Annual Business Report

April 1, 2013 through March 31, 2014

NIPPON SHARYO, LTD. and Consolidated Subsidiaries

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

185th period(2013-2014)

184th period(2012-2013)

Railway rolling stock

79,10063.6

Transportation equipment
and Steel structure

16,008Construction equipment％

Increase/(Decrease)34,72141.8

12.9

20,26821,479

17.3

Other

7,724

Total

124,311

％

127.8

24.4

(4,260)(21.0)

17,419

21.0

4,060

23.3

6.2

10,61012.8(2,886)(27.2)

100.0

83,018100.0

41,293

49.7

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

Titles of account185th period(2013-2014)

184th period(2012-2013)

183th period(2011-2012)

Net sales

124,31183,01885,167

Ordinary income

6,677

2,096

6,232

Net income

6,930

1,598

4,470

¥48.00¥11.07¥30.95

Total assets

141,453

133,400

123,193

Total equity

63,332

57,40354,277

Net income per share(Millions of Yen)

Comparison of Sales by Segment

140,000
Other

120,000
100,000

Construction equipment

80,00060,000Transportation equipment
and Steel structure

40,000Railway rolling stock

20,0000185th period

184th period％

44,379183th period

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 Information37

Directory

37

Tilting express trains "PUYUMA" running on the Yilan Line, which is located to the northeast of Taiwan.

1Message from the President
Review of Business Operations
During the fiscal term under review, there were concerns of uncertainty in the overseas economy. Yet,the Japanese economy saw improvements in production, capital investment, and employment, thanks
to strong personal consumption as a result of monetary easing measures and various economic policies
as well as last-minute demands in anticipation of the consumption tax hike.
Under this business environment, a large increase in the sales of railway rolling stock helped increase
the Group’s net sales figures, totaling ¥124,311 million, up 49.7% from the previous year. In terms
of profits, the ordinary profit was ¥6,677 million or an increase of 218.6%, and net profit was ¥6,930
million or an increase of 333.7%.

The Outlook
The environment surrounding the Group is expected to grow difficult in terms of receiving orders.
In the railway rolling stock business, the overall trend in the domestic market suggests that the midto long-term market expansion will remain poor due to replacement demands having come full cycle
as well as factors related to the country’s aging population. Setting our eyes on such a situation, we
continue to make efforts to gain a competitive edge by differentiating ourselves from competitors
through technological developments as well as cost reductions through improvements in productivity.
As growth is anticipated in overseas markets, we are looking to expand our business in these areas
and aim to secure constant orders in the North American railway rolling stock market. As a part ofthe scheme, a railway rolling stock assembly plant was constructed in Rochelle, Illinois, U.S.A., whichbegan production of railway rolling stock targeted for North America in July 2012. Furthermore, wehave added a new structural parts plant in order to equip ourselves as an integrated railway rollingstock manufacturer which handles the entire processes of railway rolling stock, from structural parts
production all the way to delivery of railway rolling stock. This scheme will give us an edge and help
us gain a presence in the North American market, which is one of our main targets. The Groupwill also focus on Taiwan, Southeast Asia, and other markets with expected growth in demand bypromoting the development of railway cars that match local needs.
In the transportation equipment and steel structure business segment, the transportation equipment
business is facing difficulties. We will, however, continue to make efforts to secure orders by2

developing products which capture energy trends and respond to market needs. Our efforts in thesteel structure business will be focused on enhancing our ability to propose technological solutions,
reducing costs, and expanding our sales activities to repair/maintenance and peripheral businesses,
both of which are anticipated to grow.
In the construction equipment segment and other businesses, we will make efforts to secure profits
through monitoring trends in public works and private capital investment. We will capture business
opportunities by deploying domestic and overseas sales activities and proposing products that cater toeach customer’s needs.
The Group’s major products such as railway cars and bridges are mostly built to order and orderunits are also relatively large; therefore, the product breakdown of the production and sales numberschanges greatly from year to year. This fluctuation poses permanent challenges to the Group; wemust level the capacity utilization rate and effectively handle specifications that vary by product.
Most of our projects require a long period of time from order to delivery, which greatly affects
management performance because of changes in exchange rates and the cost of steel and othermaterials. The Group will therefore make efforts to reduce risks against foreign exchange fluctuation
by anticipating currency movements and making use of hedging, such as foreign exchange contracts.
As for raw materials, the Group will curtail cost increases by taking measures such as optimization of
procurement timing, yield increase, and material changes.
In November 2013, the Group received an on-site inspection
by the Fair Trade Commission for suspicion of violationof antitrust laws in relation to the construction work of
agricultural facilities. The Group takes this matter seriously
and fully cooperates with the Commission in the investigation.
Moving forward, we will redouble our efforts in fulfilling
regulatory compliance as well as consolidating the internal
control systems.

Akira Nakagawa
President and Chief Executive Officer
3

Review by Segment
Railway Rolling Stock BusinessIn the railway rolling stock business, our sales to the JR
Companies amounted to ¥23,545 million. It was achieved
through the sales of the N700A Shinkansen trains and theSeries L0 superconductive Maglev trains to JR Central. Our
sales for the public and private railways reached ¥8,900
million, including the sales of the Series 1000 trains for Tokyo
Metro Ginza Line;
N700A Shinkansen Train for JR Central

the Models N1000

and N3000 trains for Nagoya City’s Transportation Bureau;
the Series 4000 trains for Nagoya Railroad Co., Ltd.; theModel 3000 trains for Keisei Electric Railway Co., Ltd.; andthe Model YR-3000 diesel cars for Yurikogen Railway Co.,
Ltd. For exported
railway cars, we had

Series 1000 Trains for Tokyo Metro Ginza Linesales of ¥46,654 million, including bi-level EMU for the U.S.A.
and EMU with tilting system and commuter trains for Taiwan.
There were some projects from the last fiscal term where sales
were carried over into this term. Consequently, our total sales
for railway rolling stock recorded ¥79,100 million, up 127.8%
EMU with Tilting System for Taiwan

from the previous year.

Transportation Equipment and Steel Structure Businesses
In the transportation equipment business, we had sales from
LPG tank lorries, LNG tank trailers, container flat cars, andcarriers for steel mills. As a result, sales reached ¥8,520
million, down 23.5% from the previous year, where a large
sum of sales from freight cars was recorded.
In the steel structure

LNG Tank Trailers

business, sales included Yatsumizo Elevated Bridge for the
Chubu Regional Bureau; Hakodate IC Bridge for the Hokkaido
Regional Development Bureau; Obata Elevated Bridge for Aichi
Prefecture; as well as temporary construction work of overpasses
Yatsumizo Elevated Bridgein Rokubancho and Sawaki. The sales also included tsunami
4evacuation towers and a large-scale repair work for Tokaido Shinkansen. Yet, sales were down
18.0% from the previous year to ¥7,488 million due to the reduction in the number of large-scaleconstruction projects.
In all, sales for the transportation equipment and steel structure businesses were ¥16,008 million,
down 21.0% from the previous year.

Construction Equipment BusinessIn the construction equipment business, the domestic demand inlarge pile driving rigs as well as compact pile driving rigs showed
healthy movement, thanks to recovery efforts from the Great East
Japan Earthquake and anticipation for increase in public works as
Tokyo was chosen to host the Olympic games. The export businessincluded large pile driving rigs, crawler cranes, casing rotators, etc.
to South Korea and Hong Kong. As
a result, the sales of construction
equipment totaled ¥18,053 million, up

Large Pile Driving Rig

25.5% from the previous year.
In the generator business, sales amounted to ¥3,425 million, up 12.9% fromthe previous year, thanks to improved business confidence and the last-minutedemands before the consumption tax hike.
Diesel Generator

In all, sales in our construction equipment business were ¥21,478 million, up 23.3% from the previous year.

Other Businesses
Our main sales included; mechanical equipment for Maglev
trains for JR Central; vehicle inspection/repair facilities; newconstruction and repair work of agricultural plants for JA
facilities in various places; paper-manufacturing equipment
for household paper manufacturers; laser processing
machines; and railway memorabilia. In all, sales in otherbusinesses areas totaled ¥7,724 million, down 27.2% from theAgricultual Plant

previous year.

Business performances of NISSHA WASHINO STEEL CO., LTD., one of the Group’s consolidated
subsidiaries, remained low due to long-term secular stagnation in demands for steel castings and5forgings. It was determined that recovery would be difficult, and, on March 31, 2014, the dissolution
of NISSHA WASHINO STEEL CO., LTD. passed a resolution at its special shareholders meeting.
The overseas sales for the year under review amount to ¥49,395 million, representing 39.7% of total
sales, which includes ¥46,654 million for the railway rolling stock business and ¥2,735 million for theconstruction equipment business.
The order on hand at the end of the year under review reached ¥177,638 million. These comprised¥158,644 million for the railway rolling stock business (¥45,849 million for rolling stock for JR
companies such as the N700A Shinkansen trains, ¥24,146 million for railway cars for other public
and private railway companies, ¥88,650 million for exported rolling stock), ¥14,885 million for
the transportation equipment and steel structure businesses (¥6,342 million for the transportationequipment business, ¥8,543 million for the steel structure business), ¥2,475 million for theconstruction equipment business, and ¥1,634 million for other businesses.

Investment in Plant and Equipment
Plant and equipment investment during the year under review totaled ¥5,033 million. Some of the
major investments aimed to maintain production capacity, such as renewal of large automatic draftingmachines at the Toyokawa Plant and NC drill machine upgrade at the Kinuura Plant. Investment wasalso made to streamline operations, exemplified by the Narumi Plant, where a five-face machining
center was newly installed and the plant layout was changed. We also reconstructed our material
inventory system in order to streamline operations at all locations. Furthermore, we are in the process of
implementing measures to prevent cranes from falling at all locations as a part of our business continuity
plan, or BCP. As for consolidated subsidiaries, NIPPON SHARYO U.S.A., INC. and its subsidiaries arecontinuously making capital investment for production of new model train cars.

Financing Activities
As for the year under review, no significant borrowing occurred.

6

NIPPON SHARYO, LTD. ANDCONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2014,
AND
INDEPENDENT AUDITOR’S REPORT

7

8

9

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2014

Thousands of
U.S. Dollars(Note 1)Millions of Yen
ASSETS

2014

2013

2014

CURRENT ASSETS:¥

Cash and cash equivalents (Note 14)

7,045

¥

4,866

$

69,067

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

34,22421,947

335,530

Inventories (Note 4)

37,71147,467369,716

Deferred tax assets (Note 13)

3,226

2,123

31,628Other current assets

5,047

4,269

49,48687,25380,672855,427Land

15,486

15,051

151,821

Buildings and structures

26,352

25,794

258,356

Machinery and equipment

34,31036,012

336,368

Construction in progress

2,235

619

21,91278,38377,476

768,457(44,081)(45,133)(432,164)

34,302

32,343

336,293

Investment securities (Notes 5 and 14)

14,543

16,070142,576

Investments in an unconsolidated subsidiary and associatedcompanies (Note 14)

1,258

1,243

12,332

Asset for employees’ retirement benefits (Notes 2.o and 8)

2,240

1,494

21,960

97

92

947

1,760

1,486

17,262

19,89820,385

195,077

Total current assets
PROPERTY, PLANT, AND EQUIPMENT:

Total
Accumulated depreciation
Net property, plant, and equipment
INVESTMENTS AND OTHER ASSETS:

Deferred tax assets (Note 13)
Other assets (Note 9)
Total investments and other assets
¥

TOTAL

141,453¥

133,400$

1,386,797(Continued)

10

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2014

Thousands of
U.S. Dollars(Note 1)
2014

Millions of Yen
LIABILITIES AND EQUITY

2014

2013

CURRENT LIABILITIES:¥

Short-term borrowings (Notes 7, 14, and 17)

4,101

¥

3,718

$

40,205Current portion of long-term debt (Notes 7 and 14)

-

25

-

Current portion of lease obligations (Notes 11 and 14)

989

1,164

9,695

Notes and accounts payable (Notes 6 and 14)

25,446

26,253

249,467

Accrued expenses

3,700

3,682

36,271

Advances received

24,71525,182

242,307

Income taxes payable (Note 14)

4,832

130

47,377

Allowance for work in process on construction contracts

95

68

932

Provision for loss on order received

445

1,109

4,366

Other current liabilities (Note 13)

366

655

3,583

Total current liabilities

64,68961,986634,203

5,000

5,038

49,020

226

308

2,211

2,019

1,879

19,794

Allowance for PCB disposal expenses (Note 2.p)

334

335

3,275

Provision for compensation for health damage from asbestos (Note 2.q)

143

75

1,402

4,768

4,951

46,750

Other long-term liabilities (Note 14)

942

1,425

9,230

Total long-term liabilities

13,432

14,011

131,682

11,811

11,811

115,791

Capital surplus

12,045

12,045

118,099

Retained earnings

34,91428,706342,286

(508)

(498)

(4,977)

4,728

5,492

46,349

12

37

113

Foreign currency translation adjustments

(338)

(248)

(3,312)

Defined retirement benefit plans (Note 2.o)

604

-

5,932

5,006

5,281

49,082

LONG-TERM LIABILITIES:Long-term debt (Notes 7 and 14)
Liability for employees’ retirement benefits (Notes 2.o and 8)
Lease obligations (Notes 11 and 14)

Deferred tax liabilities (Note 13)

COMMITMENTS AND
CONTINGENT LIABILITIES (Notes 10 and 15)
EQUITY (Note 12):
Common stock, authorized, 328,000,000 shares;
issued, 146,750,129 shares in 2014 and 2013

Treasury stock, at cost, 2,379,834 shares in 2014
and 2,361,080 shares in 2013
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting

Total accumulated other comprehensive income
Minority interests

64

58

631

Total equity

63,332

57,403620,912¥

TOTAL

141,453¥

133,400$

1,386,797(Concluded)

See notes to consolidated financial statements.

11

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2014

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2014¥

NET SALES (Note 17)2013¥

124,3112014

83,018$1,218,733

110,143

73,985

1,079,835

14,168

9,033

138,898

7,464

7,024

73,179

6,704

2,009

65,719Interest and dividend income (Note 17)

244

264

2,388

Interest expense (Note 17)

(60)

(116)

(587)

Equity in earnings of affiliated companies

46

10

453

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

562

271

5,508

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

(55)

(1)

(540)

2,800

(116)

27,452

-

(381)

-

(438)

(72)

(4,292)

3,099

(141)

30,382

9,803

1,868

96,101

Current

4,103

613

40,221

Deferred(1,237)(351)(12,131)

2,866

262

28,090

6,937

1,606

68,0117

873

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):

Gain (loss) on sales and disposals of property, plant, and equipment,
net
Loss on sales of investment in an unconsolidated subsidiary
Other, net
Other income (expenses) – net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Note 13):

Total income taxes
NET INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME¥

NET INCOME

¥

6,930

1,598

Yen

$

67,938

U.S. Dollars

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

Basic net income
Cash dividends applicable to the year

48.00
5.00

See notes to consolidated financial statements.

12

¥

11.07
5.00

$

0.47
0.05

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2014

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2014¥

NET INCOME BEFORE MINORITY INTERESTS

2013

6,937

¥

2014

1,606

$

68,011OTHER COMPREHENSIVE INCOME (Note 18):
Unrealized (loss) gain on available-for-sale securities

(773)

2,421

(7,572)

Deferred (loss) gain on derivatives under hedge accounting

(25)

3

(245)

Foreign currency translation adjustments

(90)

(172)

(885)

8

-

74

(880)

2,252

(8,628)

Share of other comprehensive income in an associated company
Total other comprehensive income
COMPREHENSIVE INCOME

¥

6,057

¥

3,858

$

59,383

¥

6,050

¥

3,850

$

59,310TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Minority interests

7

See notes to consolidated financial statements.

13

8

73

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2014
Millions of Yen
Number ofshares ofCommonCapitalRetained

Treasurycommon stock

stock

surplusearnings

stock

outstanding
BALANCE, APRIL 1, 2012

144,415,875¥

11,811¥

12,045¥27,830¥(489)

Cash dividends, ¥5.0 per share

-

-

-

(722)

-

Net income

-

-

-

1,598

-

(26,826)

-

0

-

(9)

-

-

-

-

-

BALANCE, MARCH 31, 2013

144,389,049

11,811

12,04528,706(498)

Cash dividends, ¥5.0 per share

-

-

-

(722)

-

Net income

-

-

-

6,930

-

(18,754)

-

0

-

(10)

-

-

-

-

-

Increase in treasury stock, net
Net changes in the year

Increase in treasury stock, net
Net changes in the year
BALANCE, MARCH 31, 2014

144,370,295¥

11,811¥

12,045¥34,914¥(508)

Thousands of U.S. Dollars (Note 1)

BALANCE, MARCH 31, 2013$

CommonCapitalRetained

Treasurystock

surplusearnings

stock

115,791$

118,096$

281,426$(4,880)Cash dividends, $0.05 per share--(7,078)-Net income--

67,938-

Increase in treasury stock, net

-

3

-

(97)

Net changes in the year

-

-

-

-

BALANCE, MARCH 31, 2014$

115,791

See notes to consolidated financial statements.

14$

118,099$342,286$(4,977)

Millions of Yen
Accumulated other comprehensive income
Unrealized gainonavailable-for-salesecurities

Deferred gain
on derivatives
under hedge
accounting

Foreigncurrencytranslation
adjustments

¥

¥

¥

¥

3,071

34

Definedretirement
benefit plans

(76)

-

Total
accumulated
othercomprehensive
income¥3,029

Minority

Totalinterests

equity¥51¥

54,277

-

-

-

-

-

-

(722)

-

-

-

-

-

-

1,598

-

-

-

-

-

-

(9)

2,421

3

(172)

-

2,252

7

2,259

5,492

37

(248)

-

5,281

58

57,403

-

-

-

-

-

-

(722)

-

-

-

-

-

-

6,930

-

-

-

-

-

-

(10)

(764)

(25)

(90)

¥

604

(275)

6

(269)

(338)

¥

604

4,728

¥

12

¥

¥

5,006

¥

64

¥

63,332Thousands of U.S. Dollars (Note 1)
Accumulated other comprehensive income
Unrealized
gain onavailable-forsale securities

Deferred gain
on derivatives
under hedge
accounting

Foreigncurrencytranslation
adjustments

$

$

$

$

53,846359

Definedretirement
benefit plans(2,427)-

Total
accumulated
othercomprehensive
income$51,778$

Minority

Totalinterests

equity568$

562,779

-

-

-

-

-

-

(7,078)

-

-

-

-

-

-

67,938

-

-

-

-

-

-

(94)

(7,497)

(246)

(885)

$

5,932

(2,696)63(2,633)(3,312)$

5,932

46,349

$

113

$

15

$

49,082$631$

620,912NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2014
Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2014

2013

2014

OPERATING ACTIVITIES:¥

Income before income taxes and minority interests

9,803

¥

1,868

$

96,101

Adjustments for:
Income taxes-paid(677)(2,643)(6,642)

Depreciation

2,901

2,692

28,444

Loss on impairment of property, plant, and equipment

55

1

540

Equity in net earnings of associated companies

-

(10)

-

(2,871)

42(28,151)

(562)

(271)

(5,508)

Increase in trade notes and accounts receivable(12,505)(1,601)(122,593)

Decrease (increase) in inventories

11,381(21,416)

111,583(Decrease) increase in trade notes and accounts payable(3,516)

6,717(34,472)

Increase in allowance for work in process on construction contracts

27

56

268

Increase (decrease) in provision for compensation for health damage from asbestos

68

(3)

667

(3,919)4,783(38,420)

(82)

34

(807)

2,034

(4,583)

19,944

2,137(14,334)

20,954

(0)

(50)

(0)

Purchases of property, plant, and equipment(3,985)(3,857)(39,065)

Proceeds from sales of property, plant, and equipment

3,076

303

30,157

(5)

(3)

(52)

Proceeds from sales of investment securities

991

2,885

9,718

Other-net

(247)

(193)

(2,423)

(170)

(915)

(1,665)(Gain) loss on sales and disposals of property, plant, and equipment
Gain on sales of investment securities
Changes in assets and liabilities:(Decrease) increase in advances received(Decrease) increase in liability for employees’ retirement benefits
Other-net
Net cash provided by (used in) operating activities
INVESTING ACTIVITIES:Payments for time deposits

Purchases of investment securities

Net cash used in investing activities
FINANCING ACTIVITIES:Net increase in short-term borrowings

383

3,273

3,751

Proceeds from long-term debt

-

5,000

-

Repayments of long-term debt

(63)

(25)

(613)

-

(10,000)-

Dividends paid

(722)

(723)

(7,081)Other-net

(61)

(48)

(595)

(463)

(2,523)(4,538)

675

371

6,615

2,179

(17,401)

21,366

Repayments of bonds

Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

4,866

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR¥

CASH AND CASH EQUIVALENTS, END OF YEAR

7,045

22,267¥

4,866

47,701$

69,067

See notes to consolidated financial statements.
(Concluded)

16

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2014
1. BASIS OF PRESENTATION OF CONSOLIDATEDFINANCIAL STATEMENTS
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forthin the Japanese Financial Instruments and Exchange Act
and its related accounting regulations and in accordancewith accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements ofInternational Financial Reporting Standards (IFRS).
In preparing these consolidated financial statements,
certain reclassifications and rearrangements have been
made to the consolidated financial statements issued
domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2013 consolidated
financial statements to conform to the classifications usedin 2014.
The consolidated financial statements are stated inJapanese yen, the currency of the country in which NIPPONSHARYO, LTD. (the “Company”), is incorporated andoperates. The translations of Japanese yen amounts into
U.S. dollar amounts are included solely for the convenienceof readers outside Japan and have been made at the rateof ¥102 to $1, the approximate rate of exchange at March
31, 2014. Such translations should not be construed as
representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.
──────────────────────────
2 . S U M M A RY O F S I G N I F I CA N T A C C O U N T I N GPOLICIES
a. Consolidation
The consolidated financial statements as of March 31, 2014,
include the accounts of the Company and its significant
subsidiaries (together, the “Group”). Under the control
and influence concepts, those companies in which theCompany, directly or indirectly, is able to exercise control
over operations are fully consolidated and those companies
over which the Group has the ability to exercise significant
influence are accounted for by the equity method.
Investments in an associated company are accounted
for by the equity method. Investments in the remaining
unconsolidated subsidiary and associated companies arestated at cost. If the equity method of accounting had been
applied to the investments in these companies, the effect on
the accompanying consolidated financial statements would
not be material.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions within
the Group is also eliminated.
The number of the consolidated subsidiaries,
unconsolidated subsidiary, and associated companies forthe years ended March 31, 2014 and 2013, was as follows:

Consolidated subsidiaries
Unconsolidated subsidiary, stated at cost
Associated company accounted for by the equity method
Associated companies stated at cost

2014
7
1
1
4

2013
7
1
1
4

The fiscal year-end of NIPPON SHARYO U.S.A., INC. andits subsidiaries, NIPPON SHARYO MANUFACTURING,
LLC, and NIPPON SHARYO ENGINEERING &MARKETING, LLC is December 31 and their financial
statements with the closest closing date prior to that of theCompany are used for consolidation purposes. Necessary
adjustments for significant transactions from January 1 toMarch 31 are made for consolidation purposes.
For the equity method associated company that has
a different fiscal year from that of the Company, theassociated company’s financial statements with the closest
closing date prior to that of the Company are used forconsolidation purposes.
b. Unification of accounting policies applied to foreignsubsidiaries for the consolidated financial statements
In May 2006, the Accounting Standards Board of Japan(the “ASBJ”) issued ASBJ Practical Issues Task Force(PITF) No. 18, “Practical Solution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for theConsolidated Financial Statements.” PITF No. 18 prescribesthat the accounting policies and procedures applied to aparent company and its subsidiaries for similar transactions
and events under similar circumstances should, in principle,
be unified for the preparation of the consolidated financial
statements. However, financial statements prepared byforeign subsidiaries in accordance with either IFRS orgenerally accepted accounting principles in the UnitedStates of America tentatively may be used for the
consolidation process, except for the following items thatshould be adjusted in the consolidation process so thatnet income is accounted for in accordance with Japanese
GAAP, unless they are not material: (a) amortization of
goodwill; (b) scheduled amortization of actuarial gain orloss of pensions that has been directly recorded in equity;(c) expensing capitalized development costs of researchand development (R&D); (d) cancellation of the fair value
model of accounting for property, plant and equipment andinvestment properties and incorporation of the cost modelaccounting; and (e) exclusion of minority interests from net
income, if contained in net income.
c. Unification of accounting policies applied to associatedcompanies for the equity method
In March 2008, the ASBJ issued ASBJ Statement No. 16,“Accounting Standard for Equity Method of Accounting forInvestments.” The new standard requires adjustments to
be made to conform the associate’s accounting policies for
similar transactions and events under similar circumstances
to those of the parent company when the associate’s
financial statements are used in applying the equity method,
unless it is impracticable to determine adjustments.

17

d. Business combinations
In October 2003, the Business Accounting Council
issued a Statement of Opinion, “Accounting for Business
Combinations,” and in December 2005, the ASBJ issued
ASBJ Statement No. 7, “Accounting Standard for Business
Divestitures,” and ASBJ Guidance No. 10, “Guidance
for Accounting Standard for Business Combinations
and Business Divestitures.” The accounting standard
for business combinations allowed companies to apply
the pooling of interests method of accounting only whencertain specific criteria are met such that the businesscombination is essentially regarded as a uniting-of-interests.
For business combinations that do not meet the uniting-ofinterests criteria, the business combination is considered to
be an acquisition and the purchase method of accounting
is required. This standard also prescribes the accounting
for combinations of entities under common control and forjoint ventures.
In December 2008, the ASBJ issued a revised accounting
standard for business combinations, ASBJ Statement No.
21, “Accounting Standard for Business Combinations.”
Major accounting changes under the revised accounting
standard are as follows: (1) The revised standard requires
accounting for business combinations only by the purchasemethod. As a result, the pooling-of-interests methodof accounting is no longer allowed. (2) The previous
accounting standard required the R&D costs to be charged
to income as incurred. Under the revised standard, inprocess R&D costs acquired in the business combination
are capitalized as an intangible asset. (3) The previous
accounting standard provided for a bargain purchase gain
(negative goodwill) to be systematically amortized over a
period not exceeding 20 years. Under the revised standard,
the acquirer recognizes the bargain purchase gain in profit
or loss immediately on the acquisition date after reassessing
and confirming that all of the assets acquired and all of theliabilities assumed have been identified after a review of theprocedures used in the purchase price allocation.
e. Cash equivalents
Cash equivalents are short-term investments that are readily
convertible into cash and that are exposed to insignificant
risk of changes in value.
Cash equivalents include time deposits and CashManagement System (CMS) funds due from the parent
company, Central Japan Railway Company (the “Parent”),
all of which mature or become due within three months
from the date of acquisition.
f. Investment securities
Investment securities are classified and accounted for,depending on management’s intent, as follows:
Available-for-sale securities are reported at fair value, withunrealized gains and losses, net of applicable taxes, reported
in a separate component of equity.
Nonmarketable available-for-sale securities are stated atcost determined by the moving-average method. For otherthan-temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.
g. Derivatives and hedging activities
The Group uses derivative financial instruments to manage
its exposures to fluctuations in foreign exchange andinterest rates. Forward foreign currency contracts, currency

swaps, and interest rate swaps are utilized by the Group to
reduce foreign currency exchange and interest rate risks.
The Group does not enter into derivatives for trading or
speculative purposes.
Derivative financial instruments and foreign currencytransactions are classified and accounted for as follows: 1)
all derivatives are recognized as either assets or liabilities
and measured at fair value and gains and losses onderivative transactions are recognized in the consolidated
statement of income and 2) for derivatives used for hedging
purposes, if such derivatives qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, gains and losses
on derivatives are deferred until maturity of the hedgedtransactions.
The foreign currency forward contracts are utilized tohedge foreign currency exposures in sales of merchandiseand finished goods to overseas customers and procurementof raw materials from overseas suppliers. Trade receivables
and payables denominated in foreign currencies aretranslated at the contracted rates if the forward contracts
qualify for hedge accounting. The currency swaps are
utilized to hedge foreign currency exposures in long-term
debt. Long-term debt is translated at the contracted rates if
the currency swaps qualify for hedge accounting.
The interest rate swaps, which qualify for hedge accounting
and meet specific matching criteria, are not remeasured atmarket value, but the differential paid or received under
the swap agreements is recognized and included in interest
expense or income.
h. Allowance for doubtful accounts
An allowance for doubtful accounts is provided for at
the aggregate amount of estimated credit loss based on
an individual analysis of certain doubtful or troubled
receivables and a general reserve for other receivables iscalculated using the historical loss experience.
i. Inventories
Inventories are stated at the lower of cost, determinedprincipally by the specific identification method formerchandise, finished goods, and work in process andby the moving-average method for semifinished goods,
raw materials, and supplies, or net selling value, which
is defined as the selling price, less additional estimatedmanufacturing costs and estimated direct selling expenses.
The replacement cost may be used in place of the net selling
value, if appropriate. Write-down of inventories in theamounts of ¥3,565 million ($34,961 thousand) and ¥1,434
million for the years ended March 31, 2014 and 2013,
respectively, were included in cost of sales.
j. Property, plant, and equipment
Property, plant, and equipment, including significant
renewals and additions, are stated at cost and are
depreciated principally by the straight-line method forbuildings and the declining-balance method for otherproperty at rates based on the estimated useful lives of theassets.
Depreciation of leased assets is computed by the straightline method over the leased period.
The range of useful lives is principally from 10 to 60 years
for buildings and structures and from 6 to 17 years formachinery and equipment.

18

k. Long-lived assets
The Group reviews its long-lived assets for impairment
whenever events or changes in circumstance indicate thatthe carrying amount of an asset or asset group may not
be recoverable. An impairment loss is recognized if thecarrying amount of an asset or asset group exceeds the sumof the undiscounted future cash flows expected to result
from the continued use and eventual disposition of the asset
or asset group. The impairment loss would be measured
as the amount by which the carrying amount of the asset
exceeds its recoverable amount, which is the higher of the
discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.
l. Other assets
Intangible assets are amortized by the straight-line method.
Software costs are amortized over five years.
m. Allowance for work in process on construction contracts
An allowance for work in process on construction contracts
is provided based on an estimate of the total loss inrespect to construction projects on which eventual losses
are deemed inevitable and the amounts of the loss can bereasonably estimated. Provisions for work in process on
construction contracts in the amounts of ¥27 million ($268
thousand) and ¥56 million for the years ended March 31,
2014 and 2013, respectively, were included in cost of sales.
n. Provision for loss on order received
A provision for loss on orders received, except for
construction contracts, is recorded based on an estimateof the total loss in respect to contracts on which eventual
losses are deemed inevitable and the amounts of the loss
can be reasonably estimated.
o. Retirement and pension plans
The Company has a lump-sum retirement benefit plan, adefined contribution pension plan, and a defined benefit
pension plan. The Company’s consolidated subsidiaries
have similar retirement benefit plans.
Effective April 1, 2000, the Company adopted a new
accounting standard for retirement benefits and accounted
for the liability for retirement benefits based on the
projected benefit obligations and plan assets at theconsolidated balance sheet date. The projected benefit
obligations are attributed to periods on a straight-line basis.
Actuarial gains and losses are amortized on a straight-line
basis over 15 years within the average remaining service
period. Past service costs are amortized on a straight-line
basis over 15 years within the average remaining service
period. The transitional obligation determined as of April 1,
2000, is being amortized over 15 years.
In May 2012, the ASBJ issued ASBJ Statement No. 26,“Accounting Standard for Retirement Benefits” and ASBJ
Guidance No. 25, “Guidance on Accounting Standard
for Retirement Benefits” which replaced the accounting
standard for retirement benefits that had been issued by theBusiness Accounting Council in 1998 with an effective dateof April 1, 2000, and the other related practical guidance,
and were followed by partial amendments from time to timethrough 2009.
(a) Under the revised accounting standard, actuarial
gains and losses and past service costs that are yet to berecognized in profit or loss are recognized within equity(accumulated other comprehensive income), after adjustingfor tax effects, and any resulting deficit or surplus isrecognized as a liability (liability for retirement benefits) or
asset (asset for retirement benefits).
(b) The revised accounting standard does not change how torecognize actuarial gains and losses and past service costs in
profit or loss. Those amounts are recognized in profit or loss
over a certain period no longer than the expected averageremaining service period of the employees. However,actuarial gains and losses and past service costs that arosein the current period and have not yet been recognized in
profit or loss are included in other comprehensive income
and actuarial gains and losses and past service costs thatwere recognized in other comprehensive income in priorperiods and then recognized in profit or loss in the current
period shall be treated as reclassification adjustments.
This accounting standard and the guidance for (a) and (b)above are effective for the end of annual periods beginningon or after April 1, 2013, with earlier application being
permitted from the beginning of annual periods beginningon or after April 1, 2013. However, no retrospective
application of this accounting standard to consolidated
financial statements in prior periods is required.
The Company applied the revised accounting standard
and guidance for retirement benefits for (a) and (b) above,effective March 31, 2014. As a result, asset for retirement
benefits of ¥2,240 million ($21,960 thousand) and liability
for retirement benefits of ¥226 million ($2,211 thousand)were recorded as of March 31, 2014, and accumulated othercomprehensive income for the year ended March 31, 2014,
increased by ¥604 million ($5,932 thousand).
p. Allowance for Polychlorinated Biphenyl (PCB) disposal
expensesAn allowance for PCB disposal expenses has been provided
based on the published estimated disposal fee scheduleissued by the Japan Environmental Safety Corporation.
q. Provision for compensation for health damage from asbestos
A provision for compensation for health damage fromasbestos has been recorded based on the estimatedcompensation amount for former employees who sufferedhealth damage from asbestos.
r. Income taxes
The provision for income taxes is computed based on thepretax income included in the consolidated statementof income. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets
and liabilities. Deferred taxes are measured by applying
currently enacted tax rates to the temporary differences.
s. Foreign currency transactions
All short-term and long-term monetary receivables andpayables denominated in foreign currencies are translated
into Japanese yen at the exchange rates at the consolidatedbalance sheet date. The foreign exchange gains andlosses from translation are recognized in the consolidated
statement of income to the extent that they are not hedged
by forward exchange contracts.
t. Foreign currency financial statements
The balance sheet accounts of the consolidated foreignsubsidiaries are translated into Japanese yen at the current
exchange rate as of the consolidated balance sheet date,19

and is accounted for prospectively if the change affects boththe period of the change and future periods. (4) Correctionsof Prior-Period Errors—When an error in prior-period
consolidated financial statements is discovered, thosestatements are restated.
y. New Accounting Pronouncements
Accounting Standard for Retirement Benefits—On May 17,
2012, the ASBJ issued ASBJ Statement No. 26 and ASBJ
Guidance No. 25 which replaced the accounting standard
for retirement benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April
1, 2000, and the other related practical guidance, and were
followed by partial amendments from time to time through2009.
Major change is as follow:
Amendments relating to the method of attributing expected
benefit to periods and relating to the discount rate andexpected future salary increases
The revised accounting standard also made certain
amendments relating to the method of attributing expected
benefit to periods and relating to the discount rate andexpected future salary increases.
This accounting standard and the guidance for theabove are effective for the beginning of annual periods
beginning on or after April 1, 2014, or for the beginningof annual periods beginning on or after April 1, 2015,
subject to certain disclosure in March 2015, with earlier
application being permitted from the beginning of annual
periods beginning on or after April 1, 2013. However,no retrospective application of this accounting standard
to consolidated financial statements in prior periods isrequired.
The Company applied the revised accounting standard
for the above from April 1, 2014, and the effect of theapplication is to decrease retained earnings as of April 1,
2014, by approximately ¥1,500 million ($14,706 thousand).

except for equity, which is translated at the historical rate.
Revenue and expense accounts of consolidated foreignsubsidiaries are translated into yen at the average exchange
rate. Differences arising from such translation are shown as
foreign currency translation adjustments under accumulated
other comprehensive income in a separate component ofequity.
u. R&D expenses
Expenses related to R&D activities are charged to income
as incurred. R&D expenses amounted to ¥1,356 million($13,304 thousand) and ¥1,532 million for the years ended
March 31, 2014 and 2013, respectively, and are included
in general and administrative expenses and manufacturingcosts in the accompanying consolidated statements ofincome.
v. Per share information
Basic net income per share is computed by dividing net
income available to common shareholders by the weightedaverage number of shares of common stock outstanding
during the respective year. Weighted-average number ofshares of common stock for the years ended March 31,
2014 and 2013, were 144,379 thousand shares and 144,406
thousand shares, respectively. Diluted net income pershare for the years ended March 31, 2014 and 2013, was
not applicable because the Company had no dilutive
common shares. Cash dividends per share presented in
the accompanying consolidated statement of income are
dividends applicable to the respective years, including
dividends to be paid after the end of the year.
w. Construction contracts
Construction revenue and construction costs are recognizedby the percentage-of-completion method if the outcome ofa construction contract can be estimated reliably. When
total construction revenue, total construction costs, andthe stage of completion of the contract at the consolidatedbalance sheet date can be reliably measured, the outcome ofa construction contract is deemed to be estimated reliably.
If the outcome of a construction contract cannot be reliably
estimated, the completed-contract method should beapplied. When it is probable that the total construction
costs will exceed total construction revenue, an estimatedloss on the contract should be immediately recognized byproviding for a loss on construction contracts.
x. Accounting changes and error corrections
In December 2009, the ASBJ issued ASBJ Statement No.
24, “Accounting Standard for Accounting Changes andError Corrections,” and ASBJ Guidance No. 24, “Guidanceon Accounting Standard for Accounting Changes and Error
Corrections.” Accounting treatments under this standard
and guidance are as follows: (1) Changes in Accounting
Policies—When a new accounting policy is applied following
revision of an accounting standard, the new policy is applied
retrospectively, unless the revised accounting standard
includes specific transitional provisions, in which case theentity shall comply with the specific transitional provisions.
(2) Changes in Presentation—When the presentation offinancial statements is changed, prior-period financial
statements are reclassified in accordance with the newpresentation. (3) Changes in Accounting Estimates—Achange in an accounting estimate is accounted for in the
period of the change if the change affects that period only20

3. NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable as of March 31, 2014 and 2013, consisted of the following:
Millions of Yen
Trade notes¥- Unconsolidated subsidiary and associated companies
Trade accounts- The Parent, unconsolidated subsidiary and associated companies
Other
Less allowance for doubtful accounts
Total
¥

2014
3,694
126
26,513
3,873
61
(43)
34,224

¥

¥

2013
3,869
110
15,562
2,152
299
(45)
21,947

Thousands of
U.S. Dollars
2014$
36,216
1,240
259,933
37,969595(423)$
335,530

Note: Allowance for doubtful accounts was not recognized for accounts receivable-other, which were included in Other above.
──────────────────────────────────────────────────────
4. INVENTORIESInventories as of March 31, 2014 and 2013, consisted of the following:
Millions of Yen
Merchandise
Finished goods
Work in process and semifinished goods
Raw materials
Total

¥

¥

2014
171
852
31,397
5,291
37,711

¥

2013
353
1,388
42,4863,240
47,467¥

Thousands of
U.S. Dollars
2014
$
1,676
8,348
307,82151,871$
369,716Work 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, 2014 and 2013, allowances for work in process on construction contracts of ¥14
million ($138 thousand) and ¥20 million, respectively, are provided and included in work in process above.
──────────────────────────────────────────────────────
5. INVESTMENT SECURITIESInvestment securities as of March 31, 2014 and 2013, consisted of the following:
Millions of Yen
Equity securities
Total

¥
¥

2014
14,543
14,543¥¥2013
16,07016,070Thousands of
U.S. Dollars
2014$
142,576$
142,576

The costs and aggregate fair values of investment securities as of March 31, 2014 and 2013, were as follows:

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

¥
¥

6,248
6,248

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

¥
¥

6,633
6,633

21

Millions of Yen
2014
Gross unrealized Gross unrealized
gains
losses
¥
¥

7,295
7,295

¥
¥

(23)
(23)

Millions of Yen
2013
Gross unrealized Gross unrealized
gains
losses
¥
¥

8,466
8,466

¥
¥

(39)
(39)

Fair andcarrying value¥¥

13,52013,520Fair andcarrying value¥¥

15,06015,060Cost
Securities classified as available-for-sale:
Equity securities
Total

$
$

61,256
61,256

Thousands of U.S. Dollars
2014
Gross unrealized Gross unrealized
gains
lossesFair andcarrying value

$
$

$
$

71,52371,523

$
$

(229)
(229)

132,550
132,550

The information of available-for-sale securities which were sold for the years ended March 31, 2014 and 2013, was as follows:

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

902
902

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

438
438

Millions of Yen
2014
Realized gains

Realized losses

¥
¥

¥
¥

513
513

-

Millions of Yen
2013
Realized gains

Realized losses

¥
¥

¥
¥

271
271

(0)
(0)

Thousands of U.S. Dollars
2014
Proceeds
Realized gains Realized losses
Available-for-sale:
Equity securities
Total

$
$

8,843
8,843

$
$

5,030
5,030

$
$

-

No impairment losses on available-for-sale equity securities for the years ended March 31, 2014 and 2013, were recognized.
──────────────────────────────────────────────────────
6. NOTES AND ACCOUNTS PAYABLE
Notes and accounts payable as of March 31, 2014 and 2013, consisted of the following:
Millions of Yen
Trade notes
Electronically recorded obligations - operating-Unconsolidated subsidiary and associated companies
Trade accounts-Unconsolidated subsidiary and associated companies
Other
Total

¥

¥

2014
1,050
8,822
20
11,529115
3,910
25,446

¥

¥

2013
2,558
10,864
21
11,12790
1,593
26,253Thousands of
U.S. Dollars
2014$
10,28886,489196
113,032
1,132
38,330$249,467──────────────────────────────────────────────────────
7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars
2014

Millions of Yen
2014
Unsecured bank loans with an average interest rate of
0.65% in 2013
CMS with average interest rates of 0.45% and 0.48%
in 2014 and 2013, respectively

¥
¥

22

2013
-

¥

445

$

-

4,101
4,101

¥

3,273
3,718

$

40,20540,205

Long-term debt as of March 31, 2014 and 2013, consisted of the following:
Millions of Yen
2014
Unsecured bank loans due in 2018 with averageinterest rates of 0.55% and 0.57% in 2014 and 2013,
respectively¥
Total
Less current portionLong-term debt, less current portion
¥

5,000
5,000
5,000

2013
¥
¥

5,063
5,063
(25)
5,038

Thousands of
U.S. Dollars
2014
$

$

49,02049,02049,020

The aggregate annual maturities of long-term debt as of March 31, 2014, were as follows:
Years ending March 31
2015
2016
2017
2018
2019
Total

Millions of Yen
5,000
¥
5,000
¥

Thousands of U.S. Dollars$
49,020$49,020──────────────────────────────────────────────────────
8. RETIREMENT AND PENSION PLANS
Employees who terminate their service with the Company and its domestic consolidated subsidiaries are entitled to retirement
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 is 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 consolidated
subsidiaries have similar retirement benefit plans.
For the year ended March 31, 2014
(1) Defined benefit plans(a) The changes in defined benefit obligation for the year ended March 31, 2014, were as follows:
Millions of Yen
Balance at beginning of year
Current-service cost
Interest cost
Actuarial gains
Benefits paid
Balance at end of year

¥

¥

2014
11,995
604
231
(119)
(831)
11,880Thousands of
U.S. Dollars
2014$
117,594
5,920
2,264(1,171)(8,140)$116,467(b) The changes in plan assets for the year ended March 31, 2014, were as follows:
Millions of Yen
Balance at beginning of year
Expected return on plan assets
Actuarial gains
Contribution from the employer
Benefits paid
Balance at end of year

¥

¥

2014
11,940
189
1,621
482
(352)
13,88023

Thousands of
U.S. Dollars
2014$
117,058
1,856
15,894
4,718(3,451)$
136,075

(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, 2014, was as follows:
Millions of Yen
Funded defined benefit obligation
Plan assets
Unfunded defined benefit obligation
Net asset arising from defined benefit obligation
Asset for retirement benefits
Liability for retirement benefits
Net asset arising from defined benefit obligation

¥

¥
¥
¥

2014
11,652(13,880)(2,228)212(2,014)(2,240)226(2,014)

Thousands of
U.S. Dollars
2014$
114,239(136,075)(21,836)
2,087$(19,749)$$(21,960)
2,211(19,749)(d) The components of net periodic benefit costs for the year ended March 31, 2014, were as follows:
Millions of Yen
Service cost (Note)
Interest cost
Expected return on plan assets
Amortization of transitional obligation
Recognized actuarial losses
Amortization of prior-service cost
Net periodic benefit costs

¥

2014
612
231
(189)
226
214
(4)
1,090

¥

Thousands of
U.S. Dollars
2014
$
6,007
2,264
(1,856)
2,215
2,102
(43)
$
10,689Note: Retirement benefit costs of the consolidated subsidiaries applying the simplified method are included in service cost.
(e) Accumulated other comprehensive income on defined retirement benefit plans, before tax, as of March 31, 2014, was asfollows:
Millions of Yen
Unrecognized transitional obligation
Unrecognized prior-service cost
Unrecognized actuarial gains and losses
Total

¥
¥

2014
199
(48)
(1,083)(932)

Thousands of
U.S. Dollars
2014
$
1,955
(472)
(10,623)$(9,140)(f) Plan assets(i) Components of plan assets
Plan assets consisted of the following:
Debt investments
Equity investments
Cash and deposits
Other
Total

2014
14%
79%
3%
4%
100%

Note: Total plan assets include 44% and 17% retirement benefit trusts set up for the defined benefit pension plans and the lumpsum retirement benefit plans, respectively.
(ii) Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are expectedcurrently and in the future from the various components of the plan assets.
(g) Assumptions used for the year ended March 31, 2014, were set forth as follows:
Discount rate
Expected rate of return on plan assets

2014
2.0%
2.0%

24

(2) Defined contribution plans
The required contribution of the Company and its consolidated subsidiaries amounted to ¥112 million ($1,097 thousand) for
the year ended March 31, 2014.
For the year ended March 31, 2013
The liability for employees’ retirement benefits as of March 31, 2013, consisted of the following:

Projected benefit obligation
Fair value of plan assets
Unrecognized transitional obligation
Unrecognized actuarial loss
Unrecognized prior-service cost
Net liability
Asset for retirement benefits
Liability for retirement benefits

Millions of Yen
2013
11,995¥(11,940)
(440)
(853)
52
(1,186)(1,494)308¥

Note:Consolidated subsidiaries adopted the simplified method for the calculation of projected benefit obligations based on theamount that would be required if all eligible employees voluntarily terminated their employment as of the year-end.
The components of net periodic benefit costs for the years ended March 31, 2013, were as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of transitional obligation
Recognized actuarial loss
Amortization of prior-service cost
Net periodic benefit costs
Other
Total

Millions of Yen
2013
564
¥
234
(168)
220
385
(4)
1,231
118
1,349
¥

Note 1:Benefit costs of subsidiaries, calculated by the simplified method, were included in “service cost.”
Note 2:Contributions paid to the defined contribution pension plans were included in “Other.”
Major assumptions used in the calculations of the above information as of March 31, 2013, were as follows:
2013
Straight-line method
2.0%
2.0%
15 years
15 years
15 years

Method of attributing the projected benefits to periods of service
Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial gain/loss
Amortization period of transitional obligation──────────────────────────────────────────────────────
9. ASSETS PLEDGED AS COLLATERAL
Assets pledged as substitutes for cash deposits to a real estate business as of March 31, 2014 and 2013, were as follows:
Millions of Yen
Other assets
Total

¥
¥

2014
10
10

¥
¥

2013
10
10

Thousands of
U.S. Dollars
2014
$
98
$
98

──────────────────────────────────────────────────────
10. CONTINGENT LIABILITIESIn some cases, the Company sells its construction equipment products through leasing companies. Some of these leasing
companies request that the Company enter 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, 2014 and 2013, amounted to ¥744
million ($7,290 thousand) and ¥937 million, respectively.

25

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, 2014, were as follows:
Years ending March 31
2015
2016
2017
2018
2019
2020 and thereafter
Total

Millions of Yen
989
¥
865
547
394
175
38
3,008
¥

Thousands of U.S. Dollars
$
9,695
8,476
5,358
3,864
1,719
377
$
29,489A consolidated subsidiary subleases machinery.
Investments in leases and lease obligations, which include interest portion, resulting from sublease transactions as of March
31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars
2014

Millions of Yen
2014
Investments in leases:
Due within one year
Due after one year
Total

¥

2013
293
569
862

¥

¥

396
401
797

¥

Millions of Yen
2014
Lease obligations:Due within one year
Due after one year
Total

¥

2013
321
624
945

¥

¥
¥

569
439
1,008

$

2,874
5,577
$
8,451
Thousands of
U.S. Dollars
2014
$
$

3,143
6,124
9,267

──────────────────────────────────────────────────────
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. For companies that meet certain criteria including (1) having a Boardof Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of thedirectors is prescribed as one year rather than two years of normal 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 (a componentof retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity accountcharged 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 bereversed 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 under certain conditions upon resolutionof the shareholders.
(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 theshareholders which is determined by specific formula. Under the Companies Act, stock acquisition rights are presented as aseparate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition26

rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted
directly from stock acquisition rights.
──────────────────────────────────────────────────────
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 37.5% for the years ended March 31, 2014 and 2013.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred tax assets andliabilities as of March 31, 2014 and 2013, were as follows:
Millions of Yen
2014
Deferred tax assets:
Employee retirement benefit liability¥
Amount transferred to defined contribution pension plan
Loss on impairment of fixed assets
Accrued bonuses to employees
Loss on write-down of inventories
Loss on write-down of securities and other
Other
Less valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Deferred gain on sales of property
Revaluation of property
Other
Total
Net deferred tax liabilities

¥

2013

664
428
509
595
2,433
108
2,707
7,444
(2,269)5,175(2,537)(1,436)(2,394)(253)(6,620)(1,445)

¥

923
607
548
514
1,181
174
2,869
6,816
(2,700)4,116(2,917)(1,452)(2,394)(89)(6,852)(2,736)¥

Thousands of
U.S. Dollars
2014
$

$

6,511
4,194
4,985
5,836
23,8491,057
26,542
72,974(22,243)
50,731(24,876)(14,082)(23,466)(2,482)(64,906)(14,175)

Deferred tax assets and liabilities as of March 31, 2014 and 2013, were recorded as follows:
Millions of Yen
2014
Deferred tax assets:
Current
Noncurrent
Deferred tax liabilities:
Current
Noncurrent
Net deferred tax liabilities

¥

¥

2013

3,226
97
(4,768)(1,445)

¥

¥

2,123
92
(0)
(4,951)(2,736)

Thousands of
U.S. Dollars
2014
$

$

31,628947(46,750)(14,175)

Note: Current deferred tax liabilities were included in other current liabilities in the consolidated balance sheet.
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of income for the year ended March 31, 2014, with the corresponding figures for 2013,is as follows:
Normal effective statutory tax rate
Increase (decrease) due to:
Expenses not deductible for income tax purposes
Changes in valuation allowance
Tax-exempt income
Refund of income taxes, etc.
Per capita inhabitant tax
Effect of changes in tax rate
Other
Actual effective income tax rate

2014
37.5 %

2013
37.5 %

0.3
(4.0)
(0.8)
(6.9)
0.4
2.4
0.3
29.2 %

4.6(26.8)
(4.9)
1.9
1.7
14.0 %New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on
or after April 1, 2014, from approximately 37.5% to 35.1%. The effect of this change was to increase deferred tax liabilities

27

(net of deferred tax assets) and unrealized gain on available-for-sale securities in the consolidated balance sheet as of March
31, 2014, by ¥63 million ($626 thousand) and ¥173 million ($1,697 thousand), respectively, and to increase income taxes —deferred in the consolidated statement of income for the year then ended by ¥237 million ($2,328 thousand).
──────────────────────────────────────────────────────
14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group policy for financial instruments
The Group utilizes CMS provided by the Parent to operate and finance funds. The Group finances capital investments
mainly with bank loans. 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.
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.
Short-term borrowings are mainly used for financing operating capital and long-term debt and lease obligations are primarily
used for financing capital investments. Although a part of long-term debt is exposed to market risks from changes in variableinterest rates, those risks are mitigated by using derivatives of currency swaps and interest rate swaps.
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, and currency swaps and interest rate swaps, which are used to
manage exposure to exchange fluctuations and interest rate fluctuations on long-term debt. 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 payment terms and balances ofcustomers 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.
Currency swaps and interest rate swaps are used to manage exposure to market risks from changes in the interest rates oflong-term debt.
Investment securities are managed by monitoring the market values and the financial position of issuers on a regular basis.
The basic principles of derivative transactions have been approved by the manager of corporate planning. Reconciliations of
the derivative transactions and balances with customers are performed, and transaction data is reported to the manager ofcorporate planning.
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.

28

(a) Fair value of financial instruments

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

Millions of Yen
2014
Carrying amount
Fair value
Unrealized gain (loss)
7,045
7,045
¥
¥
34,22434,224
13,52013,52054,78954,789¥¥¥¥25,446
4,101
4,832
5,000
3,008
42,387¥¥25,446
4,101
4,832
5,005
2,982
42,366

¥
¥

(5)
26
21

Millions of Yen
2013
Carrying amount
Fair value
Unrealized gain
4,866
4,866
¥
¥
21,947
21,947
15,06015,06041,873
41,873¥¥¥¥

26,253
3,718
130
5,063
3,043
38,207¥¥

26,253
3,718
130
5,062
3,020
38,183

¥
¥

1
23
24

Thousands of U.S. Dollars
2014
Carrying amount
Fair value
Unrealized gain (loss)$
69,067$69,067
335,530
335,530
132,550
132,550$
537,147$
537,147$$

249,467
40,20547,37749,02029,489415,558$$

249,467
40,20547,37749,06429,237415,350

$
$

(44)
252
208

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 and at the quoted
prices obtained from financial institutions for certain debt instruments. The information on the fair value of investment
securities by classification is included in Note 5.
Liabilities
Notes and accounts payable, short-term borrowings, and income taxes payable
The carrying values of notes and accounts payable, short-term borrowings, and income taxes payable approximate fair value
since they are scheduled to be settled in a short period of time.
Long-term debt and lease obligations
The fair values of long-term debt and lease obligations are measured at the present value of the total of the principal andinterest discounted by the interest rate applied to new loans.

29Derivative transactions
Information on the fair value of derivatives is included in Note 15.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined

2013
1,010

Thousands of
U.S. Dollars
2014$
10,026

1,243

12,332Millions of Yen
Unlisted securities
Investments in unconsolidated subsidiary andassociated companies

¥

2014
1,023

¥

1,258

(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

¥
¥

7,045
33,71240,757Due in one
year or less
Cash and cash equivalents
Notes and accounts receivable
Total

$
$

69,067
330,514399,581Millions of Yen
2014
Due after one
Due after five
year throughyears throughfive years
10 years
512
¥
512
¥
Thousands of U.S. Dollars
2014
Due after one
Due after five
year throughyears throughfive years
10 years
$
5,016
$
5,016
-

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. The Group also enters into currency and interest rate swap contracts to manage
its interest rate exposures on long-term debt.
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.
Derivative transactions to which hedge accounting is applied for the years ended March 31, 2014 and 2013, were as follows:30

Millions of Yen

2014
Hedgeditem

Contract
amountContract
amountdue after
one year

Fair
value

2013

Contract
amountContract
amountdue after
one year

Fair
value

Currency:
Forward foreign currency contracts
Buying
USD
EUR
TWD
GBP
THB

Advancepayments ¥Advancepayments
Advancepayments
Advancepayments
Advancepayments

¥

1

¥

67

-

613

78

-

31

422

109

-

18

-

-

1,079

¥

¥

126

65

59

242

-

31

-

30

-

5

-

-

9

-

2

-

(32)

891

-

(165)

Selling
USD
Interest rate:
Interest rate currency swap contracts(USD floating rate receipt/
JPY fixed rate payment)Interest rate swap contracts(floating rate receipt/fixed rate payment)

Advances
received

Long-term¥ 2,500
debt
Longterm debt(including
current
portion)

1,300

¥

2,500

Note

¥ 2,500

1,300

Note

1,363

¥

2,500

Note

1,338

Note

Thousands of U.S. Dollars
2014
Hedgeditem

Contract
amountContract
amountdue after
one year

Fair
value

Currency:
Forward foreign currency contracts
BuyingUSD
EUR
TWD

Advancepayments $Advancepayments
Advancepayments

653

-

$

11

767

-

300

1,071

-

175

10,578-(312)

Long-term$ 24,510
debt$ 24,510

Selling
USD
Interest rate:
Interest rate currency swap contracts(USD floating rate receipt/
JPY fixed rate payment)

Advances
received

NoteInterest rate swap contracts
Long-term
12,745
12,745Note(floating rate receipt/fixed rate payment)
debt
Note: Fair values of interest rate currency swaps, which qualify for hedge accounting, and those of interest rate swaps, which qualify
for hedge accounting and meet specific matching criteria, are included in the fair values of the long-term debt in Note 1431

16. LOSS ON IMPAIRMENT OF PROPERTY, PLANT, AND EQUIPMENTThe Group recognized impairment loss on the following asset groups.
For the year ended March 31, 2014:
Asset group
Unused property
Pulp and paper plantengineering businessproperty
Cast steel and forgedproduct businessproperty

Millions of Yen
2014
3
¥

Thousands of U.S. Dollars
2014
$
27

Location
Shinano, Nagano

Account
Land, etc.

Fuji, Shizuoka

Machinery andequipment, etc.

11

112

Handa, Aichi

Machinery andequipment, etc.

41

401

¥

Total

55

$

540

The Group reviewed its long-lived assets for impairment as of March 31, 2014.
For the year ended March 31, 2014, the Group recognized an impairment loss for unused property since its market pricedecreased below its book value. For pulp and paper plant engineering business property, an impairment loss was also
recognized by write-down to a recoverable amount due to consecutive operating losses in the recent years. As a result,
impairment losses were recognized on machinery and equipment, buildings, and other in the amounts of ¥8 million ($77
thousand), ¥1 million ($16 thousand), and ¥2 million ($19 thousand), respectively. A further impairment loss was recognized
for cast steel and forged product business property by write-down to a recoverable amount due to the resolution for
dissolution of Nissha Washino Steel Co., Ltd., at its extraordinary shareholder’s meeting held on March 31, 2014. As a result,
impairment losses were recognized on machinery and equipment, lease assets, and other, in the amounts of ¥33 million ($318
thousand), ¥5 million ($53 thousand), and ¥3 million ($30 thousand), respectively.
For the year ended March 31, 2013:
Asset group
Unused property

Location
Aso, Kumamoto

Millions of Yen
2013
1
¥
1
¥

Account
Land
Total

The Group reviewed its long-lived assets for impairment as of March 31, 2013.
For the year ended March 31, 2013, the Group recognized an impairment loss of ¥1 million for unused property since its
market price decreased below its book value.
──────────────────────────────────────────────────────
17. RELATED-PARTY DISCLOSURESThe Parent directly owned 51.2% of the total shares of the Company as of March 31, 2014. The Company distributes
transportation vehicles to the Parent.
Transactions of the Company with the Parent for the years ended March 31, 2014 and 2013, were as follows:
Millions of Yen
Sales
Interest income
Interest expense¥

2014
24,36825¥

2013
21,68927
9Thousands of
U.S. Dollars
2014$
238,902247

The balances due to or from the Parent as of March 31, 2014 and 2013, were as follows:
Millions of Yen
Accounts receivable
Short-term borrowings

¥

2014
3,768
4,101

32

¥

2013
2,081
3,273

Thousands of
U.S. Dollars
2014$
36,94240,205

18. COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars
2014

Millions of Yen
2014
Unrealized (loss) gain on available-for-sale securities:(Losses) gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred (loss) gain on derivatives under hedge accounting:(Losses) gains arising during the year
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Total
Share of other comprehensive income in an associated company
Gains arising during the year
Income tax effectTotal
Total other comprehensive income

¥

2013

(628)
(514)
(1,142)
369
(773)

¥

¥

¥

(41)
16
(25)

¥
¥

(90)
(90)

¥

12
(4)
8
(880)

¥
¥

¥
¥

3,847
(156)
3,691
(1,270)
2,421

$

$

¥

4
(1)
3

$

(399)
154
(245)

¥
¥

(172)
(172)

$
$

(885)
(885)

$

¥

2,252

121
(47)
74
(8,628)¥$$$(6,161)(5,030)(11,191)
3,619(7,572)──────────────────────────────────────────────────────
19. SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2014, was approved at the Company’s shareholders’ meeting
held on June 27, 2014:
Year-end cash dividends, ¥2.5 ($0.02) per share

Millions of Yen
361¥

Thousands of U.S. Dollars$
3,539──────────────────────────────────────────────────────
20. 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 anddescriptive information about its reportable segments. Reportable segments are operating segments or aggregations ofoperating 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 theCompany’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, the Group
comprises segments by products or services based on the operational headquarters and there are three reportable segments:“Railway Rolling Stock,” “Transportation Equipment and Steel Structure,” and “Construction Equipment.”“Railway Rolling Stock” consists of manufacture and sales of rolling stocks, 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.
(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 upon arm’s-length transactions.

33

(3) Information of sales, profit (loss), assets, and other items was as follows:
Millions of Yen
2014
Reportable segment
Railway Transportation
Construction
Rolling Equipment andEquipment
Stock
Steel Structure
Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation
Increase in property, plant, and equipment
and intangible assets

Other¥ 79,100 ¥ 16,008 ¥ 21,479 ¥
23
577
28
¥ 79,123 ¥ 16,585 ¥ 21,507 ¥¥ 4,157 ¥ (280) ¥ 3,482 ¥¥ 77,536 ¥ 17,678 ¥ 20,884 ¥
¥

1,453

¥

413

3,476

¥

331

714

¥

1,074

Total

Reconciliations Consolidated

7,724 ¥124,311- ¥124,311
860
1,488 ¥ (1,488)
8,584 ¥125,799 ¥ (1,488) ¥124,311
348 ¥ 7,707 ¥ (1,003) ¥ 6,704
2,562 ¥118,660 ¥ 22,793 ¥141,453
49 ¥

2,629

16

4,897

¥

272

¥

486

2,901
5,383

Millions of Yen
2013
Reportable segment
Railway Transportation
Construction
Rolling Equipment andEquipment
Stock
Steel Structure
Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation
Increase in property, plant, and equipment
and intangible assets

Other

Total

¥ 34,721 ¥ 20,268 ¥ 17,419
41
364
148
¥ 34,762 ¥ 20,632 ¥ 17,567
760 ¥ 2,328¥ (1,041) ¥¥ 68,022 ¥ 18,726 ¥ 20,089¥ 10,610 ¥ 83,018
771
1,324
¥ 11,381 ¥ 84,342
879 ¥ 2,926¥¥ 5,388 ¥112,225- ¥ 83,018¥ (1,324)¥ (1,324) ¥ 83,018¥ (917) ¥ 2,009¥ 21,175 ¥133,400

¥

¥

¥

1,243

¥

460

2,885

¥

252

660
1,088

69 ¥

2,432

76

4,301

Thousands of U.S. Dollars
2014
Reportable segment
Railway Transportation
Construction
Other
Total
Rolling Equipment andEquipment
Stock
Steel Structure
Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation
Increase in property, plant, and equipment
and intangible assets

Reconciliations Consolidated

260
265

¥

2,692
4,566

Reconciliations Consolidated$775,489
229$775,718$ 40,756$760,159$156,942 $210,574
5,652
278
$162,594 $210,852$ (2,749) $ 34,135$173,318 $204,740$ 75,728
8,431$ 84,159$ 3,410$ 25,116$1,218,733
14,590$1,233,323$ 75,552$1,163,333- $1,218,733$(14,590)$(14,590) $1,218,733$ (9,833) $ 65,719$223,464 $1,386,797$ 14,244

$

$

484

$ 25,781$

157

48,01034,078

4,053
3,244

$

7,000
10,531

2,663$ 28,444

4,765

52,775

Notes:1. “Other” represents businesses that are not included in any reportable segment, which includes manufacture and sales ofRailway Rolling Stock inspection/maintenance systems, agricultural plants, pulp and paper plants, cast steel and forgedproducts, and real estate rental.
2. “Reconciliations” in segment profit (loss) include corporate expenses of ¥ (1,012) million ($(9,926) thousand) and ¥ (913)
million, elimination of intersegment transactions of ¥ 0 and ¥ 10 million, and adjustments in inventories of ¥ 4 million ($37
thousand) and ¥ (9) million for the years ended March 31, 2014 and 2013, respectively. 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 ¥ 20,685 million ($202,794 thousand) and ¥ 21,404
million, elimination of intersegment balances of ¥ (186) million ($(1,820) thousand) and ¥ (164) million, and adjustments
in inventories of ¥ (101) million ($(989) thousand) and ¥ (105) million as of March 31, 2014 and 2013, respectively. Total

34

corporate assets principally consist of investment securities and general management properties as of March 31, 2014 andof cash and cash equivalents, investment securities, and general management properties as of March 31, 2013.
4. Segment profit (loss) is reconciled to operating income in the consolidated statement of income.
Associated Information(1) Information about products and services is not disclosed since similar information is disclosed above.
(2) Information about geographical areas for the years ended March 31, 2014 and 2013, was as follows:

North America¥ 16,952

Millions of Yen
2014
Asia
¥ 32,328

Other
¥ 115

Total
¥ 124,311

Japan¥ 72,037

North America¥ 3,302

Millions of Yen
2013
Asia
¥ 7,178

Other
¥ 501

Total
¥ 83,018

Japan$ 734,470

Thousands of U.S. Dollars
2014North America
Asia$ 166,198$ 316,937

Other
1,128

Total
$ 1,218,733

Other

Total

Japan
¥ 74,916

Sales

Sales

Sales

$

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

Japan
Property, plant,
and equipment¥ 26,630

Japan
Property, plant,
and equipment¥ 28,014

Japan
Property, plant,
and equipment$ 261,077

Millions of Yen
2014
Asia

North America
¥

¥ 1

7,671

Millions of Yen
2013
Asia

North America
¥

¥

Other

¥ 0

4,329

¥

Thousands of U.S. Dollars
2014North America
Asia$

75,210¥ 34,302

0

Total¥ 32,343

0

Other

$ 6

$

Total

0

$ 336,293(3) Information about major customers
Sales
Thousands of
U.S. Dollars
2014

Millions of Yen
Name of major customer
Sumitomo Corporation

2014¥

31,063

2013
¥

-

$

304,542

The Parent

24,36821,689238,902

Sumitomo Corporation of Americas

14,704-

144,157

35

Relatedsegment
Railway
Rolling Stock
Railway
Rolling Stock
Railway
Rolling Stock(4) Information about loss on impairment of property, plant, and equipment by reportable segment
Millions of Yen
2014

Impairment loss

Reportable segment
Railway
Transportation Construction
Rolling
Equipment andStockSteel Structure Equipment
-

Other
¥

Total

52

¥

Reconciliations Consolidated

52

¥

3

¥

55

Millions of Yen
2013

Impairment loss

Reportable segment
Railway
Transportation Construction
Rolling
Equipment andStockSteel Structure Equipment
-

Other

Total
-

Reconciliations Consolidated
-

¥

1

¥

1

Thousands of U.S. Dollars
2014

Impairment loss

Reportable segment
Railway
Transportation Construction
Rolling
Equipment andStockSteel Structure Equipment
-

36

Other
$

513

Total
$

513

Reconciliations Consolidated
$

27

$

540

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

328,000,000 shares

Common Stock:Issued

146,750,129 shares

Number of Shareholders

14,204 persons(March 31, 2014)

Line of BusinessCompany History
Sep. 1896
Jun. 1938
May. 1949
Jan. 1959
Oct. 1961
Jul. 1964
Jun. 1975
Sep. 1996
Aug. 2008
		
Sep. 2010
Jul. 2012
		

Established in Nagoya City.
Founded Narumi Plant.
Re-listed on Tokyo Security 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 3000th Shinkansen EMU.
Founded Rochelle Plant of NIPPON SHARYO
U.S.A., INC.

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

Other

Lines of business
EMUs, Railway Motor Cars, 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, Real Estate Rental, Cast
Steel Products, Forged Products

Directory
OFFICEHEAD OFFICE (NAGOYA)TOKYO OFFICEOSAKA BRANCHSHANGHAI REPRESENTATIVE OFFICE

1-1 Sanbonmatsu-cho,Atsuta-ku, Nagoya 456-8691, JAPAN
Phone: +81-52-882-3316
Fax : +81-52-882-3781

12th Fl. Marunouchi Central Bldg.
1-9-1 Marunouchi,
Chiyoda-ku, Tokyo 100-0005 JAPAN
Phone: +81-3-6688-6789
Fax : +81-3-6688-6809

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

Tomson Centre Room A1607,
No.228 Zhangyang Road,
Pudong New District,
Shanghai, PRC
Phone: +86-21-5888-8706
Fax : +86-21-5888-8705

TOYOKAWA PLANT

NARUMI PLANTKINUURA PLANTNIPPON SHARYO U.S.A.,INC.

2-20 Honohara,
Toyokawa, Aichi-pref 442-8502, JAPAN
Phone: +81-533-85-4112
Fax : +81-533-85-3619

80 Ryucho, Narumi-cho,
Midori-ku, Nagoya 458-8502, JAPAN
Phone: +81-52-623-3311
Fax : +81-52-623-4349

20 11-gouchi,
Handa, Aichi 475-0831, JAPAN
Phone: +81-569-22-7511
Fax : +81-569-22-7577

2340 S. Arlington Heights Road,
Suite 605 Arlington Heights,
IL 60005 U.S.A.
Phone: +1-847-228-2700
Fax : +1-847-228-5530

PLANT(Railway rolling stock & other transportation equipment)(Construction equipment)(Steel structure)37