Annual Business Report
April 1, 2022 through March 31, 2023

NIPPON SHARYO, LTD. and Consolidated Subsidiaries

Financial Highlights
Comparison of Sales by Segment(Unit: millions of yen)
193rd period(2021-2022)

194th period(2022-2023)

Business Segment

Increase/(Decrease)

Railway rolling stock

53,342

54.4

47,958

51.0

5,384

11.2

Transportation equipment
and Steel structure

15,52915.913,855

14.7

1,674

12.1

Construction equipment

19,882

20.3

20,186

21.5

(304)

(1.5)

Engineering

9,155

9.3

11,95712.7(2,802)(23.4)

Other

61

0.1

66

0.1

(5)

(6.4)

Total

97,969100.0

94,022

100.0

3,947

4.2

Change in Operating Performance and Asset Status(Unit: millions of yen except Net income per share)
193rd period
192th period(2021-2022)(2020-2021)

194th period(2022-2023)

Titles of accountNet sales

97,96994,02299,448

Income before income taxes

4,232

6,042

9,274

Net income attributableto owners of the parent

3,118

5,227

7,929

Net income per share¥216.08¥362.14¥549.31

Total assets

124,364

132,868

136,596

Total equity

51,12348,01845,288Comparison of Sales by Segment(Millions of Yen)
120,000

Other

100,000

Engineering

80,000Construction
equipment

60,000Transportationequipment and Steelstructure
Railway rolling stock

40,00020,0000
194th period

193rd period

192th period

Contents
Message from the President

2

Review by Segment

5

Investment in Plant and Equipment

6

Financing Activities

6

Consolidated Financial Statements and Independent Auditor's Report

7

Corporate Information

59

Directory

59

Series N700S Shinkansen Super-Express EMU

1

Message from the President
Review of Business Operations
During the fiscal year ended March 31, 2023 (hereinafter referred to as the “fiscal year underreview”), the Japanese economy showed signs of a gradual recovery as measures against novel
coronavirus disease (COVID-19) infections and restrictions on economic activities were eased andsocial and economic activities normalized. However, the outlook remains uncertain, with the need toclosely pay attention to the risks of a downturn in the Japanese economy caused by an increase incommodity prices due to soaring raw material and energy prices and a slowdown in overseas
economies due to global monetary tightening policies.
As a result of this business environment, the Group’s net sales for the fiscal year under review cameto ¥97,969 million, an increase of 4.2% from the previous year, helped by increases in the railway
rolling stock business and the transportation equipment and steel structure business. With regard to
profit, the railway rolling stock business, the transportation equipment business, the construction
equipment business and the engineering business recorded decreases, resulting in overall operating
income dropping by 28.5% year on year to ¥4,461 million, income before income taxes falling 30.0%
year on year to ¥4,232 million, and net income attributable to owners of the parent declining 40.3%
year on year to ¥3,118 million.

The Outlook
In our medium-term business plan, “Nippon Sharyo Innovative Change 2030,” we declared ourlong-term vision to be “a business partner that solves customers’ problems by providing safety andreliability in the workplace,” which represents the ideal form we desire to become by 2030. We arepromoting the areas of focus as the following three pillars to achieve this vision.
(1) Thorough strengthening of profitability (the ability to generate profit)(2) Reforming the foundations of the business for growth(3) Achieving a transformation of the business modelWith the aim of enhancing corporate value over the medium and long term, the Board of Directors has
also formulated a basic policy on sustainability designed to appropriately address sustainability issues,
including social and environmental problems. In addition, an Executive Sustainability Committee,
chaired by the President and Chief Executive Officer, has been established to identify materiality froma long-term perspective and to promote initiatives to resolve them.

In light of the projected decline in revenue in the consolidated earnings forecast for the next fiscal
year, we are working to improve business management and profitability, including further cost
reductions. The challenges to be addressed by each business are as follows.

2We expect the order environment to remain difficult for the railway rolling stock business going
forward, due to contractions in upgrade demand caused by the prolongation of the impact of COVID19, etc. In response to this environment, we will leverage our strength in handling a wide variety ofrolling stock, such as Shinkansen trains, limited express trains, commuter trains, and operational
vehicles. In addition, we will continue to strengthen our competitiveness by differentiating ourselves
through “N-QUALIS,” a brand that builds the next generation with its enhanced and advanced safety,
quality, and maintenance, and by striving to reduce costs through reforming production processes.
In the transportation equipment and steel structure business, the adverse situations for solicitingorders still remain, although a certain level of demand is expected to continue for various types of tanktrucks, carriers for steel mills, and Automated Guided Vehicles mainly due to demand for equipment
renewals. In this environment, we are working on launching new products aimed at meeting market
needs, and on R&D aimed at introducing new technology, primarily in the area of our mainstay highpressure gas tank trucks and heavy duty carriers. In addition, we will take steps to reduce costs throughactions such as standardizing design, while strengthening our competitiveness and acquiring newcustomers. For steel structures, we forecast that a certain level of orders for the construction of newsteel bridges will be maintained, but the order environment is likely to be difficult. Conversely, repair
and maintenance work to deal with deterioration is becoming increasingly important, as it can be seenfrom the trend of increasing orders for major upgrade and renovation programs for expressways. In
response to this environment, we will continue to strengthen our ability to provide technical proposals
for new bridges, as well as secure order volume. At the same time, in the repair and maintenancebusiness, we will leverage the knowledge we have accumulated in the course of bridge repair work
conducted during major repair work on the Tokaido Shinkansen to grow our orders for repair andmaintenance of highway bridges.
Market demand for the construction equipment business is expected to continue from urban
redevelopment projects in the domestic market, and a certain level of construction demand is expected
to continue in overseas markets. In these market situations, we will leverage our development andmanufacturing knowledge in construction equipment, including pile-driving rigs, and respond flexibly
to the needs of different regions, while striving to strengthen our competitiveness through the adoptionof electrification, automation, and energy-saving technology.
In the engineering business, mechanical equipment for railway companies, country elevator, andpaper-making facility are essential components of social infrastructure, and we expect a certain levelof demand to continue going forwards. In addition to enhanced safety and reduced power consumption,customers are requiring labor-saving features and improved maintainability for such equipment toaddress labor shortages caused by the aging of the population. In response, we will provide detailed
proposals to meet market needs, enabling us to secure profits.
As a countermeasure against the deteriorating financial situation caused by the large losses incurred3

on large railway car projects in the past for the U.S. market, we transferred in April 2017 the plant
property of Toyokawa Plant, Kinuura Plant, and Narumi Plant to our parent company (Central Japan
Railway Company). Further, in November 2017, we took out a long-term loan of ¥35 billion from theparent company.
In FY 2021, we started the repayment of the above long-term debt and in March 2023 werepurchased one of the transferred plant properties, Toyokawa Plant, from the parent company. We
will continue to work on gradually reducing long-term debt and strengthening our financial foundation
as well as to strengthen our business capabilities by promoting improvements in business management
and profitability that we are working on.

Mamoru Tanaka
President and Chief Executive Officer

4Review by Segment
Railway Rolling Stock Business
Our sales to the JR Companies, including Series N700S
Shinkansen Super-Express EMU, Series HC85 "Hida/Nanki", andSeries 315 Express EMU to Central Japan Railway Company
resulted in net sales of ¥48,541 million. Sales to public and private
railways included trains provided to Nagoya Railroad Co.,
Ltd., Nagoya City’s Transportation Bureau, and Shin-

Series N700S Shinkansen Super-Express EMU

Keisei Electric Railway Co., Ltd., resulting in net sales of ¥4,801
million. As a result of these increases in rolling stock for JR
Companies and others, the railway rolling stock business recorded net
sales of ¥53,342 million, up 11.2% year on year.

Model 80000 EMU

Transportation Equipment and Steel Structure BusinessIn the transportation equipment business, sales of AutomatedGuided Vehicles rose year on year.
In the steel structures business, sales were recorded for the works
on Yumeshima NorthBridge, Sugegaya Bridge Bearing Replacement, andSakura-machi Pedestrian Bridge, and sales related to highway bridges
to government and municipal offices increased year on year.
As a result of the

Bulk Tank Truck

above, net sales for thetransportation equipment and steel structure business came to¥15,529 million, up 12.1% year on year.

Sakura-machi Pedestrian Bridge

Construction Equipment Business
Sales of casting rotators increased year on year driven by thedemand for urban redevelopment projects, but sales of compact
piling rigs and other equipment declined, resulting in net sales in
the construction equipment business of ¥19,882 million, a declineof 1.5% from the previous year.

Casing Rotators

5

Engineering Business
The main components of sales in this business included mechanicalequipment for railway companies as well as manufacturing equipment
for household paper manufacturers and agricultural plant facilities forJapan Agricultural Cooperatives all over Japan. As a result of a decline
in sales of manufacturing equipment to household paper manufacturers,
net sales in the engineering business totaled ¥9,155 million, a decline of
23.4% from the previous year.
Recycling Equipment

The order backlog at the end of the fiscal year under review was¥150,337 million. The components of this were ¥105,106 million in the railway rolling stock business,¥24,334 million in the transportation equipment and steel structure business, ¥18,781million in theconstruction equipment business, and ¥2,116 million in the engineering business.

Investment in Plant and Equipment
Plant and equipment investment during the fiscal year under review totaled ¥1,803 million. Investment
was mainly targeted at renewal of equipment to maintain and improve the production capacity at eachplant.
In April 2017, we transferred the plant property of Toyokawa Plant, Kinuura Plant, and Narumi Plant toour parent company (Central Japan Railway Company). Since the relevant transaction is a transaction with
our parent company, and we concluded a lease contract with our parent company and continuously use thetransferred plant property as plants as before even after transfer, we recorded the “land” and “buildings andstructures” of this plant property as tangible fixed assets instead of executing sales and purchaseaccounting. The relevant transaction is not a finance lease transaction, so we recorded the transfer price ofthe plant property as a long-term debt (including current portion of long-term debt).
Therefore, plant and equipment investment concerning the transferred plant property was also recorded
as “buildings and structures,” “machinery and equipment,” and “other,” and some of the equipment
investment amount as long-term debt (including current portion of long-term debt).
In addition, we repurchased one of the transferred plant properties, Toyokawa Plant, from the parent
company in March 2023. As a result, long-term debt decreased.

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

6

NIPPON SHARYO, LTD. ANDCONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2023
AND
INDEPENDENT AUDITOR’S REPORT

7

INDEPENDENT AUDITOR'S REPORTTo the Board of Directors of NIPPON SHARYO, LTD.:
OpinionWe have audited the consolidated financial statements of NIPPON SHARYO, LTD. and its consolidated subsidiaries (the "Group"),which comprise the consolidated balance sheet as of March 31, 2023, and the consolidated statement of income, consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for theyear then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, allexpressed in Japanese yen.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Group as of March 31, 2023, and its consolidated financial performance and its consolidated cash flows for the year
then ended in accordance with 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 arepresented solely for the convenience of readers outside Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards
are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We
are independent of the Group in accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled ourother ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matter Description

How the Key Audit Matter Was
Addressed in the Audit[Revenue recognition of performance obligations satisfied overtime]
As stated in Note 3 to the consolidated financial statements,
the Group recognizes revenue where performance obligations
are satisfied over time in construction contracts. The revenue
recognized where performance obligations are satisfied overtime amounted to ¥10,517 million for the year ended March 31,2023.
In applying revenue recognition where performanceobligations are satisfied over time, the amount of construction

Our audit procedures to test the construction revenue
recognized where performance obligations are satisfied overtime included the following, among others:
Evaluated the design and operating effectiveness ofcontrols over the process of identifying ordered projects
subject to the revenue recognition where performanceobligations are satisfied over time, the process of
preparing and approving the working budget of
estimated total construction costs and the process of
calculating revenue in applying the revenue recognition

8

revenue for each project is its total construction revenue as
estimated gross revenue multiplied by the percentage ofincurred cost of construction to its total cost of construction
based on the working budget.
The working budget of the total construction costs includes
estimates of material costs, labor costs and subcontractor costs,
etc. These significant assumptions mainly include locations andtiming of construction projects, degrees of difficulty of
construction based on the construction method and cost
improvement effects of skill levels based on past construction
performance, etc.
In addition, since the working budget of the total cost of
construction requires updating each time when the designs arechanged, it is necessary to reflect such changes to the revenue
recognition where performance obligations are satisfied overtime, based on timely determination of the degrees and rangesof the effects of the design changes on the working budget.
We have identified the revenue recognition where
performance obligations are satisfied over time as a key audit
matter since the estimate of total cost of construction used in
the revenue recognition of performance obligations satisfied
over time is affected by the significant assumptions made bymanagement.

[Valuation of work in process and provision for loss on orders
received in railway rolling stock business]
As stated in Note 5 to the consolidated financial statements,
the Group recognized work in process of ¥22,229 million as ofMarch 31, 2023. Most of the work in process was the railway
rolling stock business related assets. In addition, as stated in
Note 3 to the consolidated financial statements, the cost of sales
included the write-down of work in process and otherinventories and provision for loss on orders received of ¥1,713
million for the year ended March 31, 2023.
The Group compares the order amount and the estimatedtotal cost for each order when calculating write-down andprovision for loss on orders received related to work in process
in railway rolling stock business. The estimated total cost isbased on the working budget prepared for each order andincludes estimated material costs, labor costs, subcontracting
costs and other expenses at each related department in thebusiness unit. The significant assumptions of the estimates ofthese costs include the impact of price fluctuations, theapplicability of know-how based on the past design andmanufacturing of similar railway rolling stock, load forecast
based on actual results and cost improvement due to progressin mass production of the similar railway rolling stock andimprovement of cost proficiency.
We have identified the valuation of work in process andprovision for loss on orders received in railway rolling stockbusiness as a key audit matter since the estimated total cost perorder is affected by the significant assumptions made bymanagement.

9

where performance obligations are satisfied over time.
Examined whether the amount of the estimated total
cost for each contract unit were consistent with theworking budget approved by the general manager of thesteel structure business division.
Compared the labor cost ratio and subcontractor cost
ratio for construction works based on characteristics ofconstruction projects by contractor, bridge types, timing,
location, term and method of constructions with thosefor past years and examined if the monthly costs by cost
category were consistent with the cost structure and thework progress.
Examined the rationality of the estimated changed total
cost of construction with design change agreements
selected from those accounted for by the revenue
recognition where performance obligations are satisfied
over time by comparing with the inquiries toappropriate people in positions in related departmentsor the latest internal material costs forecasting.

Made site inspection for selected construction projects
subject to the revenue recognition where performanceobligations are satisfied over time and tested theconsistency of cost of construction incurred with thestage of the completion of the contract by comparing the
progress toward completion to the whole contract period
or total construction process.
Our audit procedures to evaluate the reasonableness ofvaluation of work in process and provision for loss on orders
received included the following, among others:
Evaluated the design and operating effectiveness ofcontrols over the process of identifying orders for which
order losses had occurred in the railway rolling stockbusiness, the process of preparing and approving
working budgets of the total estimated costs and theprocess of evaluating loss on work in process and loss onorders received.

Examined the consistency of the schedule forcalculating the estimated loss on orders received andthe list of construction contracts outstanding as ofMarch 31, 2023 for testing the completeness ofidentifying the estimated loss on orders received.
Compared the Group’s judgment of the estimated loss
on orders received with the profit/loss experience of thesimilar railway rolling stock in the prior periods and themost recent estimated cost of construction projects andevaluated the reasonableness of the estimated loss onorders received.
Regarding the subject of the order with expected loss,
we compared the amount of each item of cost
breakdown between the latest production of similar
railway rolling stock and the subject of the order inprocess, and examined whether the items to be reflectedin the estimated total cost were comprehensively
considered. In addition, considering the impact of pricefluctuations, etc., the accuracy of the estimated total cost
was evaluated by comparing the material costs,
expenses or labor hours for each manufacturing processincluded in the manufacturing costs per latest similar
railway rolling stock with the material costs ,etc., perrailway rolling stock included in the estimates made bymanagement.

Other Information
Management is responsible for the other information. Audit & Supervisory Board members and the Audit & Supervisory Board are
responsible for overseeing the Directors' execution of duties relating to the design and operating effectiveness of the controls over theother information. The other information comprises the information included in the Annual business report, but does not include theconsolidated financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doingso, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Audit & Supervisory Board Members and the Audit & Supervisory Board for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted inJapan and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the Directors' execution ofduties relating to the design and operating effectiveness of the controls over the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted inJapan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.

10

As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks. The procedures selected depend on the auditor's judgment. In addition, we
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentionalomissions, misrepresentations, or the override of internal control.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's reportto the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are in accordance with accounting
principles generally accepted in Japan, as well as the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Groupto express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance ofthe group audit. We remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide Audit & Supervisory Board members and the Audit & Supervisory Board with a statement that we have compliedwith relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with Audit & Supervisory Board members and the Audit & Supervisory Board, we determine thosematters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about thematter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

11

Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to
the provisions of the Certified Public Accountants Act of Japan.

水上 圭祐
Keisuke Mizukami
Designated Engagement Partner
Certified Public Accountant

September 27, 2023

12

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2023

ASSETS

Millions of Yen
2023
2022

Thousands of
U.S. Dollars(Note 1)
2023

23,263$CURRENT ASSETS:
Cash and cash equivalents (Notes 14 and 16)¥

Notes and accounts receivable, and contract assets(Notes 4, 14, 16 and 19)¥

29,112

174,91222,087
26,82820,51031,031

166,069
201,713

748

709

5,622

72,92681,362548,316

Land (Note 10)

14,143

14,171

106,336

Buildings and structures (Note 10)26,265

26,345

197,484

Machinery and equipment

34,741

35,521

261,210

Construction in progress

199

178

1,494

75,34876,215566,524(47,796)(47,852)(359,368)

27,55228,363

207,156

Investment securities (Notes 6, 10 and 14)
Investments in an unconsolidated subsidiary and associatedcompanies (Note 14)

16,173

15,673

121,599

991

947

7,448

Asset for employees’ retirement benefits (Note 9)

5,302

5,128

39,868

144

149

1,080

1,276

1,246

9,600

23,88623,143

179,595

Inventories (Notes 2.i and 5)
Other current assets
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 10)
Total investments and other assets
TOTAL

¥

124,364¥

132,868$

935,067(Continued)

13

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2023
Thousands of
U.S. Dollars(Note 1)
2023

Millions of Yen
2023
2022

LIABILITIES AND EQUITYCURRENT LIABILITIES:Current portion of long-term debt (Notes 8, 10, 14 and 16) ¥Current portion of lease obligations (Notes 11 and 14)
Notes and accounts payable (Notes 7 and 14)
Accrued expenses (Note 16)
Advances received (Note 19)
Income taxes payable (Note 13)
Allowance for work in process on construction contracts(Notes 2.m and 5)
Provision for losses on orders received (Note 2.n)Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 8, 10, 14 and 16)
Liability for employees’ retirement benefits (Note 9)
Lease obligations (Notes 11 and 14)
Provision for compensation for health damage fromasbestos
Deferred tax liabilities (Note 13)
Other long-term liabilities
Total long-term liabilities

EQUITY (Note 12):
Common stock,authorized, 32,800,000 shares;
issued, 14,675,012 shares in 2023 and 2022
Retained earnings
Treasury stock, at cost, 243,535 shares in 2023
and 242,928 shares in 2022
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total equity
TOTAL

¥

3,194
611
18,795
4,758
498
486

¥

3,370
633
20,510
3,987
1,076
712

$

24,016
4,597
141,318
35,771
3,743
3,657

487

272

3,664

501
181
29,51149
365
30,974

3,765
1,355
221,886

38,166292
1,345

48,763280
1,299

286,960
2,193
10,113

75

105

564

3,644
208
43,7303,266
163
53,876

27,402
1,562
328,794

11,81133,226

11,81130,39688,802249,819

(524)

(522)

(3,936)

6,733(2,241)
1,956
6,448
162
51,123
124,364

6,329(2,243)
2,096
6,182
151
48,018132,868

50,621(16,848)
14,70848,481
1,221
384,387
935,067¥$(Concluded)

See notes to consolidated financial statements.

14

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2023
Thousands of
U.S. Dollars(Note 1)
2023

Millions of Yen
2023
2022
NET SALES (Notes 16 and 19)¥

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

97,969¥94,022$736,61185,42880,732642,317

12,541

13,29094,294

8,080

7,052

60,752

4,461

6,238

33,542

307
(325)
28
9

281
(345)
64
157

2,312
(2,442)
210
64

-

(245)

-

OTHER (EXPENSES) INCOME
Interest and dividend income (Note 16)
Interest expense (Note 16)
Equity in earnings of associated companies
Gain on sales of investment securities, net (Note 6)
Loss on impairment of property, plant and equipment(Note 15)
Loss on sales and disposals of property, plant andequipment
Other-net
Other expenses – net
INCOME BEFORE INCOME TAXES

(5)

(164)

(36)

(243)
(229)
4,232

56
(196)
6,042

(1,833)(1,725)31,817

INCOME TAXES (Note 13):
Current
Deferred
Total income taxes

818
279
1,097

886
(87)
799

6,150
2,100
8,250

3,135

5,243

23,567

17

16

120

NET INCOME
NET INCOME ATTRIBUTABLE TO NON-CONTROLLINGINTERESTS
NET INCOME ATTRIBUTABLE TO OWNERS OF
THE PARENT

¥

3,118

¥

5,227

Yen

PER SHARE OF COMMON STOCK (Note 2.u):
Basic net income
Cash dividends applicable to the year¥

See notes to consolidated financial statements.

15

216.0820.00$

23,447

U.S. Dollars¥

362.14
20.00

$

1.62
0.16

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2023
Thousands of
U.S. Dollars(Note 1)
2023

Millions of Yen
2023
2022
NET INCOME

¥

3,135

OTHER COMPREHENSIVE INCOME (LOSS) (Note 17):
Unrealized gain (loss) on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income in associatedcompanies
Total other comprehensive income (loss)
COMPREHENSIVE INCOME
¥

265
3,400

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE
TO:¥
Owners of the parent
Non-controlling interests

3,384
16

See notes to consolidated financial statements.

16

¥

5,243

$

23,567

377
2
(140)

(2,321)
(15)
65

2,835
17
(1,052)

26

4

198

¥

¥

(2,267)
2,976

2,959
17

$

$

1,998
25,56525,445120

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2023
Millions of Yen
Accumulated other comprehensive income

BALANCE, APRIL 1, 2021
(April 1, 2021, as previously reported)
Cumulative effect of change inaccounting policy
BALANCE, APRIL 1, 2021
(as restated)
Cash dividends
Net income attributable to owners of
the parent
Increase in treasury stock, net

Number ofshares ofcommon stock
outstanding

Commonstock

Retainedearnings

14,432,903¥ 11,811¥ 25,409

-

-

49

-

-

-

-

-

-

49

14,432,903

11,81125,458

(520)

8,646

(2,228)

2,031

8,449

139

45,337

-

-

(289)

-

-

-

-

-

-

(289)

-

-

5,227

-

-

-

-

-

-

5,227

(819)

-

-

(2)

-

-

-

-

-

(2)

-

-

-

-

(2,317)(15)

65(2,267)12(2,255)

14,432,084

11,81130,396

(522)

6,329

(2,243)

2,096

6,182

151

48,018

-

(288)

-

-

-

-

-

-

(288)

-

3,118

-

-

-

-

-

-

3,118

-

-

(2)

-

-

-

-

-

(2)

-

-

-

404

2

(140)

266

11

277

¥ 11,811¥ 33,226

Net changes in the year
BALANCE, MARCH 31, 2022
Cash dividends
Net income attributable to owners of
the parent
Increase in treasury stock, net(607)

Net changes in the year
BALANCE, MARCH 31, 2023

Total
accumulated
othercomprehensive
income14,431,477

Treasury
stock
¥

¥

(520)

(524)

DefinedUnrealized gain on Foreign currencytranslation
retirement benefit
available-for-saleadjustments
plans
securities
¥

¥

8,646

¥

6,733

¥

(2,228)(2,241)

¥

¥

2,031

1,956

¥

¥

8,449

6,448

Non-controllinginterests
¥

¥

139

162

Total
equity¥¥45,28851,123Thousands of U.S. Dollars (Note 1)
Accumulated other comprehensive income

DefinedUnrealized gain on Foreign currencytranslation
retirement
benefitavailable-for-saleadjustments
plans
securities$
47,589$ (16,865)$
15,760Commonstock$ 88,802

Retainedearnings$ 228,543

Treasurystock$ (3,922)

Cash dividends
Net income attributable to owners of
the parent
Increase in treasury stock, net-(2,171)

-

-

-

-

-

23,447

-

-

-

-

-

(14)

-

Net changes in the year

-

-

-

3,032

BALANCE, MARCH 31, 2022

BALANCE, MARCH 31, 2023

$ 88,802$

249,819$(3,936)$50,621

See notes to consolidated financial statements.

17

$

Total
accumulated
othercomprehensive
income$ 361,044--(2,171)---

23,447

-

-

-

-

(14)

17

(1,052)

1,997

84

2,081

1,221

$ 384,387$

14,708$46,48448,481$Total
equity1,137(16,848)$

Non-controllinginterests$

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2023
Thousands of
U.S. Dollars(Note 1)Millions of Yen
2023
2022
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes paid
Depreciation
Loss on impairment of property, plant and equipment(Gain) loss on sales and disposals of property, plant andequipment
Loss on valuation of investment securities
Gain on sales of investment securities
Changes in assets and liabilities:(Increase) decrease in trade notes and accounts receivable,
and contract assets
Decrease (increase) in inventories(Decrease) increase in trade notes and accounts payable
Increase in allowance for work in process on construction
contracts
Increase in provision for losses on orders received(Decrease) increase in provision for compensation for
health damage from asbestos
Decrease in advances received
Increase in liability for employees’ retirement benefits
Other-net
Net cash provided by operating activities
INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Other-net
Net cash used in investing activities

¥

4,232
(1,021)
2,706

¥

2023

6,042

$

31,817(1,401)
2,693
245(7,679)20,350
-

(9)

15
43
(157)

(926)
(64)

(1,823)4,203(2,783)

9,319(1,405)967(13,705)
31,604(20,927)

215
451

240
49

1,620
3,393

(30)
(585)
12
1,708
7,153

13
(95)
21
(2,082)
14,507(226)(4,399)87
12,83753,782(1,733)
186
(0)
198
(231)
(1,580)(2,561)
59
(3)
44
(176)
(2,637)(13,027)
1,398
(0)
1,488
(1,738)(11,879)(123)-(Continued)

18Thousands of
U.S. Dollars(Note 1)
2023

Millions of Yen
2023
2022
FINANCING ACTIVITIES:
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Other-net
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR¥

109
(11,147)
(287)
(106)
(11,431)

191(3,364)(287)(111)(3,571)

822(83,812)(2,160)(800)(85,950)

9

46

74

(5,849)29,112

8,345
20,767(43,973)
218,885

23,263¥29,112$

174,912(Concluded)
See notes to consolidated financial statements.

19

NIPPON SHARYO, LTD. and Consolidated Subsidiaries

Notes to Consolidated Financial Statements
Year Ended March 31, 2023
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting
regulations and in accordance with accounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards (IFRS).
In preparing these consolidated financial statements, certain reclassifications and rearrangements havebeen made to the consolidated financial statements issued domestically in order to present them in aform which is more familiar to readers outside Japan. In addition, certain reclassifications have been
made in the 2022 consolidated financial statements to conform to the classifications used in 2023.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which
NIPPON SHARYO, LTD. (the “Company”) is incorporated and operates. The translations of Japanese
yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japanand have been made at the rate of ¥133 to $1, the approximate rate of exchange at March 31, 2023.
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation
The consolidated financial statements as of March 31, 2023, include the accounts of the Company andits significant subsidiaries (together, the “Group”). Under the control and influence concepts, thosecompanies in which the Company, 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 associated companies are accounted for by the equity method. Investments in theremaining unconsolidated subsidiary and associated company are stated at cost. If the equity methodof 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 have been eliminated on consolidation. All
material unrealized profit included in assets resulting from transactions within the Group was also
eliminated.

20

The number of the consolidated subsidiaries, unconsolidated subsidiary, and associated companies forthe years ended March 31, 2023 and 2022, was as follows:

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

2023
4
1
2
1

2022
4
1
2
1

The fiscal year-end of NIPPON SHARYO MANUFACTURING, LLC is December 31 and its
financial statements with the closest closing date prior to that of the Company are used forconsolidation purposes. Necessary adjustments for significant transactions from January 1 to March
31 are made for consolidation purposes.
For the equity method associated companies that have a different fiscal year from that of the Company,
the associated companies’ financial statements with the closest closing date prior to that of theCompany are used for consolidation purposes.

b. Unification of accounting policies applied to foreign subsidiaries for the consolidated financial
statements
Under Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force (“PITF”) No. 18,“Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for theConsolidated Financial Statements,” the accounting policies and procedures applied to a parent
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 by foreign subsidiaries in accordance with either IFRS or generally accepted
accounting principles in the United States of America (Financial Accounting Standards Board
Accounting Standards Codification―“FASB ASC”) tentatively may be used for the consolidation
process, except for the following items that should be adjusted in the consolidation process so that net
income is accounted for in accordance with Japanese GAAP, unless they are not material: (a)amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has beenrecorded in equity through other comprehensive income; (c) expensing capitalized development costsof research and development (R&D); (d) cancellation of the fair value model of accounting for property,
plant and equipment and investment properties and incorporation of the cost model accounting; and(e) a gain or loss through profit or loss on the sale of an investment in an equity instrument for thedifference between the acquisition cost and selling price, and recording impairment loss through profit
or loss for other-than-temporary declines in the fair value of an investment in an equity instrument,
where a foreign subsidiary elects to present in other comprehensive income subsequent changes in thefair value of an investment in an equity instrument.

21

c. Unification of accounting policies applied to associated companies for the equity method
ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments,”
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.
In addition, financial statements prepared by foreign associated companies in accordance with either
IFRS or FASB ASC tentatively may be used in applying the equity method if the following items areadjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are notmaterial: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss on pensions
that has been recorded in equity through other comprehensive income; (c) expensing capitalized
development costs of R&D; (d) cancellation of the fair value model of accounting for property, plantand equipment and investment properties and incorporation of the cost model of accounting; and (e)recording a gain or loss through profit or loss on the sale of an investment in an equity instrument forthe difference between the acquisition cost and selling price, and recording impairment loss throughprofit or loss for other-than-temporary declines in the fair value of an investment in an equity
instrument, where a foreign associate elects to present in other comprehensive income subsequentchanges in the fair value of an investment in an equity instrument.

d. Business combinations
Business combinations are accounted for using the purchase method. Acquisition-related costs, suchas advisory fees or professional fees, are accounted for as expenses in the periods in which the costs
are incurred. If the initial accounting for a business combination is incomplete by the end of thereporting period in which the business combination occurs, an acquirer shall report in its financial
statements provisional amounts for the items for which the accounting is incomplete. During themeasurement period, which shall not exceed one year from the acquisition, the acquirer shallretrospectively adjust the provisional amounts recognized at the acquisition date to reflect new
information obtained about facts and circumstances that existed as of the acquisition date and thatwould have affected the measurement of the amounts recognized as of that date. Such adjustments
shall be recognized as if the accounting for the business combination had been completed at theacquisition date. A parent’s ownership interest in a subsidiary might change if the parent purchases orsells ownership interests in its subsidiary. The carrying amount of non-controlling interest is adjusted
to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its
controlling interest in its subsidiary. Any difference between the fair value of the consideration
received or paid and the amount by which the non-controlling interest is adjusted is accounted for as
capital surplus for as long as the parent retains control over its subsidiary.

e. Cash equivalents
Cash equivalents are short-term investments that are readily convertible into cash and exposed toinsignificant risk of changes in value.
Cash equivalents include time deposits and Cash Management System (“CMS”) funds due fromCentral Japan Railway Company (“CJR”) group, all of which mature or become due within threemonths from the date of acquisition. CJR is the parent company of the Company.

22

f. Investment securities
Investment securities are classified and accounted for, depending on management’s intent, as follows:
Available-for-sale securities other than equity securities without market price are reported at fair value,with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.
Available-for-sale securities such as equity securities without market price are stated at cost
determined by the moving-average method. For other-than-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 foreignexchange rate. Forward foreign currency contracts are utilized by the Group to reduce foreign currency
exchange risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as
follows: 1) all derivatives are recognized as either assets or liabilities and measured at fair value andgains and losses on derivative transactions are recognized in the consolidated statement of income and2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting becauseof high correlation and effectiveness between the hedging instruments and the hedged items, gains andlosses on derivatives are deferred until maturity of the hedged transactions.
The forward foreign currency contracts are utilized to hedge foreign currency exposures in sales ofmerchandise and finished goods to overseas customers and procurement of raw materials fromoverseas suppliers. Trade notes and accounts receivable and trade notes and accounts payable
denominated in foreign currencies are translated at the contracted rates if the forward foreign currency
contracts qualify for hedge accounting.

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 forother receivables is calculated based on the historical loss experience.

i. Inventories
Inventories are stated at the lower of cost, determined principally by the specific identification method
for merchandise, finished goods and work in process and by the moving-average method for semifinished goods, raw materials, and supplies, or net selling value, which is defined as the selling price,less additional estimated manufacturing costs and estimated direct selling expenses. The replacement
cost may be used in place of the net selling value, if appropriate. Net loss on write-downs of inventories(after offsetting the reversal of loss on write-downs of inventories in the previous fiscal years) in theamounts of ¥111 million ($832 thousand) for the year ended March 31, 2023, and net gain on writedowns of inventories (after offsetting the reversal of loss on write-downs of inventories in the previous
fiscal years) in the amounts of ¥75 million for the year ended March 31, 2022, were included in costof sales.

23

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 for buildings and building improvements andstructures acquired on or after April 1, 2016, and by the declining-balance method for other property
at rates based on the estimated useful lives of the assets.
Depreciation of leased assets relating to financial lease transactions without transfer of ownership is
computed by the straight-line method over the leased period. For leases with a guaranteed minimum
residual value, the contracted residual value is considered to be the residual value. For other leases, theresidual value is zero.
The range of useful lives is principally from 10 to 60 years for buildings and structures and from 6 to
17 years for machinery and equipment.
The Company has transferred its factory assets of Toyokawa Plant, Kinuura Plant, and Narumi Plant
to CJR on April 20, 2017. The transfer was not treated as a purchase or sales transaction since therelevant factory assets were transferred to CJR, but the Company continues to utilize these factory
assets as before based on a lease agreement concluded between the Company and CJR. Therefore, therelevant factory assets were still recorded under property, plant and equipment of the Company. As
the relevant transactions do not fall under a finance lease transaction, the total transfer price wasrecorded as long-term debt (including the current portion). In addition, capital expenditure related tothe transferred factory assets was recorded under “buildings and structures” and “machinery andequipment,” and a part of the capital expenditure was recorded as long-term debt (including the current
portion), for the years ended March 31, 2023 and 2022.
On March 31, 2023, of the transferred assets, the Company repurchased Toyokawa Plant from CJR,
resulting in a decrease in long-term debt. Loss on repayments of long-term debt, which is the difference
between the amount of the repurchase of Toyokawa Plant and the balance of the long-term debt, wasrecorded in “other-net” of the consolidated statement of income for the year ended March 31, 2023.
There is no impact of the repurchase on carrying amounts of property, plant, and equipment. In addition,“land” and “buildings and structures” of Toyokawa Plant formed a factory foundation, and theCompany agreed with CJR to additionally pledge them as collateral for long-term debt to CJR.
As a result, the relevant factory assets as of March 31, 2023, were recorded under property, plant andequipment with carrying amounts of ¥7,415 million ($55,751 thousand) as land, of ¥3,467 million($26,067 thousand) as buildings and structures and ¥92 million ($695 thousand) as machinery andequipment, while long-term debt (including the current portion) was recorded with a carrying amountof ¥14,644 million ($110,104 thousand) as of March 31, 2023. As of March 31, 2022, the relevant
factory assets were recorded under property, plant and equipment with carrying amounts of ¥11,975
million as land, of ¥5,545 million as buildings and structures and ¥119 million as machinery andequipment, while long-term debt (including the current portion) was recorded with a carrying amountof ¥22,336 million.

24

k. Long-lived assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstanceindicate that the carrying amount of an asset or asset group may not be recoverable. An impairment
loss is recognized if the carrying amount of an asset or asset group exceeds the sum of 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 thecontinued use and eventual disposition of the asset or the net selling value at disposition.

l. Intangible assets
Intangible assets that are included in other assets are amortized by the straight-line method. Software
costs are amortized over 5 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 thetotal loss on construction projects for which eventual losses are deemed inevitable and for which theamount of loss can be reasonably estimated. Provisions and (reversal of provisions) for work in process
on construction contracts with an amount of ¥215 million ($1,620 thousand) and ¥240 million for theyears ended March 31, 2023 and 2022, respectively, were included in cost of sales.

n. Provision for losses on orders received
A provision for losses on orders received, except for construction contracts, is recorded based on an
estimate of the total anticipated loss on contracts for which eventual losses are deemed inevitable andfor which the amount of loss can be reasonably estimated.

o. Retirement and pension plans
The Company has a lump-sum retirement benefit plan, a defined contribution pension plan and adefined benefit pension plan. The Company’s domestic consolidated subsidiaries have similar
retirement benefit plans.
Liabilities for employees’ retirement benefits are calculated based on the projected benefit obligations
and plan assets at the consolidated balance sheet date. The projected benefit obligations are attributed
to periods on a benefit formula basis. Prior service costs are amortized on a straight-line basis over 15
years, which is within the average remaining service period. Actuarial gains and losses are amortizedon a straight-line basis over 15 years, which is within the average remaining service period from thefollowing the fiscal year.

p. Provision for compensation for health damage from asbestos
A provision for compensation for health damage from asbestos has been recorded based on theestimated compensation amount for former employees who suffered health damage from asbestos.

q. Income taxes
The provision for income taxes is computed based on the pretax income included in the consolidated
statement of income. The asset and liability approach is used to recognize deferred tax assets andliabilities 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.

25

r. Foreign currency transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies
are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The
foreign exchange gains and losses from translation are recognized in the consolidated statement ofincome to the extent that they are not hedged by forward foreign currency contracts.
s. Foreign currency financial statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at
the current exchange rate as of the consolidated balance sheet date, except for equity, which istranslated at the historical rate. Revenue and expense accounts of consolidated foreign subsidiaries aretranslated into Japanese yen at the average exchange rate. Differences arising from such translation are
shown as foreign currency translation adjustments under accumulated other comprehensive income ina separate component of equity.

t. R&D expenses
Expenses related to R&D activities are charged to income as incurred. R&D expenses amounted to¥2,010 million ($15,111 thousand) and ¥2,127 million for the years ended March 31, 2023 and 2022,
respectively, and are included in selling, general and administrative expenses and cost of sales in theaccompanying consolidated statement of income.
u. Per share information
Basic net income per share is computed by dividing net income attributable to common shareholders
by the weighted-average number of shares of common stock outstanding during the respective year.
Weighted-average number of shares of common stock for the years ended March 31, 2023 and 2022,
were 14,431 thousand shares and 14,432 thousand shares, respectively. Diluted net income per sharefor the years ended March 31, 2023 and 2022, was not applicable because the Company had no dilutive
common shares. Cash dividends per share presented in the accompanying consolidated statement ofincome are dividends applicable to the respective years, including dividends to be paid after the endof the year.

v. Accounting changes and error corrections
Under ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error
Corrections” and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting
Changes and Error Corrections,” accounting treatments are required 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 the entity shall comply with thespecific transitional provisions. (2) Changes in Presentation—When the presentation of financial
statements is changed, prior-period financial statements are reclassified in accordance with thenew presentation. (3) Changes in Accounting Estimates—A change in an accounting estimate isaccounted for in the period of the change if the change affects that period only, and is accounted
for prospectively if the change affects both the period of the change and future periods. (4)Corrections of Prior-Period Errors—When an error in prior-period consolidated financial
statements is discovered, those statements are restated.

26

w. Revenue recognition
The Group recognizes revenue from contracts with customers based on the following five-step
approach.
Step 1:
Step 2:

Identify the contract(s) with a customer
Identify the performance obligations in the contract

Step 3:
Step 4:

Determine the transaction price
Allocate the transaction price to the performance obligations in the contract

Step 5:

Recognize revenue when (or as) the entity satisfies a performance obligation

The Group is engaged in offering a variety of products and services in Railway Rolling Stock,
Transportation Equipment and Steel Structure, Construction Equipment, and Engineeringbusinesses, etc.
(1) Performance obligations satisfied at a point in time
The Group considers that control of finished products or merchandises is, in principle,
transferred to customers at the time of customer acceptance, and the performance obligations
are satisfied. Therefore, revenue from sales of finished products and merchandises is mainly
recognized at the time of customer acceptance.
However, the Group considers that control of finished products is transferred to customers at
the time of shipment if the period from the time of shipment to the time of delivery is very
short, and revenue from such sales is recognized at a time of shipment.
(2) Performance obligations satisfied over time
The Group recognizes revenue over time if one of the following criteria is met.
a. The customer simultaneously receives and consumes the benefits provided by theGroup’s performance as the Group performsb. The Group’s performance creates or enhances an asset that the customer controls as theasset is created or enhancedc. The Group’s performance does not create an asset with an alternative use to the Group,and the Group has an enforceable right to payment for performance completed to date
The Group’s revenue from performance obligations satisfied over time relates to construction
contracts and others. If reasonable estimates of the total contract cost and the progress towards
complete satisfaction of performance obligations under the contracts are available, the Group
determines that it is appropriate to use the input method to measure the progress based on thecosts incurred to date relative to the total expected costs by contract. Additionally, revenue isrecognized based on the cost recovery method when it is not possible to reasonably estimate
the progress towards complete satisfaction of performance obligations, but it is probable thatthe costs incurred will be recovered.

27

x. New accounting pronouncements- Accounting Standard for Current Income Taxes (ASBJ Statement No. 27, revised on October28, 2022)- Accounting Standard for Comprehensive Income (ASBJ Statement No. 25, revised on October28, 2022)- Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28,
revised on October 28, 2022)(a) Overview
In February 2018, ASBJ issued ASBJ Statement No. 28, “Partial Amendments to AccountingStandard for Tax Effect Accounting,” etc. (“ASBJ Statement No. 28, etc.”), which completed
the transfer of practical guidelines on tax effect accounting of the Japanese Institute ofCertified Public Accountants to the ASBJ, and in the course of the deliberations, thefollowing two issues, which were to be discussed again after the release of ASBJ Statement
No. 28, etc., were discussed and released.
- Classification of tax expense (taxation on other comprehensive income)- Tax effects on sales of shares of subsidiaries, etc. (shares of subsidiaries or affiliates)when group corporate taxation is applied.
(b) Effective date
The above standards and guidance are scheduled to be applied from the beginning of the
fiscal year ending March 31, 2025.
(c) Effects of application of the standards
The effects of the application of the above standards and guidance on the consolidated
financial statements are currently being assessed.
3. SIGNIFICANT ACCOUNTING ESTIMATES
In preparing the consolidated financial statements of the Group, management makes judgments,
estimates and assumptions that affect the application of the accounting policies and the reported
amounts of assets, liabilities, income, and expenses. The Group’s significant estimates andunderlying assumptions are reviewed on an ongoing basis. Those revisions could result in amaterial adjustment to carrying amounts of assets and liabilities in the future periods due touncertainty of estimates and assumptions. The Group’s significant estimates and assumptions
used are as follows:(1) Revenue recognition (performance obligations satisfied over time)(a) Amount recognized for the fiscal years ended March 31, 2023 and 2022
Millions of Yen
2023
2022
¥ 10,517¥
8,667

Net sales

Thousands of
U.S. Dollars
2023$
79,073(b) Information on the nature of significant account estimates useful for the users of theconsolidated financial statements(i)

Calculation method
In recognizing revenue for performance obligations satisfied over time, the amount28

of revenue for each construction project is mainly its total construction revenue
multiplied by the percentage of incurred cost of construction to its total cost of
construction based on the working budget.
(ii) Key assumptions
The working budget of the total construction costs includes estimates of material
costs, labor costs and subcontractor costs. The significant assumptions of estimatesof labor and subcontractor costs mainly include locations and timing of construction
projects, degrees of difficulty of construction based on the construction method andcost improvement effects of skill levels based on past construction performance.
(iii) Impact on the next fiscal year’s consolidated financial statements
In case of engineering design change, the working budget is reviewed by assessing
the impact level and extent of the design change in a timely manner. The revenue
amount may vary, if the percentage of completion is to be changed significantly
based on such a revision of the working budget.
(2) Valuation of inventories and provision for losses on orders received(a) Amount recognized for the fiscal years ended March 31, 2023 and 2022 (before
offsetting the amount of gains on reversals in the previous fiscal years)
Millions of Yen
2023
2022
Loss on write-downs of inventories
and provision for losses on orders ¥received

1,713

¥

1,151

Thousands of
U.S. Dollars
2023$

12,881(b) Information on the nature of significant account estimates useful for the users of theconsolidated financial statements(i)

Calculation method
In calculating write-down and provision for loss on orders received related to workin process in the Railway Rolling Stock business, the order amounts are comparedto the estimated total cost for each order.

(ii) Key assumptions
The estimated total cost is based on the working budget prepared for each order andincludes estimated material costs, labor costs, subcontracting costs and otherexpenses at each related department in the business unit. The significant
assumptions of the estimates of these costs include impact of price fluctuations, theapplicability of know-how based on the past design and manufacturing of similar
railway rolling stock, load forecast based on actual results and cost improvement
due to progress in mass production of the similar railway rolling stock andimprovement of cost proficiency.
(iii) Impact on the next fiscal year’s consolidated financial statements
In case of engineering design change, the working budget is reviewed by assessing
the impact level and extent of the design change in a timely manner. The amount ofloss on valuation of work in process and provision for losses on orders received
may vary if the working budget is to be changed significantly.

29

(3) Recoverability of deferred tax assets (before offsetting the balance of deferred tax liabilities)(a) Carrying amounts as of March 31, 2023 and 2022
Millions of Yen
2023
2022
¥
1,912
¥
2,222

Deferred tax assets

Thousands of
U.S. Dollars
2023$
14,374(b) Information on the nature of significant account estimates useful for the users of theconsolidated financial statements(i)

Calculation method
In judgment for recoverability of deferred tax assets, the Group recognizes deferred
tax assets within the expected range of amount for the future period where taxable
income is reasonably estimated, depending on the fiscal year where temporary
differences are expected to be eliminated by scheduling of temporary differences
and tax loss carried forward.

(ii) Key assumptions
For calculating the expected amount of taxable income, projected business results
are used which are based on the business strategies of each business unit
considering its market volume, customer need, capital investments, etc.
(iii) Impact on the next fiscal year’s consolidated financial statements
Changes in taxation system and tax rates could affect the calculation results for thetax purpose, while changes in market environment and a shortfall of management
objectives could affect the future business results, thus such changes and shortfalls
could affect valuation of deferred tax assets.
4. NOTES AND ACCOUNTS RECEIVABLE, AND CONTRACT ASSETS
Notes and accounts receivable, and contract assets as of March 31, 2023 and 2022, consisted of thefollowing:

Trade notes receivable- Unconsolidated subsidiary and associatedcompanies
Trade accounts receivable and contract assets- CJR, unconsolidated subsidiary andassociated companies
Other
Less allowance for doubtful accounts

¥

¥

Total

Millions of Yen
2023
2022
3,294
¥
3,323

Thousands of
U.S. Dollars
2023$
24,769211
14,55092
12,271

1,587
109,401

3,883
154
(5)
22,087

4,427
427
(30)
20,51029,1931,157(38)
166,069¥$

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

30

5. INVENTORIESInventories as of March 31, 2023 and 2022, consisted of the following:

Merchandise
Finished goods
Semi-finished goods
Work in process
Raw materials and supplies

¥

¥

Total

Millions of Yen
2023
2022
150
¥
257
1,453
708
1,169
1,148
22,22927,432
1,827
1,486
26,828¥31,031Thousands of
U.S. Dollars
2023
$
1,130
10,921
8,792
167,136
13,734$
201,713Work in process and the allowance for work in process on construction contracts are presented in the
gross amount in the consolidated balance sheet. At March 31, 2023 and 2022, the balances of work inprocess for which an allowance for work in process on construction contracts were provided were ¥7
million ($54 thousand) and ¥23 million, respectively.
6. INVESTMENT SECURITIESInvestment securities as of March 31, 2023 and 2022, consisted of the following:

Equity securities
Total

¥
¥

Millions of Yen
2023
2022
16,173¥
15,673
16,173
15,673¥Thousands of
U.S. Dollars
2023$
121,599$
121,599

The costs and aggregate carrying amount (fair value) of investment securities as of March 31, 2023
and 2022, were as follows:
Millions of Yen
2023
Cost

Securities classified asavailable-for-sale:
Equity securities
Total

¥
¥

5,009
5,009

Gross unrealized
gains

Gross unrealized
losses

¥

¥

¥

9,430
9,430

¥

(4)
(4)

Carrying
amount(Fair value)¥¥

14,435
14,435

Millions of Yen
2022
Cost

Securities classified asavailable-for-sale:
Equity securities
Total

¥
¥

5,052
5,052

Gross unrealized
gains

Gross unrealized
losses

¥

¥

¥

31

9,088
9,088

¥

(45)
(45)

Carrying
amount(Fair value)¥¥

14,095
14,095

Thousands of U.S. Dollars
2023
Cost

Securities classified asavailable-for-sale:
Equity securities
Total

$
$

37,66537,665Gross unrealized
gains

Gross unrealized
losses$$$70,90270,902Carrying
amount(Fair value)

(36)
(36)

$

$
$

108,531
108,531

The information of available-for-sale securities which were sold for the years ended March 31, 2023
and 2022, was as follows:
Millions of Yen
2023
Realized
gains

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

51
51

¥
¥

¥
¥

191
191

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

Millions of Yen
2022
Realized
gains

Proceeds
Available-for-sale:
Equity securities
Total

10
10

Realized
losses

¥
¥

158
158

2
2

Realized
losses¥¥Thousands of U.S. Dollars
2023
Realized
gains

0
0

Realized
losses

$

387

$

78

$

14

$

387

$

78

$

14

7. NOTES AND ACCOUNTS PAYABLE
Notes and accounts payable as of March 31, 2023 and 2022, consisted of the following:32

¥Trade notes payable

Electronically recorded obligations-operating-Unconsolidated subsidiary and associatedcompanies
Trade accounts payable-Unconsolidated subsidiary and associatedcompanies
Other
Total

¥

Millions of Yen
2023
2022
249
¥
263
8,910
10,509Thousands of
U.S. Dollars
2023
$
1,876
66,996

5

4

36

6,740

7,948

50,677

56

20

418

2,835
18,795¥

1,766
20,510$21,315
141,318

8. LONG-TERM DEBT
Long-term debt as of March 31, 2023 and 2022, consisted of the following:Thousands of
U.S. Dollars
2023

Millions of Yen
2023
2022
Loans from CJR due through 2027 (Note) with¥average interest rate of 0.61%
Less current portion¥
Total

41,360(3,194)
38,166¥¥52,133(3,370)48,763$$

310,976(24,016)
286,960

The aggregate annual maturities of long-term debt as of March 31, 2023, were as follows:

Thousands ofMillions of Yen
U.S. Dollars
Years ending March 31
2024
¥
$
2,900
21,8052025
2,900
21,8052026
2,900
21,8052027
2,900
21,8052028
15,116113,652
Total
200,872¥
26,716$
Note: Long-term debt recorded for the transfer price of the factory assets transferred to CJR and fora part of capital expenditure related to the transferred factory assets in the total amount of¥14,644 million ($110,104 thousand) was not reflected.

33

9. 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 timeof 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, 2023 and 2022, were as
follows:

Millions of Yen
2023
2022
¥
13,888¥13,668
706
721
122
121
225
34
(758)
(593)
(63)
¥
14,183¥
13,888

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses
Benefits paid
Prior service cost
Balance at end of year

Thousands of
U.S. Dollars
2023$ 104,423
5,310
921
1,691
(5,708)$ 106,637

Note: The domestic consolidated subsidiaries of the Company apply the simplified method in
calculating the defined benefit obligation.
(b) The changes in plan assets for the years ended March 31, 2023 and 2022, were as follows:

Millions of Yen
2023
2022
¥
18,736¥18,326
300
275
70
51
375
330
(287)
(246)
¥
19,194¥
18,736

Balance at beginning of year
Expected return on plan assets
Actuarial gains
Contribution from the employer
Benefits paid
Balance at end of year

34

Thousands of
U.S. Dollars
2023$ 140,873
2,257
525
2,823
(2,165)$ 144,313

(c) Reconciliation between the liability (asset) recorded in the consolidated balance sheet and thebalances of defined benefit obligation and plan assets as of March 31, 2023 and 2022, was as follows:

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation
Net asset arising from defined benefit
obligation
Asset for employees’ retirement benefits
Liability for employees’ retirement benefits
Net asset arising from defined benefit
obligation

Millions of Yen
2023
2022
¥
13,891¥
13,608(19,193)(18,736)(5,302)(5,128)292
280

Thousands of
U.S. Dollars
2023$ 104,444(144,312)(39,868)
2,193¥(5,010)¥(4,848)$(37,675)¥(5,302)292¥(5,128)280$(39,868)
2,193¥(5,010)¥(4,848)$(37,675)(d) The components of net periodic benefit costs for the years ended March 31, 2023 and 2022, wereas follows:

Millions of Yen
2023
2022
¥
706
¥
721
122
121
(300)
(275)
(30)
27
(16)
(14)
¥
482
¥
580

Service cost (Note)
Interest cost
Expected return on plan assets
Recognized actuarial (gains) losses
Amortization of prior service cost
Net periodic benefit costs

Thousands of
U.S. Dollars
2023
$
5,310
921
(2,257)
(228)
(121)
$
3,625

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 ofdefined retirement benefit plans for the years ended March 31, 2023 and 2022

Millions of Yen
2023
2022
¥
(16)
¥
49
(185)
44
¥
(201)
¥
93

Prior service cost
Actuarial (losses) gains
Total

35

Thousands of
U.S. Dollars
2023
$
(121)
(1,394)$(1,515)(f) Amounts recognized in accumulated other comprehensive income (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2023 and 2022

Millions of Yen
2023
2022
¥
(147)
¥
(163)
(2,672)(2,857)¥(2,819)¥(3,020)

Unrecognized prior service cost
Unrecognized actuarial gains
Total

Thousands of
U.S. Dollars
2023$(1,104)(20,090)$(21,194)(g) Plan assets(i) Components of plan assets
Plan assets as of March 31, 2023 and 2022, consisted of the following:

2023
15%
68%
6%
11%
100%

Debt securities
Equity securities
Cash and deposits
Other
Total

2022
15%
68%
5%
12%
100%

Note: The employees’ retirement benefit trusts for the contributory pension plans accounted for
14% of total plan assets as of March 31, 2023 and 2022.
(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 long-term rates of return which are expected currently and in the future from thevarious components of the plan assets.
(h) Assumptions used for the years ended March 31, 2023 and 2022, were set forth as follows:

2023
0.9%
2.0%

Discount rate
Expected rate of return on plan assets

2022
0.9%
2.0%

(2) Defined contribution plans
The required contribution of the Company and its consolidated subsidiaries for defined contributionplans amounted to ¥158 million ($1,191 thousand) and ¥150 million for the years ended March 31,
2023 and 2022, respectively.

36

10. ASSETS PLEDGED AS COLLATERAL(1) Assets pledged as collateral for long-term debt borrowed from CJR in November 2017 for thepayment of settlement money related to a large railway rolling stock project in the U.S.A. wereas follows. The balance of the long-term debt, including current portion, as of March 31, 2023
and 2022 was ¥26,716 million ($200,872 thousand) and ¥29,797 million, respectively. “Land” of¥4,560 million ($34,289 thousand) and “buildings and structures” of ¥1,774 million ($13,337
thousand) (carrying amounts as of March 31, 2023) of Toyokawa Plant, which were repurchased
on March 31, 2023, formed a factory foundation, and the Company agreed with CJR toadditionally pledge them as collateral for the long-term debt.

Millions of Yen
2023
2022
¥
240
¥
249
15
15
14,434
13,980¥ 14,689¥ 14,244

Buildings and structures
Land
Investment securities
Total

Thousands of
U.S. Dollars
2023
$
1,803
113
108,529$ 110,445(2) Other assets pledged as collateral as of March 31, 2023 and 2022, were as follows:

Millions of Yen
2023
2022
Other assets under Investments and Other
Assets (Note)
Total

¥

10

¥

10

$

75

¥

10

¥

10

$

75

Note: Guarantee deposit required by the Real Estate Brokerage Act

37

Thousands of
U.S. Dollars
2023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 purchasetransactions.
The aggregate annual maturities of lease obligations as of March 31, 2023, were as follows:
Years ending March 31
2024
2025
2026
2027
2028
2029 and thereafter
Total

Millions of Yen
¥
611
560
257
207
269
52
¥
1,956

Thousands of U.S.
Dollars
$
4,597
4,207
1,935
1,558
2,019
394
$
14,710A consolidated subsidiary subleases machinery.
Investments in leases and lease obligations, which include an interest portion, resulting from subleasetransactions as of March 31, 2023 and 2022, were as follows:

Thousands of
U.S. Dollars
2023

Millions of Yen
2023
2022
Investments in leases:
Due within one year
Due after one year
Total

¥
¥

176
413
589

¥
¥

130
371
501

$
$

Thousands of
U.S. Dollars
2023

Millions of Yen
2023
2022
Lease obligations:Due within one year
Due after one year
Total

¥
¥

38

183
486
669

¥
¥

142
426
568

1,327
3,105
4,432

$
$

1,378
3,652
5,030

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, forcompanies 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 of service ofthe directors being prescribed as one year rather than the normal two-year term by its articles ofincorporation, 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) toshareholders 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 of incorporation 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 the shareholders, 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 asa legal reserve (a component of retained earnings) or as additional paid-in capital (a componentof 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 thecommon 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 betransferred among the accounts within equity under certain conditions upon resolution of theshareholders.
(3) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of suchtreasury stock by resolution of 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 specificformula. Under the Companies Act, stock acquisition rights are presented as a separate component ofequity. The Companies Act also provides that companies can purchase both treasury stock acquisitionrights and treasury stock. Such treasury stock acquisition rights are presented as a separate componentof equity or deducted directly from stock acquisition rights.

39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 30.6% for
the years ended March 31, 2023 and 2022.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred
tax assets and liabilities as of March 31, 2023 and 2022, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
2023

2022

2023

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 long-lived assets
Accrued bonuses to employees
Research and development assets
Other
Sub-total
Less valuation allowance for tax loss
carryforwards (Note 2)Less valuation allowance pertaining to total
amount of deductible temporary differences
Valuation allowance, total (Note 1)
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Other
Total
Net deferred tax liabilities
Notes: 1.
2.

4,182
2,380
371
1,578
31
576
842
1,449
11,409

¥

¥

¥

¥

$

31,445
17,895
2,791
11,865
233
4,331
6,335
10,88885,783(4,036)(4,237)(30,351)(5,461)(9,497)
1,912(5,052)(9,289)2,222 $

(41,058)(71,409)
14,374(2,764) $(2,575)(5,339)(3,117) $(22,034)(18,662)(40,696)(26,322)¥(2,930)(2,482)(5,412)(3,500)

¥

4,605
2,468
338
1,509
477
521
536
1,057
11,511¥¥
Valuation allowance increased by ¥208 million ($1,569 thousand) during the year ended
March 31, 2023. This is mainly due to the increases in valuation allowance for research anddevelopment assets.
The expiration of tax loss carryforwards, the related valuation allowances and the resulting
net deferred tax assets as of March 31, 2023 and 2022, were as follows:
Millions of Yen

2023
Deferred tax assets
relating to tax loss
carryforwards (*)
Less valuation allowancefor tax loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

Over 1 year Over 2 years Over 3 years Over 4 years
but within but within
but within
but within Over 5 years
2 years
3 years
4 years
5 years

Within1 year

Total

-

-

-

-

- ¥

4,182 ¥

4,182

-

-

-

-

-

(4,036)(4,036)

-

-

-

-

-

146

(**) 146

40

Millions of Yen
Over 1 year Over 2 years Over 3 years Over 4 years
but within but within
but within
but within Over 5 years
2 years
3 years
4 years
5 years

Within1 year2022
Deferred tax assets
relating to tax loss
carryforwards (*)
Less valuation allowancefor tax loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

Total

-

-

-

-

- ¥

4,605 ¥

4,605

-

-

-

-

-

(4,236)(4,236)

-

-

-

-

-

369

(**) 369

Thousands of U.S. Dollars
2023

Within1 yearOver 1 year Over 2 years Over 3 years Over 4 years
but within but within
but within
but within Over 5 years
2 years
3 years
4 years
5 years

Total

Deferred tax assets
relating to tax loss
- $ 31,445 $ 31,445
carryforwards (*)
Less valuation allowance(30,351)(30,351)
for tax loss carryforwards
Net deferred tax assets
relating to tax loss
1,094(**) 1,094
carryforwards(*) The amount of deferred tax assets relating to tax loss carryforwards was calculated by using
the normal effective statutory tax rate.
(**) The amount of net deferred tax assets relating to tax loss carryforwards is determined to be
recovered based on the expected future taxable income.
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates
reflected in the accompanying consolidated statement of income for the year ended March 31, 2023,
with the corresponding figures for 2022, is as follows:
2023
30.6

Normal effective statutory tax rate

Increase (decrease) due to:Permanently non-deductible expenses for income tax
purposes
Permanently non-taxable income for income tax
purposes
Changes in valuation allowance
Per capita inhabitant tax
Higher (lower) income tax rates applicable to taxable
income in certain foreign countries
Income tax credit
Tax credits for research and development expenses

Other
Actual effective income tax rate

41

%

2022
30.6

0.4

0.1

(0.7)

(0.4)

(2.6)
0.8

(15.4)
0.5

0.3

(0.2)

(0.6)
(1.3)
(1.0)
25.9

(0.4)
(0.9)
(0.7)
13.2

%

%

%

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. Derivativetransactions are not used for speculative purposes but to manage exposure to risks as described in (2)below.
(2) Nature and extent of risks arising from financial instruments
Trade notes and accounts receivables, such as trade notes receivable, trade accounts receivable andelectronically recorded monetary claims, are exposed to customer credit risk.
Although trade notes and accounts receivable in foreign currencies are exposed to the risk of fluctuation
in foreign currency exchange rates, the position, net of payables in foreign currencies, is, in principle,
hedged by using forward foreign currency contracts.
Investment securities, mainly equity securities of customers and suppliers of the Group, are exposedto the risk of market price fluctuations.
Payment terms of trade notes and accounts payable, such as trade notes payable, trade accounts payableand electronically recorded obligation, are generally less than one year. Although trade notes andaccounts 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, if necessary, 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 ofcapital expenditure related to the transferred factory assets is not exposed to market risks from changes
in variable interest rates since the Company repays a constant lease fee including the interest portion
based on the lease agreement. Long-term debt borrowed from CJR in November 2017 for the payment
of settlement money related to a large railway rolling stock project in the U.S.A. is also not exposed
to market risks from changes in variable interest rates due to the fixed interest rate. Lease obligations
are primarily used for financing capital investments.
Derivatives mainly include forward foreign currency contracts, which are used to manage exposure torisks associated with fluctuations in foreign currency exchange rates related to trade notes and accounts
receivable and trade notes and accounts payable denominated in foreign currencies and forecasted
transactions denominated in foreign currencies. Please see Note 2 “Summary of Significant
Accounting Policies,” “g. Derivatives and hedging activities” for more information about derivatives.
(3) Risk management for financial instruments
Credit risk management
The Group manages its credit risk from trade notes and accounts receivable by periodically monitoring
circumstances of the financial position of major customers and managing due dates and balances by
each customer.

42

Market risk management (foreign exchange risk and market price risk)
Trade notes and accounts receivable and trade notes and accounts payable in foreign currencies are
exposed to market risk resulting from fluctuations in foreign currency exchange rates. Such foreignexchange risk is hedged principally by forward foreign currency contracts.
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 each subsidiary in order to monitor its liquidity risk associated with trade notes
and accounts payable and long-term debt.
(4) Fair values of financial instruments
Since various assumptions and factors are reflected in estimating fair value, different assumptions andfactors could result in different fair value.
Fair value of financial instruments

Millions of Yen
2023

Investment securities
Total
Long-term debt, including current portion
Lease obligations, including current portion
Total

Carrying
amount¥ 14,435¥ 14,435

Fair value¥ 14,435¥ 14,435

Unrealized
gain (loss)
-

¥

¥

¥

¥

26,716
1,956
28,672¥

26,7501,937
28,687

¥

(34)
19
(15)

Millions of Yen
2022

Investment securities
Total
Long-term debt, including current portion
Lease obligations, including current portion
Total

Carrying
amount¥ 14,095¥ 14,095

Fair value¥ 14,095¥ 14,095

Unrealized
gain (loss)
-

¥

¥

¥

¥

43

29,797
1,932
31,729¥30,0171,920
31,937

¥

(220)
12
(208)

Investment securities
Total

Thousands of U.S. Dollars
2023
Carrying
Unrealized
amountgain (loss)
Fair value$ 108,531$ 108,531$ 108,531$ 108,531

Long-term debt, including current portion
Lease obligations, including current portion
Total$ 200,872
14,710$ 215,582

Notes: 1.

2.

$ 201,126
14,570$ 215,696

$
$

(254)
140
(114)

Cash and cash equivalents are omitted as their carrying amounts approximate the fair values
since they are cash or scheduled to be settled in a short period of time. Additionally, notes andaccounts receivable, short-term loan receivables, notes and accounts payable and income
taxes payable are also omitted as their carrying amounts approximate the fair values since
they are scheduled to be settled in a short period of time.
Carrying amounts of equity securities without market priceThousands of
U.S. Dollars

Millions of Yen
2023¥
Unlisted securities
Investments in an unconsolidated subsidiary andassociated companies
Long-term debt recorded for the transfer price ofthe factory assets transferred to CJR and for apart of capital expenditure related to thetransferred factory assets (including the current
portion)

2022

1,738

¥

1,578

2023
$

13,068

991

947

7,448

14,644

22,336110,104(5) Maturity analysis for financial assets and securities with contractual maturities

Due in 1 year
or less
Cash and cash equivalents
Notes and accounts receivable
Total

¥
¥

44

23,263
16,11539,378Millions of Yen
2023
Due after 1
Due after 5
year through years through5 years
10 years
¥
¥

131
131

-

Due after
10 years-Due in 1 year
or less
Cash and cash equivalents
Notes and accounts receivable
Total$ 174,912
121,166$ 296,078

Thousands of U.S. Dollars
2023
Due after 1
Due after 5
year through years through5 years
10 years

$
$

986
986

Due after
10 years--

Please see Note 8 for annual maturities of long-term debt and Note 11 for obligations under financeleases.
(6) Financial instruments categorized by fair value hierarchy
The fair value of financial instruments is categorized into the following three levels, depending on theobservability and significance of the inputs used in making fair value measurements:
Level 1:
Level 2:
Level 3:

Fair values measured by using quoted prices (unadjusted) in active markets for identicalassets or liabilities.
Fair values measured by using inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly or indirectly.
Fair values measured by using unobservable inputs for the assets or liabilities.

If multiple inputs are used that have a significant impact on the measurement of fair value, fairvalue is categorized at the lowest level in the fair value measurement among the levels to which
each of these inputs belongs.
(a) The financial assets and liabilities measured at the fair values in the consolidated balance
sheet

As of March 31, 2023
Level 1
Investment securities
Available-for-sale securities
Equity securities
Total assets

45

Millions of Yen
Fair value
Level 2
Level 3

Total¥

14,435--¥

14,435¥

14,435--¥

14,435

Millions of Yen
Fair value
Level 2
Level 3As of March 31, 2022
Level 1
Investment securities
Available-for-sale securities
Equity securities
Total assets¥

14,095--¥

14,095¥

14,095--¥

14,095

Thousands of U.S. Dollars
Fair value
Level 2
Level 3As of March 31, 2023
Level 1
Investment securities
Available-for-sale securities
Equity securities
Total assets

Total

Total

$ 108,531--$ 108,531$ 108,531--$ 108,531(b) Financial instruments other than those recorded at fair value in the consolidated balance sheet
Millions of Yen
Fair value
Level 2
Level 3As of March 31, 2023
Level 1Long-term debt, including current portion
Lease obligations, including current portion
Total liabilities

-

¥

-

¥

Level 1

Total liabilities

46

26,7501,937-¥

28,687

-

¥

-

¥

-

¥

26,750

1,937

Millions of Yen
Fair value
Level 2
Level 3As of March 31, 2022

Long-term debt, including current portion
Lease obligations, including current portion

Total

28,687

Total

30,0171,920-¥

31,937-¥30,0171,920
31,937

Thousands of U.S. Dollars
Fair value
Level 2
Level 3As of March 31, 2023
Level 1Long-term debt, including current portion
Lease obligations, including current portion
Total liabilities

Total

-

$ 201,126
14,570-$ 201,126
14,570-$ 215,696-$ 215,696

Note: Explanation of valuation techniques and valuation inputs used in fair value measurements
Investment securities
The fair values of listed equity securities are measured at the quoted market prices. Since listed equity
securities are traded in active markets, their fair values are classified as Level 1.
Long-term debt and lease obligations
The fair values of long-term debt (including the current portion) and lease obligations are measured
using the discounted cash flow method based on the total amount of the principal and interest, andinterest rates reflecting the remaining periods of such obligations and credit risks, and are classified as
Level 2.
15. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
For the year ended March 31, 2023:
No loss on impairment was recognized.
For the year ended March 31, 2022:
The Group recognized impairment losses on the following asset group.

Millions of Yen
Asset group
Idle assets

Location
Agui, Aichi
Kawasaki, Miyagi
Koga, Ibaraki, etc.

AccountLand,
buildings andstructures
Total

2022
¥

245

¥

245

The Group reviewed its long-lived assets for impairment as of March 31, 2022.
The Group recognized an impairment loss for idle assets by writing down the property to its net selling
value (based on estimated sales amount of contract).
The impairment loss of ¥245 million for the year ended March 31, 2022 consisted of ¥208 million onland and ¥37 million on buildings and structures.

47

16. RELATED-PARTY DISCLOSURES(1) Parent and major shareholders

CJR directly owned 51.2% of the total shares of the Company as of March 31, 2023 and 2022.
The Company distributes transportation vehicles to CJR.
Transactions of the Company with CJR for the years ended March 31, 2023 and 2022, were as
follows:
For the year ended March 31, 2023
Millions ofYen

Thousands of
U.S. Dollars

2023

Net sales
Borrowing of funds
Repayment of debt
Loss on repayments of long-term debt
Interest expense¥

52,923
109
10,882
264
318

2023
$

397,915822
81,824
1,988
2,393

Borrowing of funds, repayment of debt, and interest expense of ¥109 million ($822 thousand), ¥7,802
million ($58,659 thousand), and ¥140 million ($1,055 thousand), respectively, were recorded for thetransfer of the factory assets transferred to CJR and for a part of capital expenditure related to thetransferred factory assets.

For the year ended March 31, 2022
Millions of
Yen
2022

Net sales
Borrowing of funds
Repayment of debt
Interest expense¥

41,807
191
3,364
337

Borrowing of funds, repayment of debt, and interest expense of ¥191 million, ¥464 million, and ¥141
million, respectively, were recorded for the transfer of the factory assets transferred to CJR and for apart of capital expenditure related to the transferred factory assets.

48

The balances due to or from CJR as of March 31, 2023 and 2022, were as follows:
As of March 31, 2023

Trade accounts receivable and contract
assetsCurrent portion of long-term debt
Long-term debt
Accrued expenses¥

Millions ofYen

Thousands of
U.S. Dollars

2023

2023

3,831

$

3,194
38,16640

28,80424,016286,960
297

Current portion of long-term debt, long-term debt, and accrued expenses of ¥294 million ($2,212
thousand), ¥14,350 million ($107,892 thousand), and ¥40 million ($297 thousand), 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.

As of March 31, 2022
Millions of
Yen
2022

Trade accounts receivable and contract
assetsCurrent portion of long-term debt
Long-term debt
Accrued expenses

¥

4,357
3,370
48,76340

Current portion of long-term debt, long-term debt, and accrued expenses of ¥470 million, ¥21,866
million, and ¥40 million, respectively, were the balances related to long-term debt for the transfer priceof the factory assets transferred to CJR and for a part of capital expenditure related to the transferredfactory assets.
(2) Fellow subsidiaries and subsidiaries of other affiliates

Transactions of the Company with the fellow subsidiaries for the years ended March 31, 2023
and 2022, were as follows:
For the year ended March 31, 2023

JR Central Financial Management Co., Ltd.
¥
Loan of funds and interest income

Millions ofYen

Thousands of
U.S. Dollars

2023

2023

18

$

134

Transactions related to loan of funds are omitted since the transactions are conducted using
CMS provided by a consolidated subsidiary of CJR.

49

For the year ended March 31, 2022
Millions of
Yen
2022

JR Central Financial Management Co., Ltd.
¥
Loan of funds and interest income

26

Transactions related to loan of funds are omitted since the transactions are conducted using
CMS provided by a consolidated subsidiary of CJR.
The balances due to or from the fellow subsidiaries as of March 31, 2023 and 2022, were as
follows:
As of March 31, 2023

JR Central Financial Management Co., Ltd.
¥Cash and cash equivalents

Millions ofYen

Thousands of
U.S. Dollars

2023

2023

19,894As of March 31, 2022
Millions of
Yen
2022

JR Central Financial Management Co., Ltd.
¥Cash and cash equivalents

50

25,752$

149,576

17. OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) for the years ended March 31, 2023 and2022, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2023

2022

2023

Unrealized gain (loss) on available-for-salesecurities:
Gains (losses) arising during the year

¥

545

¥

(3,262)$

4,098

Reclassification adjustments to profit or loss

(2)

(83)

(14)

Amount before income tax effect543(3,345)

4,084

Income tax effect

(166)

1,024

(1,249)

Total

¥

377

¥

(2,321)

$

2,835

¥

2

¥

(15)

$

17

¥

2

¥

(15)

$

17

¥

(155)

¥

80

$

(1,166)

Foreign currency translation adjustments:
Adjustments arising during the year
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss

(46)

13

(349)

Amount before income tax effect

(201)

93

(1,515)

61

(28)

463

Income tax effect
Total
Share of other comprehensive income inassociated companies
Gains arising during the year

¥

(140)

¥

65

$

(1,052)

¥

26

¥

4

$

198

Income tax effect

-

Total
Total other comprehensive income (loss)

-

-

¥

26

¥

4

$

198

¥

265

¥

(2,267)$

1,998

18. SUBSEQUENT EVENT
Appropriation of Retained Earnings
The following appropriation of retained earnings at March 31, 2023, was approved at the Company’s shareholders’meeting held on June 29, 2023:

Millions of
Yen
¥
144

Year-end cash dividends, ¥10 ($0.08) per share
19. REVENUE RECOGNITION

51

Thousands of
U.S. Dollars$
1,085

(1) Disaggregation of revenue from contracts with customers

The businesses of the Group are composed of Railway Rolling Stock, Transportation Equipment
and Steel Structure, Construction Equipment, Engineering, and Other. The Group presented
revenue from these businesses as net sales.
The disaggregation of revenue from contracts with customers by reportable segment for the years
ended March 31, 2023 and 2022, is as follows.
Thousands of
U.S. Dollars

Millions of Yen
2022
2023
Reportable segment:
Railway Rolling Stock:
JR
Public operated or private operated companies¥

Sub-total

Transportation Equipment and Steel Structure:
Transportation equipment
Steel structure
Sub-total

Construction Equipment
Engineering
Other (Note 1)
Total

¥

Revenue recognized from contracts with customers:
Goods transferred at a point in time
Goods transferred over time
Total
Revenue recognized from other sources (Note 2)
Sales to external customers
Notes: 1.
2.

¥¥

48,541
4,801
53,342
7,916
7,608
15,52419,0689,155
61
97,15086,633
10,517
97,150819
97,969¥¥¥¥38,882
9,075
47,957
7,238
6,611
13,84919,34011,957
66
93,16984,502
8,667
93,169853
94,022

2023

$

$

$

$

“Other” represents operating segments, etc. that are not included in any reportablesegment.
“Revenue recognized from other sources” includes lease transactions, etc. stipulatedin “Accounting Standard for Lease Transaction” (ASBJ Statement No. 13), which isoutside of the scope of the Accounting Standard for Revenue Recognition.

(2) Basic information to understand revenue from contracts with customers(a) Information on contracts and performance obligations
With respect of information on contracts, performance obligations and the timing of satisfactionsof performance obligations, please see Note 2 “Summary of Significant Accounting Policies” “w.
Revenue recognition.” Payment terms are on general terms, and consideration is primarily received
within one year. The amount of consideration promised does not include a significant financing
component.

52

364,971
36,094401,065
59,52057,198116,718
143,367
68,837461
730,448

651,375
79,073
730,448
6,163
736,611(b) Information on determining the amounts allocated to performance obligations
Transaction price is primarily allocated to each performance obligation based on observable standalone selling prices when contracts contain multiple performance obligations.
(3) Information on the relationship between the satisfactions of performance obligations based oncontracts with customers, the cash flows from such contracts and the amount and timing of revenue
expected to be recognized in subsequent fiscal years from the contracts with the customers thatexisted as of March 31, 2023 and 2022(a) Balance of contract assets and contract liabilities, etc.

Millions of Yen
2023

Trade notes receivable (Balance at beginning¥of year)Trade notes receivable (Balance at end of year)
Trade accounts receivable (Balance at
beginning of year)
Trade accounts receivable (Balance at end ofyear)
Contract assets (Balance at beginning of year)
Contract assets (Balance at end of year)
Electronically recorded monetary claims(Balance at beginning of year)
Electronically recorded monetary claims(Balance at end of year)
Advances received (Balance at beginning ofyear)
Advances received (Balance at end of year)

2,020

Thousands of
U.S. Dollars

2022
¥

2,846

2023
$

1,123

2,020

8,443

13,833

21,714

104,00712,467

13,83393,734

2,747
5,841

3,065
2,747

20,653
43,918

1,393

1,672

10,471

2,382

1,393

17,909

1,076

1,169

8,091

498

1,076

3,743

Contract assets relate to the Group’s rights to consideration for performance obligations satisfied
under the construction contracts, etc. but not billed as of the end of the fiscal year.
The contract assets are reclassified to trade accounts receivables when the Group’s rights
become unconditional. Considerations for those performance obligations are billed and received
by the Group in accordance with the terms and conditions of the transactions with customers.
Advances received primarily related to payments received in advance under construction
contracts, etc. for which revenues are recognized over time. Advances received decreases asrevenue is recognized. Of the revenue recognized during the years ended March 31, 2023 and2022, the amounts included in the balance of advances received at the beginning of the years
ended March 31, 2023 and 2022, were ¥873 million ($6,564 thousand) and ¥1,169 million,
respectively.
Additionally, the amounts of revenue recognized during the years ended March 31, 2023 and2022 from performance obligations satisfied (or partially satisfied) in previous periods were¥235 million ($1,769 thousand) and ¥154 million, respectively.

53

15,186

(b) Transaction prices allocated to the remaining performance obligations
The aggregate amount of transaction prices allocated to unsatisfied (or partially unsatisfied)
performance obligations by reportable segment as of March 31, 2023 and 2022 is as follows.

Millions of Yen
Reportable segment:

2023

Railway Rolling Stock
Transportation Equipment andSteel Structure
Construction Equipment
Engineering
Other (Note)
Total
Note:

¥

¥

105,106

Thousands of
U.S. Dollars

2022¥

89,5302023$

790,273

24,33418,021

182,964

18,781
2,116
150,337

13,976
1,962
123,489

141,206
15,911
1,130,354¥$“Other” represents operating segments, etc. that are not included in any reportablesegment.

Remaining performance obligations for each reportable segment are expected to be satisfied andrecognized as revenue within the following number of years from March 31, 2023 and 2022.
For the year ended March 31, 2023

Within 4 years(of which approximately 40% within 1 year)- Railway Rolling Stock- Transportation Equipment and Steel Structure Within 3 years- Construction Equipment

Within 2 years- Engineering

Within 1 year

For the year ended March 31, 2022

Within 4 years(of which approximately 60% within 1 year)- Railway Rolling Stock- Transportation Equipment and Steel Structure Within 3 years- Construction Equipment

Within 2 years- Engineering

Within 1 year54

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 and descriptive
information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information isavailable 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 usedinternally 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, the Group is comprisedof 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.”“Railway Rolling Stock” consists of manufacture and sales of EMUs, railway motor cars, etc.
“Transportation Equipment and Steel Structure” consists of manufacture and sales of freight cars, tank trucks, heavy-duty industrial vehicles, etc. and manufacture and construction of roadway and railway bridges.
“Construction Equipment” consists of manufacture and sales of pile driving rigs, casing rotators, portable diesel generator sets and emergency generators.
“Engineering” consists of manufacture and sales of mechanical equipment for railway companies, manufacturing equipment for household paper manufacturers, and agricultural 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 mainly based
upon market prices or manufacturing costs.
(3) Information of sales, profit (loss), assets and other items was as follows:

Millions of Yen
2023
Reportable segment

Transportation
Equipment andSteel Structure

Railway Rolling
Stock
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

53,342160
53,502
3,231
35,642

¥

1,033
906

Construction
Equipment¥¥¥¥

15,529370
15,899(929)
19,267

¥

625
178

Other

Engineering

¥

¥
¥
¥

19,882
7
19,8892,890
22,081

¥

¥
¥
¥

9,155
2
9,157
338
4,799

¥

680

¥

55

635

¥

¥
¥
¥

61
260
321
205
592

¥

1

9

Millions of Yen
2022

55

Total

3

Reconciliations

Consolidated¥¥¥

97,969799
98,768
5,735
82,381

¥
¥
¥
¥

(799)
(799)
(1,274)
41,983¥¥¥

97,96997,9694,461
124,364

¥

2,394

¥

312

¥

2,706

1,731

238

¥

1,969

Reportable segment

Transportation
Equipment andSteel Structure

Railway Rolling
Stock
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

47,958217
48,175
4,419
40,848¥982

Construction
Equipment¥¥¥¥

13,855
198
14,053(1,265)
18,249

¥

697

1,422

¥

¥
¥
¥

20,18664
20,2503,393
20,773

¥

714

¥

¥
¥
¥

11,957
11,957
609
4,805

¥

59

1,094

209

Other

Engineering

Total
¥

¥
¥
¥

66
264
330
53
618

¥

2

45

Reconciliations

Consolidated¥¥¥

94,022743
94,765
7,209
85,293

¥
¥
¥
¥

(743)
(743)
(971)
47,575¥¥¥94,022
94,022
6,238
132,868

¥

2,454

¥

239

¥

2,693

1

2,771

¥

169

2,940

Thousands of U.S. Dollars
2023
Reportable segment

Transportation
Equipment andSteel Structure

Railway Rolling
Stock
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

401,065
1,207
402,272
24,296
267,980

$

7,769
6,816

Construction
Equipment$$$$

116,757
2,777
119,534(6,988)144,862

$

4,697
1,337

Other

Engineering

$

$
$
$

149,49154
149,545
21,727
166,025$$$$

68,837
16
68,853
2,543
36,086

$

5,112

$

413

4,772

66

Total
$

$
$
$

461
1,953
2,414
1,543
4,450

$

7
22

$
$
$

736,611
6,007
742,618
43,121
619,403$

17,99813,013

Reconciliations

Consolidated

$
$
$
$

(6,007)(6,007)(9,579)315,664$$$

736,611736,61133,542935,067

$

2,352

$

20,3501,787$

14,800Notes: 1. “Other” represents operating segments, etc. that are not included in any reportable segment.
2. “Reconciliations” in segment profit (loss) include corporate expenses of ¥(1,309) million ($(9,839) thousand) and ¥(995) million for the years ended March 31, 2023 and 2022, respectively, and elimination of intersegment
transactions of ¥17 million ($127 thousand) and ¥16 million for the years ended March 31, 2023 and 2022, respectively. Corporate expenses principally consist of general and administrative expenses that are not attributable
to any reportable segment.
3. “Reconciliations” in segment assets include total corporate assets of ¥39,784 million ($299,130 thousand) and ¥45,418 million, elimination of intersegment balances of ¥(77) million ($(578) thousand) and ¥(78) million, andadjustments in inventories of ¥(43) million ($(320) thousand) and ¥(60) million as of March 31, 2023 and 2022, respectively. Total corporate assets principally consist of investment securities and general management
properties as of March 31, 2023 and 2022.
4. Segment profit (loss) is reconciled to operating income in the consolidated statement of income.

56

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, 2023 and 2022 was asfollows.
Millions of Yen
2023

Net salesJapan¥94,868

U.S.A.
¥337

Asia¥2,723

Other
¥41

Total
¥97,969

Other
¥31

Total
¥94,022

Millions of Yen
2022

Net salesJapan¥90,738

U.S.A.
¥275

Asia¥2,978

Thousands of U.S. Dollars
2023
Japan
Net sales$713,291

U.S.A.

Asia$2,530Other$20,474

Total

$316

$736,611

Note: Net sales are based on the location of the customers and grouped by country or area.
Millions of Yen
2023
Japan
Property, plantand equipment

U.S.A.

¥27,506

Asia

¥27

Other

¥19

Total
¥0

¥27,552

Millions of Yen
2022
Japan
Property, plantand equipment

U.S.A.

¥28,318

Asia

¥32

Other
¥13

Total
¥0

¥28,363

Thousands of U.S. Dollars
2023
Japan
Property, plantand equipment$206,807

U.S.A.
$205

57

Asia
$144

Other

Total
$0

$207,156

(3) Information about major customers
Net sales
Millions of Yen
2023
2022

Name of major
customer

CJR¥

52,923¥41,807

Thousands of
U.S. Dollars
2023

Relatedsegment

397,915$

Railway Rolling
Stock, Transportation
Equipment and Steel
Structure,Engineering(4) Information about loss on impairment of property, plant and equipment by reportable segment

For the year ended March 31, 2023
No loss on impairment was recognized.
For the year ended March 31, 2022

Millions of Yen
2022
Reportable segment

Railway
Rolling
Stock
Impairment
loss-

Transportation
Equipment andSteel Structure

Construction
Equipment

Engineering

Other

Total

-

-

-

-

-

Reconciliations¥

Note: “Reconciliations” for the year ended March 31, 2022, represents an impairment loss ofidle assets which are not attributable to any reportable segment.
＊＊＊＊＊＊

58245 ¥Consolidated
245

Corporate Information
Corporate Profile
Company Name: NIPPON SHARYO, LTD.

Company History

Capital Stock

Sep. 1896 Established in Nagoya City.

Common Stock:Authorized

32,800,000 shares

Jun. 1938 Founded Narumi Plant.

Common Stock:Issued

14,675,012 shares

May. 1949 Re-listed on Tokyo Stock Exchange.

Number of Shareholders

11,668 persons

Jan. 1959 Began Construction Machinery Business.

(March 31, 2023)

Oct. 1961 Started Bridge Manufacturing.
Jul. 1964 Founded Toyokawa Plant.
Jun. 1975 Founded Kinuura Plant.
Sep. 1996 100th Anniversary.
Aug. 2008 Equity and business tie-up entered into with
Central Japan Railway Company.
Aug. 2019 Manufactured 4000th Shinkansen.

Line of Business
Overview of the Main Segments
NIPPON SHARYO manufactures and sells the following products:
Lines of businessBusiness segment
Railway rolling stock

EMUs, DMUs, Passenger Cars, Track Maintenance Machines and Rolling Stock Components

Transportation equipment
and Steel structure

Tank Truck, LNG Tank Semi-Trailer, Containers, Storage Tanks, Heavy Duty Carrier, Automated Guided Vehicle, FreightCars, Roadway Bridges and Railway Bridges

Construction equipment

Piling Rigs, Casing Rotators, Rotary Drilling Rigs, Other Products Related to Foundation WorkEngineering

Railway Rolling Stock Inspection/Maintenance System, Agricultural Plants, Pulp and Paper Facilities

Directory
OFFICEHEAD OFFICE (NAGOYA)TOKYO OFFICENIPPON SHARYO MANUFACTURING, LLC

1-1 Sanbonmatsu-cho,

Shinagawa Intercity Tower C 6F,

1051 Perimeter Drive, Suite 270

Atsuta-ku, Nagoya 456-8691 JAPAN

2-15-3, Konan,Minato-ku, Tokyo 108-6206 Japan

Schaumburg, IL 60173 U.S.A.

Phone: +81-52-882-3316

Phone: +1-847-228-2700

Fax: +81-52-882-3781

PLANT
TOYOKAWA PLANTKINUURA PLANT(Railway rolling stock)(Transportation equipment and Steel structure) (Construction equipment)

NARUMI PLANT

2-20 Honohara,

20 11-gouchi,

80 Ryucho, Narumi-cho,

Toyokawa, Aichi 442-8502 JAPANHanda, Aichi 475-0831 JAPAN

Midori-ku, Nagoya 458-8502 JAPAN

Phone: +81-533-85-4900

Phone: +81-52-623-3529

Fax: +81-533-85-4123

Fax: +81-52-623-4349

59