Annual Business Report
April 1, 2019 through March 31, 2020

NIPPON SHARYO, LTD. and Consolidated Subsidiaries

Financial Highlights
Comparison of Sales by Segment(Unit: millions of yen)
191th period(2019-2020)

Business Segment

190th period(2018-2019)

Increase/(Decrease)

Railway rolling stock

42,37144.8%

38,049

41.7%

4,322

11.4%

Transportation equipment
and Steel structure

21,07822.3

21,794

23.9

(716)

(3.3)

Construction equipment

24,93926.3

25,167

27.6

(228)

(0.9)

Engineering

6,100

6.4

6,006

6.6

94

1.6

Other

147

0.2

163

0.2

(16)

(9.5)

Total

94,635100.0

91,179

100.0

3456

3.8

Change in Operating Performance and Asset Status(Unit: millions of yen except Net income per share)
190th period
189th period(2018-2019)(2017-2018)

191th period(2019-2020)

Titles of accountNet sales

94,63591,17995,311

Income before income taxes

7,530

8,547

(11,240)

Net income (loss) attributableto owners of the parent

7,895

9,199

(8,271)

Net income per share (loss)¥547.00¥637.29(¥573.01)

Total assets

127,813134,194

127,413

Total equity

34,50432,446

20,954

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

Comparison of Sales by Segment(Millions of Yen)
120,000

Other

100,000

Engineering

80,000Construction
equipment

60,000Transportationequipment and Steelstructure
Railway rolling stock

40,00020,0000
191th period

190th period

189th period

Contents

Message from the President

2

Review by Segment

4

Investment in Plant and Equipment

6

Financing Activities

6

Consolidated Financial Statements and Independent Auditor's Report

7

Corporate Information52

Directory

52

Series N700S Shinkansen

1Message from the President
Review of Business Operations
During the fiscal term under review, the Japanese economy had a tendency to decrease
mainly in personal consumption with the global economic slowdown and under the
influence of the consumption tax increase, natural disasters as well as the spread of the newcoronavirus in the last half of the year.
Under this business environment, our performance for the year showed sales of ¥94,635
million, up 3.8% from the previous year, with an increase in sales of the railway rollingstocks. In terms of profits, the profits of the railway rolling stock business increased while
the profits of the transportation equipment and steel structure business decreased. As aresult, the operating profit was ¥8,538 million, up 0.5%, and the income before income
taxes amounted to ¥7,530 million, down 11.9% from the previous year. With the decision ofplant sell-off made by the subsidiary in the U.S.A., we recorded the impairment loss.
Consequently, the net income attributable to owners of the parent was ¥7,895 million, down
14.2% from the previous year.

The Outlook
Considering the losses accumulated mainly in the railway rolling stock business in the
U.S.A in the past that significantly damaged the financial base and an increasingly straitenedmarket environment, the Group has been seeking “enhancement of the operation control
structure and human resources development” and has been promoting “technology/productdevelopment by exerting collective strength” while securing the profit with “businessdevelopment where we can exhibit our strengths.” Concretely, we have been seeking toenhance the operation control structure including the quality, cost, and process with a focus
on the railway rolling stock business, our core business, exhibiting our strengths in the strong
area of each business segment by providing products and service that match customer needs,
and gaining a competitive edge by cost reductions to secure stable order receipt with all ourstrength. In such efforts, we will develop closer cooperative ties with the parent company tocontribute to improving the corporate value of the entire JR Central Group as well as todevelop our business.
In the railway rolling stock business, the environment will be continuously difficult interms of receiving orders. In such a circumstance, we will continue to make efforts to gain acompetitive edge concerning various railway rolling stocks with a focus on high speed2railways, by differentiating ourselves from competitors through technological developments
as well as cost reductions through improvements in efficiency of production processes, etc.
In the transportation equipment and steel structure business segment, the transportationequipment business is facing severe competition. We will, however, make efforts to secureorders and develop new customers by developing products which promptly capture market
trends and reducing costs. Our efforts in the steel structure business will be focused onenhancing our ability to propose technological solutions that match customer specificationsin bridge construction work, etc. and reducing costs to secure orders. At the same time, wewill expand our business to peripheral areas such as repair/maintenance projects.
In the construction equipment business segment, demands are increasingly uncertain in thedomestic and overseas markets due to the influence of the spread of the new coronavirus on
the economy though there are plans for renewal in urban areas. We will capture business
opportunities steadily by promoting flexible measures to meet the needs of each region.
In the engineering business segment, we will secure profits by proposing products thatcater to market needs.

Kazuhiro Igarashi
President and Chief Executive Officer

3

Review by Segment
Railway Rolling Stock BusinessIn the railway rolling stock business, our sales to the
JR Companies amounted to ¥23,637 million. It wasachieved through the sales of the Series N700A
Shinkansen trains to Central Japan Railway Company
and West Japan Railway Company, and the testing
hybrid multiple units used as limited express to Central
Japan Railway Company, etc. Our sales for the public andModel AE Express E.M.U.

private railways reached ¥13, 841 million, including the sales of the Marunouchi Line
Series 2000 trains for Tokyo Metro Co., Ltd.; the Model AE Express E.M.U. and Model
3100 trains for Keisei Electric Railway Co., Ltd.; the Model 80000 trains for Shin-Keisei
Electric Railway Co., Ltd.; and the Series 9500 and 2200 trains for Nagoya Railroad Co.,
Ltd. For railway cars for overseas, we had sales of ¥4,892
million, including subway cars for Indonesia.
Consequently, our total sales for railway rolling stock
recorded ¥42,371 million, up 11.4% from the previous
year, with an increase in railway cars for the public andprivate railways and a decrease in railway cars for
Series N700A Shinkansen

overseas.

Transportation Equipment and Steel Structure BusinessIn the transportation equipment business, we
had sales of ¥8,979 million, up 2.9% from theprevious year, with an increase in tank cars andsales of large land vehicles such as carriers andconsumer-purpose LPG tank trucks.
In the steel structure business, we had sales of
Heavy Duty Carriers

the Fukuoka Urban Expressway Route 6 Kashiihama

Viaduct, Shin-Tomei Expressway Shin-KomakadoHigashi Number 3 Viaduct, Kansai Main Line Haruta
Footbridge construction work, and large-scale repair
work for Tokaido Shinkansen, etc., however, the sales ofhighway bridges for government and municipal offices
decreased. As a result, sales were ¥12,097 million, down

4

Shin-Komakado-Higashi Number 3 Viaduct7.4% from the previous year.
In all, sales for the transportation equipment and steel structure businesses were ¥21,078
million, down 3.3% from the previous year.

Construction Equipment BusinessIn the construction equipment business, sales of casting rotators, large and mini piledriving rigs, etc. were continuously at a high level thanks to demands for reconstruction
work from the Great East Japan Earthquake and construction work for urban renewal. As aresult, sales in the construction equipment businessreached ¥22,332 million, up 1.6% from the previous year.
In the generator business, sales were ¥2,605 million,
down 18.4% from the previous year, with a decrease intransportable diesel generators.
In all, sales in our construction equipment businessCasting rotator

were ¥24,939 million, down 0.9% from the previous year.

Engineering BusinessOur main sales included; mechanical equipment forSuperconducting Maglev trains for Central Japan
Railway Company; vehicle inspection/repair facilities
for railway companies; agricultural plants for Japan
Agricultural Cooperatives all over Japan; and papermanufacturing equipment for household paper
manufacturers. As a result, sales in the engineering

Railway turntablebusiness totaled ¥6,100 million, up 1.6% from theprevious year.

Other Businesses
The overseas sales for the year under review amounted to ¥8,124 million, representing
8.6% of total sales, which includes ¥4,892 million for the railway rolling stock business and¥3,226 million for the construction equipment business.
The orders on hand at the end of the year under review reached ¥127,485 million. Thesecomprised ¥101,878 million for the railway rolling stock business, ¥19,732 million for thetransportation equipment and steel structure businesses (¥9,532 million for thetransportation equipment business and ¥10,200 million for the steel structure business),¥3,769 million for the construction equipment business, and ¥2,102 million for the5

engineering business.

Investment in Plant and Equipment
Plant and equipment investment during the year under review totaled ¥3,801 million.
Investment was mainly targeted at renewal of equipment necessary for production oftransportation equipment and the steel structure business. Investment was also made forrenewal of equipment to maintain/improve the production capacity at each plant.
On April 20, 2017, the Group transferred the plant property of Toyokawa Plant, Kinuura
Plant, and Narumi Plant to our parent company (Central Japan Railway Company). Since
the relevant transaction is a transaction with our parent company, and we concluded a lease
contract with our parent company and continuously use the transferred plant property as
plants as before even after transfer, we recorded the “land” and “buildings and structures”of this plant property as tangible fixed assets instead of executing sales and purchaseaccounting. The relevant transaction is not a finance lease transaction, so we recorded thetransfer price of the plant property as a long-term debt (including the long-term debt to becleared within one year).
Therefore, plant and equipment investment concerning the transferred plant property was
also recorded as “buildings and structures”, “machinery and equipment”, and “other”, andsome of the equipment investment amount as long-term debt (including the long-term debt
to be cleared within one year).
Concerning our consolidated subsidiary, the sale of the U.S.A plant of NIPPONSHARYO U.S.A., INC. (closed in August 2018) to a third party was completed.

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

6

NIPPON SHARYO, LTD. ANDCONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2019AND
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, 2020, and the consolidated statement of income, consolidated statement of comprehensive income,consolidated statement of changes in equity and consolidated statement of cash flows for the year thenended, and notes to the consolidated financial statements, including a summary of significant
accounting policies, all expressed 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, 2020, and its consolidated
financial performance and its consolidated cash flows for the year then ended in accordance withaccounting 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 theconsolidated financial statements. Such U.S. dollar amounts are presented solely for the convenienceof readers outside Japan.

8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 Groupin accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled
our other ethical responsibilities as auditors. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Audit & Supervisory Board Members and the Audit &Supervisory Board for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing theGroup's ability to continue as a going concern, disclosing, as applicable, matters related to going
concern in accordance with accounting principles generally accepted in Japan 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 foroverseeing the Directors' execution of duties relating to the design and operating effectiveness of thecontrols over the Group's financial reporting process.

9

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 from material misstatement, whether due to fraud or error, and to issue an auditor'sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain 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 thoserisks. 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, intentional omissions, 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 the Group's internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

10•Conclude on the appropriateness of management's use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group's ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor's report to 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 theoverall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the 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 astatement that we have complied with relevant ethical requirements regarding independence, andcommunicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.

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.

12

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2020

ASSETS

Millions of Yen
2020
2019

Thousands of
U.S. Dollars(Note 1)
2020

13,256$CURRENT ASSETS:
Cash and cash equivalents (Notes 14 and 17)¥¥

12,721

122,738

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

29,31429,756

271,425

Inventories (Notes 2.i and 4)
Other current assets (Note 9)33,36931,484308,969

692

1,039

6,411

76,63175,000709,543

Land (Note 9)

14,383

14,971

133,173

Buildings and structures (Note 9)25,89827,438

239,798

Machinery and equipment

34,92534,686323,383

Construction in progress

109

846

1,013

75,31577,941

697,367(47,092)(49,527)(436,042)

28,22328,414

261,325

Investment securities (Notes 5, 9 and 14)
Investments in an unconsolidated subsidiary and associatedcompanies (Note 14)

17,405

20,381

161,162

842

795

7,796

Asset for employees’ retirement benefits (Note 8)

3,365

7,910

31,154

124

159

1,150

1,223

1,535

11,327

22,95930,780212,589

134,194$ 1,183,457

Total current assets
PROPERTY, PLANT AND EQUIPMENT:

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

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

¥

127,813¥(Continued)

13

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2020

LIABILITIES AND EQUITYCURRENT LIABILITIES:Current portion of long-term debt (Notes 7, 14 and 17)¥
Current portion of lease obligations (Notes 11 and 14)
Notes and accounts payable (Notes 6 and 14)
Accrued expenses (Note 17)
Advances received
Income taxes payable (Note 13)
Allowance for work in progress on construction contracts
Provision for losses on orders received (Note 2.n)Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 7, 9 14 and 17)
Liability for employees’ retirement benefits (Note 8)
Lease obligations (Notes 11 and 14)
Allowance for PCB disposal expenses
Provision for compensation for health damage fromasbestos
Deferred tax liabilities (Note 13)
Other long-term liabilities
Total long-term liabilities
COMMITMENTS AND
CONTINGENT LIABILITIES (Notes 10 and 15)
EQUITY (Note 12):
Common stock,authorized, 32,800,000 shares;
issued, 14,675,012 shares in 2020 and 2019
Capital surplus
Retained earnings
Treasury stock, at cost, 241,705 shares in 2020
and 241,136 shares in 2019
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¥

Thousands of
U.S. Dollars(Note 1)
2020

Millions of Yen
2020
2019
450
744
22,883
5,469
613
26
120
313
1,100
31,718¥296
678
22,912
5,422
4,281
538
176
1,837
1,158
37,298

$

4,169
6,887
211,880
50,640
5,676
243
1,114
2,900
10,173
293,682

56,364
454
1,436
141

55,219
292
1,650
203

521,885
4,200
13,301
1,306

62

87

574

2,923
211
61,591

6,048
951
64,45027,0681,955
570,289

11,811
17,48011,811
9,585

109,358
161,859

(519)

(517)

(4,804)63,521(20,764)
9,113
51,8701,203
319,486¥$ 1,183,457(Concluded)
Note: Effective October 1, 2018, the Company implemented a 1-for-10 consolidation of common stock. The
number of authorized and issued shares were not retroactively adjusted.
See notes to consolidated financial statements.

14

6,860
(2,242)
984
5,602
130
34,504
127,813

8,919(2,224)
4,754
11,449118
32,446
134,194

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2020
Thousands of
U.S. Dollars(Note 1)
2020

Millions of Yen
2020
2019
NET SALES (Note 17)¥

COST OF SALES (Notes 2.i, 2.m and 2.u)
Gross profit
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES (Note 2.u)Operating income
OTHER INCOME (EXPENSES)Interest and dividend income (Note 17)
Interest expense (Note 17)
Equity in earnings of associated companies
Gain on sales of investment securities, net (Note 5)
Loss on impairment of property, plant and equipment(Note 16)
Loss on sales and disposals of property, plant andequipment, net
Other – net
Other (expenses) income – net
INCOME BEFORE INCOME TAXESINCOME TAXES (Note 13):
Current
Deferred
Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TONONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO OWNERS OF
THE PARENT¥

94,635¥91,179¥876,248

79,03375,816

731,783

15,602

15,363

144,465

7,064

6,863

65,403

8,538

8,500

79,062

352
(372)
53
68

344
(344)
82
3

3,259
(3,445)489
630(1,123)(270)(10,396)

(57)

(52)

(530)

71
(1,008)
7,530

284
47
8,547

660
(9,333)69,729

238
(618)
(380)

543
(1,216)
(673)

2,203
(5,720)(3,517)

7,910

9,220

73,246

15

21

143

7,895

¥

9,199

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

547.00-$U.S. Dollars¥

637.29-$Note: Effective October 1, 2018, the Company implemented a 1-for-10 consolidation of common stock. Per
share of common stock has been retroactively adjusted. Per share information has been disclosed as though theconsolidation occurred at the beginning of the fiscal year ended March 31, 2019.
See notes to consolidated financial statements.

15

73,1035.06-

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2020
Thousands of
U.S. Dollars(Note 1)
2020

Millions of Yen
2020
2019
NET INCOME¥

OTHER COMPREHENSIVE (LOSS) INCOME (Note 18):
Unrealized (loss) gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income (loss) in associatedcompanies
Total other comprehensive (loss) income
COMPREHENSIVE INCOME¥
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE
TO:
Owners of the parent¥
Non-controlling interests

See notes to consolidated financial statements.

16

7,910

¥

9,220

$

73,246(2,060)(19)(3,769)

1,220
8
(33)
1,093

(19,070)(175)(34,903)

1

(9)

8

(5,847)
2,063

2,279
11,499(54,140)
19,106

2,048
15

¥

¥

11,47821$$

18,964
142

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2020
Millions of Yen
Accumulated other comprehensive income

BALANCE, APRIL 1, 2018

BALANCE, MARCH 31, 2019

Definedretirement
benefit plans(8)¥ (2,191)¥

Total
accumulated
othercomprehensive Noncontrollingincomeinterests

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

144,343,508¥ 11,811¥ 12,045¥ (11,659)

¥

-

-

(12,045)

12,045

-

-

-

-

-

-

-

-

-

-

-

9,199

-

-

-

-

-

-

-

9,199

(475)

-

0

-

(1)

-

-

-

-

-

-

(1)

-

-

0

(0)

-

-

-

-

-

-

-

-

-

-

-

-

1,211

8

(33)

1,093

2,279

15

2,294

14,433,876

11,811

-

9,585

(517)

8,919

-

(2,224)

4,754

11,449118

32,446

-

-

-

7,895

-

-

-

-

-

-

-

7,895

(569)

-

-

-

(2)

-

-

-

-

-

-

(2)

-

-

-

-

-

(2,059)-(18)(3,770)(5,847)

12(5,835)

14,433,307¥ 11,811-¥ 17,480-¥ (2,242)(129,909,157)*

Net income attributable toowners of the parent
Increase in treasury stock, net
Net changes in the year
BALANCE, MARCH 31, 2020

Foreigncurrencytranslation
adjustments

Number ofshares ofcommon stock
outstanding
Disposition of deficit
Net income attributable toowners of the parent
Increase in treasury stock, net
Transfer to capital surplus fromretained earnings
Net changes in the year

Deferred loss
on derivatives
under hedge
accounting¥¥

Unrealized gain
on available-forsale securities

(516)

¥

(519)

¥

7,708

6,860

¥

¥

3,661

¥

984

¥

¥

9,170

5,602

¥

¥

103

130

Total
equity¥¥20,95434,504

Thousands of U.S. Dollars (Note 1)
Accumulated other comprehensive income

BALANCE, MARCH 31, 2019
Net income attributable toowners of the parent
Increase in treasury stock, net
Net changes in the year
BALANCE, MARCH 31, 2020

Deferred loss
on derivatives
under hedge
accounting$-

Foreigncurrencytranslation
adjustments$ (20,590)

Definedretirement
benefit plans$
44,016

Total
accumulated
othercomprehensive Noncontrollingincomeinterests$ 106,010$ 1,099

Commonstock$ 109,358

Capitalsurplus$-Retainedearnings$ 88,756

Treasurystock$ (4,790)

Unrealized gain
on available-forsale securities$
82,584--

73,103

-

-

-

-

-

-

-

73,103

-

-

-

(14)
-

(19,063)-(174)(34,903)(54,140)104(14)(54,036)-$ 161,859$ (4,804)

1,203$ 319,486$ 109,358$$

63,521$-$(20,764)$*Effective October 1, 2018, the Company implemented a 1-for-10 consolidation of common stock. The number of shares of common stock outstanding has not been retroactively adjusted.
See notes to consolidated financial statements.

17

9,113

$

51,870$Total
equity$ 300,433

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2020
Thousands of
U.S. Dollars(Note 1)Millions of Yen
2020
2019
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
Gain on sales of investment securities
Changes in assets and liabilities:
Decrease (increase) in trade notes and accounts receivable
Increase in inventories
Decrease in trade notes and accounts payable(Decrease) increase in allowance for work in progress on
construction contracts
Decrease in provision for losses on orders received
Decrease in provision for compensation for health damage
from asbestos(Decrease) increase in advances received
Increase in liability for employees’ retirement benefits
Other-net
Net cash provided by (used in) 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

¥

7,530

¥

2020

8,547

$

69,729

(802)
2,362
1,123

(5)
2,370
270

(7,431)
21,870
10,396

(139)
(68)

21
(3)

(1,289)(630)

697(1,896)(119)(1,029)(4,792)(2,053)

6,457(17,559)(1,106)(56)(1,524)140(4,248)(515)(14,111)(25)(3,668)161(2,267)
1,309

(12)
814
20
(1,376)(1,336)(231)(33,960)
1,495(20,994)
12,121(4,615)
2,665
(4)
145
(93)
(1,902)(1,235)
46
(3)
11
(66)
(1,247)(42,734)
24,677
(33)
1,346
(864)
(17,608)(Continued)

18Thousands of
U.S. Dollars(Note 1)
2020

Millions of Yen
2020
2019
FINANCING ACTIVITIES:
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Other-net
Net cash provided by (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

¥

2,739
(1,440)
(0)
(151)
1,148

118
(289)
(0)
(303)
(474)

25,362(13,332)(0)(1,405)
10,625

(20)

(59)

(186)

535
12,721(3,116)
15,837

4,952
117,786

13,256¥

12,721$

122,738(Concluded)
See notes to consolidated financial statements.

19

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2020
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 of International Financial Reporting Standards (IFRS).
In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present
them in a form which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2019 consolidated financial statements to conform to theclassifications used in 2020.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich NIPPON SHARYO, LTD. (the “Company”) is incorporated and operates. The translationsof Japanese yen amounts into U.S. dollar amounts are included solely for the convenience ofreaders outside Japan and have been made at the rate of ¥108 to $1, the approximate rate ofexchange at March 31, 2020. Such translations should not be construed as representations that theJapanese 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, 2020, include the accounts of the Company
and its significant subsidiaries (together, the “Group”). Under the control and influence concepts,
those companies 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
method of accounting had been applied to the investments in these companies, the effect on theaccompanying 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 subsidiaries, and associatedcompanies for the years ended March 31, 2020 and 2019, was as follows:
2020
2019
Consolidated subsidiaries
6
6
Unconsolidated subsidiaries stated at cost
1
1
Associated companies accounted for by the equity method22
Associated companies stated at cost
1
1
The fiscal year-end of NIPPON SHARYO U.S.A., INC. and its subsidiaries, NIPPON SHARYOMANUFACTURING, LLC, and NIPPON SHARYO ENGINEERING & MARKETING, LLC
is December 31 and their financial statements with the closest closing date prior to that of theCompany are used for consolidation purposes. Necessary adjustments for significant transactions
from January 1 to March 31 are made for consolidation purposes.
For the equity method associated companies that have a different fiscal year from that of theCompany, the associated companies’ financial statements with the closest closing date prior tothat of the Company 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
the Consolidated Financial Statements,” the accounting policies and procedures applied to aparent company and its subsidiaries for similar transactions and events under similar
circumstances should, in principle, be unified for the preparation of the consolidated financial
statements. However, financial statements prepared by foreign subsidiaries in accordance witheither 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 withJapanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled
amortization of actuarial gain or loss of pensions that has been recorded in equity through othercomprehensive income; (c) expensing capitalized development costs of research and development(R&D); and (d) cancellation of the fair value model of accounting for property, plant andequipment and investment properties and incorporation of the cost model accounting.
c. Unification of accounting policies applied to associated companies for the equity method
ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting forInvestments,” 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 isimpracticable to determine adjustments.
d. Business combinations
Business combinations are accounted for using the purchase method. Acquisition-related costs,
such as 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 theend of the reporting period in which the business combination occurs, an acquirer shall report inits financial statements provisional amounts for the items for which the accounting is incomplete.
During the measurement period, which shall not exceed one year from the acquisition, theacquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date toreflect new information obtained about facts and circumstances that existed as of the acquisition
date and that would have affected the measurement of the amounts recognized as of that date.

21

Such adjustments shall be recognized as if the accounting for the business combination had been
completed at the acquisition date. A parent’s ownership interest in a subsidiary might change if
the parent purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling 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 noncontrolling 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.
f. Investment securities
Investment securities are classified and accounted for, depending on management’s intent, as
follows:
Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-averagemethod. 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 and interest rates. 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 fairvalue and gains and losses on derivative transactions are recognized in the consolidated statementof operations and 2) for derivatives used for hedging purposes, if such derivatives qualify forhedge accounting because of high correlation and effectiveness between the hedging instruments
and the hedged items, gains and losses on derivatives are deferred until maturity of the hedgedtransactions.
The forward foreign currency contracts are utilized to hedge foreign currency exposures in salesof merchandise and finished goods to overseas customers and procurement of raw materials fromoverseas suppliers. Trade receivables and payables denominated in foreign currencies aretranslated at the contracted rates if the forward 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 generalreserve for other receivables is calculated based on the historical loss experience.

22

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 semi-finished goods, raw materials, and supplies, or net selling value, which is defined as theselling 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. Reversal ofwrite-downs of inventories in the amounts of ¥(1,837) million ($(17,010) thousand) and ¥(1,157)
million for the years ended March 31, 2020 and 2019, respectively, were included in cost of sales.
j. Property, plant and equipment
Property, plant and equipment, including significant renewals and additions, are stated at cost andare depreciated principally by the straight-line method for buildings and building improvements
and structures acquired on or after April 1, 2016, and by the declining-balance method for otherproperty at rates based on the estimated useful lives of the assets.
Depreciation of leased assets relating to financial lease transactions without transfer of ownershipis computed by the straight-line method over the leased period.
The range of useful lives is principally from 10 to 60 years for buildings and structures and fromsix 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 buying and selling transaction
since the relevant 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. The relevant factory assets were therefore still recorded under property, plant and equipmentof the Company. As the relevant transactions do not fall under a finance lease transaction, thetotal transfer price was recorded as long-term debt (including the current portion). In addition,
capital expenditure related to the transferred factory assets was recorded under “buildings andstructures” and “machinery and equipment,” and a part of the capital expenditure was recorded
as long-term debt (including the current portion), for the years ended March 31, 2020 and 2019.
As a result, the relevant factory assets as of March 31, 2020, were recorded under property, plantand equipment with carrying amounts of ¥11,975 million ($110,883 thousand) as land, of ¥5,997
million ($55,531 thousand) as buildings and structures and ¥200 million ($1,848 thousand) as
machinery and equipment, while long-term debt (including the current portion) was recorded witha carrying amount of ¥22,893 million ($211,970 thousand) as of March 31, 2020. As of March
31, 2019, the relevant factory assets were recorded under property, plant and equipment withcarrying amounts of ¥11,975 million as land, of ¥3,827 million as buildings and structures and¥7 million as machinery and equipment, while long-term debt (including the current portion) wasrecorded with a carrying amount of ¥20,515 million.
k. Long-lived assets
The Group reviews its long-lived assets for impairment whenever events or changes incircumstance indicate 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 thesum 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 bywhich the carrying amount of the asset exceeds its recoverable amount, which is the higher of the
discounted cash flows from the continued use and eventual disposition of the asset or the net
selling value at disposition.

23

l. Intangible assets
Intangible assets that are included in other assets are amortized by the straight-line method.
Software costs are amortized over five years.
m. Allowance for work in progress on construction contracts
An allowance for work in progress on construction contracts is provided based on an estimate of
the total loss on construction projects for which eventual losses are deemed inevitable and forwhich the quantum of loss can be reasonably estimated. Provisions and (reversal of provisions)for work in progress on construction contracts with an amount of ¥56 million ($515 thousand)and ¥140 million for the years ended March 31, 2020 and 2019, respectively, were included incost of sales.
n. Provision for losses on orders received
A provision for losses on orders received, except for construction contracts, is recorded based onan estimate of the total anticipated loss on contracts for which eventual losses are deemed
inevitable and for which the quantum 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 amortizedon a straight-line basis over 15 years, which is within the average remaining service period.
Actuarial gains and losses are amortized on a straight-line basis mainly over 15 years, which iswithin the average remaining service period in the following the fiscal year.
p. Allowance for Polychlorinated Biphenyl (PCB) disposal expenses
An allowance for PCB disposal expenses has been provided based on the published estimateddisposal fee schedule issued by the Japan Environmental Storage & Safety Corporation.
q. 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.
r. Income taxes
The provision for income taxes is computed based on the pretax income included in the
consolidated statement of operations. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and liabilities. Deferredtaxes are measured by applying currently enacted tax rates to the temporary differences.
s. 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 of operations to the extent that they are not hedged by forward exchange contracts.
t. 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
is translated at the historical rate. Revenue and expense accounts of consolidated foreign24subsidiaries are translated into yen at the average exchange rate. Differences arising from suchtranslation are shown as foreign currency translation adjustments under accumulated othercomprehensive income in a separate component of equity.
u. R&D expenses
Expenses related to R&D activities are charged to income as incurred. R&D expenses amounted
to ¥1,480 million ($13,700 thousand) and ¥1,344 million for the years ended March 31, 2020 and
2019, respectively, and are included in general and administrative expenses and manufacturingcosts in the accompanying consolidated statement of operations.
v. Per share information
Basic net income per share is computed by dividing net income attributable to commonshareholders 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, 2020 and 2019, were 14,433 and 14,434 thousand shares, respectively. Diluted net
income per share for the years ended March 31, 2020 and 2019, was not applicable because theCompany had no dilutive common shares. Cash dividends per share presented in theaccompanying consolidated statement of operations are dividends applicable to the respective
years, including dividends to be paid after the end of the year.
Effective October 1, 2018, the Company has implemented a 1-for-10 consolidation of common
stock. Per share of common stock has been retroactively adjusted as though the shareconsolidation occurred at the beginning of the fiscal year ended March 31, 2019.
w. Construction contracts
Construction revenue and construction costs are recognized by the percentage-of-completion
method if the outcome of a construction contract can be estimated reliably. When total
construction revenue, total construction costs and the stage of completion of the contract at theconsolidated balance sheet date can be reliably measured, the outcome of a construction contract
is deemed to be estimated reliably. If the outcome of a construction contract cannot be reliably
estimated, the completed-contract method is applied. When it is probable that the total
construction costs will exceed total construction revenue, the estimated loss on the contract isrecognized.
x. 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.
y. Change in accounting policies
Accounting Standards Codification (ASC) 606 – Revenue from Contract with Customers
Foreign subsidiaries adopting generally accepted accounting principles in the United States ofAmerica (“US-GAAP”) have applied ASC 606 “Revenue from Contract with Customers” from25

the fiscal year ended March 31, 2020. The effects of the application of this standard on the
consolidated financial statements are immaterial.
z. New accounting pronouncements
Accounting Standard for Revenue Recognition, etc.
- Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, revised on March
31, 2020)- Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance
No. 30, revised on March 31, 2020)- Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ
Guidance No. 19, revised on March 31, 2020)(a) Overview
The International Accounting Standards Board (“IASB”) and the Financial Accounting Standards
Board (“FASB”) have jointly developed a comprehensive accounting standard for revenue
recognition and issued it as converged guidance on recognizing revenue in contracts withcustomers in May 2014 as IFRS 15 (IASB) and Topic 606 (FASB), respectively. To respond toboth IFRS 15 and Topic 606 effective from the fiscal years beginning on or after January 1, 2018and December 15, 2017, respectively, ASBJ has developed a comprehensive accounting standard
for revenue recognition and issued it with the respective implementation guidance.
In developing the accounting standard for revenue recognition, ASBJ basically integrated thecore principle of IFRS 15 from a comparability point of view of the financial statements, which
is one of the benefits of ensuring consistency with IFRS 15. ASBJ, on the other side, consideredadditional alternative treatments where current practices under Japanese GAAP are to be reflected
as far as such treatments would not significantly impair international comparability.
(b) Effective date
The above standard and guidances are scheduled to be applied from the beginning of the fiscal
year ending March 31, 2022.
(c) Effects of application of the standards
The effects of the application of the above standard and guidances on the consolidated financial
statements are currently being assessed.
Accounting Standard for Fair Value Measurement, etc.
- Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, issued on July 4,
2019)- Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, issued on July4, 2019)- Accounting Standard for Financial Instruments (ASBJ Statement No. 10, issued on July 4,
2019)- Implementation Guidance on Accounting Standard for Fair Value Management (ASBJ
Guidance No. 31, issued on July 4, 2019)- Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ
Guidance No. 19, revised on March 31, 2020)(a) Overview
Both the IASB and the FASB each established a nearly identical and detailed guidance for fairvalue measurement (IFRS 13 “Fair Value Measurement” in IFRS and ASC Topic 820 “Fair Value
Measurement” in US-GAAP.) Given this fact, ASBJ issued the “Accounting Standard for Fair
Value Measurement” to establish consistency between Japanese standards and international
standards regarding the guidance and disclosure mainly for fair value of financial instruments.

26

ASBJ’s basic policy in developing the accounting standard for fair value measurement was toadopt entire IFRS 13 with the unified measurement methodology for a better comparability of
the financial statements of domestic and foreign enterprises. ASBJ, on the other side, specified
other alternative treatments in individual items considering the current practices under Japanese
GAAP as far as such treatments would not significantly impair international comparability.
(b) Effective date
The above standards and guidances are scheduled to be applied from the beginning of the fiscal
year ending March 31, 2022.
(c) Effects of application of the standards, etc.
The effects of the application of the above standards and guidances on the consolidated financial
statements are currently being assessed.
Accounting Standard for Disclosure of Accounting Estimates- Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, issued
on March 31, 2020)(a) Overview
Paragraph 125 of International Accounting Standards (“IAS”) 1 “Presentation of Financial
Statements” issued by IASB in 2003 requires disclosure of “sources of estimation uncertainty.”
As this information was considered highly useful to users of financial statements, there wererequests for discussion on implementation of such disclosure requirement in Japanese GAAP.
Accordingly, ASBJ developed and issued the “Accounting Standard for Disclosure of
Accounting Estimates.”
ASBJ’s basic policy in developing this accounting standard was to refer to requirements of
Paragraph 125 of IAS 1. The standard was intended not to enhance existing note disclosure
requirements, but to require enterprises to specify the purposes of disclosure and to determine
what to disclose according to such purposes.
(b) Effective date
The above standard is scheduled to be applied from the end of the fiscal year ending March 31,
2021.
Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections- Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections (ASBJ Statement No. 24, issued on March 31, 2020)(a) Overview
In response to suggestions to discuss improving the note disclosure of “principle and procedure
applied to accounting treatments when related accounting standards are undefined,” ASBJ
accordingly revised the “Accounting Standard for Accounting Policy Disclosures, Accounting
Changes and Error Corrections.”
To avoid conflict with the current practices of disclosure when related accounting standards aredefined, in adopting this standard, it should be noted that Paragraph 1-2 of annotations of
Accounting Principles for Business Enterprises is still effective.
(b) Effective date
The above standard is scheduled to be applied from the end of the fiscal year ending March 31,
2021.

27

3. NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable as of March 31, 2020 and 2019, consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2020
2019
2020
Trade notes receivable
¥
4,230
¥
5,022
$
39,162- Unconsolidated subsidiary and associatedcompanies
136
215
1,260
Trade accounts receivable
16,75017,600155,094- CJR, unconsolidated subsidiary andassociated companies
7,065
6,054
65,418
Other
1,147
911
10,621Less allowance for doubtful accounts
(14)
(46)
(130)
¥
29,314¥29,756$
271,425
Total
Note: Allowance for doubtful accounts was not recognized for accounts receivable-other, which
was included in Other above.
4. INVENTORIESInventories as of March 31, 2020 and 2019, consisted of the following:

Merchandise
Finished goods
Work in process and semi-finished goods
Raw materials

¥

¥

Total

Millions of Yen
2020
2019
424
¥
224
968
1,303
30,45728,676
1,520
1,281
33,369¥31,484

Thousands of
U.S. Dollars
2020
$
3,923
8,959
282,009
14,078$308,969

Work in process and the allowance for work in progress on construction contracts are presented
in the gross amount in the consolidated balance sheet. At March 31, 2020 and 2019, an allowancefor work in progress on construction contracts of ¥nil and ¥80 million, respectively, was provided
and included in work in process and semi-finished goods above.

28

5. INVESTMENT SECURITIESInvestment securities as of March 31, 2020 and 2019, consisted of the following:

Equity securities
Total

¥
¥

Millions of Yen
2020
2019
17,405¥
20,381
17,405¥
20,381Thousands of
U.S. Dollars
2020$
161,162$
161,162

The costs and aggregate fair values of investment securities as of March 31, 2020 and 2019, wereas follows:

Cost
Securities classified asavailable-for-sale:
Equity securities
Total

¥
¥

5,993
5,993

Cost
Securities classified asavailable-for-sale:
Equity securities
Total

Securities classified asavailable-for-sale:
Equity securities
Total

¥
¥

$
$

6,063
6,063

Millions of Yen
2020
Gross unrealized
Gross unrealized
gains
lossesFair andcarrying value

¥
¥

¥
¥

10,064
10,064

¥
¥

(246)
(246)

15,811
15,811Millions of Yen
2019
Gross unrealized
Gross unrealized
gains
lossesFair andcarrying value

¥
¥

¥
¥

12,743
12,743

¥
¥

(25)
(25)

18,781
18,781

Cost

Thousands of U.S. Dollars
2020
Gross unrealized
Gross unrealized
gains
lossesFair andcarrying value

55,49255,492

$
$

$
$

29

93,192
93,192$$(2,282)(2,282)

146,402
146,402

The information of available-for-sale securities which were sold for the years ended March 31,
2020 and 2019, was as follows:

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

145
145

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

10
10

Proceeds
Available-for-sale:
Equity securities
Total

Millions of Yen
2020
Realized
gains
¥
¥

68
68

Realized
losses¥¥Millions of Yen
2019Realized
gains
¥
¥

3
3

-

Realized
losses
¥
¥

(0)
(0)

Thousands of U.S. Dollars
2020
Realized
gains

Realized
losses

$

1,346

$

630

$

-

$

1,346

$

630

$

-

No impairment losses were recognized on available-for-sale equity securities for the years ended
March 31, 2020 and 2019.
6. NOTES AND ACCOUNTS PAYABLE
Notes and accounts payable as of March 31, 2020 and 2019, consisted of the following:Thousands ofMillions of Yen
U.S. Dollars
2020
2019
2020
Trade notes payable
¥
384
¥
1,418
$
3,558
Electronically recorded obligations-operating
10,774
10,67099,755-Unconsolidated subsidiary and associated
12
25
112
companies
Trade accounts payable
8,886
8,001
82,277-Unconsolidated subsidiary and associated
32
94
300
companies
Other
2,795
2,704
25,878¥22,883¥
22,912$211,880
Total

30

7. LONG-TERM DEBT
Long-term debt as of March 31, 2020 and 2019, consisted of the following:Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Loans from CJR due through 2027 (Note) withaverage interest rate of 0.61%¥
Less current portion
Total¥

56,814(450)
56,364¥55,515(296)
55,219$$526,054(4,169)521,885

The aggregate annual maturities of long-term debt as of March 31, 2020, were as follows:
Thousands ofYears ending March 31
Millions of Yen
U.S. Dollars
2021
2022
¥
2,900
$
26,8522023
2,900
26,8522024
2,900
26,8522025
2,900
26,8522026 and thereafter
22,321
206,676
Total¥
33,921$
314,084
Note: Long-term debt recorded for the transfer price of the factory assets transferred to CJR andfor a part of capital expenditure related to the transferred factory assets in the total
amount of ¥22,893 million ($211,970 thousand) was not reflected.

31

8. RETIREMENT AND PENSION PLANS
Employees who terminate their service with the Company and its domestic consolidated
subsidiaries are entitled to retirement benefits generally determined by reference to the basic rateof pay at the time of termination, length of service and conditions under which the termination
occurs. The Company has a lump-sum retirement benefit plan, a defined contribution pension
plan and a defined benefit pension plan, which are assumed to cover retirement benefits for
employees who have retired voluntarily. The Company contributed certain assets to the employee
retirement benefit trust. The Company’s domestic consolidated subsidiaries have similar
retirement benefit plans.
(1) Defined benefit plans(a) The changes in defined benefit obligation for the years ended March 31, 2020 and 2019, wereas follows:
Thousands ofMillions of Yen
U.S. Dollars
2020
2019
2020
Balance at beginning of year¥
13,638¥13,359$ 126,274
Current service cost
750
738
6,946
Interest cost
120
118
1,112
Actuarial gains
(14)
(93)
(132)
Benefits paid
(698)
(484)
(6,462)
Prior service cost
(65)
(595)
Balance at end of year¥
13,731¥
13,638$ 127,143
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, 2020 and 2019, were as follows:
Millions of Yen
2020
2019
¥
21,256¥
18,710258
245(4,908)
2,123
380
380
(344)
(202)
¥
16,642¥
21,256

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

32

Thousands of
U.S. Dollars
2020$ 196,809
2,389(45,445)
3,522(3,178)$ 154,097

(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, 2020 and 2019, was asfollows:

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
2020
2019
¥
13,498¥13,346(16,642)(21,256)(3,144)(7,910)233
292

Thousands of
U.S. Dollars
2020$ 124,985(154,097)(29,112)2,158¥(2,911)¥(7,618)$(26,954)¥(3,365)454¥(7,910)292$(31,154)
4,200¥(2,911)¥(7,618)$(26,954)(d) The components of net periodic benefit costs for the years ended March 31, 2020 and 2019,were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2020
2019
2020
Service cost (Note)
¥
750
¥
738
$
6,946
Interest cost
120
118
1,112
Expected return on plan assets
(258)
(245)
(2,389)
Recognized actuarial gains
(563)
(640)
(5,217)
Amortization of prior service cost
(9)
(8)
(84)
Net periodic benefit costs
¥
40
¥
(37)
$
368
Note: Retirement benefit costs of the consolidated subsidiaries applying the simplified method
are included 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, 2020 and 2019
Millions of Yen
2020
2019
¥
55
¥
8
(5,457)(1,576)¥(5,402)¥(1,568)

Prior service cost
Actuarial gains
Total

33

Thousands of
U.S. Dollars
2020
$
511
(50,530)$(50,019)(f) Amounts recognized in accumulated other comprehensive income (before income tax effect)
in respect of defined retirement benefit plans as of March 31, 2020 and 2019
Millions of Yen
2020
2019
¥
(126)
¥
(71)
(1,292)(6,749)¥(1,418)¥(6,820)

Unrecognized prior service cost
Unrecognized actuarial gains
Total

Thousands of
U.S. Dollars
2020$(1,170)(11,961)$(13,131)(g) Plan assets(i) Components of plan assets
Plan assets consisted of the following:
2020
17%
72%
4%
7%
100%

Debt investments
Equity investments
Cash and deposits
Other
Total

2019
12%
80%
3%
5%
100%

Note: The employees’ retirement benefit trusts for the contributory pension plans accounted
for 16% and 18% of total plan assets for the years ended March 31, 2020 and 2019,respectively.
(ii) Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the current and future
asset portfolio and the long-term rates of return which are expected currently and in the futurefrom the various components of the plan assets.
(h) Assumptions used for the years ended March 31, 2020 and 2019, were set forth as follows:
2020
0.9%
2.0%

Discount rate
Expected rate of return on plan assets

2019
0.9%
2.0%

(2) Defined contribution plans
The required contribution of the Company and its consolidated subsidiaries amounted to ¥143
million ($1,322 thousand) and ¥139 million for the years ended March 31, 2020 and 2019,respectively.

34

9. ASSETS PLEDGED AS COLLATERAL(1) Assets pledged as collateral for long-term debt borrowed from CJR in November 2017 forthe payment of settlement money related to a large railway rolling stock project in the U.S.A.
were as follows. The balance of the long-term debt as of March 31, 2020 and 2019 was¥33,921 million ($314,083 thousand) and ¥35,000 million, respectively.
Thousands ofMillions of Yen
U.S. Dollars
2020
2019
2020
Buildings and structures
¥
259
¥
261
$
2,398
Land
15
15
138
Investment securities
14,881
12,606
137,784
Total¥ 15,155¥ 12,882$ 140,320(2) Other assets pledged as collateral as of March 31, 2020 and 2019, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2020
2019
2020
Other current assets (Note 1)
¥
1
¥
56
$
10
Other assets under Investments and Other
101093
Assets (Note 2)
Investment securities (Note 3)
5,887
Total
¥
11
¥ 5,953$
103
Notes 1: Deposit required by insurance contracts
2: Guarantee deposit required by the Building Lots and Buildings Transaction Business
Law
3: Deposit for letter of credit

10. CONTINGENT LIABILITIESIn some cases, the Company sells its construction equipment products through leasing companies.
Some of these leasing companies request that the Company enters into lease credit guarantee
contracts. Under these contracts, if the lease credits are unrecoverable from users of theCompany’s construction equipment products, the Company guarantees payment of the amountdefined by the contract to the leasing companies. Such guarantees as of March 31, 2020 and 2019,
amounted to ¥129 million ($1,197 thousand) and ¥226 million, respectively.

35

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, 2020, were as follows:
Years ending March 31
2021
2022
2023
2024
2025
2026 and thereafter
Total

Millions of Yen
¥
744
778
318
164
176
¥
2,180

Thousands of
U.S. Dollars
$
6,887
7,206
2,949
1,517
1,629
$
20,188A consolidated subsidiary subleases machinery.
Investments in leases and lease obligations, which include an interest portion, resulting fromsublease transactions as of March 31, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Investments in leases:
Due within one year
Due after one year
Total

¥
¥

116
112
228

¥
¥

122
205
327

$
$

Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Lease obligations:Due within one year
Due after one year
Total

¥
¥

36

132
129
261

¥
¥

140
235
375

1,070
1,043
2,113

$
$

1,221
1,195
2,416

12. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The
significant provisions in the Companies Act that affect financial and accounting matters are
summarized below:(1) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in
addition to the year-end dividend upon resolution at the shareholders’ meeting. Additionally,for companies that meet certain criteria including (1) having a Board of Directors, (2) having
independent auditors, (3) having an Audit & Supervisory Board, and (4) the term 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 the common stock. Under the Companies Act, the total amount of additional paid-in capitaland legal reserve may be reversed without limitation. The Companies Act also provides that
common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts within equity under certain conditions upon
resolution of the shareholders.
(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 aspecific formula. Under the Companies Act, stock acquisition rights are presented as a separate
component of equity. The Companies Act also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights arepresented as a separate component of equity or deducted directly from stock acquisition rights.
Effective June 28, 2018, the Company transferred capital surplus to retained earnings based on
the resolution of the Shareholders’ Meeting held on June 28, 2018.
Effective October 1, 2018, the Company has implemented a 1-for-10 consolidation of common
stock based on the resolution of the Shareholders’ Meeting held on June 28, 2018.

37

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
30.3% and 30.2% for the years ended March 31, 2020 and 2019, respectively.
The tax effects of significant temporary differences and tax loss carryforwards that resulted indeferred tax assets and liabilities as of March 31, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Deferred tax assets:
Tax loss carryforwards (Note 2)
Liability for employees’ retirement benefits
Loss on write-downs of inventories
Land and building of plants
Loss on impairment of fixed assets
Accrued bonuses to employees
Provision for losses on orders received
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

¥

¥

6,479
2,496
1,218
1,517
417
536
96
1,545
14,304

¥

3,630
2,510
1,761
1,458
1,155
485
273
1,834
13,106$59,987
23,10911,27914,050
3,858
4,964
888
14,309132,444(5,929)(3,630)(54,898)(6,094)(12,023)
2,281(7,974)(11,604)¥
1,502 $

(56,427)(111,325)
21,119Deferred tax liabilities:
Unrealized gain on available-for-sale securities ¥(3,002)¥ (3,842) $(27,794)
Other(2,078)(3,549)(19,243)
Total(5,080)(7,391)(47,037)
Net deferred tax liabilities¥(2,799)¥ (5,889) $(25,918)
Notes 1: Valuation allowance increased by ¥419 million ($3,879 thousand) during the year ended
March 31, 2020. This is mainly due to the increase of the Company’s tax loss
carryforwards.
2: Expected maturity of the deferred tax assets after the balance sheet date for tax loss
carryforwards as of March 31, 2020, was as follows:38

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net
deferred tax assets as of March 31, 2020, were as follows:
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 year

2020
Tax loss carryforwards (*)
Valuation allowance
Deferred tax assets

-

-

-

-

- ¥
-

Total

6,479 ¥ 6,479(5,929)(5,929)550(**) 550

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 year2019
Tax loss carryforwards (*)
Valuation allowance
Deferred tax assets

-

-

-

-

- ¥
-

Total

3,630 ¥ 3,630(3,630)(3,630)-Thousands of U.S. Dollars
Over 1 year Over 2 years Over 3 years Over 4 years
but within
but within Over 5 years
but within but within
2 years
3 years
4 years
5 years

Within1 year

2020
Tax loss carryforwards (*)
Valuation allowance
Deferred tax assets

-

-

-

-

- $ 59,987 $ 59,987(54,898)(54,898)5,089(**) 5,089(*) The amount of tax loss carryforwards was calculated by using the statutory tax rate.
(**) The amount of deferred tax assets related 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 operations for the year ended
March 31, 2020, with the corresponding figures for 2019, is as follows:

Normal effective statutory tax rate
Increase (decrease) due to:
Expenses not deductible for income tax purposes
Tax-exempt income
Changes in valuation allowance
Per capita inhabitant tax
Transfer price adjustments on consolidation
Higher (lower) income tax rates applicable to income incertain foreign countries
Transfer price adjustment
Effect of changes in tax rate

Other
Actual effective income tax rate

39

2020
30.3 %

2019
30.2

14.4
(0.4)
(4.5)
0.4
10.3

3.9
(0.3)
(37.6)
0.4
(5.4)

2.4

1.8

(58.3)
0.2
0.2
(5.0)

(0.9)
(7.9)

%

Total

%

%

14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group policy for financial instruments
The Group finances capital investments and necessary funds mainly internally and with CMS
provided by a consolidated subsidiary of CJR. The Company also operates funds by utilizing
CMS. Derivative transactions are used, not for speculative purposes, but to manage exposure tofinancial risks as described in (2) below.
(2) Nature and extent of risks arising from financial instruments
Receivables, such as notes and accounts receivable, are exposed to customer credit risk.
Although receivables in foreign currencies are exposed to the risk of fluctuation in foreign
currency exchange rates, the position, net of payables in foreign currencies, is hedged by using
forward foreign currency contracts. Investment securities, mainly equity instruments of customers
and suppliers of the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year.
Although payables in foreign currencies are exposed to the risk of fluctuation in foreign currency
exchange rates, the position, net of receivables in foreign currencies, is hedged by using forward
foreign currency contracts.
Long-term debt recorded for the transfer price of the factory assets transferred to CJR and for apart of capital 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 to risks associated with fluctuations in foreign currency exchange rates related toreceivables and payables denominated in foreign currencies and forecasted transactions
denominated in foreign currencies. Please see Note 15 for more information about derivatives.
(3) Risk management for financial instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service
debt according to the contractual terms. The Group manages its credit risk from receivables bymonitoring financial position, payment terms and balances of customers to identify default riskof customers at an early stage.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting fromfluctuations in foreign currency exchange rates. Such foreign exchange risk is hedged principally
by forward foreign currency contracts. In addition, when foreign currency trade receivables andpayables are expected from forecasted transactions, forward foreign currency contracts may be
used.

40

Investment securities are managed by monitoring the market values and the financial position ofissuers 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
operating payables and short-term borrowings and long-term debt.
(4) Fair values of financial instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices
are not available, other rational valuation techniques are used instead. Please see Note 15 for thedetails of the fair value of derivatives.
(a) Fair value of financial instruments
Millions of Yen
2020

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total

Carrying
amount¥ 13,256
29,314
15,811¥ 58,381

Notes and accounts payable
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total¥ 22,883
26
33,921
2,180¥ 59,010

Fair value¥ 13,256
29,314
15,811¥ 58,381
22,88326
34,5132,169¥ 59,591

Unrealized
gain (loss)
-

¥

¥

¥

(592)
11
(581)

Millions of Yen
2019

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total

Carrying
amount¥ 12,721
29,756
18,781¥ 61,258

Notes and accounts payable
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total¥ 22,912
538
35,0002,328¥ 60,778

41

Fair value¥ 12,721
29,756
18,781¥ 61,258
22,912538
35,6092,315¥ 61,374

Unrealized
gain (loss)
-

¥

¥

¥

(609)
13
(596)

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total

Thousands of U.S. Dollars
2020
Carrying
Unrealized
amountFair value
gain (loss)$ 122,738$ 122,738
271,425
271,425
146,402
146,402$ 540,565$ 540,565-

Notes and accounts payable
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total$ 211,880
243
314,084
20,188$ 546,395$ 211,880
243
319,569
20,085$ 551,777$$(5,485)103(5,382)

AssetsCash and cash equivalents, and notes and accounts receivable
The carrying values of cash and cash equivalents, and notes and accounts receivable approximate
fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market prices of the stock
exchange. The information on the fair value of investment securities by classification is includedin Note 5.
Liabilities
Notes and accounts payable, and income taxes payable
The carrying values of notes and accounts payable, and income taxes payable approximate fairvalue since they are scheduled to be settled in a short period of time.
Long-term debt and lease obligations
The fair values of long-term debt (including the current portion) and lease obligations aremeasured at the present value of the total of the principal and interest discounted by the interest
rate applied to new loans.
Derivative transactions
Information on the fair value of derivatives is included in Note 15.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined

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

42

Millions of Yen
2020
2019
1,595
¥
1,600

Thousands of
U.S. Dollars
2020$
14,760

842

795

7,796

22,893

20,515211,970

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

Cash and cash equivalents
Notes and accounts receivable
Total

Cash and cash equivalents
Notes and accounts receivable
Total

Due in one
year or lessMillions of Yen
2020
Due after
Due after
one yearfive years
throughthroughfive years
10 years¥ 13,256
28,674¥ 41,930¥¥

Due in one
year or lessThousands of U.S. Dollars
2020
Due after
Due after
one yearfive years
throughthroughfive years
10 years$ 122,738
265,497$ 388,235

$
$

640
640

5,928
5,928

¥
¥

$
$

Due after
10 years--

Due after
10 years-

Please see Note 7 for annual maturities of long-term debt and Note 11 for obligations underfinance leases.
15. DERIVATIVE TRANSACTIONSThe Group enters into forward foreign currency contracts to hedge foreign exchange risk
associated with certain assets and liabilities denominated in foreign currencies.
All derivative transactions are entered into to hedge interest and foreign currency exposuresincorporated within its business. Accordingly, market risk in these derivatives is basically offset
by opposite movements in the value of hedged assets or liabilities.
Derivative transactions entered into by the Group have been made in accordance with internal
policies which regulate the authorization and credit limit amount.
There was no derivative transaction to which hedge accounting was applied for the years ended
March 31, 2020 and 2019.

43-

16. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENTThe Group recognized impairment losses on the following asset groups.
For the year ended March 31, 2020:

Asset group
Idle assets

Location
Illinois,
U.S.A.

Account
Land andbuildings, etc.
Total

Millions of Yen
2020

Thousands of
U.S. Dollars
2020¥

1,123 $

10,396¥

1,123 $

10,396

For the year ended March 31, 2019:
Asset group
Idle assets
Idle assets
Idle assets

Location
Shinanomachi,
NaganoNagoya,Aichi
Illinois,
U.S.A.

Account

Millions of Yen
2019

Land

¥

Buildings andstructures, etc.
Machinery andequipment
Total

14
17
239

¥

270

The Group reviewed its long-lived assets for impairment as of March 31, 2020 and 2019.
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 for the year ended March 31, 2020,
and reasonably adjusted amount of property tax assessment value for the year ended March 31,2019).
The Company resolved at the Board of Directors held on November 22, 2019 to sell all the assetsof the manufacturing plant of an U.S. subsidiary, NIPPON SHARYO U.S.A., INC. in Rochelle,
Illinois, U.S.A. The Company recognized an impairment loss by writing down to its recoverable
amount since the carrying amount of the asset exceeds its recoverable amount based on the net
selling value.

4417. RELATED-PARTY DISCLOSURES(1) Parent and major shareholders
CJR directly owned 51.2% of the total shares of the Company as of March 31, 2020 and 2019.
The Company distributes transportation vehicles to CJR.
Transactions of the Company with CJR for the years ended March 31, 2020 and 2019, were as
follows:
For the year ended March 31, 2020

Sales
Borrowing of funds
Repayment of debt
Interest expense

Millions of
Yen
2020
¥
18,290
2,740
1,441
345

Thousands of
U.S. Dollars
2020$
169,350
25,362
13,338
3,192

Borrowing of funds, repayment of debt, and interest expense of ¥2,740 million ($25,362
thousand), ¥362 million ($3,348 thousand), and ¥134 million ($1,244 thousand), respectively,
were recorded for the transfer of the factory assets transferred to CJR and for a part of capital
expenditure related to the transferred factory assets.
For the year ended March 31, 2019

Sales
Borrowing of funds
Repayment of debt
Interest expense

Millions of
Yen
2019
¥
19,955117
289
337

Borrowing of funds, repayment of debt and interest expense of ¥117 million, ¥289 million and¥127 million, respectively, were recorded for the transfer of the factory assets transferred to
CJR and for a part of capital expenditure related to the transferred factory assets.
The balances due to or from CJR as of March 31, 2020 and 2019, were as follows:
As of March 31, 2020

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

Millions of
Yen
2020
¥
7,018
450
56,36342

Thousands of
U.S. Dollars
2020$
64,986
4,169
521,885388

Current portion of long-term debt, long-term debt, and accrued expenses of ¥450 million($4,169 thousand), ¥22,443 million ($207,802 thousand), and ¥42 million ($385 thousand),
respectively, were the balances related to long-term debt for the transfer price of the factory
assets transferred to CJR and for a part of capital expenditure related to the transferred factory
assets.

45

As of March 31, 2019

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

Millions of
Yen
2019
¥
5,993
296
55,21943

Current portion of long-term debt, long-term debt and accrued expenses of ¥296 million,¥20,220 million and ¥42 million, respectively, were the balances related to long-term debt for
the transfer price of the factory assets transferred to CJR and for a part of capital expenditure
related to the transferred factory assets.
(2) Fellow subsidiaries and subsidiaries of other affiliates
Transactions of the Company with the fellow subsidiaries for the years ended March 31, 2020
and 2019, were as follows:
For the year ended March 31, 2020
Millions ofYen
2020
JR Central Financial Management Co., Ltd.
Interest income¥

7

Thousands of
U.S. Dollars
2020
$

64

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

5

The balances due to or from the fellow subsidiaries as of March 31, 2020 and 2019, were as
follows:
As of March 31, 2020
Millions ofYen
2020
JR Central Financial Management Co., Ltd.
Cash and cash equivalents
¥

6,872

As of March 31, 2019
Millions ofYen
2019
JR Central Financial Management Co., Ltd.
Cash and cash equivalents
¥

46

7,398

Thousands of
U.S. Dollars
2020$

63,626

18. OTHER COMPREHENSIVE (LOSS) INCOME
The components of other comprehensive (loss) income for the years ended March 31, 2020 and
2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2020

2019

2020

Unrealized (loss) gain on available-for-salesecurities:(Losses) gains arising during the year¥

Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gain on derivatives under hedge
accounting:
Gains arising during the year

(2,831)¥$(26,216)

(68)

-

(630)

(2,899)1,753(26,846)

839

(533)

7,776

¥

(2,060)

¥

1,220

$

(19,070)

¥

-

¥

8

$

-

-

Income tax effect
Total

1,753

-

-

¥

-

¥

8

$

-

¥

(19)

¥

(33)

$

(175)

¥

(19)

¥

(33)

$

(175)

¥

(4,830)

¥

2,216

$

(44,718)

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

(572)

(648)

(5,301)

Amount before income tax effect(5,402)

1,568(50,019)

Income tax effect

1,633

(475)

15,116

Total
Share of other comprehensive income (loss) in
associated companies
Gains (losses) arising during the year¥

(3,769)

¥

1,093

$

(34,903)

¥

1

¥

(9)

$

8

Income tax effect

-

Total
Total other comprehensive (loss) income

47

-

-

¥

1

¥

(9)

$

8

¥

(5,847)

¥

2,279

$

(54,140)

19. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial
and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate
financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported
on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
(1) Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Company’s management is being performed in order to decide how resources are allocated among the Group.
The Group has operational headquarters by each product or service. Each of the operational headquarters develops comprehensive strategies and engages in business activities relating to each product and service. Accordingly, the Groupis comprised of segments organized by products or services based on the operational headquarters, and there are four reportable segments: “Railway Rolling Stock,” “Transportation Equipment and Steel Structure,” “Construction
Equipment,” and “Engineering.”“Railway Rolling Stock” consists of manufacture and sales of rolling stock, such as EMUs and railway motor cars.
“Transportation Equipment and Steel Structure” consists of manufacture and sales of transportation equipment, such as freight cars, tank trucks, heavy-duty industrial vehicles and manufacture and construction of roadway and railway
bridges.
“Construction Equipment” consists of manufacture and sales of pile driving rigs, crawler cranes, casing rotators, portable diesel generator sets and emergency generators.
“Engineering” consists of manufacture and sales of railway rolling stock inspection/maintenance systems, agricultural plants, and pulp and paper plants.
(2) Method of measurement for the amount of sales, profit (loss), assets and other items for each reportable segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2 “Summary of Significant Accounting Policies.” Reporting segment profit represents operating income. Intersegment transactions are based
upon arm’s-length transactions.
(3) Information of sales, profit (loss), assets and other items was as follows:
Millions of Yen
2020
Reportable segment
Transportation
Equipment andConstruction
Steel Structure
Equipment

Railway Rolling
Stock
Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit
Segment assets
Other:
Depreciation
Increase in property, plant andequipment and intangible assets

¥

¥
¥
¥

42,371
133
42,504
3,014
46,827

¥

901

¥

1,334

¥

¥
¥
¥

21,078100
21,178895
23,415

¥

489
3,239

Engineering
¥

¥
¥
¥

24,9396
24,945
4,952
23,139

¥

803

Other
¥

¥
¥
¥

6,100
6,100
349
4,669

¥

35

793

228

48

Total
¥

¥
¥
¥

147
149
296
152
687

¥

2
2

Reconciliations

Consolidated¥¥¥

94,635388
95,023
9,362
98,737

¥
¥
¥
¥

(388)
(388)
(824)
29,076¥¥¥

94,635
94,635
8,538
127,813

¥

2,230

¥

132

¥

2,362

5,596

202

¥

5,798

Millions of Yen
2019
Reportable segment
Transportation
Equipment andConstruction
Steel Structure
Equipment

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 andequipment and intangible assets

¥

¥

¥
¥
¥

38,049129
38,1782,034
47,448

¥

1,046

¥

¥
¥
¥

25,167
13
25,1804,887
22,978

¥

779

¥

¥
¥
¥

21,794
187
21,981
2,040
22,556

¥

276

1,010

Engineering

937

Other
¥

¥
¥
¥

6,006
67
6,073
386
2,906

¥

15

740

Total
¥

¥
¥
¥

163
185
348
(27)
645

¥

2

22

Reconciliations¥¥¥

91,179581
91,7609,320
96,533

¥

2,118

2

Consolidated

¥
¥
¥
¥

(581)
(581)
(820)
37,661¥¥¥

91,17991,1798,500
134,194

¥

252

¥

2,370

2,711

¥

160

2,871

Thousands of U.S. Dollars
2020
Reportable segment
Transportation
Equipment andConstruction
Steel Structure
Equipment

Railway Rolling
Stock
Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit
Segment assets
Other:
Depreciation
Increase in property, plant andequipment and intangible assets

$

$

$
$
$

392,330
1,230
393,560
27,903
433,584$

8,344
12,351$$$

195,162925
196,087
8,290
216,806$

4,525
29,992$Engineering
$

$
$
$

230,91256
230,968
45,848214,248

$

7,433

Other
$

$
$
$

56,481
56,481
3,236
43,231

$

329

7,343

2,113

Total
$

$
$
$

1,363
1,378
2,741
1,413
6,359

$

17
19

Reconciliations

Consolidated

$
$
$
$

(3,589)(3,589)(7,628)269,229$$$$876,248
3,589
879,837
86,690914,228$$$

876,248876,248
79,062
1,183,457$

20,648

$

1,222

$

21,87051,8181,870

53,688Notes: 1. “Other” represents businesses that are not included in any reportable segment, which includes manufacture and sales of laser processing system.
2. “Reconciliations” in segment profit (loss) include corporate expenses of ¥(839) million ($(7,767) thousand) and ¥(854) million for the years ended March 31, 2020 and 2019, respectively, and elimination of intersegment
transactions of ¥15 million ($141 thousand) and ¥27 million for the years ended March 31, 2020 and 2019, 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 ¥29,807 million ($275,992 thousand) and ¥32,158 million, elimination of intersegment balances of ¥(110) million ($(1,016) thousand) and ¥(116) million,
and adjustments in inventories of ¥(61) million ($(564) thousand) and ¥(61) million as of March 31, 2020 and 2019, respectively. Total corporate assets principally consist of investment securities and general management
properties as of March 31, 2020 and 2019.
4. Segment profit (loss) is reconciled to operating income in the consolidated statement of operations.

49

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, 2020 and 2019 was asfollows.
Millions of Yen
2020

Net salesJapan¥86,510

U.S.A.
¥405

Asia¥7,701

Other
¥19

Total
¥94,635

Other
¥43

Total
¥91,179

Millions of Yen
2019

Net salesJapan¥81,477

U.S.A.
¥156

Asia¥9,503Thousands of U.S. Dollars
2020
Japan
U.S.A.
Asia
Other
Total
Net sales$801,022$3,751$71,304$171$876,248
Note: Sales are based on the location of the customers and grouped by country or area.
Millions of Yen
2020
Japan
Property, plantand equipment

U.S.A.

¥28,214

Asia
¥8

Other
¥1

Total
¥0

¥28,223

Millions of Yen
2019
Japan
Property, plantand equipment¥24,784

U.S.A.

Asia¥3,630

Other
¥0

Total
¥0

¥28,414

Thousands of U.S. Dollars
2020
Japan
Property, plantand equipment

U.S.A.

$261,245

$70

50

Asia
$10

Other

Total
$0

$261,325

(3) Information about major customers
Net sales

Millions of Yen
2020
2019

Name of major
customer
CJR¥

18,290¥19,955

Thousands of
U.S. Dollars
2020$

Relatedsegment

169,350

Railway Rolling
Stock, Transportation
Equipment and Steel
Structure(4) Information about loss on impairment of property, plant and equipment by reportable segment
Millions of Yen
2020
Railway
Rolling
Stock
Impairment
loss
¥

1,123

Reportable segment
Transportation
Equipment and Construction
Steel Structure
Equipment--

Engineering
-

Other

Total

Reconciliations- ¥ 1,123

Consoli-dated- ¥1,123Millions of Yen
2019
Railway
Rolling
Stock
Impairment
loss
¥

238

Reportable segment
Transportation
Equipment and Construction
Steel Structure
Equipment--

Engineering
-

Other

Total

- ¥ 238

Reconciliations

Consoli-dated32 ¥270

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

Railway
Rolling
Stock
Impairment
loss$

10,396

Thousands of U.S. Dollars
2020
Reportable segment
Transportation
Equipment and Construction EngineerOther
Steel Structure
Equipmenting-＊＊＊＊＊＊

51

-

Total

- $ 10,396

Reconciliations- $Consoli-dated10,396

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

11,356 persons

Jan. 1959 Began Construction Machinery Business.

(March 31, 2020)

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, Linear Motor Cars, Track Maintenance Machines,
Rolling Stock Components, and Automated Guideway Transit Systems

Transportation equipment
and Steel structure

Freight Cars, Tank Trucks, Tank Trailers, Storage Tanks, Heavy-duty
Industrial Vehicles, Containers, Automated Guided Vehicles, Roadway Bridges,
Railway Bridges, Water Gates

Construction equipment

Pile Driving Rigs, Crawler Cranes, Hydraulic Hammers, Casing Rotators, Other
Products Related to Foundation Work, Portable Diesel Generator Sets, Emergency
Generators, Various Products Related to Electric Machines

Engineering

Agricultural Plants, Grain Complex, Seed Processing Plants, Railway Rolling Stock
Inspection/Maintenance System, Pulp and Paper Plants

Directory
OFFICEHEAD OFFICE (NAGOYA)TOKYO OFFICEOSAKA BRANCHNIPPON SHARYO U.S.A., INC.

1-1 Sanbonmatsu-cho,

12th Fl. Marunouchi Central Bldg.

14th FL,North Gate Building.

2340 S. Arlington Heights Road,

Atsuta-ku, Nagoya 456-8691 JAPAN

1-9-1 Marunouchi,

3-1-3 Umeda,

Phone: +81-52-882-3316

Chiyoda-ku, Tokyo 100-0005 JAPAN Kita-ku, Osaka 530-0001 JAPANFax: +81-52-882-3781

Suite 605 Arlington Heights,
IL 60005 U.S.A.
Attn.: NIPPON SHARYOENGINEERING & MARKETING, LLC
Phone: +1-847-228-2700
Fax: +1-847-562-8600

PLANT
TOYOKAWA PLANT

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

2-20 Honohara,

80 Ryucho, Narumi-cho,

20 11-gouchi,

Toyokawa, Aichi 442-8502 JAPAN

Midori-ku, Nagoya 458-8502 JAPANHanda, Aichi 475-0831 JAPAN

Phone: +81-533-85-4900

Phone: +81-52-623-3529

Fax: +81-533-85-4123

Fax: +81-52-623-4349

52