Annual Business Report

April 1, 2014 through March 31, 2015

NIPPON SHARYO, LTD. and Consolidated Subsidiaries

Financial Highlights
Comparison of Sales by Segment
Business Segment(Unit: millions of yen)186th period(2014-2015)

185th period(2013-2014)

Railway rolling stock

55,035

57.1

Transportation equipment
and Steel structure

16,260Construction equipment％

Increase/(Decrease)79,10063.6

16.9

16,00820,311

21.1

Other

4,693

Total

96,299％％(24,065)(30.4)

12.9

252

1.6

21,47917.3(1,168)

(5.4)

4.9

7,724

6.2

(3,031)(39.3)

100.0

124,311100.0(28,012)(22.5)

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

186th period(2014-2015)

185th period(2013-2014)

184th period(2012-2013)

Net sales

96,299124,31183,018

Ordinary income (loss)(8,234)

6,677

2,096

(14,568)

6,930

1,598

Net income per share (loss)(¥100.91)¥48.00¥11.07

Total assets

145,137

141,453

133,400

Total equity

51,461

63,332

57,403

Titles of accountNet income (loss)(Millions of Yen)

Comparison of Sales by Segment

140,000
Other

120,000
100,000

Construction equipment

80,00060,000Transportation equipment
and Steel structure

40,000Railway rolling stock

20,0000186th period

185th period

184th period

Contents
Message from the President

2

Review by Segment

4

Investment in Plant and Equipment

6

Financing Activities

6

Consolidated Financial Statements and Independent Auditor's Report

7

Corporate Information37

Directory

37

N700A Shinkansen train

1

Message from the President
Review of Business Operations
During the fiscal term under review, the Japanese economy saw an improvement in capital investment
and employment as a result of various economic policies and measures although consumer spending
showed weak growth in reaction to last-minute demands prior to the consumption tax hike.
Under this business environment, the Group performance showed a reactionary fall following
concentrated sales of railway rolling stock in the previous fiscal year, totaling ￥96,299 million, down
22.5% from the previous year. In terms of profits, the US subsidiary recognized loss on contract andan impairment loss for the plant and equipment. As a result, the ordinary loss was ￥8,234 million, andnet loss was ￥14,568 million.

The Outlook
The environment surrounding the Group is expected to grow difficult in terms of receiving orders.
In the railway rolling stock business, the overall trend in the domestic market suggests that the midto long-term market expansion will remain poor due to replacement demands having come full cycle
as well as factors related to the country’s aging population. Setting our eyes on such a situation, we
continue to make efforts to gain a competitive edge by differentiating ourselves from competitors
through technological developments as well as cost reductions through improvements in productivity.
In terms of expansion to the overseas market, we are setting our eyes on Asian markets where growthin demands is anticipated. We will make an effort in increasing sales by developing and proposing
railway rolling stock which matches local needs in Taiwan and Southeast Asian countries. As for our
North American business promoted mainly by the railway rolling stock plant in Illinois, U.S.A., theentire Group is working to improve performance through establishing stable production and reducing
costs.
In the transportation equipment and steel structure business segment, the transportation equipment
business is facing difficulties. We will, however, continue to make efforts to secure orders bydeveloping products which promptly capture market trends including energy and environmental
trends. Our efforts in the steel structure business will be focused on enhancing our ability to propose
technological solutions and reducing costs. At the same time, we will expand our activities to repair/maintenance and peripheral businesses, both of which are anticipated to grow.
2

In the construction equipment segment and other businesses, we will make efforts to secure profits
through monitoring trends in public works and private capital investment in Japan as well as overseas
market situations. We will capture business opportunities by proposing products that cater to market
needs.
The Group’s major products such as railway cars and bridges are mostly built to order and orderunits are also relatively large; therefore, the product breakdown of the production and sales numberschanges greatly from year to year. This fluctuation poses permanent challenges to the Group; wemust level the capacity utilization rate and effectively handle specifications that vary by product. Mostof our projects require a long period of time from order to delivery, which greatly affects management
performance because of changes in exchange rates and the cost of steel and other materials. The
Group will therefore make efforts to reduce risks against foreign exchange fluctuation by making
use of hedging, such as foreign exchange contracts. As for raw materials, the Group will curtail cost
increases by taking measures such as optimization of procurement timing, yield improvement, andmaterial changes.
In March 2015, the Fair Trade Commission made an announcement that there was a violation of
antitrust laws in relation to construction work of grain drying, mixing, and storing facilities and riceprocessing facilities ordered by the Agricultural Cooperatives, etc. The Fair Trade Commission
further announced that a cease and desist order and an administrative monetary penalty payment
order were issued against multiple business entities. The Group submitted an application for theleniency policy in August 2013 to the Fair Trade Commission.
The application was approved and, therefore, the Group has
not received either of the aforementioned orders. Prior tothis, the board of directors has reconfirmed that the Group's
intention of non-violation of antitrust laws and reviewed inhouse compliance programs in order to ensure compliance.
However, we take this matter seriously and will redouble
our efforts in fulfilling regulatory compliance as well as
consolidating the internal control systems.
Tsutomu Morimura
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 ￥24,717 million. It wasachieved through the sales of the N700A Shinkansen
trains, the Series L0 Superconductive Maglev trains, theSeries 313 trains, and the Model KiHa 25 diesel cars to
JR Central. Our sales for the public and private railways
reached ￥9,522 million, including the sales of the Series
N700A Shinkansen trains for JR Central

1000 trains for Tokyo Metro Ginza Line; the Models

N1000 and N3000 trains for Nagoya City’s Transportation
Bureau; the Series 3300 trains for Nagoya Railroad Co.,
Ltd.; the Model 3000 trains for Keisei Electric Railway
Co., Ltd.; the Model 12-600 trains for the Bureau ofTransportation Tokyo Metropolitan Government, andthe Model 2000 trains for Enshu Railway Co., Ltd.
For railway cars for overseas, we had sales of ￥20,796
million,includingSeries 3300 trains for Nagoya Railroad Co., Ltdbi-level EMU and passenger cars for the U.S.A.;
trains for Venezuela; and diesel cars for Canada.
Consequently, our total sales for railway rolling stock
recorded ￥55,035 million, down 30.4% from the previous
year, when sales were concentrated due to delayed
Trains for Venezuela

timing of sales.

Transportation Equipment and Steel Structure Businesses
In the transportation equipment business, we hadsales of carriers, AGV, and other heavy-duty industrial
vehicles, as well as LPG tank lorries, container flat cars,
and limestone hopper cars. There were also demands
for LNG tank lorries. As a result, sales reached ￥9,138
million, up 7.3% from the previous year.
In the steel structure business, sales included KunimotoLPG Tank Lorry

nishi Elevated Bridge and the Yoro Junction - G Ramp

Bridge for the Chubu Regional Bureau; Miyayama Elevated Bridge, Fukushigawa Second Bridge4

for Central Nippon Expressway Company; as well as
temporary construction work of Mita overpass. The
sales also included a large-scale repair work for Tokaido
Shinkansen. Yet, sales were down 4.9% from theprevious year to ￥7,122 million.
In all, sales for the transportation equipment and steel
structure businesses were ￥16,260 million, up 1.6% from
Miyayama Elevated Bridge

the previous year.

Construction Equipment BusinessIn the construction equipment business, the domestic demand in large pile driving rigs showed healthy
movement, thanks to recovery efforts from the Great East
Japan Earthquake and anticipation for increase in public
works as Tokyo was chosen to host the Olympic Games. The
export business included large pile driving rigs to South Korea
and casing rotators to China. Yet, sales did not reach the levelof the previous year when we operated at a high operation
capacity, resulting at ￥16,637 million, down 7.8% from theprevious year.
The generator business

Large Pile Driving Rig

showed healthy movement even though some products suffered froma reactionary fall in sales following last-minute demands prior to theconsumption tax hike. The sales of generators were ￥3,675 million, up
7.3% from the previous year.
In all, sales in our construction equipment business were ￥20,311 million,
Casing Rotator

down 5.4% from the previous year.

Other Businesses
Our main sales included; mechanical equipment for
Maglev trains for JR Central; vehicle inspection/repair
facilities; paper-manufacturing equipment for household
paper manufacturers; laser processing machines; andrailway memorabilia. However, due to dissolution of
Nissha Washino Steel Co., Ltd. and reduction in sales inagricultural plants, sales in other businesses areas totaled￥4,693 million, down 39.3% from the previous year.
5

Vehicle Inspection/Repair Facility

The overseas sales for the year under review amount to ￥22,993 million, representing 23.9% of total
sales, which includes ￥20,796 million for the railway rolling stock business and ￥2,054 million for theconstruction equipment business.
The order on hand at the end of the year under review reached ￥177,803 million. These comprised￥150,068 million for the railway rolling stock business (￥36,680 million for rolling stock for JR
companies such as the N700A Shinkansen trains, ￥21,071 million for railway cars for other public
and private railway companies, ￥92,317 million for rolling stock for overseas), ￥22,688 million for
the transportation equipment and steel structure businesses (￥8,617 million for the transportationequipment business, ￥14,071 million for the steel structure business), ￥2,289 million for theconstruction equipment business, and ￥2,758 million for other businesses.

Investment in Plant and Equipment
Plant and equipment investment during the year under review totaled ￥5,191 million. At the Toyokawa
Plant, investment was mainly targeted at consolidating technical and development capabilities, including
renewal of supercomputer used for noise, vibration, and fluid analysis as well as implementation of adesign modularization system. Investment was also made at all of our plants to maintain the production
capacity, exemplified by the renewal of the transport trolley in the Toyokawa Plant, yard cranes in
the Kinuura Plant, and the main-frame welding positioner in the Narumi Plant. Also as a part ofour business continuity plan, or BCP, seismic reinforcement construction is being undertaken on the
Narumi Plant production building. The implementation of measures to prevent cranes from falling wascompleted at all locations in December 2014. As for consolidated subsidiaries, NIPPON SHARYO
U.S.A., INC. and its subsidiaries completed the construction of the railway rolling stock assembly plantin Illinois, U.S.A. (Rochelle Plant) in July 2014. The plant has begun operation.

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, 2015,
AND
INDEPENDENT AUDITOR’S REPORT

7

8

9

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2015

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

2015

2014

2015

CURRENT ASSETS:¥

Cash and cash equivalents (Note 15)

3,181

¥

7,045

$

26,510Notes and accounts receivable (Notes 4, 15, and 18)

29,21334,224

243,445

Inventories (Note 5)

48,24437,711

402,035

Deferred tax assets (Note 14)

2,794

3,226

23,281Other current assets

3,115

5,047

25,95186,54787,253

721,222Land

15,08915,486

125,741

Buildings and structures

27,78326,352

231,524

Machinery and equipment

34,42934,310286,909

Construction in progress

333

2,235

2,773

77,63478,383646,947(45,777)(44,081)(381,473)

31,85734,302

265,474

Investment securities (Notes 6 and 15)

18,04014,543

150,334

Investments in an unconsolidated subsidiary and associatedcompanies

1,293

1,258

10,774

Asset for employees’ retirement benefits (Notes 2.o and 9)

5,895

2,240

49,124

87

97

725

1,418

1,760

11,822

26,73319,898

222,779

Total current assets
PROPERTY, PLANT, AND EQUIPMENT:

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

Deferred tax assets (Note 14)
Other assets (Note 10)
Total investments and other assets
¥

TOTAL

145,137¥

141,453$

1,209,475(Continued)

10

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2015

Thousands of
U.S. Dollars(Note 1)
2015

Millions of Yen
LIABILITIES AND EQUITY

2015

2014

CURRENT LIABILITIES:¥

Short-term borrowings (Notes 8, 15, and 18)
Current portion of lease obligations (Notes 12 and 15)

10,015

¥

4,101

$

83,460

987

989

8,221

Notes and accounts payable (Notes 7 and 15)

22,49925,446

187,489

Accrued expenses

5,819

3,700

48,490

Advances received

28,766

24,715

239,718

770

4,832

6,418

9

95

72

9,576

445

79,797

286

366

2,394

78,72764,689656,059

5,000

5,000

41,667

229

226

1,908

Income taxes payable (Note 15)
Allowance for work in process on construction contracts
Provision for loss on order received
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 8 and 15)
Liability for employees’ retirement benefits (Notes 2.o and 9)
Lease obligations (Notes 12 and 15)

1,672

2,019

13,930Allowance for PCB disposal expenses

334

334

2,783

Provision for compensation for health damage from asbestos

149

143

1,242

6,946

4,768

57,886

619

942

5,158

14,94913,432

124,574

Deferred tax liabilities (Note 14)
Other long-term liabilities
Total long-term liabilities
COMMITMENTS AND
CONTINGENT LIABILITIES (Notes 11 and 16)
EQUITY (Note 13):
Common stock, authorized, 328,000,000 shares;

11,811

11,811

98,423

Capital surplus

issued, 146,750,129 shares in 2015 and 2014

12,045

12,045

100,384

Retained earnings

18,04934,914150,401

(511)

(508)

(4,257)

7,486

4,728

62,387

(47)

12

(396)

Foreign currency translation adjustments(2,155)(338)(17,959)

Defined retirement benefit plans (Note 2.o)

4,709

604

39,238Treasury stock, at cost, 2,388,628 shares in 2015
and 2,379,834 shares in 2014
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting

Total accumulated other comprehensive income

9,993

5,006

83,270Minority interests

74

64

621

Total equity

51,461

63,332428,842¥

TOTAL

145,137¥

141,453$

1,209,475(Concluded)

See notes to consolidated financial statements.

11

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Operations
Year Ended March 31, 2015

2015¥

NET SALES (Note 18)

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

COST OF SALES (Notes 2.i and 2.m)

2014¥

96,2992015

124,311$

802,490

97,134

110,143

809,447(835)

14,168(6,957)

7,343

7,464

61,196(8,178)

6,704(68,153)

Interest and dividend income

240

244

2,000

Interest expense (Note 18)

(87)

(60)

(728)

Equity in earnings of affiliated companies

40

46

337

Gain on sales of investment securities, net (Note 6)

247

562

2,057

(4,815)(55)(40,123)(Loss) gain on sales and disposals of property, plant, andequipment, net

(23)

2,800

(195)

Other – net

(279)

(438)

(2,319)(4,677)

3,099(38,971)(12,855)

9,803(107,124)

Current

1,002

4,103

8,354

Deferred700(1,237)

5,830

1,702

2,866

14,184(14,557)

6,937(121,308)

11

7

94

Gross (loss) profit

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Operating (loss) income
OTHER (EXPENSES) INCOME:

Loss on impairment of property, plant, and equipment (Note 17)

Other (expenses) income – net(LOSS) INCOME BEFORE INCOME TAXES AND MINORITY
INTERESTSINCOME TAXES (Note 14):

Total income taxes
NET (LOSS) INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME¥

NET (LOSS) INCOME(14,568)

¥

6,930

Yen

$

(121,402)

U.S. Dollars

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

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

(100.91)
2.50

See notes to consolidated financial statements.

12

¥

48.00
5.00

$

(0.84)
0.02

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2015

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2015
NET (LOSS) INCOME BEFORE MINORITY INTERESTS

¥

2014

(14,557)

¥

2015

6,937

$

(121,308)

OTHER COMPREHENSIVE INCOME (Note 19):
Unrealized gain (loss) on available-for-sale securities

2,759

(773)

22,992

Deferred loss on derivatives under hedge accounting

(59)

(25)

(492)

Foreign currency translation adjustments(1,817)(90)(15,144)

Defined retirement benefit plans

4,103

-

34,197

(0)

8

(2)

4,986

(880)

41,551

Share of other comprehensive income in an associated company
Total other comprehensive income
COMPREHENSIVE INCOME¥(9,571)

¥

6,057

$

(79,757)¥(9,582)

¥

6,050

$

(79,851)TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Minority interests

11

See notes to consolidated financial statements.

13

7

94

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2015
Millions of Yen
Number ofshares ofCommonCapitalRetained

Treasurycommon stock

stock

surplusearnings

stock

outstanding
BALANCE, APRIL 1, 2013

144,389,049¥

11,811¥

12,045¥28,706¥(498)

Cash dividends, ￥5.0 per share

-

-

-

(722)

-

Net income

-

-

-

6,930

-

(18,754)

-

0

-

(10)

-

-

-

-

-

144,370,295

11,811

12,04534,914

(508)

-

-

-

(1,575)-

144,370,295

11,811

12,04533,339(508)

Cash dividends, ￥5.0 per share

-

-

-

(722)

-

Net loss---(14,568)-(8,794)

-

0

-

(3)

-

-

-

-

-

Increase in treasury stock, net
Net changes in the year
BALANCE, MARCH 31, 2014
(APRIL 1, 2014, as previously reported)
Cumulative effect of accountingchangeBALANCE, APRIL 1, 2014(as restated)

Increase in treasury stock, net
Net changes in the year
BALANCE, MARCH 31, 2015

144,361,501¥

11,811¥

12,045¥18,049¥(511)

Thousands of U.S. Dollars (Note 1)

BALANCE, MARCH 31, 2014
(APRIL 1, 2014, as previously reported)
Cumulative effect of accountingchangeBALANCE, APRIL 1, 2014(as restated)$

CommonCapitalRetained

Treasurystock

surplusearnings

stock

98,423$

100,384$

290,944$(4,230)--(13,125)-

98,423

100,384

277,819(4,230)Cash dividends, $0.04 per share--(6,016)-Net loss--(121,402)-

Increase in treasury stock, net

-

0

-

(27)

Net changes in the year

-

-

-

-

BALANCE, MARCH 31, 2015$

98,423

See notes to consolidated financial statements.

14$

100,384$

150,401$(4,257)

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

Deferred gain
on derivatives
under hedge
accounting

Foreigncurrencytranslation
adjustments

¥

¥

¥

¥

5,492

37

Definedretirement
benefit plans

(248)

-

Total
accumulated
othercomprehensive
income¥5,281

Minority

Totalinterests

equity¥58¥

57,403

-

-

-

-

-

-

(722)

-

-

-

-

-

-

6,930

-

-

-

-

-

-

(10)

(764)

(25)

(90)

604

(275)

6

(269)

4,728

12

(338)

604

5,006

64

63,332

-

-

-

-

-

-

(1,575)

4,728

12

(338)

604

5,006

64

61,757

-

-

-

-

-

-

(722)

-

-

-

-

-

-

(14,568)

-

-

-

-

-

-

(3)

2,758

(59)

(1,817)

4,105

4,987

10

4,997

7,486

¥

(47)

¥

(2,155)

¥

¥

4,709

¥

9,993

¥

74

¥

51,461Thousands of U.S. Dollars (Note 1)
Accumulated other comprehensive income
Unrealized gainonavailable-for-salesecurities

Deferred gain
on derivatives
under hedge
accounting

Foreigncurrencytranslation
adjustments

Definedretirement
benefit plans

Total
accumulated
othercomprehensive
income

$

$

$

$

$

$

39,39796(2,815)

5,042

41,720$Minority

Totalinterests

equity537$

527,778

-

-

-

-

-

-

(13,125)

39,39796(2,815)

5,042

41,720537

514,653

-

-

-

-

-

-

(6,016)

-

-

-

-

-

-

(121,402)

-

-

-

-

-

-

(27)

22,990(492)(15,144)

34,196

41,55084

41,63462,387

$

(396)

$

(17,959)$

39,23815$

83,270$621$

428,842NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2015
Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2015

2014

2015

OPERATING ACTIVITIES:(Loss) income before income taxes and minority interests¥(12,855)

¥

9,803

$

(107,124)

Adjustments for:
Income taxes-paid(4,433)(677)(36,946)

Depreciation

3,021

2,901

25,172

Loss on impairment of property, plant, and equipment

4,815

55

40,1239(2,871)

78

(247)

(562)

(2,057)

Decrease (increase) in trade notes and accounts receivable

5,062(12,505)

42,183(Increase) decrease in inventories(7,935)

11,381(66,126)

Decrease in trade notes and accounts payable(1,341)(3,516)(11,172)(Decrease) increase in allowance for work in process on construction contracts

(86)

27

(721)

Increase (decrease) in provision for loss on orders received

7,994

(822)

66,617

Increase in provision for compensation for health damage from asbestos

6

68

50

Increase (decrease) in advances received

1,020(3,919)8,497

Decrease in liability for employees’ retirement benefits(1,572)(82)(13,096)

2,856

2,856

23,803(3,686)2,137(30,719)(4,414)(3,985)(36,784)

Proceeds from sales of property, plant, and equipment

48

3,076

398

Purchases of investment securities

(3)

(5)

(27)

Proceeds from sales of investment securities

440

991

3,665

Other-net

(381)

(247)

(3,166)(4,310)(170)(35,914)

4,772

383

39,768-(63)-

Dividends paid

(722)

(722)

(6,021)Other-net

(70)

(61)

(577)

Net cash provided by (used in) financing activities

3,980

(463)

33,170

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS

152

675

1,266

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(3,864)2,179(32,197)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

7,045

4,866

58,707

Loss (gain) on sales and disposals of property, plant, and equipment
Gain on sales of investment securities
Changes in assets and liabilities:

Other-net
Net cash (used in) provided by operating activities
INVESTING ACTIVITIES:
Purchases of property, plant, and equipment

Net cash used in investing activities
FINANCING ACTIVITIES:Net increase in short-term borrowings
Repayments of long-term debt¥

CASH AND CASH EQUIVALENTS, END OF YEAR

3,181

¥

7,045

$

26,510See notes to consolidated financial statements.
(Concluded)

16

NIPPON SHARYO, LTD. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2015
1. BASIS OF PRESENTATION OF CONSOLIDATEDFINANCIAL STATEMENTS
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forthin the Japanese Financial Instruments and Exchange Act
and its related accounting regulations and in accordancewith accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements ofInternational Financial Reporting Standards (IFRS).
In preparing these consolidated financial statements,
certain reclassifications and rearrangements have been
made to the consolidated financial statements issued
domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2014 consolidated
financial statements to conform to the classifications usedin 2015.
The consolidated financial statements are stated inJapanese yen, the currency of the country in which NIPPONSHARYO, LTD. (the “Company”), is incorporated andoperates. The translations of Japanese yen amounts into
U.S. dollar amounts are included solely for the convenienceof readers outside Japan and have been made at the rateof ￥120 to $1, the approximate rate of exchange at March
31, 2015. Such translations should not be construed as
representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.
──────────────────────────
2 . S U M M A RY O F S I G N I F I CA N T A C C O U N T I N GPOLICIES
a. Consolidation
The consolidated financial statements as of March 31, 2015,
include the accounts of the Company and its significant
subsidiaries (together, the “Group”). Under the control
and influence concepts, those companies in which theCompany, directly or indirectly, is able to exercise control
over operations are fully consolidated and those companies
over which the Group has the ability to exercise significant
influence are accounted for by the equity method.
Investment in an associated company is accounted forby the equity method. Investments in the remaining
unconsolidated subsidiary and associated companies arestated at cost. If the equity method of accounting had been
applied to the investments in these companies, the effect on
the accompanying consolidated financial statements would
not be material.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions within
the Group is also eliminated.
The number of the consolidated subsidiaries,
unconsolidated subsidiary, and associated companies forthe years ended March 31, 2015 and 2014, was as follows:

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

2015
6
1
1
4

2014
7
1
1
4

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

17

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

swaps, and interest rate swaps are utilized by the Group to
reduce foreign currency exchange and interest rate risks.
The Group does not enter into derivatives for trading or
speculative purposes.
Derivative financial instruments and foreign currencytransactions are classified and accounted for as follows: 1)
all derivatives are recognized as either assets or liabilities
and measured at fair value and gains and losses onderivative transactions are recognized in the consolidated
statement of operations and 2) for derivatives used forhedging purposes, if such derivatives qualify for hedge
accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items,
gains and losses on derivatives are deferred until maturityof the hedged transactions.
The foreign currency forward contracts are utilized tohedge foreign currency exposures in sales of merchandiseand finished goods to overseas customers and procurementof raw materials from overseas suppliers. Trade receivables
and payables denominated in foreign currencies aretranslated at the contracted rates if the forward contracts
qualify for hedge accounting. The currency swaps are
utilized to hedge foreign currency exposures in long-term
debt. Long-term debt is translated at the contracted rates if
the currency swaps qualify for hedge accounting.
The interest rate swaps, which qualify for hedge accounting
and meet specific matching criteria, are not remeasured atmarket value, but the differential paid or received under
the swap agreements is recognized and included in interest
expense or income.
h. Allowance for doubtful accounts
An allowance for doubtful accounts is provided for at
the aggregate amount of estimated credit loss based on
an individual analysis of certain doubtful or troubled
receivables and a general reserve for other receivables iscalculated based on the historical loss experience.
i. Inventories
Inventories are stated at the lower of cost, determinedprincipally by the specific identification method formerchandise, finished goods, and work in process and by
the moving-average method for semifinished goods, andraw materials, 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.
Write-down of inventories in the amounts of ￥3,059 million($25,495 thousand) and ￥3,565 million for the years ended
March 31, 2015 and 2014, respectively, were included incost of sales.
j. Property, plant, and equipment
Property, plant, and equipment, including significant
renewals and additions, are stated at cost and are
depreciated principally by the straight-line method forbuildings and the declining-balance method for otherproperty at rates based on the estimated useful lives of theassets.
Depreciation of leased assets is computed by the straightline method over the leased period.
The range of useful lives is principally from 10 to 60 years
for buildings and structures and from 6 to 17 years formachinery and equipment.

18

k. Long-lived assets
The Group reviews its long-lived assets for impairment
whenever events or changes in circumstance indicate thatthe carrying amount of an asset or asset group may not
be recoverable. An impairment loss is recognized if thecarrying amount of an asset or asset group exceeds the sumof the undiscounted future cash flows expected to result
from the continued use and eventual disposition of the asset
or asset group. The impairment loss would be measured
as the amount by which the carrying amount of the asset
exceeds its recoverable amount, which is the higher of the
discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.
l. Intangible assets
Intangible assets that are included in other assets areamortized by the straight-line method. Software costs areamortized over five years.
m. Allowance for work in process on construction contracts
An allowance for work in process on construction contracts
is provided based on an estimate of the total loss inrespect to construction projects on which eventual losses
are deemed inevitable and the amounts of the loss canbe reasonably estimated. Provisions for work in process
on construction contracts in the amounts of ￥(86) million($(721) thousand) and ￥27 million for the years ended
March 31, 2015 and 2014, respectively, were included incost of sales.
n. Provision for loss on order received
A provision for loss on orders received, except for
construction contracts, is recorded based on an estimateof the total loss in respect to contracts on which eventual
losses are deemed inevitable and the amounts of the loss
can be reasonably estimated.
o. Retirement and pension plans
The Company has a lump-sum retirement benefit plan, adefined contribution pension plan, and a defined benefit
pension plan. The Company’s consolidated subsidiaries
have similar retirement benefit plans.
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. The transitional obligations are amortizedon a straight-line basis over 15 years. Prior service costs
are amortized on a straight-line basis over 15 years, which
is within the average remaining service period. Actuarial
gains and losses are amortized on a straight-line basis
mainly over 15 years, which is within the average remaining
service period in the following the fiscal year.
The Accounting Standards Board of Japan (the “ASBJ”)
issued ASBJ Statement No. 26, "Accounting Standard for
Retirement Benefits" in May 2012 and ASBJ Guidance
No. 25, "Guidance on Accounting Standard for Retirement
Benefits” in March 2015, which replaced the accounting
standard for retirement benefits that had been issued by theBusiness Accounting Council in 1998 with an effective dateof April 1, 2000, and the other related practical guidance,
and were followed by partial amendments from time to timethrough 2009.
(a)Under the revised accounting standard, actuarial
gains and losses and prior service costs that are yet to berecognized in profit or loss are recognized within equity(accumulated other comprehensive income), after adjustingfor tax effects, and any resulting deficit or surplus isrecognized as a liability (liability for retirement benefits) or
asset (asset for retirement benefits).
(b)The revised accounting standard does not change how torecognize actuarial gains and losses and prior service costs in
profit or loss. Those amounts are recognized in profit or loss
over a certain period no longer than the expected averageremaining service period of the employees. However,actuarial gains and losses and prior service costs that arosein the current period and have not yet been recognized in
profit or loss are included in other comprehensive income,and actuarial gains and losses and prior service costs thatwere recognized in other comprehensive income in priorperiods and then recognized in profit or loss in the current
period, are treated as reclassification adjustments (see Note
19).
(c)The revised accounting standard also made certain
amendments relating to the method of attributing expected
benefit to periods, the discount rate, and expected futuresalary increases.
This accounting standard and the guidance for (a) and (b)above are effective for the end of annual periods beginningon or after April 1, 2013, and for (c) above are effective forthe beginning of annual periods beginning on or after April
1, 2014, or for the beginning of annual periods beginningon or after April 1, 2015, subject to certain disclosure in
March 2015, all with earlier application being permitted
from the beginning of annual periods beginning on or after
April 1, 2013. However, no retrospective application of thisaccounting standard to consolidated financial statements inprior periods is required.
The Companies applied the revised accounting standard
and guidance for retirement benefits for (a) and (b) above,effective March 31, 2014, and for (c) above, effective April 1,
2014.
With respect to (c) above, the Companies changed themethod of attributing the expected benefit to periods froma straight-line basis to a benefit formula basis and themethod of determining the discount rate, and recorded
the effect above as of April 1, 2014, in retained earnings.
As a result, asset for employees’ retirement benefits as ofApril 1, 2014, increased by ￥142 million ($1,185 thousand),liability for employees’ retirement benefits as of April 1,
2014, increased by ￥2,569 million ($21,408 thousand), andretained earnings as of April 1, 2014, decreased by ￥1,575
million ($13,125 thousand). In addition, basic net income
per share for the year ended March 31, 2015, increased by￥10.90 ($0.09). The effect of this change on the consolidated
statement of operations for the year ended March 31, 2015,
was immaterial.
p. Allowance for Polychlorinated Biphenyl (PCB) disposal
expensesAn allowance for PCB disposal expenses has been provided
based on the published estimated disposal fee scheduleissued by the Japan Environmental Safety Corporation.
q. Provision for compensation for health damage from asbestos
A provision for compensation for health damage fromasbestos has been recorded based on the estimatedcompensation amount for former employees who suffered19

health damage from asbestos.
r. Income taxes
The provision for income taxes is computed based on thepretax income included in the consolidated statementof 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. Deferred taxes are measured by applying
currently enacted tax rates to the temporary differences.
s. Foreign currency transactions
All short-term and long-term monetary receivables andpayables denominated in foreign currencies are translated
into Japanese yen at the exchange rates at the consolidatedbalance sheet date. The foreign exchange gains andlosses from translation are recognized in the consolidated
statement of operations to the extent that they are nothedged by forward exchange contracts.
t. Foreign currency financial statements
The balance sheet accounts of the consolidated foreignsubsidiaries are translated into Japanese yen at the current
exchange rate as of the consolidated balance sheet date,
except for equity, which is translated at the historical rate.
Revenue and expense accounts of consolidated foreignsubsidiaries are translated into yen at the average exchange
rate. Differences arising from such translation are shown as
foreign currency translation adjustments under accumulated
other comprehensive income in a separate component ofequity.
u. R&D expenses
Expenses related to R&D activities are charged to income
as incurred. R&D expenses amounted to ￥1,130 million($9,415 thousand) and ￥1,356 million for the years ended
March 31, 2015 and 2014, respectively, and are included
in general and administrative expenses and manufacturingcosts in the accompanying consolidated statements ofoperations.
v. Per share information
Basic net income per share is computed by dividing net
income available to common shareholders by the weightedaverage number of shares of common stock outstanding
during the respective year. Weighted-average number ofshares of common stock for the years ended March 31,
2015 and 2014, were 144,366 thousand shares and 144,379
thousand shares, respectively. Diluted net income pershare for the years ended March 31, 2015 and 2014, was
not applicable because the Company had no dilutive
common shares. Cash dividends per share presented in
the accompanying consolidated statement of operations
are dividends applicable to the respective years, including
dividends to be paid after the end of the year.
w. Construction contracts
Construction revenue and construction costs are recognizedby the percentage-of-completion method if the outcome ofa construction contract can be estimated reliably. When
total construction revenue, total construction costs, andthe stage of completion of the contract at the consolidatedbalance sheet date can be reliably measured, the outcome ofa construction contract is deemed to be estimated reliably.
If the outcome of a construction contract cannot be reliably
estimated, the completed-contract method should beapplied. When it is probable that the total construction
costs will exceed total construction revenue, an estimatedloss on the contract should be immediately recognized byproviding for a loss on construction contracts.
x. Accounting changes and error corrections
In December 2009, the ASBJ issued ASBJ Statement No.
24, “Accounting Standard for Accounting Changes andError Corrections,” and ASBJ Guidance No. 24, “Guidanceon Accounting Standard for Accounting Changes and Error
Corrections.” Accounting treatments under this standard
and guidance are as follows: (1) Changes in Accounting
Policies—When a new accounting policy is applied following
revision of an accounting standard, the new policy is applied
retrospectively, unless the revised accounting standard
includes specific transitional provisions, in which case theentity shall comply with the specific transitional provisions.
(2) Changes in Presentation—When the presentation offinancial statements is changed, prior-period financial
statements are reclassified in accordance with the newpresentation. (3) Changes in Accounting Estimates—Achange in an accounting estimate is accounted for in the
period of the change if the change affects that period only
and is accounted for prospectively if the change affects boththe period of the change and future periods. (4) Correctionsof Prior-Period Errors—When an error in prior-period
consolidated financial statements is discovered, thosestatements are restated.
──────────────────────────
3. CHANGES IN PRESENTATION METHOD(Consolidated statement of cash flows)
Prior to April 1, 2014, “Provision for loss on order received”
was included in “Other - net” in the “OPERATINGACTIVITIES” section of the consolidated statement ofcash flows. Since the amount increased significantly during
this fiscal year ended March 31, 2015, such amount isdisclosed separately in the “OPERATING ACTIVITIES”
section of the consolidated statement of cash flows for theyear ended March 31, 2015. The amount included in “Other- net” for the year ended March 31, 2014, was ￥(822) million(cash outflow).

20

4. NOTES AND ACCOUNTS RECEIVABLE
Notes and accounts receivable as of March 31, 2015 and 2014, consisted of the following:
Millions of Yen
Trade notes¥- Unconsolidated subsidiary and associated companies
Trade accounts- The Parent, unconsolidated subsidiary and associated companies
Other
Less allowance for doubtful accounts
Total
¥

2015
3,903
138
21,955
3,186
51
(20)
29,213

¥

¥

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

Thousands of
U.S. Dollars
2015$
32,521
1,147
182,956
26,552431(162)$
243,445

Note: Allowance for doubtful accounts was not recognized for accounts receivable-other, which were included in Other above.
──────────────────────────────────────────────────────
5. INVENTORIESInventories as of March 31, 2015 and 2014, consisted of the following:
Millions of Yen
Merchandise
Finished goods
Work in process and semifinished goods
Raw materials
Total

¥

¥

2015
92
1,297
38,947
7,908
48,244

¥

2014
171
852
31,397
5,291
37,711¥Thousands of
U.S. Dollars
2015
$
770
10,804
324,559
65,902$402,035Work in process and allowance for work in process on construction contracts are presented in the gross amount in the
consolidated balance sheet. At March 31, 2014, allowance for work in process on construction contracts of ￥14 million isprovided and included in work in process above. At March 31, 2015, no respective allowance is provided and included in work inprocess.
──────────────────────────────────────────────────────
6. INVESTMENT SECURITIESInvestment securities as of March 31, 2015 and 2014, consisted of the following:
Millions of Yen
Equity securities
Total

¥
¥

2015
18,04018,040¥¥2014
14,543
14,543Thousands of
U.S. Dollars
2015$
150,334$
150,334

The costs and aggregate fair values of investment securities as of March 31, 2015 and 2014, were as follows:

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

¥
¥

6,060
6,060

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

¥
¥

6,248
6,248

21

Millions of Yen
2015
Gross unrealized Gross unrealized
gains
losses¥¥10,938
10,938¥¥-Millions of Yen
2014
Gross unrealized Gross unrealized
gains
losses
¥
¥

7,295
7,295

¥
¥

(23)
(23)

Fair andcarrying value¥¥

16,99816,998Fair andcarrying value¥¥

13,52013,520Thousands of U.S. Dollars
2015
Gross unrealized Gross unrealized
gains
losses

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

$
$

50,49950,499$$91,14991,149¥¥-Fair andcarrying value$$

141,648
141,648

The information of available-for-sale securities which were sold for the years ended March 31, 2015 and 2014, was as follows:

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

420
420

Proceeds
Available-for-sale:
Equity securities
Total

¥
¥

902
902

Millions of Yen
2015
Realized gains

Realized losses

¥
¥

¥
¥

228
228

-

Millions of Yen
2014
Realized gains

Realized losses

¥
¥

¥
¥

513
513

-

Thousands of U.S. Dollars
2015
Proceeds
Realized gains Realized losses
Available-for-sale:
Equity securities
Total

$
$

3,497
3,497

$
$

1,902
1,902

$
$

-

No impairment losses on available-for-sale equity securities for the years ended March 31, 2015 and 2014, were recognized.
──────────────────────────────────────────────────────
7. NOTES AND ACCOUNTS PAYABLE
Notes and accounts payable as of March 31, 2015 and 2014, consisted of the following:
Millions of Yen
Trade notes
Electronically recorded obligations-operating-Unconsolidated subsidiary and associated companies
Trade accounts-Unconsolidated subsidiary and associated companies
Other
Total

¥

¥

2015
941
8,964
18
10,47839
2,059
22,499

¥

¥

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

Thousands of
U.S. Dollars
2015
$
7,838
74,698151
87,318324
17,160$187,489──────────────────────────────────────────────────────
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2015 and 2014, consisted of the following:
Millions of Yen
2015
CMS with average interest rates of 0.49% and 0.45%¥
in 2015 and 2014, respectively
Unsecured bank loans with interest rates ranging from
0.47% to 0.70%
Total
¥

2014

Thousands of
U.S. Dollars
2015

648

¥

4,101

$

5,404

9,367
10,015

¥

4,101

$

78,056
83,46022

Long-term debt as of March 31, 2015 and 2014, consisted of the following:
Millions of Yen
2015
Unsecured bank loans due in 2018 with average¥interest rates of 0.55% in 2015 and 2014
Total
¥

5,000

2014
¥

5,000
¥

5,000

Thousands of
U.S. Dollars
2015$

41,667$

41,667

Note: Long-term debt as of March 31, 2015 and 2014 had no current portion.
The aggregate annual maturities of long-term debt as of March 31, 2015, were as follows:
Years ending March 31
2016
2017
2018
2019
2020
Total

Millions of Yen
5,000
¥
5,000
¥

Thousands of U.S. Dollars$
41,667$
41,667──────────────────────────────────────────────────────
9. RETIREMENT AND PENSION PLANS
Employees who terminate their service with the Company and its domestic consolidated subsidiaries are entitled to retirement
benefits generally determined by reference to the basic rate of pay at the 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, 2015 and 2014, were as follows:
Millions of Yen
Balance at beginning of year (as previously reported)
Cumulative effect of accounting change
Balance at beginning of year (as restated)
Current service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Balance at end of year

¥

¥

2015
11,8802,426
14,306699
125
88(1,207)
14,011¥¥

2014
11,995
11,995
604
231
(119)
(831)
11,880Thousands of
U.S. Dollars
2015$
98,997
20,223
119,220
5,821
1,044
738
(10,061)$
116,762(b) The changes in plan assets for the years ended March 31, 2015 and 2014, were as follows:
Millions of Yen
Balance at beginning of year
Expected return on plan assets
Actuarial gains
Contribution from the employer
Benefits paid
Balance at end of year

¥

¥

2015
13,880
205
5,766
456
(630)
19,677

23

¥

¥

2014
11,940
189
1,621
482
(352)
13,880Thousands of
U.S. Dollars
2015$
115,664
1,712
48,047
3,802(5,247)$
163,978

(c) Reconciliation between the liability (asset) recorded in the consolidated balance sheet and the balances of defined benefit
obligation and plan assets as of March 31, 2015 and 2014, was as follows:
Millions of Yen
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

¥

¥

¥

2015
13,782(19,677)(5,895)229(5,666)(5,895)229(5,666)¥¥

2014
11,653(13,880)(2,227)213(2,014)¥(2,240)226(2,014)¥

Thousands of
U.S. Dollars
2015$
114,854(163,978)(49,124)
1,908$(47,216)$$(49,124)
1,908(47,216)(d) The components of net periodic benefit costs for the years ended March 31, 2015 and 2014, were as follows:
Millions of Yen
Service cost (Note)
Interest cost
Expected return on plan assets
Amortization of transitional obligation
Recognized actuarial losses
Amortization of prior service cost
Net periodic benefit costs

¥

2015
719
125
(205)
214
99
(4)
948

¥

¥

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

¥

Thousands of
U.S. Dollars
2015
$
5,991
1,044
(1,712)
1,783
829
(36)
$
7,899

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 of defined retirement benefit
plans for the years ended March 31, 2015 and 2014
Millions of Yen
Transitional obligation
Prior service cost
Actuarial gains
Total

¥
¥

2015
(199)
4
(5,777)(5,972)

¥

2014
-

¥

Thousands of
U.S. Dollars
2015$(1,662)
36(48,139)$(49,765)(f) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans as of March 31, 2015 and 2014
Millions of Yen
Unrecognized transitional obligation
Unrecognized prior service cost
Unrecognized actuarial gains
Total

¥
¥

2015
(44)
(6,860)(6,904)

¥
¥

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

Thousands of
U.S. Dollars
2015
$
(365)
(57,169)$(57,534)(g) Plan assets(i) Components of plan assets
Plan assets consisted of the following:
Debt investments
Equity investments
Cash and deposits
Other
Total

2015
11%
84%
2%
3%
100%

2014
14%
79%
3%
4%
100%

Note: The employees’ retirement benefit trusts for the contributory pension plans accounted for 50% and 44%, and that for the
lump-sum retirement benefit plan accounts for 18% and 17% of total plan assets for the years ended March 31, 2015 and2014, respectively.

24

(ii) Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are expectedcurrently and in the future from the various components of the plan assets.
(h) Assumptions used for the years ended March 31, 2015 and 2014, were set forth as follows:
2015
0.9%
2.0%

Discount rate
Expected rate of return on plan assets

2014
2.0%
2.0%

(2) Defined contribution plans
The required contribution of the Company and its consolidated subsidiaries amounted to ￥116 million ($970 thousand) and￥112 million for the years ended March 31, 2015 and 2014, respectively.
──────────────────────────────────────────────────────
10. ASSETS PLEDGED AS COLLATERAL
Assets pledged as collateral required by the Building Lots and Buildings Transaction Business Law as of March 31, 2015 and2014, were as follows:
Millions of Yen
Other assets
Total

¥
¥

2015
10
10

¥
¥

2014
10
10

Thousands of
U.S. Dollars
2015
$
83
$
83

──────────────────────────────────────────────────────
11. CONTINGENT LIABILITIESIn some cases, the Company sells its construction equipment products through leasing companies. Some of these leasing
companies request that the Company enter into lease credit guarantee contracts. Under these contracts, if the lease credits
are unrecoverable from users of the Company’s construction equipment products, the Company guarantees payment of theamount defined by the contract to the leasing companies. Such guarantees as of March 31, 2015 and 2014, amounted to ￥598
million ($4,983 thousand) and ￥744 million, respectively.
──────────────────────────────────────────────────────
12. LEASE TRANSACTIONSThe Group uses certain machinery and equipment under finance lease contracts.
All finance lease transactions are accounted for in a manner similar to ordinary sale or purchase transactions.
The aggregate annual maturities of lease obligations as of March 31, 2015, were as follows:
Years ending March 31
2016
2017
2018
2019
2020
2021 and thereafter
Total

Millions of Yen
987
¥
664
508
274
150
76
2,659
¥

Thousands of U.S. Dollars
$
8,221
5,529
4,236
2,283
1,253
629
$
22,151A consolidated subsidiary subleases machinery.
Investments in leases and lease obligations, which include an interest portion, resulting from sublease transactions as ofMarch 31, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars
2015

Millions of Yen
2015
Investments in leases:
Due within one year
Due after one year
Total

¥

2014
287
356
643

¥

¥
¥

293
569
862

2,392
2,968
$
5,360
Thousands of
U.S. Dollars
2015

321
624
945

$

Millions of Yen
2015
Lease obligations:Due within one year
Due after one year
Total

¥

2014
296
411
707

¥

25

¥
¥

$

$

2,468
3,422
5,890

13. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are summarized below:(1) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria including (1) having a Boardof Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of thedirectors being prescribed as one year rather than the normal two year term by its articles of incorporation, the Board of
Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribedso in its articles of incorporation. However, the Company cannot do so because it does not meet all the above criteria.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available
for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must be maintained at no less than ￥3 million.
(2) Increases/decreases and transfer of common stock, reserve, and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity accountcharged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals
25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may bereversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital,
other capital surplus, and retained earnings can be transferred among the accounts 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 such treasury stock by resolutionof the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to theshareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as aseparate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisitionrights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted
directly from stock acquisition rights.
──────────────────────────────────────────────────────
14. 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 35.1% and 37.5% for the years ended March 31, 2015 and2014, respectively.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred tax assets andliabilities as of March 31, 2015 and 2014, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2015
2014
2015
Deferred tax assets:
Loss on write-down of inventories
7,979
2,433
$
66,490¥¥
Provision for loss on business of subsidiaries and associates
3,407
28,389Loss on impairment of fixed assets
2,058
509
17,153
Loss on write-down of securities and other
1,887
108
15,725
Allowance for doubtful accounts
1,618
31
13,486
Accrued bonuses to employees
534
595
4,447
Amount transferred to defined contribution pension plan
245
428
2,040
1,892
3,340
15,769Other
19,6207,444
163,499(16,742)(2,269)(139,518)
Less valuation allowance
Total
2,878
5,175
23,981
Deferred tax liabilities:
Revaluation of property
Deferred gain on sales of property
Unrealized gain on available-for-sale securities
Other
Total
Net deferred tax liabilities¥(2,168)(1,289)(3,486)(6,943)(4,065)26¥(2,394)(1,436)(2,537)(253)(6,620)(1,445)$(18,070)(10,743)(29,048)(57,861)(33,880)

Deferred tax assets and liabilities as of March 31, 2015 and 2014, were recorded as follows:
Millions of Yen
2015
Deferred tax assets:
Current
Noncurrent
Deferred tax liabilities:
Noncurrent
Net deferred tax liabilities

¥

¥

2,794
87
(6,946)(4,065)

2014
¥

¥

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

Thousands of
U.S. Dollars
2015
$

$

23,281
725(57,886)(33,880)

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of operations for the year ended March 31, 2015, with the corresponding figures for2014, 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
Refund of income taxes, etc.
Per capita inhabitant tax
Effect of changes in tax rate
Other
Actual effective income tax rate

2015
35.1 %

201437.5 %(0.2)
0.6(49.4)
(0.3)
(0.6)
1.6
(13.2) %

0.3
(0.8)
(4.0)
(6.9)
0.4
2.4
0.3
29.2 %New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal year beginningon or after April 1, 2015, from approximately 35.1% to 32.6% and the normal effective statutory tax rate for the fiscal
year beginning on or after April 1, 2016, to approximately 31.8%. The effect of these changes was to decrease deferred
tax liabilities, net of deferred tax assets, in the consolidated balance sheet as of March 31, 2015, by ￥285 million ($2,376
thousand), and to increase income taxes - deferred in the consolidated statement of operations for the year then ended by ￥74
million ($620 thousand) and unrealized gain on available-for-sale securities in the consolidated balance sheet as of March 31,
2015, by ￥361 million ($3,010 thousand).
──────────────────────────────────────────────────────
15. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group policy for financial instruments
The Group utilizes CMS provided by the Parent to operate and finance funds. The Group finances capital investments
mainly with bank loans. Derivative transactions are used, not for speculative purposes, but to manage exposure to financial
risks as described in (2) below.
(2) Nature and extent of risks arising from financial instruments
Receivables, such as notes and accounts receivable, are exposed to customer credit risk.
Although receivables in foreign currencies are exposed to the risk of fluctuation in foreign currency exchange rates, theposition, net of payables in foreign currencies, is hedged by using forward foreign currency contracts. Investment securities,
mainly equity instruments of customers and suppliers of the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign
currencies are exposed to the risk of fluctuation in foreign currency exchange rates, the position, net of receivables in foreign
currencies, is hedged by using forward foreign currency contracts.
Short-term borrowings are mainly used for financing operating capital and long-term debt and lease obligations are primarily
used for financing capital investments. Although a part of long-term debt is exposed to market risks from changes in variableinterest rates, those risks are mitigated by using derivatives of currency swaps and interest rate swaps.
Derivatives mainly include forward foreign currency contracts, which are used to manage exposure to risks associated withfluctuations in foreign currency exchange rates related to receivables and payables denominated in foreign currencies andforecasted transactions denominated in foreign currencies, and currency swaps and interest rate swaps, which are used to
manage exposure to exchange fluctuations and interest rate fluctuations on long-term debt. Please see Note 16 for more
information about derivatives.
(3) Risk management for financial instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to thecontractual terms. The Group manages its credit risk from receivables by monitoring payment terms and balances ofcustomers to identify default risk of customers at an early stage.

27

Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign currency
exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency contracts. In addition, when
foreign currency trade receivables and payables are expected from forecasted transactions, forward foreign currency contracts
may be used.
Currency swaps and interest rate swaps are used to manage exposure to market risks from changes in the interest rates oflong-term debt.
Investment securities are managed by monitoring the market values and the financial position of issuers on a regular basis.
The basic principles of derivative transactions have been approved by the manager of corporate planning. Reconciliations of
the derivative transactions and balances with customers are performed, and transaction data is reported to the manager ofcorporate planning.
Liquidity risk management
The Group establishes or updates its cash management plan according to the monthly cash management plan from eachsubsidiary in order to monitor its liquidity risk associated with operating payables and short-term borrowings and long-term
debt.
(4) Fair values of financial instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are not available, otherrational valuation techniques are used instead. Please see Note 16 for the details of the fair value of derivatives.
(a) Fair value of financial instruments

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total

Millions of Yen
2015
Carrying amount
Fair value
Unrealized gain (loss)
3,181
3,181
¥
¥
29,21329,213
16,99816,99849,39249,392¥¥¥¥

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Total

Millions of Yen
2014
Carrying amount
Fair value
Unrealized gain (loss)
7,045
7,045
¥
¥
34,22434,224
13,52013,52054,78954,789¥¥Notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total

¥

¥

22,49910,015
770
5,000
2,659
40,943¥

Notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt, including current portion
Lease obligations, including current portion
Total

25,446
4,101
4,832
5,000
3,008
42,387

28

¥

¥

¥

22,49910,015
770
5,021
2,639
40,94425,446
4,101
4,832
5,005
2,982
42,366

¥
¥

¥
¥

(21)
20
(1)

(5)
26
21

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

Thousands of U.S. Dollars
2015
Carrying amount
Fair value
Unrealized gain (loss)$
26,510$26,510243,445
243,445
141,648
141,648$
411,603$411,603$$

187,489
83,4606,418
41,66722,151
341,185$

187,489
83,4606,418
41,84421,982
341,193

$

$
$

(177)
169
(8)

AssetsCash and cash equivalents, and notes and accounts receivable
The carrying values of cash and cash equivalents, and notes and accounts receivable approximate fair value because of theirshort maturities.
Investment securities
The fair values of investment securities are measured at the quoted market prices of the stock exchange and at the quoted
prices obtained from financial institutions for certain debt instruments. The information on the fair value of investment
securities by classification is included in Note 6.
Liabilities
Notes and accounts payable, short-term borrowings, and income taxes payable
The carrying values of notes and accounts payable, short-term borrowings, and income taxes payable approximate fair value
since they are scheduled to be settled in a short period of time.
Long-term debt and lease obligations
The fair values of long-term debt and lease obligations are measured at the present value of the total of the principal andinterest discounted by the interest rate applied to new loans.
Derivative transactions
Information on the fair value of derivatives is included in Note 16.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined

2014
1,023

Thousands of
U.S. Dollars
2015
$
8,685

1,258

10,774

Millions of Yen
Unlisted securities
Investments in unconsolidated subsidiary andassociated companies

¥

2015
1,042

¥

1,293

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

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

¥
¥

3,181
29,17232,353

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

$
$

26,510243,100
269,610

Millions of Yen
2015
Due after one
Due after five
year throughyears throughfive years
10 years
41¥
41¥
Thousands of U.S. Dollars
2015
Due after one
Due after five
year throughyears throughfive years
10 years
$
345
$
345
-

Please see Note 8 for annual maturities of long-term debt and Note 12 for obligations under finance leases.

29

Due after
10 years-

Due after
10 years-16. DERIVATIVE TRANSACTIONSThe Group enters into forward foreign currency contracts to hedge foreign exchange risk associated with certain assets andliabilities denominated in foreign currencies. The Group also enters into currency and interest rate swap contracts to manage
its interest rate exposures on long-term debt.
All derivative transactions are entered into to hedge interest and foreign currency exposures incorporated within its business.
Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or
liabilities.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate theauthorization and credit limit amount.
Derivative transactions to which hedge accounting is applied for the years ended March 31, 2015 and 2014, were as follows:
Millions of Yen

2015
Hedgeditem

Contract
amountContract
amountdue after
one year

Fair
value

2014

Contract
amountContract
amountdue after
one year

Fair
value

Currency:
Forward foreign currency contracts
BuyingUSD
EUR
TWD

Advancepayments ¥Advancepayments
Advancepayments

112

-

40

-

786

¥

1

¥

¥

67

-

1

(1)

78

-

31

-

-

109

-

18

-

(69)

1,079

-

(32)

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

Advances
received
Long-term¥debtLong-term
debt

2,500
1,300

¥

2,500

Note

1,300

Note

¥

2,500
1,300

¥

2,500

Note

1,300

Note

Thousands of U.S. Dollars
2015
Hedgeditem

Contract
amountContract
amountdue after
one year

Fair
value

Currency:
Forward foreign currency contracts
BuyingUSD
EUR

Advancepayments $Advancepayments

937

-

$

9

332

-

(11)

6,549

-

(578)

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

Advances
received

Long-term$ 20,833
debt
Long-term
10,833debt$ 20,833

Note10,833

Note

Note: Fair values of interest rate currency swaps, which qualify for hedge accounting, and those of interest rate swaps, which qualify
for hedge accounting and meet specific matching criteria, are included in the fair values of the long-term debt in Note 15.

30

17. LOSS ON IMPAIRMENT OF PROPERTY, PLANT, AND EQUIPMENTThe Group recognized impairment loss on the following asset groups.
For the year ended March 31, 2015:
Asset group
Railway rolling stockbusiness property

Location
Illinois, the UnitedStatesMillions of Yen
2015

Account

Thousands of U.S. Dollars
2015

Buildings and structures,
Machinery andequipment, etc.

¥

4,815

$

40,123

Total

¥

4,815

$

40,123

The Group reviewed its long-lived assets for impairment as of March 31, 2015.
For the year ended March 31, 2015, the Group recognized impairment losses for railway rolling stock business property of
NIPPON SHARYO U.S.A., INC. and two other subsidiaries by writing down the property to its recoverable amounts due totheir consecutive operating losses in recent years. As a result, impairment losses were recognized on buildings and structures,
machinery and equipment, land, construction in progress, and other in the amounts of ￥2,674 million ($22,281 thousand),￥826 million ($6,882 thousand), ￥449 million ($3,741 thousand), ￥366 million ($3,047 thousand), and ￥500 million ($4,172
thousand), respectively.
For the year ended March 31, 2014:
Millions of Yen
Asset group
Location
Account
2014
Unused property
Shinano, Nagano
Land, etc.
3¥
Pulp and paper plant
Machinery andengineering business
Fuji, Shizuoka
11equipment,
etc.
property
Cast steel and forgedproduct businessproperty

Handa, Aichi

Machinery andequipment, etc.

41
¥

Total

55

The Group reviewed its long-lived assets for impairment as of March 31, 2014.
For the year ended March 31, 2014, the Group recognized an impairment loss for unused property since its market pricedecreased below its book value. For pulp and paper plant engineering business property, an impairment loss was also
recognized by writing down the property to its recoverable amounts due to consecutive operating losses in recent years. As
a result, impairment losses were recognized on machinery and equipment, buildings, and other in the amounts of ￥8 million,￥1 million, and ￥2 million, respectively. A further impairment loss was recognized for cast steel and forged product businessproperty by writing down the property to its recoverable amounts due to the resolution for dissolution of Nissha Washino
Steel Co., Ltd., at its extraordinary shareholder’s meeting held on March 31, 2014. As a result, impairment losses wererecognized on machinery and equipment, lease assets, and other, in the amounts of ￥33 million, ￥5 million, and ￥3 million,
respectively.
──────────────────────────────────────────────────────
18. RELATED-PARTY DISCLOSURESThe Parent directly owned 51.2% of the total shares of the Company as of March 31, 2015 and 2014. The Company
distributes transportation vehicles to the Parent.
Transactions of the Company with the Parent for the years ended March 31, 2015 and 2014, were as follows:
Millions of Yen
Sales
Interest expense¥

2015
25,99331¥

2014
24,36825

Thousands of
U.S. Dollars
2015$
216,607259

The balances due to or from the Parent as of March 31, 2015 and 2014, were as follows:
Millions of Yen
Accounts receivable
Short-term borrowings

¥

2015
3,048
648

31

¥

2014
3,768
4,101

Thousands of
U.S. Dollars
2015$
25,3965,404

19. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars
2015

Millions of Yen
2015
Unrealized gain (loss) on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred loss on derivatives under hedge accounting:Losses arising during the year
Income tax effectTotal
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
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive income in an associated company.
(Losses) gains arising during the year
Income tax effectTotal
Total other comprehensive income

¥

2014

3,920
(228)
3,692
(933)
2,759

¥

¥

¥

(88)
29
(59)

¥
¥
¥

¥
¥

¥

¥

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

$

$

¥

(41)
16
(25)

$

(735)
243
(492)

(1,817)(1,817)

¥
¥

(90)
(90)

$
$

(15,144)(15,144)

5,677
295
5,972
(1,869)
4,103

¥

-

$

47,3092,456
49,765(15,568)
34,197

¥

(0)
0
(0)
4,986

¥
¥

¥
¥
¥
¥

12
(4)
8
(880)

$

32,669(1,902)30,767(7,775)22,992

$
$
$
$

(3)
1
(2)
41,551──────────────────────────────────────────────────────
20. SUBSEQUENT EVENT
Substantial amount of Long-term Debts
The Company resolved to borrow long-term debt at the Board of Directors’ meeting held on May 21, 2015 under thefollowing conditions:
1. Syndicated loan led by the Bank of Tokyo-Mitsubishi UFJ, Ltd.
Capital increase at the consolidated subsidiary(1)Porpose of the loan:		
NIPPON SHARYO U.S.A., INC.
(2)Aggregate amount of borrowings:$110,000 thousand(3)Interest rate:
Fixed (interest rate currency swap contract)(4)Borrowing date:June 19, 2015(5)Maturity date:June 17, 2022
(6)Pledged assets or security:
None
2. Syndicated loan led by Mizuho Bank, Ltd.
(1)Porpose of the loan:
Capital increase at the consolidated subsidiary		
NIPPON SHARYO U.S.A., INC.
(2)Aggregate amount of borrowings:
Japanese yen equivalent to $45,000 thousand(3)Interest rate:
Fixed (interest rate swap contract)(4)Borrowing date:June 19, 2015(5)Maturity date:June 17, 2022
(6)Pledged assets or security:None──────────────────────────────────────────────────────
21. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance No. 20,“Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial anddescriptive information about its reportable segments. Reportable segments are operating segments or aggregations ofoperating segments that meet specified criteria. Operating segments are components of an entity about which separate
financial information is available and such information is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported
on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources
to operating segments.

32

(1)Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by theCompany’s management is being performed in order to decide how resources are allocated among the Group.
The Group has operational headquarters by each product or service. Each of the operational headquarters develops
comprehensive strategies and engages in business activities relating to each product and service. Accordingly, the Groupis comprised of segments organized by products or services based on the operational headquarters and there are threereportable segments: “Railway Rolling Stock,” “Transportation Equipment and Steel Structure,” and “Construction
Equipment.”“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.
(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
2015
Reportable segment
Railway Transportation
Construction
Rolling Equipment andEquipment
Steel Structure
Stock
Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation
Increase in property, plant, and equipment
and intangible assets

Other¥ 55,035 ¥ 16,260 ¥ 20,311 ¥
30
622
10
¥ 55,065 ¥ 16,882 ¥ 20,321 ¥407 ¥ 3,352 ¥¥(10,785) ¥¥ 75,774 ¥ 17,225 ¥ 20,571 ¥¥

1,581 ¥

421

4,037

329

¥

655

¥

902

Total

Reconciliations Consolidated

4,693 ¥ 96,299- ¥ 96,299
246
908 ¥ (908)
4,939 ¥ 97,207 ¥ (908) ¥ 96,299(27) ¥ (7,053) ¥ (1,125) ¥ (8,178)
2,671 ¥116,241 ¥ 28,896 ¥145,137
35

¥

48

2,692 ¥

329

5,316

288

¥

3,021
5,604

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

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

1,453

¥

413

3,476

331

33

¥

714
1,074

¥

Total

Reconciliations Consolidated

7,724 ¥124,311- ¥124,311
860
1,488 ¥ (1,488)
8,584 ¥125,799 ¥ (1,488) ¥124,311
348 ¥ 7,707 ¥ (1,003) ¥ 6,704
2,562 ¥118,660 ¥ 22,793 ¥141,453
49
16

¥

2,629
4,897

¥

272
486

¥

2,901
5,383

Thousands of U.S. Dollars
2015
Reportable segment
Railway Transportation
Construction
Other
Total
Rolling Equipment andEquipment
Steel Structure
Stock
Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation
Increase in property, plant, and equipment
and intangible assets

Reconciliations Consolidated$458,625 $135,500
247
5,187
$458,872 $140,687$(89,875) $ 3,388$631,448 $143,540$169,262
83$169,345$ 27,933$171,422$ 39,103 $802,490- $802,490
2,047
7,564 $ (7,564)$ 41,150 $810,054 $ (7,564) $802,490$ (224) $(58,778) $ (9,375) $(68,153)$ 22,265 $968,675 $240,800 $1,209,475$ 13,179$$$

33,638

3,510
2,738

5,456
7,520

282

$ 22,427

398

44,294$

2,745$ 25,172

2,402

46,696

Notes:1. “Other” represents businesses that are not included in any reportable segment, which includes manufacture and sales ofRailway Rolling Stock inspection/maintenance systems, agricultural plants, and pulp and paper plants, and real estate
rental for the year ended March 31, 2015, and manufacture and sales of Railway Rolling Stock inspection/maintenancesystems, agricultural plants, pulp and paper plants, and cast steel and forged products, and real estate rental for the year
ended March 31, 2014.
2. “Reconciliations” in segment profit (loss) include corporate expenses of ￥ (1,158) million ($(9,647) thousand) andelimination of intersegment transactions of ￥ 28 million ($231 thousand) for the year ended March 31, 2015, and corporate
expenses of ￥ (1,012) million and adjustments in inventories of ￥ 4 million for the year ended March 31, 2014. 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 ￥ 24,653 million ($205,439 thousand) and ￥ 20,685
million, elimination of intersegment balances of ￥ (113) million ($(943) thousand) and ￥ (186) million, and adjustments
in inventories of ￥ (105) million ($(878) thousand) and ￥ (101) million as of March 31, 2015 and 2014, respectively. Total
corporate assets principally consist of investment securities and general management properties as of March 31, 2015 and2014.
4. Segment profit (loss) is reconciled to operating (loss) income in the consolidated statement of operations.
──────────────────────────────────────────────────────
Associated Information(1) Information about products and services is not disclosed since similar information is disclosed above.
(2) Information about geographical areas for the years ended March 31, 2015 and 2014, was as follows:

Sales

Sales

Sales

¥

¥

$

North America¥ 10,594

Millions of Yen
2015
Asia
¥ 7,630

¥

Other
4,758

¥

Total
96,299Japan
74,916

North America¥ 16,952

Millions of Yen
2014
Asia
¥ 32,328

Other
¥ 115

¥

Total
124,311

Japan
610,975

Thousands of U.S. Dollars
2015North America
Asia$ 88,287$ 63,578

Other$ 39,650

Total$ 820,490

Japan
73,317

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

34

JapanProperty, plant,
and equipment¥

26,050Japan
Property, plant,
and equipment¥

26,630Japan
Property, plant,
and equipment$

217,085

Millions of Yen
2015
Asia

North America
¥

¥

5,805

¥

2

Millions of Yen
2014
Asia

North America
¥

Other

¥

7,671

$

¥

0

Other
¥

1

Thousands of U.S. Dollars
2015North AmericaAsia$ 48,375

Total

Total
¥

0

Other

14

$

31,85734,302

Total

0

$

265,474(3) Information about major customers
Sales
Thousands of
U.S. Dollars
2015

Millions of Yen
Name of major customer

2015¥

The Parent

2014¥

25,99324,368$Relatedsegment
Railway
Rolling Stock
Railway
Rolling Stock
Railway
Rolling Stock

216,607

Sumitomo Corporation-

31,063-

Sumitomo Corporation of Americas-

14,704-(4) Information about loss on impairment of property, plant, and equipment by reportable segment
Millions of Yen
2015

Impairment loss

Reportable segment
Transportation Construction
Railway
Equipment andRolling
Steel Structure Equipment
Stock¥ 4,815

Other

Total
-

¥

Reconciliations Consolidated

4,815

-

¥

4,815

Millions of Yen
2014

Impairment loss

Reportable segment
Transportation Construction
Railway
Equipment andRolling
Steel Structure Equipment
Stock
-

Other
¥

Total

52

¥

52

Reconciliations Consolidated
¥

3

¥

55

Thousands of U.S. Dollars
2015

Impairment loss

Reportable segment
Transportation Construction
Railway
Equipment andRolling
Steel Structure Equipment
Stock$ 40,123
-

35

Other

Total
-

$ 40,123

Reconciliations Consolidated-$ 40,123

36

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

328,000,000 shares

Common Stock:Issued

146,750,129 shares

Number of Shareholders

15,903 persons(March 31, 2015)

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

Established in Nagoya City.
Founded Narumi Plant.
Re-listed on Tokyo Security Exchange.
Began Construction Machinery Business.
Started Bridge Manufacturing.
Founded Toyokawa Plant.
Founded Kinuura Plant.
100th Anniversary.
Equity and business tie-up entered into with
Central Japan Railway Company.
Manufactured 3000th Shinkansen EMU.
Founded Rochelle Plant of NIPPON SHARYO
U.S.A., INC.

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

Other

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

Directory
OFFICEHEAD OFFICE (NAGOYA)TOKYO OFFICEOSAKA BRANCHSHANGHAI REPRESENTATIVE OFFICE

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

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

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

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

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

NARUMI PLANT(Steel structure)

KINUURA PLANTNIPPON SHARYO U.S.A.,INC.

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

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

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

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

37