ANNUAL REPORT 2003

PARAMOUNT BED CO., LTD.

Profile

Statement:

As Human, for Human
Paramount Bed Co., Ltd. founded in 1947, is a pioneer in the field of medical beds. Using
its own unique integrated production system, it has been providing products designed not
only to improve conditions for convalescing patients, but also to facilitate the work of
caregivers for more than half a century. With the ageing of the Japanese population, it
has expanded its scope of business to cover facilities for the elderly and home nursing
care in recent years, developing home-care beds and various other types of welfare
equipment. These initiatives are in line with Paramount Bed’s goal of creating a patientfriendly healthcare environment.
The Paramount Bed group consists of Paramount Bed and 2 consolidated subsidiaries(as of March 31, 2003). In the fiscal year to March 2003, it had net sales of ¥45,774
million, operating income of ¥5,891 million and net income of ¥3,127 million. Paramount
Bed is Japan’s leading maker of medical beds and has acquired a strong reputation, as
reflected in its domestic market share of 70% (PB estimate).

Contents
2 Financial Highlights

17 Consolidated Statements of Cash Flows

3 To Our Shareholders

18 Notes to Consolidated Financial Statements

7 Product Line-up

24 Independent Auditors’ Report

9 Special Feature

25 Corporate History

10 Six-year Summary

26 Corporate Information

11 Business Review in Fiscal 2003

Corporate Data

13 Consolidated Balance Sheets

Board of Directors and Corporate Auditors

15 Consolidated Statements of Income

Shareholder Information

16 Consolidated Statements of Shareholders’ Equity

Network

Disclaimer Regarding Forward-Looking Statements
The information contained in this annual report is given for the sole purpose of providing information regarding the business performance ofParamount Bed Co., Ltd. during the fiscal year ended March 31, 2003, and is not intended to solicit investment in any securities issued by
the Company. Any statements with respect to Paramount Bed’s current plans, strategies and forecasts are forward-looking statements
based upon information available as of March 31, 2003, and involve known and unknown risks and uncertainties. Actual events and results
may differ materially from those anticipated in these statements.

1

Financial Highlights

Paramount Bed Co., Ltd. and Subsidiaries — Years ended March 31, 2003 and 2002

Millions of yen

2002

2003
For the year:
Net sales
Operating income
Income before income taxes
Net income¥

Thousands of U.S.dollars¥

45,774
5,891
5,521
3,127

2003

45,153
4,786
4,326
2,498

$

380,81549,01045,93226,015Per share data (yen):
Net income
Total shareholders’ equity

98.29
1,945.48

77.69
1,882.47

0.82
16.19

At year-end:
Total assets
Total shareholders’ equity

74,331
61,14872,82259,442

618,394508,719

Note:The U.S dollar amounts have been translated from yen, for convenience only, at the rate of ¥120.20 to U.S.$1, the approximate exchange rate at March 31, 2003.

Net sales

Millions of yen

50,00043,072

46,35946,54145,15345,774

Operating income

Millions of yen

10,00040,0008,000

30,000

6,000

7,350
6,324

5,951

5,891
4,786

20,0004,000

10,000

2,000
0

0

1999

2000

2001

2002

Net income

1999

2003

Millions of yen

55,021

4,355

2002

2003

Millions of yen

57,75359,442

61,148

2001

2002

2003

3,889

4,000
3,000

2001

Total shareholders’ equity
60,000

5,000

2000

3,127

2,881

40,00039,281

2,498

2,000

20,000

1,000

0

0

1999

2000

2001

2002

2003

1999

2000

2

To Our Shareholders

Striving for stable and sustainable growththrough proactive marketing promotion
and new business development
Increase of sales and profits in severebusiness conditions
In fiscal 2003 (year ended March 31, 2003), the harshbusiness climate continued. In the healthcare sector,
measures to reduce Japan’s medical expenditures havebeen implemented by downward revisions in medical
treatment fees as well as increases in the personal
contribution of medical fees that senior citizens mustshoulder themselves. In the welfare sector, fees fornursing-care services have been revised.
In such an adverse environment, the Paramount Bed
group has made efforts to reduce costs by boosting
efficiency in the production and logistics systems in thepast two years or so, so that production and marketing
match market trends. Due to these efforts, we have seen
growth in both sales and profits for the fiscal year underreview (April 1, 2002 - March 31, 2003), as net sales
posted ¥45,774 million, up 1.4%, year on year, with
operating income at ¥5,891 million, up 23.1%, year on
year, and net income of ¥3,127 million, up 25.2%, year
on year.
Accordingly, an annual dividend of ¥24 per share was
decided for the current term. We will continue tomaintain the distribution of annual dividend of ¥24 pershare, while further expanding business domains andincreasing retained earnings.
Kenji Kimura
President and Representative Director

3Commitment to corporate governanceIn order to ensure and reinforce the rationality,
legitimacy and transparency of our management, wehave consolidated our management organization andcarried out the necessary policy measures.
The board of directors currently consists of six members.
The board meets once a month to facilitate quick
decision-making on important management issues, suchas compliance with corporate provisions. There are four
corporate auditors, including two from outside. They
attend every board meeting to offer opinions, andconduct audits on the execution of the directors’ duties.
In addition, we introduced an operating officer system inJune 2001 to clarify authority and responsibility in
executing business operations. Under the supervision of
the board of directors, six operating officers endeavor toprovide smooth and reliable management operations.

New business development leveraging thecomprehensive strength and advantages of
the Paramount Bed group
The Paramount Bed group has made remarkableprogress in the medical sector, through extensive
experience in supplying its products to medical
institutions nationwide. Regarding such experience as
one of our assets, we have internally considered thedevelopment of new business as a means to cultivate
new customers for the last two years. Consequently, we
have set up two businesses for the current term.
First, we have entered into the maintenance business.
With our high level of technology and network, we set up
PARA TECHNO Co. Ltd., a wholly-owned subsidiary, in
July 2002. The new company provides comprehensive
services, such as sterilization/cleaning,
maintenance/repair, and leasing of beds andmattresses. In the medical sector, as there is a great

TopicsDevelopment of adjustable bed level system, KIND motion
The function of the backrest raising of the bed used for nursing care on site is one of the essential basic
functions for patients’ meal assistance, transfer/moving, and assisting patients in getting up. However,sometimes beds do not fit the body or they cause a sensation of pressure when the backrest angle of the bed israised or lowered. In order to reduce such occurrences, we have developed a comfortable and adjustable bedcontrol system: KIND motion. The Metis Series hospital beds equippedwith this new system were launched in January 2003.
KIND motion is a highly functional control system utilizing a Kyma line
lower frame, which curves gently as the bed is extended, in a wellbalanced manner based on ergonomic design. The Kyma line
mechanism has already been developed and put into practical use(global patents pending).

KIND motion system significantly reduces
friction or pressure to the body when thebackrest angle of the bed is raised or lowered.

4

To Our Shareholders

need of safety measures, including those against inhospital infection, we expect this business to grow as apromising major business when the service lineup is
expanded and specialized.
Second, we have established a new brand called
INTIME. Based on the Club Paramount Series on which
trial marketing has been conducted for the last three
years, INTIME will provide sound sleep and excellent
health by offering semi-customized mattresses to matchthe body weight and preference of each customer. With
the aging of society, we will identify the needs of the
middle-aged and elderly who seek improvement ofquality of life (QOL) in health, and will foster INTIME as
one of our new businesses.

Strengthening marketing activities andcreating new products to bolster ourcompetitive edge
As for the outlook for the fiscal year ending March 2004,
medical institutions in the healthcare industry are
expected to face an increasingly severe businessclimate, as the government is taking more severe
measures to curb Japan’s medical expenditures by suchmeans as raising the personal contributions of salaried
workers to 30% of total treatment cost in April 2003, a
10% increase. Besides, market segmentation(specialization and sophistication) is advancing, with anincrease in classification of hospital beds according tofunction (general hospital beds and long-term carebeds), which was completed in August 2003.
In the sector of welfare for seniors, while the welfare
equipment distribution market continues to slightly expand
under the nursing care insurance scheme, the market

TopicsRelease of the new brand INTIME
In order to make a full-scale entry into the bedroom/interior market for the health-conscious
consumer, which is quite different from our traditional business lines of healthcare andnursing care, we have created a new brand INTIME, which offers “sound sleep and excellent
health.” In May 2003, we opened our directly-managed brand shops in three major cities,
Tokyo, Osaka and Nagoya.
After three years of trial marketing since the introduction of the electric adjustable bed Club
Paramount 5121 in 2000, we have confidently established the new brand INTIME embodying
both health and design concepts, intending to advance into new business areas. We willcontinue to offer various other products besides beds and mattresses optimally designed formaking the stay in bed more comfortable.

5structure, currently led mainly by new demands, is
expected to shift gradually toward one led by replacement
demand. Concurrently, many types of facilities for seniors
are steadily increasing as the number of people seeking
residency in such facilities is increasing.
In this business climate, it is of primary importance torespond immediately to customers’ diversifying needs.
We are developing marketing, sales and service
activities to create new products that stimulate
customers’ trust and willingness to purchase, thereby
differentiating our products from peers’ products in the
sector and improving our competitive edge.
Furthermore, we strive to consolidate our financial baseand to increase profits by reviewing the overall cost
structure of the entire Paramount Bed group.

population is aging rapidly. In order to securesustainable growth of the Paramount Bed group, we
think it vital to engage in the above-mentioned new
businesses as well as enter overseas markets. As a firststep, we will concentrate our efforts on businessdevelopment in the medical bed market in China.

July 2003

Kenji Kimura
President and Representative Director

To assess the healthcare industry, our current businessarea, the market will be likely to expand slowly as the

Styleport
Styleport is a custom-made mattress with its
sturdiness tailored to the body weight andpreference of each customer. It provides
comfort for both stationary sleepers andthose who frequently turn over while
sleeping.

INTIME Kyobashi

INTIME 3020
With some improvements to Club
Paramount 5121, INTIME 3020 successfully
combines health and design concepts. The
newly developed Styleport is adopted forthe mattress.

6

Product Line-up

Hospital beds

Beds for elderly-care facilities

Beds must provide safety, comfort and ease of operation.
Our hospital bed line offers a full range, from sophisticatedto standard models. The KA-6000 Series embodies
Paramount Bed’s next-generation technology.

It is important to prevent residents ofelderly-care facilities from falling out ofbed. Our ultra-low Callisto beds (Callisto
Series) reduce the risk of accident in theevent of a fall. (Photo shows bed fittedwith Thestor shock-absorbing mattress)

Advanced, emergency use

Acute care (for special rooms)

Callisto Series
KA-8530 ICU Bed
KA-6000 Series

Woody Bed Series
Excellent SeriesMulti-Purpose Medical Chair

New products
In the fiscal year ended March 2003,
Paramount Bed was proactively introducing
new products on the markets.
KA-8000: a new, highly functional bed for avariety of uses – from emergency care tointensive care units,
KY-600 Series: nursing wagons withimproved interface and reduced caster noise
Kyma Aura Bed Mini: specially designed,
for patients not exceeding 1.5m in height(overall length approximately 11cm shorter
than the standard bed).

7KA-8000 (Emergency/ICU bed)

KY-600 Series (nursing wagons)

Kyma Aura Bed Mini

Beds for the physicallyunimpaired (INTIME)
Everyone spends time in bed, and thesemodels are designed to make sleeping
more enjoyable.

Bed peripherals
Mattresses

Home-care beds
Demand for rental home-care beds hasgrown rapidly since the start of thenursing care insurance program. The
Aura 21 Series is designed to cater tovaried needs of different users.

The Accu MaxTM, designed to prevent
bedsores, and the versatile Preglar
Mattress, for use in hospitals, elderlycare facilities and home care.

5121 Bed

Preglar Mattress

Relaxing Chair
Aura 21 Series
Accu MaxTM

Other Products
Scot-klean is a urine collector that automatically activates to collect urine when
it detects the presence of urine. The Mobile Electric Nursing Lift assists inmoving patients between bed and wheelchair.

Wide Aura Bed

This unit is based on an original concept
developed by Paramount Bed. We alsooffer a wide range of bed peripherals,
such as drip stands, designed tomaximize usability.
Scot-klean

KK-330S Wheelchair

Nursing Lift

Irrigator Stand

8

Special Feature

Products to Support
Healthcare Safety at
Medical Institutions

Callisto Series
The Callisto Series is a low-height bed
equipped with a Thestor shock-absorbing
mattress and a side support rim that prevents
the sleeper falling out of bed.

Growth in sales of products with focus on safety
and comfort
In Japan, everyone has the right to medical treatment without anxiety
under the universal coverage of public health insurance for thewhole Japanese population. However, the population is rapidly
aging as birthrates fall. In order to be able to receive medical
treatment without worry in the future, it is necessary to carry out
fundamental reforms that stabilize the financial side of medical
insurance, by such means as moderating healthcare costs,
changing the method by which salaried workers bear their personal
contribution, and efficiently providing services. As part of thereforms, medical treatment fees have been reduced since April
2002, while the personal contribution of medical fees that seniorcitizens must pay themselves has been increased. At the sametime, the government has been working for improvement of thequality and efficiency of medical treatment. As for the revision of
medical treatment fees, “assessment of medical safety measures”
has been implemented since October 2002. This consists of “cuts inmedical treatment fees for undeveloped medical treatment safety
management system” and “cuts in medical treatment fees for nomeasures against bedsore/pressure ulcer.” The former means that
medical treatment fees will be lowered in case any safety
management system for medical treatment has not been developedin medical facilities. The latter means that medical treatment fees
will be lowered in case proper measures against bedsore/pressure
ulcer have not been adopted in medical facilities.
The Paramount Bed group has quickly responded to these revisions,and strives to offer products and services to support users in solving
their problems. Products currently on the market include the Callisto
Series of low-height beds and the Thestor shock-absorbing
mattresses. Both of them support safer management in terms of
preventing seniors from falling out of bed and reducing the shock inthe event of a fall. Maxi Float Mattress and Para Float Mattress,
which will prevent bedsore/pressure ulcer, are also on the market.
Sales of all these products has been gradually increasing.
In the fiscal year under review, we launched Accu Max and Overlay,
expanding the product lineup for bedsore/pressure ulcer care.

* Pressure ulcers or bedsores are a skin ulcer (caused by avascular necrosis) whichappears when a certain amount of pressure is applied to certain parts of the body.

9Side Support

Thestor shock-absorbing mattress

Accu MaxAccu Max is a body-weight dispersion
mattress, suitable for bedsore/pressure ulcer
care in all stages ranging from prevention to
alleviating the most severe cases.

Six-year Summary

Paramount Bed Co., Ltd. and Subsidiaries — Years ended March 31, 2003, 2002, 2001, 2000, 1999, and 1998

2003

2002

For the year:
Net sales

2001

2000

1999

1998

Millions of yen¥ 45,774¥ 45,153¥ 46,541¥ 46,359¥ 43,072¥ 47,314

Cost of sales

27,57427,304

26,836

26,07425,75128,015Gross profit

18,20017,84919,70520,285

17,321

19,299Selling, general and administrative expenses

12,30913,063

13,381

12,935

11,370

11,108Operating income

5,891

4,786

6,324

7,350

5,951

8,191

Net income

3,127

2,498

3,889

4,355

2,881

3,809

Net cash provided by operating activities (*1)

6,194

4,076

4,042

4,761

—

—

Net cash used in investing activities (*1)

(1,615)(3,948)(3,715)(5,373)——

Net cash (used in) provided by financing activities (*1)

(1,198)(1,040)

(917)

822

—

—

Cash and cash equivalents, end of year (*1)

14,661

11,267

12,15812,641——

Research and development costs

1,075

983

890

881

733

622

Total assets

74,331

72,822

72,07873,52464,44964,202

Total shareholders’ equity

61,14859,44257,75355,021

39,281

37,247

At year-end:

Per share data:
Net income
Total shareholders’ equity

Yen

98.29

77.69

122.75140.4595.65

126.44

1,945.48

1,882.47

1,822.88

1,736.65

1,304.00

1,236.48

Value indicators:%

Return on equity (*2)

5.19

4.26

6.90

9.24

7.53

10.66

Return on assets (*3)

4.25

3.45

5.34

6.31

4.48

6.02

Shareholders’ equity ratio

82.26

81.63

80.13

74.83

60.95

58.02

*1) Consolidated statements of cash flows were first prepared for the year ended March 2000.
*2) Return on equity (ROE): Net income / Average total shareholders’ equity*3) Return on assets (ROA): Net income / Average total assets

10Business Review in Fiscal 2003

Overview of Financial Results
In fiscal 2003 (year ended March 2003), the Japanese
economy was not yet back on the track to recovery as
deflation persisted. The future outlook became more
uncertain towards the term-end due to the mounting
tension over the situation in Iraq and stagnating stock
prices in the global markets, though corporate earnings
showed some signs of recovery.
In the healthcare industry, the business climate of
medical institutions became harsher because of the firstever reduction in medical treatment fees implemented in
April 2002 as well as increases in the personal
contribution of medical fees that senior citizens must pay
themselves since October 2002. Though the healthcare
reform has not progressed beyond the debate stage, theCabinet decided basic policies for the medical
insurance system and the medical treatment fee system,
hoping to actually materialize them by fiscal 2008.
In the field of welfare for the elderly, fees for nursingcare services were revised for the first time. Fees forhome-care services were raised by 0.1% and those forservices offered at nursing-care facilities were loweredby 4.0%, leading to an overall decline of 2.3%. This
revision dealt a heavy blow to most nursing-care
centers.
Facing such a difficult business climate, the ParamountBed group (Paramount Bed and two consolidated
subsidiaries) allocated funds for capital investment,
research and development in order to boost earnings.
As for R&D investment, we started building missioncritical systems for product development, including thefull-scale introduction of 3D computer-aided design(CAD) systems, to improve design quality and streamline
design/development process. We also upgraded thespraying lines at our Chiba Plant — our main plant — toraise the quality of color finish of products. In addition,
we remodeled the showrooms at the head office and the
Yokohama branch.
With regard to the development of products, welaunched: the Metis Series low-level beds (equippedwith a new mechanism, KIND motion, which is designed
to drastically reduce the number of occasions when thepatient’s body does not conform to the bed and theincrease in pressure when the bed is raised); a bed for
emergency medical care/ICUs (intensive care units); and11

a bed for infants. All of these are used in medical
facilities. Furthermore, we released various other new
products other than beds, including chairs for facilitating
blood-collection, nursing trolleys, body weight-disperal
mattresses and cabinets with a built-in IC timer. We
expanded the lineup of Kyma Aura Bed, one of ourmainstay products for the home-care market, and that of
the Club Paramount Series, highly functional family beds.
The customer breakdown shows consolidated sales to
medical institutions grew by 2.2%, year on year, in thefiscal year ended March 2003, while sales for home-careuse declined by 0.3%, almost unchanged from theprevious fiscal year.
Sales by major product category for the fiscal year are
as follows.
%

Millions of yen

2003
Beds

¥

26,5602002¥

Year-on-year Change

27,026(1.7)

Mattresses

4,408

3,922

12.4

Hospital-use furniture

4,128

4,608

(10.4)

Medical-use products

2,884

2,599

11.0

Other

7,794

6,998

11.4

45,153

1.4

Total

¥

45,774¥

As a result, net sales for the fiscal year increased by¥621 million, or 1.4%, year on year, to ¥45,774 million.
Operating income grew by 23.1%, year on year, to¥5,891 million, mainly thanks to cost reductions in the
manufacturing division and reduction of selling, generaland administrative expenses.
Net income soared by 25.2%, year on year, to ¥3,127
million.

Year ended March 31, 2003

Cash Flows(Cash flows from operating activities)
Net cash (hereinafter referred to as “funds”) inflow fromoperating activities was ¥6,194 million. The breakdownof inflow showed income before income taxes of ¥5,521
million, depreciation expenses of ¥1,796 million and a
decline in inventories of ¥885 million, while the primary
items of outflow were a decrease of ¥547 million in notes
and accounts payable and payment of income taxes
amounting to ¥2,222 million.
(Cash flows from investing activities)
There was a net cash outflow from investing activities forthe year of ¥1,615 million, as the expenditures foracquisition of marketable and investment securities
surpassed the gain from the sale of such securities by¥1,738 million.
(Cash flows from financing activities)
There was a net cash outflow of ¥1,198 million resulting
from financing activities. This was primarily due topayment of ¥755 million in cash dividends andexpenditures of ¥443 million for purchasing own shares.
As a result, funds outstanding at the fiscal year-end
totaled ¥14,661 million, up ¥3,394 million from theprevious fiscal year.

Issues to Be Addressed and Outlook for
the Next Term
With no indication of deflation letting up, the Japanese
economy is expected to remain in its current difficult
phase in the next fiscal year, as sluggish consumer
spending and a harsh employment situation are likely tocontinue.
In the healthcare industry, medical institutions are
expected to face an increasingly severe businessclimate, since the government is taking more severe
steps to curb Japan’s medical expenditures by suchmeans as raising the personal contribution that salaried
workers must shoulder to 30% of the total treatment
costs from April 2003, a 10% increase. As a result of thereview of designating beds according to function, whichshould be completed by the end of August 2003, theclassification of hospital beds by function is sure toincrease.

In the sector of elderly welfare, while the welfare
equipment distribution market will continue to expand
gradually with the nursing care insurance scheme, many
types of facilities for the elderly are steadily increasing
as the number of those who wish to benefit from facilities
are sharply increasing.
Against this backdrop, we are endeavouring to expand
sales of a series of new products, including the Metis
Series, in the healthcare sector as we intend to capitalizeon the business opportunity for the classification of
hospital beds by function. Concurrently, we provide
maintenance services, which will contribute to theimprovement of healthcare safety at medical institutions,through the subsidiary of PARA TECHNO Co., Ltd.
established during the fiscal year. Through such efforts,
we are striving to improve group earnings. As foroverseas markets, we will concentrate our energies
particularly on the development of the medical bed
market in China.
In the welfare equipment market, we will enhance our“area marketing” strategy and do our utmost to boost
sales of support chairs designed to aid patients ingetting up to their feets, which were added to the list ofrental items certified by the public nursing careinsurance in April 2003. In the market of facilities for theelderly, we will enhance marketing activities, mainly led
by our market development office.
We will devote ourselves to secure new customers to
expand our customer base, by launching a new INTIME
brand, through which we will provide users with“peaceful and high-quality sleep”. As an initial step inthis strategy, we will launch semi-customized mattresses
tailored to the body weight and preferences of eachcustomer.
We integrated the engineering division, themanufacturing division and the quality assurance
division into the production division in April 2003 toestablish a framework which would comprehensively
cover everything from design and development tomanufacturing and quality assurance.

12

Consolidated Balance Sheets

Thousands of U.S. dollars(Note 1)Millions of yen

ASSETS

CURRENT ASSETS:
Cash and cash equivalents
Time deposits
Marketable securities (Note 3)
Notes and accounts receivable:
Trade notes
Trade accounts
Other
Allowance for doubtful accounts
Inventories (Note 4)
Deferred tax assets (Note 6)
Prepaid expenses and other current assets

2003$ 121,972

1,335
5,413
12,328
3
(42)
4,476
435
97

5,763
12,220
6
(45)
5,361
367
86

45,033
102,56225(349)
37,2383,619
807

38,70638,510322,013PROPERTY, PLANT AND EQUIPMENT:Land
Buildings and structures
Machinery and equipment
Construction in progress
Total
Accumulated depreciation

8,371
21,05911,83912
41,281(19,905)

8,385
21,155
11,59841,138(18,623)

69,642
175,200
98,494100
343,436(165,599)

Net property, plant and equipment

21,376

22,515

177,837

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)
Life insurance premium
Deferred tax assets (Note 6)
Other assets

10,483
777
597
2,392

7,864
861
464
2,608

87,213
6,464
4,967
19,900Total investments and other assets

14,249

11,797

118,544

72,822$ 618,394

TOTAL
See notes to consolidated financial statements.

¥

14,661

74,331¥

2003

11,267
534
2,951

¥

Total current assets

13

2002

¥

11,106

Paramount Bed Co., Ltd. and Subsidiaries — March 31, 2003 and 2002

Thousands of U.S. dollars(Note 1)Millions of yen

LIABILITIES AND SHAREHOLDERS’ EQUITY

2003

2002

2003

CURRENT LIABILITIES:
Notes and accounts payable:
Trade notes

¥

1,386

Trade accounts

5,670

Other

¥

1,778
6,036

$

11,53147,171

1,141

930

9,492

Income taxes payable (Note 6)

1,577

1,265

13,120Accrued expenses

1,187

1,090

9,875

463

526

3,852

11,424

11,625

95,041

1,419

1,441

11,805

336

314

2,796

Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:
Liability for employees’ retirement benefits (Note 5)
Liability for directors’ and corporate auditors’ retirement benefits
Other long-term liabilities

4

Total long-term liabilities

33

1,759

1,755

14,634

6,591

6,591

54,834

COMMITMENTS AND CONTINGENT LIABILITIES(Notes 7, 9 and 11)
SHAREHOLDERS’ EQUITY (Notes 8 and 12):
Common stock — authorized, 100,000,000 shares;
issued, 31,682,526 shares
Capital surplus

7,277

7,277

60,541Retained earnings

48,06545,731

399,875

(153)

(52)

(1,273)

92

175

765

(724)

(280)

(6,023)

61,14859,442508,719

72,822$ 618,394

Unrealized loss on available-for-sale securities
Foreign currency translation adjustments
Treasury stock — at cost,
270,568 shares in 2003 and 106,109 shares in 2002
Total shareholders’ equity
TOTAL

¥

74,331¥

14

Consolidated Statements of Income

Paramount Bed Co., Ltd. and Subsidiaries — Years ended March 31, 2003 and 2002

Thousands of U.S. dollars(Note 1)Millions of yen

2003
NET SALES¥

2002

45,774¥45,153

2003$

COST OF SALES

27,57427,304229,401

Gross profit

18,20017,849151,414

12,30913,063

102,404

5,891

4,786

49,010

217
(132)

1,805
(1,098)

(326)
(129)

318
177
(306)
(523)
(126)

(370)

(460)

(3,078)

INCOME BEFORE INCOME TAXES

5,521

4,326

45,932

INCOME TAXES (Note 6):
Current
Deferred

2,533
(139)

1,681
147

21,073(1,156)

Total income taxes

2,394

1,828

19,917SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Note 10)
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income
Foreign exchange (loss) gain
Loss on sales of investment securities
Loss on devaluation of investment securities
Other — net
Other expenses — net

NET INCOME

¥

3,127

¥

2,498

(2,712)(1,073)$Yen

PER SHARE OF COMMON STOCK (Note 2.m):
Net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

15

380,815

¥

98.29
24.00

26,015

U.S. dollars

¥

77.69
24.00

$

0.82
0.20

Consolidated Statements of Shareholders’ Equity

Millions of yen

Thousands
IssuedNumber of
Shares ofCommon Stock

BALANCE, APRIL 1, 2001

31,683

Common
Stock

¥

6,591

CapitalSurplus¥

7,277

Net income
Cash dividends, ¥24 per share
Bonuses to directors
Net decrease in unrealized loss
on available-for-sale securities
Net increase in foreign currencytranslation adjustments
Increase in treasury stock(105,997 shares)
BALANCE, MARCH 31, 2002

BALANCE, MARCH 31, 2002

¥ 44,059

Unrealized
Loss onAvailable-forsale Securities¥

Foreign
Currency
Translation
Adjustments(178) ¥

Treasury
Stock

4

126
171
¥
31,683

6,591

7,277

(52)

45,731

(280)
(280)

175

3,127
(756)
(37)
(101)
(83)
(444)
31,683

¥

6,591

¥

7,277

CommonStockCapitalSurplus$ 54,834$ 60,541

Net income
Cash dividends, $0.20 per share
Bonuses to directors
Net increase in unrealized loss
on available-for-sale securities
Net decrease in foreign currencytranslation adjustments
Increase in treasury stock(164,459 shares)
BALANCE, MARCH 31, 2003

Retained
Earnings

2,498
(760)
(66)

Net income
Cash dividends, ¥24 per share
Bonuses to directors
Net increase in unrealized loss
on available-for-sale securities
Net decrease in foreign currencytranslation adjustments
Increase in treasury stock(164,459 shares)
BALANCE, MARCH 31, 2003

Paramount Bed Co., Ltd. and Subsidiaries — Years ended March 31, 2003 and 2002

¥ 48,065¥(153) ¥

Thousands of U.S. dollars (Note 1)
Unrealized
Loss onRetained
Available-forEarnings
sale Securities$ 380,458$

92

Foreign
Currency
Translation
Adjustments(433) $

1,456

¥

(724)

TreasuryStock$ (2,329)

26,015(6,290)
(308)
(840)
(691)
(3,694)$ 54,834$ 60,541$ 399,875$ (1,273) $765$ (6,023)

See notes to consolidated financial statements.

16

Consolidated Statements of Cash Flows

Paramount Bed Co., Ltd. and Subsidiaries — Years ended March 31, 2003 and 2002

Thousands of U.S.dollars(Note 1)Millions of yen

2003
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes — paid
Depreciation and amortization
Loss on sales of investment securities
Loss on devaluation of investment securities
Changes in operating assets and liabilities:
Decrease (increase) in notes and accounts receivable
Decrease in inventories
Increase in prepaid expenses and other current assets
Decrease in notes and accounts payable
Increase (decrease) in accrued expenses andother current liabilities
Decrease in directors’, corporate auditors’ andemployees’ retirement benefits
Other — net

¥

5,521

¥

2003

4,326

$

45,932(18,486)
14,942326(1,982)
1,954
306
523

241
885
(11)
(547)

(957)
527
(32)
(42)

2,005
7,363
(91)
(4,551)

34

(74)

283

171

(529)
56

1,422

6,194

4,076

51,531534(1,100)4,063(411)(5,242)541(534)(2,302)
3,482(1,216)(5,065)
1,723
(36)

4,442
(9,151)33,802(3,419)(43,611)4,501(1,615)(3,948)(13,436)(443)(3,686)

(755)

(283)
3
(760)

(1,198)(1,040)(9,967)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS

13

21

108

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

3,394

(891)

28,236

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

11,267

12,15893,736

11,267$ 121,972(2,222)
1,796

Net cash provided by operating activities
INVESTING ACTIVITIES:
Decrease (increase) in time deposits
Purchases of marketable securities
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Increase in other assets
Net cash used in investing activities
FINANCING ACTIVITIES:
Purchases of treasury stock — at cost
Proceeds from sales of treasury stock — at cost
Cash dividends paid
Net cash used in financing activities

CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

17

2002

¥

14,661¥

2,712(6,281)

Notes to Consolidated Financial Statements

Paramount Bed Co., Ltd. and Subsidiaries — Years ended March 31, 2003 and 2002

1. BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS

c. Inventories — Inventories are stated at cost determined by theaverage cost method and the most recent purchase price method.

The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in theJapanese Securities and Exchange Law and its related
accounting regulations, and in conformity with accounting
principles and practices generally accepted in Japan, which are
different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards. The
consolidated financial statements are not intended to present thefinancial position, results of operations and cash flows inaccordance with accounting principles and practices generally
accepted in countries and jurisdictions other than Japan.

d. Marketable and Investment Securities — Marketable andinvestment securities are classified and accounted for,depending on management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to beheld to maturity with the positive intent and ability to hold tomaturity are reported at amortized cost and(2) available-for-sale securities, which are not classified as theaforementioned securities, are reported at fair value, withunrealized gains and losses, net of applicable taxes, reported ina separate component of shareholders’ equity.

In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in
the 2002 consolidated financial statements to conform to theclassifications used in 2003.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which Paramount Bed Co., Ltd.
(the “Company”) is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and havebeen made at the rate of ¥120.20 to $1, the rate of exchange at
March 31, 2003. Such translations should not be construed as
representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES
a. Consolidation — The consolidated financial statements as ofMarch 31, 2003 include the accounts of the Company and its two(one in 2002) subsidiaries (together, the “Group”).
All significant intercompany balances and transactions havebeen eliminated in consolidation.
All material unrealized profit included in assets resulting fromtransactions within the Group is eliminated.
b. 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. Cashequivalents include time deposits and mutual funds investing inbonds, all of which mature or become due within three months ofthe date of acquisition.

Non-marketable available-for-sale securities are stated at cost
determined by the moving-average method. The cost of
securities sold is determined based on the moving-averagemethod. For other than temporary declines in fair value,
investment securities are reduced to net realizable value by acharge to income.
e. Property, Plant and Equipment — Property, plant andequipment are stated at cost. Depreciation of property, plant andequipment of the Group is computed by the declining-balancemethod while the straight-line method is applied to the buildingsof the Company acquired after April 1, 1998. The range of useful
lives is principally from 3 to 50 years for buildings and structuresand from 2 to 20 years for machinery and equipment.
f. Retirement and Pension Plans — The Company has an
unfunded severance indemnity plan partially supplemented by aqualified pension plan and a welfare annuity plan. The
consolidated foreign subsidiary adopts a national welfare pension
system of the country where the subsidiary is located.
The Group accounts for liability for retirement benefits based on
the projected benefit obligations and plan assets at the balance
sheet date.
Retirement benefits to directors and corporate auditors of theCompany are provided at the amount which would be required if all
directors and corporate auditors retired at the balance sheet date.
g. Research and Development Costs — Research anddevelopment costs are charged to income as incurred.
h. Leases — All leases are accounted for as operating leases.
Under Japanese accounting standards for leases, finance leases
that deem to transfer ownership of the leased property to thelessee are to be capitalized, while other finance leases are18

permitted to be accounted for as operating lease transactions if
certain “as if capitalized” information is disclosed in the notes tothe lessee’s financial statements.
i. Income Taxes — The provision for income taxes is computed
based on the pretax income included in the consolidated
statements of income. The asset and liability approach is used torecognize 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
laws to the temporary differences.
j. Appropriations of Retained Earnings — Appropriations ofretained earnings at each year end are reflected in the financial
statements for the following year upon shareholders’ approval.
k. Foreign Currency Transactions and Financial Statements —All short-term and long-term receivables and payables
denominated in foreign currencies are translated into Japanese
yen at the exchange rates at each balance sheet date. The
foreign exchange gains and losses from translation arerecognized in the consolidated statements of income to theextent that derivatives for foreign currency transactions do not
qualify for hedge accounting.
The balance sheet accounts of the consolidated foreignsubsidiary are translated into Japanese yen at the current
exchange rate as of the balance sheet date except forshareholders’ equity, which is translated at the historical rate.
Differences arising from such translation are shown as “Foreign
currency translation adjustments” in a separate component ofshareholders’ equity.
Revenue and expense accounts of the consolidated foreignsubsidiary are translated into Japanese yen at the current
exchange rate as of the balance sheet date.

income. Gains or losses on derivatives are deferred until maturityof the hedged transactions, if derivatives used for hedging
purposes qualify for hedge accounting because of highcorrelation and effectiveness between the hedging instruments
and the hedged items.
The foreign exchange forward contracts, which qualify for hedge
accounting employed to hedge foreign exchange exposures forimport purchases, are translated at the foreign exchange rate
stipulated in the contract.
m. Per Share Information — Effective April 1, 2002, theCompany adopted a new accounting standard for earnings per
share of common stock issued by the Accounting Standards
Board of Japan. Under the new standard, basic net income pershare is computed by dividing net income available to commonshareholders, which is more precisely computed than underprevious practices, by the weighted-average number of commonshares outstanding for the period, retroactively adjusted for stock
splits.
Diluted net income per share reflects the potential dilution that
could occur if securities were converted into common stock.
Diluted net income per share of common stock assumes fullconversion of the outstanding convertible securities at the
beginning of the year with an applicable adjustment for related
interest expense, net of tax.
Basic net income and diluted net income per share for the years
ended March 31, 2003 and 2002 are computed in accordancewith the new standard. Diluted net income per share is notdisclosed because it is anti-dilutive.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to
the respective years including dividends to be paid after the endof the year.

3. MARKETABLE AND INVESTMENT SECURITIES
l. Derivatives and Hedging Activities — The Group uses
derivative financial instruments (“derivatives”) to manage their
exposures to fluctuations in foreign exchange. Foreign exchange
forward contracts are utilized by the Group to reduce foreign
currency exchange risks. The Group does not enter into
derivatives for trading or speculative purposes.
All derivatives are recognized as either assets or liabilities andmeasured at fair value, and gains or losses on derivativetransactions are recognized in the consolidated statements of19

Marketable and investment securities as of March 31, 2003 and2002 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Current:
Government and corporate bonds
Non-current:
Marketable equity securities
Non-marketable equity securities
Government and corporate bonds
Trust fund investments and other

2003

2002

2003

¥ 1,335¥ 2,951$ 11,106

¥

¥

$

255
823
6,246
3,159

¥ 10,483

Total

428
333
3,967
3,136

¥ 7,864

2,122
6,847
51,963
26,281$ 87,213

Information regarding each category of the securities classified
as available-for-sale and held-to-maturity at March 31, 2003 and2002 were as follows:
Millions of yen

March 31, 2003

Securities classified as:
Available-for-sale:
Equity securities
Debt securities
Others
Held-to-maturity

Unrealized Unrealized
Gains
Losses

Cost

Fair
Value

Proceeds from sales of available-for-sale securities for the years
ended March 31, 2003 and 2002 were ¥938 million ($7,804
thousand) and ¥2,229 million, respectively. Gross realized gains
and losses on these sales, computed on the moving average costbasis, were ¥0 million ($5 thousand) gains for the year ended
March 31, 2003 and ¥0 million gains and ¥306 million losses forthe year ended March 31, 2002.
The carrying values of debt securities by contractual maturities
for securities classified as available-for-sale and held-to-maturity
at March 31, 2003 were as follows:

March 31, 2003

278 ¥
6,648
3,381
1,000

1 ¥
62
5

24 ¥ 255
129
6,581
227
3,159
70
930

Available
for SaleHeld toMaturity

Available
for Sale¥ 6,581 ¥ 1,000 $ 54,750 $ 8,319

4. INVENTORIESInventories at March 31, 2003 and 2002 consisted of thefollowing:

Millions of yen
Millions of yen
March 31, 2002

Securities classified as:
Available-for-sale:
Equity securities
Debt securities
Others
Held-to-maturity

Unrealized Unrealized
Gains
Losses

Cost

¥

488 ¥
4,381
3,138
2,565

12 ¥
58
71
10

Fair
Value

72 ¥ 428
86
4,353
73
3,136
36
2,539

Held toMaturity

Due in one year or less
¥ 1,411$ 11,739
Due after one year through five years
4,014
33,394Due after five years through ten years
697
5,798
Due after ten years
459 ¥ 1,000
3,819 $ 8,319
Total

¥

Thousands of U.S.
dollars

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Merchandise
Finished products
Work in process
Raw materials and supplies

¥

¥

111
4,190
182
878

$ 2,055
27,987
1,206
5,990

Total

¥ 4,476¥ 5,361$ 37,238

247
3,364
145
720

Thousands of U.S. dollars

March 31, 2003

Securities classified as:
Available-for-sale:
Equity securities
Debt securities
Others
Held-to-maturity

Unrealized Unrealized
Gains
LossesCost$ 2,313 $55,30828,128
8,319

Fair
Value

8 $ 200 $ 2,121
1,074 54,750
516
1,889 26,281
42
582
7,737

Available-for-sale securities whose fair value was not readily
determinable as of March 31, 2003 and 2002 were as follows:
Carrying AmountThousands of
U.S. dollars

Millions of yen

Available-for-sale—Equity securities

2003

2002

2003

¥

¥

$ 6,847823

333

5. LIABILITY FOR RETIREMENT BENEFITS
Under most circumstances, employees terminating theiremployment are entitled to certain severance payments based on
their rate of pay at the time of termination, years of service andcertain other factors. If the termination is involuntary, caused byretirement at the mandatory retirement age or caused by death,the employee is entitled to greater payments than in the case ofvoluntary termination.
Such severance payments are made in the form of a lump-sum
payment from the Company, in case emproyees retire before thenormal retirement age.

20

The Company has a non-contributory funded pension plan. The
non-contributory funded pension plan covers employees only incase they retire at the normal retirement age.
Under the pension plan, employees terminating their employment
at the normal retirement age are entitled to receive an annuity ora lump-sum payment at the selection of the terminating
employee.
Liabilities for emproyees’ retirement benefits as of March 31,
2003 and 2002 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial net loss
Liabilities presented on the
consolidated balance sheets

2003

2002

2003

¥

4,541
(2,689)(433)¥ 4,465(2,584)(440)$ 37,778(22,371)(3,602)¥

1,419¥ 1,441$ 11,805

In addition to the aforementioned pension plan, the Company has
joined the Tokyo Pharmaceutical Welfare Annuity Foundation,
which is established as a mutual pension plan for employees inthe same industrial parties. The projected benefit obligation
above does not include that of the Foundation. The Company’s
portion of the plan assets amounted to ¥3,677 million ($30,591
thousand) as of March 31, 2003.
The components of net periodic benefit costs for the years ended
March 31, 2003 and 2002 were as follows:
Thousands of
U.S. dollars

Millions of yen

2003
Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Installment on the welfare annuity
Others¥Net periodic benefit costs

¥

2002

2003

312
111
(64)
48
166
130

¥

302
107
(60)
40
165
44

$ 2,596
923
(532)
399
1,381
1,082

703

¥

598

$ 5,849

Assumptions used for the years ended March 31, 2003 and 2002
were set forth as follows:

Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain/loss

2003

2002

2.5%
2.5%
10 years

2.5%
2.5%
10 years

6. INCOME TAXESThe Company and its domestic subsidiaries are subject to anumber of different taxes based on income, which, in theaggregate, resulted in a normal effective statutory tax rate of
approximately 41.6% for the years ended March 31, 2003 and2002.
On March 31, 2003, a tax reform law was enacted in Japan whichchanged the normal effective statutory tax rate fromapproximately 41.6% to 39.5%, effective for years beginning April
1, 2004. The effects of this change on deferred taxes in the
consolidated financial statements for the year ended March 31,
2003 were as follows:
Deferred tax assets, net of deferred tax liabilities:
Decrease by ¥31 million ($258 thousand)Income taxes — Deferred:
Increase by ¥25 million ($208 thousand)Unrealized loss on available-for-sale securities:
Increase by ¥6 million ($50 thousand)
The tax effects of significant temporary differences and loss
carryforwards which resulted in deferred tax assets and liabilities
at March 31, 2003 and 2002 were as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

¥

¥

229
115

$ 2,288
1,165

133
234
265
(12)

130
196
165

1,106
1,947
2,205
(100)

1,035

835

8,611

Deferred tax liabilities:
Reserve for advanced depreciation and other

4

4

34

Total deferred tax liabilities

4

4

34

831

$ 8,577

Deferred tax assets:
Accrued bonuses
Enterprise taxes
Liability for directors’ and corporate
auditors’ retirement benefits
Liability for employees’ retirement benefits
Other
Less valuation allowance
Total deferred tax assets

Net deferred tax assets

275
140

¥ 1,031¥

7. CONTINGENT LIABILITIESAt March 31, 2003, the Group had the following contingent
liabilities:
Millions of yen

The amounts payable to directors and corporate auditors uponretirement are subject to the approval of the shareholders inaccordance with the Japanese Commercial Code (the “Code”).

21

Guarantees of employees’ housing loans
Recourse obligation for the balance on thetransfers of payables in factoring transactions

¥

797
1,135

Thousands of
U.S. dollars

$

6,631
9,443

8. SHAREHOLDERS’ EQUITY
Japanese companies are subject to the Code to which certain
amendments became effective from October 1, 2001.
The Code was revised whereby common stock par value waseliminated resulting in all shares being recorded with no parvalue and at least 50% of the issue price of new shares isrequired to be recorded as common stock and the remaining net
proceeds as additional paid-in capital, which is included incapital surplus. The Code permits Japanese companies, upon
approval of the Board of Directors, to issue shares to existing
shareholders without consideration as a stock split. Suchissuance of shares generally does not give rise to changes within
the shareholders’ accounts.
The revised Code also provides that an amount at least equal to
10% of the aggregate amount of cash dividends and certain
other appropriations of retained earnings associated with cash
outlays applicable to each period shall be appropriated as alegal reserve (a component of retained earnings) until suchreserve and additional paid-in capital equals 25% of common
stock. The amount of total additional paid-in capital and legal
reserve that exceeds 25% of the common stock may be available
for dividends by resolution of the shareholders. In addition, theCode permits the transfer of a portion of additional paid-in capitaland legal reserve to the common stock by resolution of the Boardof Directors.
The revised Code eliminated restrictions on the repurchase anduse of treasury stock allowing Japanese companies torepurchase treasury stock by a resolution of the shareholders at
the general shareholders meeting and dispose of such treasury
stock by resolution of the Board of Directors beginning April 1,
2002. The repurchased amount of treasury stock cannnot exceed
the amount available for future dividend plus amount of common
stock, additional paid-in capital or legal reserve to be reduced in
the case where such reduction was resolved at the generalshareholders meeting.
The amount of retained earnings available for dividends under
the Code was ¥46,097 million ($383,502 thousand) as of March
31, 2003, based on the amount recorded in the Company’s
general books of account. In addition to the provision that
requires an appropriation for a legal reserve in connection withthe cash payment, the Code imposes certain limitations on theamount of retained earnings available for dividends.

Dividends are approved by the shareholders at a meeting held
subsequent to the fiscal year to which the dividends areapplicable. Semiannual interim dividends may also be paid upon
resolution of the Board of Directors, subject to certain limitations
imposed by the Code.
The Company has following stock option plan. The plan provides
for granting options to directors and employees to 228 thousand
shares of the Company’s common stock in the period from July 1,
2004 to June 29, 2007. The options will be granted at an exercise
price of ¥2,687 ($22.35). The Company plans to issue acquired
treasury stock upon exercise of the stock options.

9. LEASES
The Group, as a lessee, leases certain machinery, computerequipment and other assets, and as a lessor, leases certain bed.
Total lease payments included in cost of sales and selling,
general and administrative expenses under finance leasearrangements that do not transfer ownership of the leased
property to the lessee were ¥112 million ($932 thousand) and ¥94
million for the years ended March 31, 2003 and 2002,
respectively. Total lease revenues were ¥0 million ($4 thousand)for the year ended March 31, 2003.
(1) The Group as Lessee
Pro forma information of leased property such as acquisition cost,
accumulated depreciation, obligations under finance lease,depreciation expense and interest expense of finance leases that
do not transfer ownership of the leased property to the lessee on
an “as if capitalized” basis for the years ended March 31, 2003
and 2002 was as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Acquisition cost
Accumulated depreciation

¥

425
264

¥

437
219

$ 3,536
2,197

Net leased property

¥

161

¥

218

$ 1,339

Obligations under finance leases :Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Due within one year
Due after one year

¥

91
74

¥

93
131

$

Total

¥

165

¥

224

$ 1,373

757
616

22

Depreciation expense and interest expense under finance leases:
Thousands of
U.S. dollars

Millions of yen

2002

2003

Depreciation expense
Interest expense

¥

2003
104
6

¥

88
7

$

865
50

Total

¥

110

¥

95

$

915

Depreciation expense and interest expense, which were notreflected in the accompanying consolidated statements ofincome, were computed by the straight-line method and theinterest method, respectively.
(2) The Group as Lessor
Pro forma information of leasing property such as acquisition
cost, accumulated depreciation, credits under finance lease,depreciation expense and interest income of finance leases that
do not transfer ownership of the leasing property to the lessee on
an “as if capitalized” basis for the year ended March 31, 2003
was as follows:
Millions of yen

Thousands of
U.S. dollars

Acquisition cost
Accumulated depreciation

¥

15
1

$

125
9

Net leased property

¥

14

$

116

11. DERIVATIVESThe Group enters into foreign exchange forward contracts inorder to hedge market risk. Foreign exchange forward contracts
were used to hedge foreign exchange risk associated withcertain liabilities denominated in the foreign currency.
The Group does not hold or issue derivatives for trading or
speculative purposes.
Derivatives are subject to market risk and credit risk frompotential fluctuations in foreign exchange rates. The Group does
not anticipate any losses arising from credit risk because thecounterparties to those derivatives are limited to highly rated
major financial institutions.
Derivative transactions are controlled by the finance department
in accordance with the Group’s internal regulations and are
periodically reported by the finance manager in regular meetingsof the Board of Directors.
All derivatives were excluded from the disclosure of market value
information because all of them were qualified for hedge
accounting and recorded on the consolidated balance sheets asof March 31, 2003 and 2002.

12. SUBSEQUENT EVENT
Credits under finance leases:
Thousands ofMillions of yen
U.S. dollars

Due within one year
Due after one year

¥

Total

¥

2
12

$

14

$

17
99
116

Depreciation expense and interest income, which are reflected in
the accompanying consolidated statements of income, werecomputed by the straight-line method and the interest method,respectively.

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were
¥1,075 million ($8,943 thousand) and ¥983 million for the years
ended March 31, 2003 and 2002, respectively.

23

On June 27, 2003, the shareholders of the Company authorized
the following appropriations of retained earnings as of March 31,
2003:
Millions of yen

Thousands of
U.S. dollars

Ordinary year-end cash dividends,¥12 ($0.10) per share
Bonuses to directors

¥

377
37

$ 3,136
308

Total

¥

414

$ 3,444At the general shareholders meeting held on June 27, 2003, theCompany’s shareholders approved the following the purchase oftreasury stock for the related reduction of retained earnings:
Purchase of Treasury Stock
The Company was authorized to repurchase up to 1,000
thousand shares of the Company’s common stock (aggregate
amount of ¥2,000 million) as treasury stock until the next generalshareholders meeting.

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORTTo the Board of Directors of Paramount Bed Co., Ltd.:We have audited the accompanying consolidated balance sheets of Paramount Bed Co., Ltd. and subsidiaries as of March 31,
2003 and 2002, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years thenended, all expressed in Japanease yen. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted and applied inJapan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Paramount Bed Co., Ltd. and subsidiaries as of March 31, 2003 and 2002, and the consolidated resultsof their operations and their cash flows for the years then ended in conformity with accounting principles and practices
generally accepted in Japan.
Our audits also comprehended the translation of Japanease yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts are presented solely for theconvenience of readers outside Japan.

June 27, 200324

Corporate History
In 1947 the Company’s founder, Ryusuke Kimura, bought scrapped hospital beds that were delivered to thegovernment during World War 2, refurbished them, and sold them. More than half a century has passed since then,and the Company’s brief history up to now is described below.

May 1947: Ryusuke Kimura founds Kimura Shindai Seisakujo Ltd. as a private
enterprise, and starts manufacturing hospital beds.
May 1950: Kimura Shindai Industry Co., Ltd. is established with capital of 200
thousand yen. Paramount Bed is adopted as the brand name.
May 1953: Edogawa plant is built.
July 1955: Gatch (hospital) bed is developed.
May 1961: Head office is moved to current location.
April 1962: KA-45, the first electric bed in Japan, is developed and sold.
March 1966: Kyushu sales office (now Fukuoka branch) is set up.
May 1966: Chiba plant is built.
February 1970: Matsuo plant is built and absorbs Edogawa plant operation.
February 1971: Osaka branch is set up.
January 1972: KA-500 and KA-600 Series hospital beds are developed and sold.
September 1977: Hiroshima and Nagoya sales offices (now Hiroshima branch andNagoya branch) are set up.
June 1980: Scot-klean (automatic urine receptacle) is developed and sold.
December 1983: KQ-100 (Aura electric bed) home-care bed is developed and sold.
July 1986: The Company absorbs Paramount Sendai Co., Ltd. (now Sendai
branch) and Paramount Sapporo Co., Ltd. (now Sapporo branch).
March 1987: Corporate name is changed to Paramount Bed Co., Ltd.
December 1987: The Company shares are listed on the JASDAQ market.
November 1988: Paracare Mattress, a mattress made from new material, is developedand sold.
October 1990: Hestia Series (beds for elderly-care facilities) is developed and sold.
April 1991: Ryusuke Kimura and Kenji Kimura become Chairman and President,
respectively.
January 1992: KA-900 Series (microcomputer controlled electric beds) is developedand sold.
May 1992: Yokohama branch is set up.
October 1993: Rakusho Series (home-care beds) is developed and sold.
December 1993: The Company shares are listed on the Second Section of the Tokyo
Stock Exchange.
June 1994: Central showroom is set up.
September 1995: PT. Paramount Bed Indonesia is set up as an overseas subsidiary.
May 1996: Takamatsu branch is set up.
September 1996: The Company shares are listed on the First Section of the Tokyo Stock
Exchange.
April 1997: Kyma Aura Bed Series (home-care beds) is developed and sold.
October 1997: Customer Service Center is set up.
October 1998: KA-6000 Series (hospital beds) is developed and sold.
April 1999: New Scot-klean (automatic urine receptacle) is developed and sold.
May 1999: Obtain ISO9001 certification.
October 1999: Aura 21 Series (home-care beds) is developed and sold.
February 2000: Club Paramount Series (highly functional family beds) is developedand sold.
October 2000: Saitama branch is set up.
February 2001: Callisto Series (beds for elderly-care facilities) is developed and sold.
October 2001: Nagoya branch relocates to newly-built office.
January 2002: Shanghai representative office is set up.
July 2002: PARA TECHNO Co., Ltd. is set up as a consolidated subsidiary.
May 2003: A new brand INTIME, which provides sound sleep and excellent
health, is established.
July 2003: Paramount Universal Design Station (PUDS) is set up.

25

Gatch (hospital) bed

KA-500 Series hospital bed

Aura electric bed

Hestia Series

Rakusho Series home-care bed

Club Paramount highly functional family bed

Callisto SeriesCorporate Information

As of March 31, 2003

Corporate Data
Corporate Name:
Head Office:Founded:Capital:Number of Employees:

NetworkParamount Bed Co., Ltd.
14-5, Higashisuna 2-chome, Koto-ku,
Tokyo 136-8670, JapanMay 1947¥6,591 million
1,010

Board of Directors and Corporate Auditors(As of June 27,2003)
President and Representative Director:
Vice-president and Representative Director:

Kenji Kimura
Kyosuke Kimura

Directors:

Ichiro Motozu
Michihide Kimura
Tadaharu Kato
Ikuo Sakamoto

Standing Corporate Auditors:

Katsura Ogino
Tadahiro Sekine

Corporate Auditors:

Kenji Sasanuma
Tetsuo Takekawa
Etsuji Ikegami

Shareholder Information
Authorized Shares:
Issued Shares:
Number of Shareholders:

100,000,000
31,682,526
22,678Domestic
Head Office14-5, Higashisuna 2-chome, Koto-ku, Tokyo 136-8670
Tel. +81-3-3648-1111(key number)Tel. +81-3-3648-1171(Sales division)
Branches● Sapporo Branch318-11, Nishi 13-chome, Minaminijo, Chuo-ku, Sapporo 060-0062
Tel. +81-11-271-1181● Sendai Branch
3-3, Oroshi-machi 2-chome, Wakabayashi-ku, Sendai 984-0015
Tel. +81-22-239-5211● Saitama Branch
4-7, Kamiochiai 9-chome, Saitama 338-0001
Tel. +81-48-852-0707● Yokohama Branch
1715-1, Tsuruma, Machida, Tokyo 194-0004
Tel. +81-42-795-8800● Nagoya Branch
20-17, Izumi 1-chome, Higashi-ku, Nagoya 461-0001
Tel. +81-52-963-0600● Osaka Branch
3-33, Tosabori 2-chome, Nishi-ku, Osaka 550-0001
Tel. +81-6-6443-8791● Hiroshima Branch
8-5, Yokogawa-cho 3-chome, Nishi-ku, Hiroshima 733-0011
Tel. +81-82-293-1311● Takamatsu Branch223-1, Goto-cho, Takamatsu, Kagawa 761-8031
Tel. +81-87-881-8800● Fukuoka Branch
14-20, Hakataeki-higashi 3-chome, Hakata-ku, Fukuoka 812-0013
Tel. +81-92-461-1131
INTIME Shops and PUDS (Paramount Universal Design Station)● INTIME Kyobashi and PUDS
Sumitomo Mitsui Hull Tepco Bldg.1F
6-1, Kyobashi 1-chome, Chuo-ku, Tokyo 104-0031
Tel.+81-3-5250-1515(INTIME)*Opened on May 17, 2003

Tel.+81-3-5250-1535(PUDS)*Opened on July 2, 2003

● INTIME Shinsaibashi

Sanei Shinsaibashi Bldg.1F
13-15, Nishishinsaibashi 1-chome, Chuo-ku, Osaka 542-0086
Tel.+81-6-6245-9021

Major Shareholders
Number of Shares Percentage of Voting Right toOwned (Thousands) Total Shares Issued (%)

Kimura Kosan Co., Ltd.
Kenji Kimura
Kyosuke Kimura
Michihide Kimura
Mizuho Bank, Ltd.
The Kimura Foundation for Nursing Education
Japan Trustee Services Bank, Ltd. (Trust)
Ryusuke Kimura
Mizuho Corporate Bank, Ltd.
The Master Trust Bank of Japan, Ltd. (Trust)

6,607
3,134
2,413
1,595
1,570
801
799
699
626
609

21.1
10.0
7.7
5.1
5.0
2.5
2.5
2.2
2.0
1.9

Ownership among Shareholders
Number of Shares Percentage of Total
Owned (Thousands) Shares Issued (%)

Financial institutions
Security firms
Foreign corporations
Other domestic corporations
Individuals and others
Treasury stock

65,396
1,322
4,443
80,729162,224
2,709

20.6
0.4
1.4
25.5
51.2
0.9

*Opened on May 17, 2003

● INTIME Nagoya

Address: Same as Nagoya BranchTel.+81-52-963-6800*Opened on May 17, 2003

Plants● Chiba Plant
2078, Shirahata, Naruto-machi, Sambu-gun, Chiba 289-1306
Tel. +81-475-82-6111● Matsuo Plant
617, Kashikehongo, Matsuo-machi, Sambu-gun, Chiba 289-1537
Tel. +81-479-86-3331● Ohira Plant
690-1, Aza Uenohara, Shimonogo, Matsuo-machi, Sambu-gun,Chiba 289-1536
Tel. +81-479-86-2121
Subsidiary● PARA TECHNO CO., LTD.
14-5, Higashisuna 2-chome, Koto-ku, Tokyo 136-8670
Tel. +81-3-3648-3331

Overseas
Representative Office● Shanghai Representative OfficeParamount Bed Co., Ltd. Shanghai representative office
Suite 1701, Shanghai Plaza Building, No.138, Huai Hai M. Road,
Shanghai 200021, P.R.China
Tel. +86-021-5383-5111 or 5383-6111
URL: http://www.paramountbed.com/
Subsidiary● PT. Paramount Bed Indonesia
MM2100 Industrial Town, Block M-1-1 Export Processing Zone,
Cikarang Barat Bekasi 17520, Jawa Barat, Indonesia
Tel. +62-21-8980715

26

Paramount Bed Co., Ltd.
14-5, Higashisuna 2-chome,
Koto-ku, Tokyo 136-8670, Japan
Tel. +81-3-3648-1111
URL: http://www.paramount.co.jp/
Printed in Japan