accounting," which requires deferred tax assets and deferred

the change affects both the period of the change and future

tax liabilities to be classified as investments and other assets

periods. (4) Corrections of Prior-Period Errors—When an error

and long-term liabilities, respectively. Deferred tax assets werein prior-period consolidated financial statements is discovered,previously classified as current assets and investments and other

those statements are restated.

assets, and deferred tax liabilities were previously classified as
current liabilities and long-term liabilities under the previous
accounting standard. The revised accounting standard is

y. New accounting pronouncement
Accounting Standard for Revenue Recognition, etc.

effective for annual periods beginning on or after April 1, 2018.

- Accounting Standard for Revenue Recognition (ASBJ

The Group retrospectively applied the revised accounting

Statement No. 29, issued on March 30, 2018)

standard effective April 1, 2018, and deferred tax assets of ¥51- Implementation Guidance on Accounting Standard formillion which were previously classified as current assets as of

Revenue Recognition (ASBJ Guidance No. 30, issued on

March 31, 2018, have been reclassified as investments and other

March 30, 2018)

assets in the accompanying consolidated balance sheet. In
accordance with transitional treatment allowed for the adoption(a) Overview

of the revised accounting standard, the note information

The International Accounting Standards Board (“IASB”) andof valuation allowances for tax loss carryforwards and for

the Financial Accounting Standards Board (“FASB”) have

temporary differences for the year ended March 31, 2018, wasjointly developed a comprehensive accounting standard fornot separately disclosed.

revenue recognition and issued it as converged guidance on
recognizing revenue in contracts with customers in May 2014as IFRS 15 (IASB) and Topic 606 (FASB), respectively. To
respond to both IFRS 15 and Topic 606 effective from the fiscal
years beginning on or after January 1, 2018 and December
15, 2017, respectively, ASBJ has developed a comprehensive
accounting standard for revenue recognition and issued it withthe respective implementation guidance.
In developing the accounting standard for revenue recognition,
ASBJ basically integrated the core principle of IFRS 15 from acomparability point of view of the financial statements, which
is one of the benefits of ensuring consistency with IFRS 15.
ASBJ, on the other side, considered additional alternative
treatments where current practices under Japanese GAAP areto be reflected as far as such treatments would not significantly
impair international comparability.

21───────────────────────────────────────────────────────
3. NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable as of March 31, 2019 and 2018, consisted of the following:
Millions of Yen
Trade notes receivable¥- Unconsolidated subsidiary and associated companies
Trade accounts receivable- CJR, unconsolidated subsidiary and associated companies
Other
Less allowance for doubtful accounts
¥
Total

2019
5,022
215
17,600
6,054
911
(46)
29,756

¥

¥

2018
4,848
198
16,793
6,051
640
(4)
28,526

Thousands of
U.S. Dollars
201945,654$
1,956
160,001
55,0408,277(415)
270,513$

Note: Allowance for doubtful accounts was not recognized for accounts receivable-other, which was included in
Other above.

───────────────────────────────────────────────────────
4. INVENTORIESInventories as of March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars
2019
2,039
$
11,841
260,695
11,644286,219$

Millions of Yen
Merchandise
Finished goods
Work in process and semi-finished goods
Raw materials
Total

¥

¥

2019
224
1,303
28,676
1,281
31,484

¥

¥

2018
258
1,642
23,4501,355
26,705Work in process and allowance for work in process on construction contracts are presented in the gross amount in the
consolidated balance sheet. At March 31, 2019 and 2018, allowance for work in process on construction contracts of ¥80
million ($725 thousand) and none, respectively, was provided and included in work in process and semi-finished goods
above.

───────────────────────────────────────────────────────
5. INVESTMENT SECURITIESInvestment securities as of March 31, 2019 and 2018, consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
20,381
18,632
185,281
Equity securities¥$¥
20,381
18,632
185,281
¥
$
¥
Total

The costs and aggregate fair values of investment securities as of March 31, 2019 and 2018, were as follows:

Cost
Securities classified as available-for-sale:
Equity securities
Total

¥
¥

6,063
6,063

Millions of Yen
2019
Gross unrealized Gross unrealized
gains
lossesFair andcarrying value

¥
¥

¥
¥

22

12,743
12,743

¥
¥

(25)
(25)

18,781
18,781

Cost
Securities classified as available-for-sale:
Equity securities
Total

¥
¥

Fair andcarrying value

¥
¥

¥
¥

6,059
6,059

Cost
Securities classified as available-for-sale:
Equity securities
Total

Millions of Yen
2018
Gross unrealized Gross unrealized
gains
losses$$¥¥

10,965
10,965-17,024
17,024

Thousands of U.S. Dollars
2019
Gross unrealized Gross unrealized
gains
lossesFair andcarrying value

$
$

$
$

55,117
55,117$$

115,842
115,842

(226)
(226)

170,733
170,733

The information of available-for-sale securities which were sold for the years ended March 31, 2019 and 2018, was as follows:

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

10
10

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

100
100

Millions of Yen
2019Realized gains

Realized losses

¥
¥

¥
¥

3
3

(0)
(0)

Millions of Yen
2018
Realized gains

Realized losses

¥
¥

¥
¥

54
54

-

Thousands of U.S. Dollars
2019
Proceeds
Realized gains Realized losses
Available-for-sale:
Equity securities
Total

$
$

90
90

$
$

31
31

$
$

(9)
(9)

No impairment losses were recognized on available-for-sale equity securities for the years ended March 31, 2019 and 2018.

───────────────────────────────────────────────────────
6. NOTES AND ACCOUNTS PAYABLE
Notes and accounts payable as of March 31, 2019 and 2018, consisted of the following:
Millions of Yen
Trade notes payable¥
Electronically recorded obligations-operating-Unconsolidated subsidiary and associated companies
Trade accounts payable-Unconsolidated subsidiary and associated companies
Other
¥
Total

2019
1,418
10,670
25
8,001
94
2,704
22,912

23

¥

¥

2018
1,208
10,66717
10,32350
2,580
24,845

Thousands of
U.S. Dollars
201912,890$96,993226
72,740857
24,581
208,287$───────────────────────────────────────────────────────
7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
There was no balance of short-term borrowings as of March 31, 2019 and 2018.
Long-term debt as of March 31, 2019 and 2018, consisted of the following:
Millions of Yen
2019Loans from CJR due through 2027 (Note) withaverage interest rate of 0.61%
Less current portion
Total

2018

Thousands of
U.S. Dollars
2019¥

55,515¥55,687$

504,684¥(296)
55,219¥(287)
55,400$(2,688)501,996

The aggregate annual maturities of long-term debt as of March 31, 2019, were as follows:
Years ending March 31

Millions of Yen

2020
2021
2022
2023
2024
2025 and thereafter
Total

2,900
2,900
2,900
26,30035,000¥¥Thousands of U.S. Dollars$$

26,36426,36426,364
239,090318,182

Note: Long-term debt recorded for the transfer price of the factory assets transferred to
CJR and for a part of capital expenditure related to the transferred factory assets
in the total amount of ¥ 20,219 million ($ 183,814 thousand) was not reflected.

───────────────────────────────────────────────────────
8. RETIREMENT AND PENSION PLANS
Employees who terminate their service with the Company and its domestic consolidated subsidiaries are entitled toretirement benefits generally determined by reference to the basic rate of pay at the time of termination, length of service
and conditions under which the termination occurs. The Company has a lump-sum retirement benefit plan, a defined
contribution pension plan and a defined benefit pension plan, which are assumed to cover retirement benefits for employees
who have retired voluntarily. The Company contributed certain assets to the employee retirement benefit trust. The
Company’s domestic consolidated subsidiaries have similar retirement benefit plans.

(1) Defined benefit plans(a) The changes in defined benefit obligation for the years ended March 31, 2019 and 2018, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Balance at beginning of year
121,448
13,35913,445¥¥$Current service cost
738
724
6,709
Interest cost
118
119
1,071
Actuarial gains
(93)
(42)
(844)
Benefits paid
(484)
(838)
(4,406)(49)
Prior service cost
13,63813,359123,978¥¥$
Balance at end of year
Note: The domestic consolidated subsidiaries of the Company apply the simplified method in calculating
the defined benefit obligation.

24

(b) The changes in plan assets for the years ended March 31, 2019 and 2018, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Balance at beginning of year
17,26918,710170,088¥$¥
Expected return on plan assets
245
232
2,232
Actuarial gains
2,123
1,305
19,300Contribution from the employer
380
383
3,449
(202)
(479)
(1,838)Benefits paid
18,71021,256
193,231$¥¥
Balance at end of year(c) Reconciliation between the liability (asset) recorded in the consolidated balance sheet and the balances of defined benefit
obligation and plan assets as of March 31, 2019 and 2018, was as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Funded defined benefit obligation
13,346
13,086
121,322¥¥$(21,256)(18,709)(193,231)
Plan assets
Total(7,910)(5,623)(71,909)
292
273
2,656
Unfunded defined benefit obligation(7,618) ¥(5,350) $(69,253)
Net asset arising from defined benefit obligation ¥Asset for employees’ retirement benefits
Liability for employees’ retirement benefits
Net asset arising from defined benefit obligation¥¥(7,910)292(7,618)¥¥(5,623)273(5,350)$$(71,909)2,656(69,253)(d) The components of net periodic benefit costs for the years ended March 31, 2019 and 2018, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Service cost (Note)
728
738
6,709
¥
¥
$
Interest cost
118
118
1,071
Expected return on plan assets
(245)
(232)
(2,232)
Recognized actuarial gains
(640)
(426)
(5,817)
(8)
(5)
(70)
Amortization of prior service cost(37) ¥
183
(339)
$
¥
Net periodic benefit costs
Note: Retirement benefit costs of the consolidated subsidiaries applying the simplified method areincluded in service cost.

(e) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit
plans for the years ended March 31, 2019 and 2018
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Prior service cost
8(44) $
70¥¥(1,576)(920)(14,329)
Actuarial (gains) losses(1,568) ¥(964) $
(14,259)
¥
Total

25

(f) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2019 and 2018
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Unrecognized prior service cost ¥(71) ¥(79) $(647)(6,749)(5,173)(61,355)
Unrecognized actuarial gains(6,820) ¥(5,252) $(62,002)¥
Total(g) Plan assets(i) Components of plan assets
Plan assets consisted of the following:

Debt investments
Equity investments
Cash and deposits
Other
Total

2019
12%
80%
3%
5%
100%

2018
14%
78%
3%
5%
100%

Note: The employees’ retirement benefit trusts for the contributory pension plansaccounted for 18% of total plan assets for the years ended March 31, 2019 and2018.
(ii) Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the current and future asset portfolio and the longterm rates of return which are expected currently and in the future from the various components of the plan assets.

(h) Assumptions used for the years ended March 31, 2019 and 2018, were set forth as follows:
Discount rate
Expected rate of return on plan assets

2019
0.9%
2.0%

2018
0.9%
2.0%

(2) Defined contribution plans
The required contribution of the Company and its consolidated subsidiaries amounted to ¥139 million ($1,265 thousand)and ¥133 million for the years ended March 31, 2019 and 2018, respectively.

26───────────────────────────────────────────────────────
9. ASSETS PLEDGED AS COLLATERAL(1)Assets pledged as collateral for long-term debt from CJR in the amount of ¥35,000 million ($318,182 thousand) for thepayment of settlement money related to a large railway rolling stock project in the U.S.A. as of March 31, 2019 and 2018
were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Buildings and structures
261
277
2,372
¥
¥
$
Land
15
15
136
12,606
12,338
114,598
Investment securities
12,882
117,106
12,630¥¥$Total(2)Other assets pledged as collateral as of March 31, 2019 and 2018, were as follows:
Millions of Yen
Other current assets (Note 1)¥
Other assets under Investments and Other Assets (Note 2)
Investment securities (Note 3)
¥
Total

2019
56
10
5,887
5,953

¥

2018

¥

56
10
4,487
4,553

Thousands of
U.S. Dollars
2019
505
$
91
53,52554,121$

Notes 1: Deposit required by insurance contracts
2: Guarantee deposit required by the Building Lots and Buildings Transaction Business Law
3: Deposit for letter of credit───────────────────────────────────────────────────────
10. CONTINGENT LIABILITIESIn some cases, the Company sells its construction equipment products through leasing companies. Some of these leasing
companies request that the Company enters into lease credit guarantee contracts. Under these contracts, if the lease credits
are unrecoverable from users of the Company’s construction equipment products, the Company guarantees payment of theamount defined by the contract to the leasing companies. Such guarantees as of March 31, 2019 and 2018, amounted to ¥226
million ($2,056 thousand) and ¥389 million, respectively.

───────────────────────────────────────────────────────
11. LEASE TRANSACTIONSThe Group uses certain machinery and equipment under finance lease contracts.
All finance lease transactions are accounted for in a manner similar to ordinary sale or purchase transactions.
The aggregate annual maturities of lease obligations as of March 31, 2019, were as follows:
Years ending March 31
2020
2021
2022
2023
2024
2025 and thereafter
Total

Millions of Yen
¥

¥

678
651
665
244
90
2,328

Thousands of
U.S. Dollars
6,168
$
5,913
6,045
2,221
817
21,164$27

A consolidated subsidiary subleases machinery.
Investments in leases and lease obligations, which include an interest portion, resulting from sublease transactions as ofMarch 31, 2019 and 2018, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Investments in leases:
Due within one year
122
154
1,112
¥
¥
$
205
327
1,859
Due after one year
481
2,971
327
¥
$
¥
Total
Thousands of
U.S. Dollars
2019

Millions of Yen
2019
Lease obligations:Due within one year
Due after one year
Total

¥
¥

2018
140
235
375

¥
¥

170
375
545

$
$

1,272
2,139
3,411

───────────────────────────────────────────────────────
12. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are summarized below:(1) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain criteria including (1)having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term ofservice of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation,
the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company
has prescribed so in its articles of incorporation. However, the Company cannot do so because it does not meet all the above
criteria.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available
for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
(2) Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity
account charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal
reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional
paid-in capital, other capital surplus and retained earnings can be transferred among the accounts within equity undercertain conditions upon resolution of the shareholders.

28(3) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolutionof the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to
the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented
as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stockacquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity
or deducted directly from stock acquisition rights.
Effective June 28, 2018, the Company transferred capital surplus to retained earnings based on the resolution of the
Shareholders’ Meeting held on June 28, 2018.
Effective October 1, 2018, the Company has implemented a 1-for-10 reverse stock split of common stock based on the
resolution of the Shareholders’ Meeting held on June 28, 2018.

───────────────────────────────────────────────────────
13. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,
resulted in a normal effective statutory tax rate of approximately 30.2% and 30.5% for the years ended March 31, 2019 and2018, respectively.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred tax assets andliabilities as of March 31, 2019 and 2018, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
Deferred tax assets:
Tax loss carryforwards (Note 2)
Liability for employees’ retirement benefits
Loss on write-downs of inventories
Land and building of plants
Loss on impairment of fixed assets
Accrued bonuses to employees
Provision for loss on orders received
Other
Sub-total

¥

3,630
2,510
1,761
1,458
1,155
485
273
1,834
13,106

Less valuation allowance for tax loss crryforwards (Note 2)Less valuation allowance pertaining to total amount of deductible temporary differences
Valuation allowance, total (Note 1)
Total¥(3,630)(7,974)(11,604)
1,502

Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Deferred gain on sales of property
Other
Total
Net deferred tax liabilities¥¥(3,842)(3,549)(7,391)(5,889)

2018
¥

¥
¥

¥

3,642
2,528
2,101
1,487
1,218
446
1,682
2,352
15,456(15,320)
136(3,308)(22)(2,903)(6,233)(6,097)2019$

32,99922,81516,013
13,253
10,502
4,411
2,485
16,664
119,142(32,999)$$$(72,493)(105,492)
13,650(34,924)(32,264)(67,188)(53,538)

Notes 1: Valuation allowance decreased by ¥ 3,716 million ($ 33,779 thousand) during the year ended March 31, 2019. This ismainly due to the decrease of deductible temporary differences on the one hand. On the other hand, the respective
deferred tax assets related to tax loss carryforwards were partly judged as recoverable as a result of careful consideration
taking into account the current and estimated future taxable income.
2: Expected maturity of the deferred tax assets after the balance sheet date for tax loss carryforwards as of March 31, 2019,
was as follows:29

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax assets as ofMarch 31, 2019, were as follows:
Millions of Yen
Over 1 year Over 2 years Over 3 years Over 4 years
Over 5
Within2019
but within
but within
but within
but within
Total
years
1 year
2 years
3 years
4 years
5 years
Deferred tax assets relating to
tax loss carryforwards (*)

-

-

-

-

-

Less valuation allowance fortax loss carry forwards

-

-

-

-

-

(3,630)(3,630)Net deferred tax assets relating
to tax loss carry forwards

-

-

-

-

-

-

-

2019

Within1 yearThousands of U.S. Dollars
Over 1 year Over 2 years Over 3 years Over 4 years
but within
but within
but within
but within
2 years
3 years
4 years
5 years
-

¥

3,630

¥

3,630

Over 5
years

Total

Tax loss carryforwards (*)-

Valuation allowance

-

-

-

-

-

$ 32,999(32,999)$ 32,999(32,999)

Deferred tax assets

-

-

-

-

-

-

-

(*)The amount of tax loss carryforwards was calculated by using the statutory tax rate.
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of operations for the year ended March 31, 2019, with the corresponding figures for
2018, is as follows:
2019
2018
Normal effective statutory tax rate
30.2 %
30.5 %
Increase (decrease) due to:
Expenses not deductible for income tax purposes
3.9(29.0)
Tax-exempt income
(0.3)
0.2
Changes in valuation allowance(37.6)
15.6
Per capita inhabitant tax
0.4
(0.3)
Transfer price adjustments on consolidation
(5.4)
9.1
Higher (lower) income tax rates applicable to income
1.8
(0.7)
in certain foreign countries
(0.9)
1.2
Other
(7.9) %
26.6 %
Actual effective income tax rate───────────────────────────────────────────────────────
14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group policy for financial instruments
The Group finances capital investments and necessary funds mainly internally and with CMS provided by a consolidated
subsidiary of CJR. The Company also operates funds by utilizing CMS. Derivative transactions are used, not for speculative
purposes, but to manage exposure to financial risks as described in (2) below.
(2) Nature and extent of risks arising from financial instruments
Receivables, such as notes and accounts receivable, are exposed to customer credit risk.
Although receivables in foreign currencies are exposed to the risk of fluctuation in foreign currency exchange rates, theposition, net of payables in foreign currencies, is hedged by using forward foreign currency contracts. Investment securities,
mainly equity instruments of customers and suppliers of the Group, are exposed to the risk of market price fluctuations.

30

Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign
currencies are exposed to the risk of fluctuation in foreign currency exchange rates, the position, net of receivables in foreign
currencies, is hedged by using forward foreign currency contracts.
Long-term debt recorded for the transfer price of the factory assets transferred to CJR and for a part of capital expenditure
related to the transferred factory assets is not exposed to market risks from changes in variable interest rates since theCompany repays a constant lease fee including the interest portion based on the lease agreement. Long-term debt fromCJR for the payment of settlement money related to a large railway rolling stock project in the U.S.A. is also not exposed tomarket risks from changes in variable interest rates due to the fixed interest rate. Lease obligations are primarily used forfinancing capital investments.
Derivatives mainly include forward foreign currency contracts, which are used to manage exposure to risks associated withfluctuations in foreign currency exchange rates related to receivables and payables denominated in foreign currencies andforecasted transactions denominated in foreign currencies. Please see Note 15 for more information about derivatives.
(3)Risk management for financial instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to thecontractual terms. The Group manages its credit risk from receivables by monitoring financial position, payment terms andbalances of customers to identify default risk of customers at an early stage.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign currency
exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency contracts. In addition, when
foreign currency trade receivables and payables are expected from forecasted transactions, forward foreign currency
contracts may be used.
Investment securities are managed by monitoring the market values and the financial position of issuers on a regular basis.
Liquidity risk management
The Group establishes or updates its cash management plan according to the monthly cash management plan from eachsubsidiary in order to monitor its liquidity risk associated with operating payables and short-term borrowings and long-term
debt.
(4)Fair values of financial instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are not available, otherrational valuation techniques are used instead. Please see Note 15 for the details of the fair value of derivatives.
(a) Fair value of financial instruments
Millions of Yen
2019
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total
Notes and accounts payable
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total

Carrying
amount12,721¥29,756
18,781
61,258¥¥¥22,912538
35,0002,328
60,77831

Fair value
¥
¥
¥

¥

Unrealized
gain (loss)

12,72129,756
18,781
61,258-22,912538
35,6092,315
61,374

(609)
13
(596)

¥
¥

Millions of Yen
2018
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total
Notes and accounts payable
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total
Notes and accounts payable
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total

Carrying
amount15,837¥28,526
17,024
61,387
¥

¥

¥

¥

¥

24,845132
35,0002,473
62,450Fair value¥¥

Unrealized
gain (loss)

15,83728,526
17,024
61,387-

24,845
132
35,1272,454
62,558

(127)
19
(108)

¥
¥

Thousands of U.S. Dollars
2019
Carrying
Unrealized
Fair value
amountgain (loss)
115,645
115,645$$
270,513
270,513
170,733
170,733
556,891
556,891$$$$

208,287
4,888
318,183
21,164
552,522$$208,287
4,888
323,72121,046557,942$$(5,538)118(5,420)AssetsCash and cash equivalents, and notes and accounts receivable
The carrying values of cash and cash equivalents, and notes and accounts receivable approximate fair value because of theirshort maturities.
Investment securities
The fair values of investment securities are measured at the quoted market prices of the stock exchange. The information on
the fair value of investment securities by classification is included in Note 5.
Liabilities
Notes and accounts payable, and income taxes payable
The carrying values of notes and accounts payable, and income taxes payable approximate fair value since they arescheduled to be settled in a short period of time.
Long-term debt and lease obligations
The fair values of long-term debt (including the current portion) and lease obligations are measured at the present value ofthe total of the principal and interest discounted by the interest rate applied to new loans.
Derivative transactions
Information on the fair value of derivatives is included in Note 15.

32

(b)Carrying amount of financial instruments whose fair value cannot be reliably determined

2018
1,608

Thousands of
U.S. Dollars
2019
14,548
$

795

728

7,226

20,515

20,687

186,501

Millions of Yen¥

Unlisted securities
Investments in an unconsolidated subsidiary andassociated companies
Long-term debt recorded for the transfer price of thefactory assets transferred to CJR and for a part ofcapital expenditure related to the transferred factory
assets (including the current portion)

2019
1,600

¥

(5)Maturity analysis for financial assets and securities with contractual maturities

Due in one
year or less
Cash and cash equivalents
Notes and accounts receivable
Total

¥
¥

12,721
29,402
42,123

Due in one
year or less
Cash and cash equivalents
Notes and accounts receivable
Total

$
$

115,645
267,294
382,939

Millions of Yen
2019
Due after one
Due after five
year throughyears throughfive years
10 years
354
¥
¥
354
¥
¥
Thousands of U.S. Dollars
2019
Due after one
Due after five
year throughyears throughfive years
10 years
3,219
$
$
3,219
$
$

Due after
10 years-

Due after
10 years-

Please see Note 7 for annual maturities of long-term debt and Note 11 for obligations under finance leases.

───────────────────────────────────────────────────────
15. DERIVATIVE TRANSACTIONSThe Group enters into forward foreign currency contracts to hedge foreign exchange risk associated with certain assets andliabilities denominated in foreign currencies.
All derivative transactions are entered into to hedge interest and foreign currency exposures incorporated within its
business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets
or liabilities.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate theauthorization and credit limit amount.

33

There was no derivative transaction to which hedge accounting was applied for the year ended March 31, 2019. Derivativetransactions to which hedge accounting was applied for the year ended March 31, 2018, were as follows:
Millions of Yen
2018
Hedgeditem

Contract
amountContract
amount due
after one year

Fair
value

Currency:
Forward foreign currency contracts
BuyingAdvancepayments

USD

¥

152

-

¥

(8)

───────────────────────────────────────────────────────
16. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENTThe Group recognized impairment losses on the following asset groups.
For the year ended March 31, 2019:
Asset group
Idle assets
Idle assets
Idle assets

Location
Shinanomachi, Nagano
Nagoya, Aichi
Illinois, U.S.A.

Account
Land
Buildings and structures, etc.
Machinery and equipment
Total

Millions of Yen
2019
14
¥
17
239
270
¥

Thousands of U.S. Dollars
2019
133
$
153
2,170
2,456
$

For the year ended March 31, 2018:
Asset group

Location

Idle assets

Nakatsugawa, Gifu

Account
Buildings and structures, land,
etc.
Total

Millions of Yen
2018
¥

34

¥

34

The Group reviewed its long-lived assets for impairment as of March 31, 2019 and 2018.
For the years ended March 31, 2019 and 2018, the Group recognized an impairment loss for idle assets by writing down theproperty to its net selling value (based on reasonably adjusted amount of property tax assessment value).
Upon the decision to close the manufacturing plant of an U.S. subsidiary, NIPPON SHARYO U.S.A., INC. in Rochelle,
Illinois, U.S.A., on July 24, 2018, the sale of the plant to a third party has been considered. Therefore, we recognized an
impairment loss on the manufacturing plant at its net selling value for the year ended March 31, 2019.
Impairment losses other than the above were not disclosed as they were immaterial.

───────────────────────────────────────────────────────
17. RELATED-PARTY DISCLOSURES(1)Parent and major shareholders
CJR directly owned 51.2% of the total shares of the Company as of March 31, 2019 and 2018. The Company distributes
transportation vehicles to CJR.

34

Transactions of the Company with CJR for the years ended March 31, 2019 and 2018, were as follows:
For the year ended March 31, 2019

Millions of Yen

Sales
Borrowing of funds
Repayment of debt
Interest expense¥

2019
19,955117
289
337

Thousands of
U.S. Dollars
2019
181,413
$
1,072
2,631
3,067

Borrowing of funds, repayment of debt, and interest expense of ¥117 million ($1,072 thousand), ¥289 million ($2,631
thousand), and ¥127 million ($1,158 thousand), respectively, were recorded for the transfer of the factory assets transferred
to CJR and for a part of capital expenditure related to the transferred factory assets.
For the year ended March 31, 2018

Millions of Yen

Sales
Borrowing of funds
Repayment of debt
Interest expense¥

2018
24,00156,000313
193

Borrowing of funds, repayment of debt and interest expense of ¥21,000 million, ¥313 million and ¥122 million, respectively,
were recorded for the transfer of the factory assets transferred to CJR and for a part of capital expenditure related to thetransferred factory assets.
The balances due to or from CJR as of March 31, 2019 and 2018, were as follows:
As of March 31, 2019

Millions of Yen

Accounts receivable
Current portion of long-term debt
Long-term debt
Accrued expenses

¥

2019
5,993
296
55,21943

Thousands of
U.S. Dollars
201954,483$2,688
501,996
392

Current portion of long-term debt, long-term debt, and accrued expenses of ¥296 million ($2,688 thousand), ¥20,220 million($183,815 thousand), and ¥42 million ($381 thousand), respectively, were the balances related to long-term debt for thetransfer price of the factory assets transferred to CJR and for a part of capital expenditure related to the transferred factory
assets.
As of March 31, 2018

Millions of Yen

Accounts receivable
Current portion of long-term debt
Long-term debt
Accrued expenses

¥

2018
5,947
287
55,40043

Current portion of long-term debt, long-term debt and accrued expenses of ¥287 million, ¥20,400 million and ¥42 million,
respectively, were the balances related to long-term debt for the transfer price of the factory assets transferred to CJR andfor a part of capital expenditure related to the transferred factory assets.
(2)Fellow subsidiaries and subsidiaries of other affiliates

35Transactions of the Company with the fellow subsidiaries for the years ended March 31, 2019 and 2018, were as follows:

For the year ended March 31, 2019
JR Central Financial Management Co., Ltd.
Interest income

For the year ended March 31, 2018
JR Central Financial Management Co., Ltd.
Interest income

Millions of Yen
2019
¥

5

Thousands of
U.S. Dollars
2019
$

45

Millions of Yen
2018
¥

2

The balances due to or from the fellow subsidiaries as of March 31, 2019 and 2018, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
As of March 31, 2019
2019
2019
JR Central Financial Management Co., Ltd.
7,398
67,255
Cash and cash equivalents$¥

As of March 31, 2018
JR Central Financial Management Co., Ltd.
Cash and cash equivalents

Millions of Yen
2018
¥

7,534

36

───────────────────────────────────────────────────────
18. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2019 and 2018, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2019
2018
2019
Unrealized gain on available-for-sale securities:
1,753
1,131
15,938
Gains arising during the year
¥
$
¥
(0)
Reclassification adjustments to profit or loss
Amount before income tax effect
1,753
1,131
15,938(533)(354)(4,848)
Income tax effect
1,220
777
11,090¥¥$
Total
Deferred gain (loss) on derivatives under hedge accounting:
8
69
(5) $
Gains (losses) arising during the year¥¥
Income tax effect
8
69
(5) $
¥
¥
Total
Foreign currency translation adjustments:(33) ¥(105) $
(301)
Adjustments arising during the year¥(33) ¥(105) $
(301)
¥
Total
Defined retirement benefit plans:
2,216
1,396
20,145Adjustments arising during the year
¥
$
¥
(648)
(432)
(5,887)
Reclassification adjustments to profit or loss
Amount before income tax effect
1,568
964
14,258(475)(296)(4,320)
Income tax effect
1,093
668
9,938
¥
¥
$
Total
Share of other comprehensive (loss) income in associated companies
Gains arising during the year
(9) ¥
36
(81)
¥
$
Income tax effect
(9) ¥
36
(81)
$
¥
Total
¥

Total other comprehensive income

2,279

¥

1,371

$

20,715───────────────────────────────────────────────────────
19. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance No.
20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial
and descriptive information about its reportable segments. Reportable segments are operating segments or aggregationsof operating segments that meet specified criteria. Operating segments are components of an entity about which separate
financial information is available and such information is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported
on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources
to operating segments.
(1)Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by
the Company’s management is being performed in order to decide how resources are allocated among the Group.
The Group has operational headquarters by each product or service. Each of the operational headquarters develops
comprehensive strategies and engages in business activities relating to each product and service. Accordingly, theGroup is comprised of segments organized by products or services based on the operational headquarters, and there are
four reportable segments: “Railway Rolling Stock,” “Transportation Equipment and Steel Structure,” “Construction
Equipment,” and “Engineering.”

37

“Railway Rolling Stock” consists of manufacture and sales of rolling stock, such as EMUs and railway motor cars.
“Transportation Equipment and Steel Structure” consists of manufacture and sales of transportation equipment, such as
freight cars, tank trucks, heavy-duty industrial vehicles and manufacture and construction of roadway and railway bridges.
“Construction Equipment” consists of manufacture and sales of pile driving rigs, crawler cranes, casing rotators, portable
diesel generator sets and emergency generators.
“Engineering” consists of manufacture and sales of railway rolling stock inspection/maintenance systems, agricultural
plants, and pulp and paper plants.

(2)Method of measurement for the amount of sales, profit (loss), assets and other items for each reportable segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2 “Summary of Significant
Accounting Policies.” Reporting segment profit represents operating income. Intersegment transactions are based uponarm’s-length transactions.

(3)Information of sales, profit (loss), assets and other items was as follows:
Millions of Yen
2019
Railway
Rolling
Stock

Reportable segment
Transportation
Construction
Equipment andEngineering
Equipment
Steel Structure

Net sales
Sales to external customers¥ 38,049 ¥ 21,794 ¥ 25,167 ¥
129
187
13
Intersegment sales or transfers¥ 38,178 ¥ 21,981 ¥ 25,180 ¥Total
Segment profit (loss)¥ 2,034 ¥ 2,040 ¥ 4,887 ¥Segment assets¥ 47,448 ¥ 22,556 ¥ 22,978 ¥Other:
276 ¥779 ¥Depreciation¥ 1,046 ¥Increase in property, plant and
1,010
937
740
equipment and intangible assets

Other

Total

Reconciliations Consolidated

6,006 ¥
67
6,073 ¥

163 ¥ 91,179
185
581 ¥
348 ¥ 91,760 ¥386 ¥2,906 ¥

(27) ¥ 9,320 ¥(820) ¥
8,500
645 ¥ 96,533 ¥ 37,661 ¥ 134,194

15

¥

22

2

¥

2

2,118

¥

2,711

- ¥
(581)
(581) ¥

252

¥

160

91,17991,179

2,370
2,871

Millions of Yen
2018
Railway
Rolling
Stock

Reportable segment
Transportation
Construction
Equipment andEngineering
Equipment
Steel Structure

Net sales
Sales to external customers¥ 41,455 ¥ 22,475 ¥ 24,573 ¥
261
331
10
Intersegment sales or transfers¥ 41,716 ¥ 22,806 ¥ 24,583 ¥Total
Segment profit (loss)¥ 1,413 ¥ 1,991 ¥ 5,270
Segment assets¥ 46,176 ¥ 19,734 ¥ 22,724
Other:
760
319 ¥Depreciation¥ 1,340 ¥Increase in property, plant and
563
143
962
equipment and intangible assets

38

Other

Total

Reconciliations Consolidated
- ¥
(817)
(817) ¥

6,560 ¥
23
6,583 ¥

248 ¥ 95,311
192
817 ¥
440 ¥ 96,128 ¥¥¥(75) ¥
4,684 ¥

7,266
(93) ¥ 8,506 ¥ (1,240) ¥669 ¥ 93,987 ¥ 33,426 ¥ 127,413

¥

14
5

¥

2
0

¥

2,435
1,673

¥

293
107

¥

95,311
95,311

2,728
1,780

Thousands of U.S. Dollars
2019
Railway
Rolling
Stock

Reportable segment
Transportation
Construction
Equipment andEngineering
Equipment
Steel Structure

Other

Total

Reconciliations

Consolidated

Net sales
Sales to external customers- $$ 345,904 $ 198,128 $ 228,791 $ 54,601 $ 1,480 $ 828,904
1,169
1,696
122
608
1,682
5,277 $ (5,277)
Intersegment sales or transfers$ 347,073 $ 199,824 $ 228,913 $ 55,209 $ 3,162 $ 834,181 $ (5,277) $Total

828,904
828,904

Segment profit (loss)
77,270$ 18,494 $ 18,548 $ 44,423 $ 3,512 $ (248) $ 84,729 $ (7,459) $Segment assets$ 431,340 $ 205,056 $ 208,891 $ 26,422 $ 5,859 $ 877,568 $ 342,384 $ 1,219,952
Other:
Depreciation
14 $ 19,255 $ 2,294 $
21,549133 $$ 9,513 $ 2,515 $ 7,080 $Increase in property, plant and
9,186
8,514
6,725
202
15
24,642
1,461
26,103equipment and intangible assets

Notes: 1. “Other” represents businesses that are not included in any reportable segment, which includes manufacture and sales oflaser processing system, sales of railroad-related merchandise and real estate rental.
2. “Reconciliations” in segment profit (loss) include corporate expenses of ¥ (854) million ($ (7,766) thousand) and ¥ (1,294)
million for the years ended March 31, 2019 and 2018, respectively, elimination of intersegment transactions of ¥ 27
million ($ 246 thousand) and ¥ 42 million for the years ended March 31, 2019 and 2018. Corporate expenses principallyconsist of general and administrative expenses that are not attributable to any reportable segment.
3. “Reconciliations” in segment assets include total corporate assets of ¥ 32,158 million ($ 292,350 thousand) and ¥ 29,889
million, elimination of intersegment balances of ¥ (116) million ($ (1,051) thousand) and ¥ (136) million, and adjustments
in inventories of ¥ (61) million ($ (556) thousand) and ¥ (68) million as of March 31, 2019 and 2018, respectively. Total
corporate assets principally consist of investment securities and general management properties as of March 31, 2019and 2018.
4. Segment profit (loss) is reconciled to operating income in the consolidated statement of operations.

Associated Information(1) Information about products and services is not disclosed since similar information is disclosed above.
(2) Information about geographical areas for the year ended March 31, 2019 was as follows.

Net sales¥Japan
81,477¥

U.S.A.
156

Millions of Yen
2019
Asia
9,503
¥

¥

Other
43

¥

Total
91,179Note: Sales are based on the location of the customers and grouped by country or area.

Information about net sales by geographical areas for the year ended March 31, 2018 is not disclosed since net sales toexternal customers in Japan exceeds 90% of consolidated net sales.

Property, plant and equipment

¥

Japan
24,784¥

U.S.A.
3,630

39

Millions of Yen
2019
Asia
0
¥

¥

Other
0

¥

Total
28,414¥Property, plant and equipment

Japan24,306

Japan$ 225,304

Property, plant and equipment¥

Millions of Yen
2018
Asia
0
¥

U.S.A.
4,258

¥

Other

¥

0

Thousands of U.S. Dollars
2019
U.S.A.
Asia
Other
1
0
$ 33,001$$

Total
28,564

Total$ 258,306(3) Information about major customers
Net sales
2018

Thousands of
U.S. Dollars
2019

24,001$ 181,413

Millions of Yen
Name of major customer

2019
¥

CJR

19,955¥

Relatedsegment
Railway Rolling Stock,
Transportation Equipment
and Steel Structure(4) Information about loss on impairment of property, plant and equipment by reportable segment
Millions of Yen
2019
Railway
Rolling
Stock
Impairment
¥
loss

238

Reportable segment
Transportation
Equipment andConstruction
Steel Structure
Equipment-

Engineering

-

Other
-

-

Reconciliations

Total
¥

238

32

Consoli-dated¥270

Millions of Yen
2018
Railway
Rolling
Stock
Impairment
¥
loss

-

Reportable segment
Transportation
Equipment andConstruction
Steel Structure
Equipment-

Engineering

-

Other
-

-

Reconciliations

Total
¥

-

34

Consoli-dated¥34

Thousands of U.S. Dollars
2019
Railway
Rolling
Stock
Impairment$ 2,168
loss

Reportable segment
Transportation
Equipment andConstruction
Steel Structure
Equipment-

Engineering

-

-

Other

Total
-

$ 2,168

Reconciliations

Consoli-dated288$ 2,456

Note: The amount of “Reconciliations” is related to idle assets which are not attributable to any reporting segment.

＊ ＊ ＊ ＊ ＊ ＊40Corporate Information
Corporate Profile
Company Name: NIPPON SHARYO, LTD.
Capital Stock
Common Stock:Authorized

32,800,000 shares

Common Stock:Issued

14,675,012 shares

Number of Shareholders

12,509 persons(March 31, 2019)

Company History
Sep. 1896
Jun. 1938
May. 1949
Jan. 1959
Oct. 1961
Jul. 1964
Jun. 1975
Sep. 1996
Aug. 2008
		Aug. 2019

Established in Nagoya City.
Founded Narumi Plant.
Re-listed on Tokyo Stock Exchange.
Began Construction Machinery Business.
Started Bridge Manufacturing.
Founded Toyokawa Plant.
Founded Kinuura Plant.
100th Anniversary.
Equity and business tie-up entered into with
Central Japan Railway Company.
Manufactured 4000th Shinkansen EMU.

Line of Business
Overview of the Main Segments
NIPPON SHARYO manufactures and sells the following products:
Business segment
Railway rolling stock
Transportation equipment
and Steel structure
Construction equipment

EngineeringLines of business
EMUs, DMUs, Passenger Cars, Linear Motor Cars, Track Maintenance Machines,
Rolling Stock Components, and Automated Guideway Transit Systems
Freight Cars, Locomotives, Tank Trucks, Tank Trailers, Storage Tanks, Heavy-duty
Industrial Vehicles, Containers, Automated Guided Vehicles, Roadway Bridges,
Railway Bridges, Water Gates
Pile Driving Rigs, Crawler Cranes, Hydraulic Hammers, Casing Rotators, Other
Products Related to Foundation Work, Portable Diesel Generator Sets, Emergency
Generators, Various Products Related to Electric Machines
Agricultural Plants, Grain Complex, Seed Processing Plants, Railway Rolling Stock
Inspection/Maintenance System, Pulp and Paper Plants

Directory
OFFICEHEAD OFFICE (NAGOYA)
1-1 Sanbonmatsu-cho,Atsuta-ku, Nagoya 456-8691 JAPAN
Phone: +81-52-882-3316
Fax    : +81-52-882-3781

TOKYO OFFICEOSAKA BRANCHthth

12 Fl. Marunouchi Central Bldg.
1-9-1 Marunouchi,
Chiyoda-ku, Tokyo 100-0005 JAPAN
Phone: +81-3-6688-6808
Fax    : +81-3-6688-6813

14 FL,North Gate Building.
3-1-3 Umeda,
Kita-ku, Osaka 530-0001 JAPAN
Phone: +81-6-6341-4455
Fax    : +81-6-6341-4487

PLANT
TOYOKAWA PLANT(Railway rolling stock & other transportation equipment)(Construction equipment)

NARUMI PLANTKINUURA PLANT

2-20 Honohara,
Toyokawa, Aichi-pref 442-8502 JAPAN
Phone: +81-533-85-4900
Fax    : +81-533-85-4123

80 Ryucho, Narumi-cho,
Midori-ku, Nagoya 458-8502 JAPAN
Phone: +81-52-623-3529
Fax    : +81-52-623-4349

20 11-gouchi,
Handa, Aichi 475-0831 JAPAN(Steel structure)

41

NIPPON SHARYO U.S.A., INC.
2340 S. Arlington Heights Road,
Suite 605 Arlington Heights,
IL 60005 U.S.A.
Attn. NIPPON SHARYOENGINEERING & MARKETING, LLC
Phone: +1-847-228-2700
Fax    : +1-847-228-5530