THE KINKI SHARYO CO., LTD.
AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
Years ended March 31, 2018 and 2017

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMarch 31,2018 and 2017
Millions of yen
2018
2017
LIABILITIES AND NET ASSETSASSETS
Current Assets
Cash and time deposits（Note 7 and 8）
Receivables
Notes and accounts - trade（Note 8）
Other accounts
Allowance for doubtful receivables（Note 8）\Inventories
Work-in-process（Note 22）
Raw materials and supplies

Other current assets
Total current assets

Property, Plant and Equipment
Land（Note 10 and 17）
Buildings and structures（Note 10 and 17）
Machinery and equipment
Leased assets
Construction in progress
Accumulated depreciation

Investments and Other Assets
Stocks of subsidiaries and affiliates（Note 8）
Investment securities（Note 8 and 9）
Intangible assets
Deferred income tax assets（Note 4, 5 and 13）
Other assets
Allowance for doubtful receivables
Total assets

\

4,602

\

27,39363(17)27,43917,374780(16)
18,13823,302676
23,97823,986780
24,766

1,240
57,2592,194
49,0892,666
14,417
12,290881
6730,321(16,851)
13,4702,666
14,612
12,435831
1330,557(16,127)
14,430

36
7,956
78
423
463
(15)
8,941
79,670\Current Liabilities
Short-term loans payable（Note 8, 10, 11 and 22）
Current portion of long-term loans payable（Note 8 and 11）
Lease obligations （Note 8 and 11）
Payables（Note 15）
Trade accounts（Note 8）
Construction
Advances received
Income and enterprise taxes payable
Accrued expenses
Provision for bonuses
Allowance for losses on contracts
Provision for product warranties
Other current liabilities
Total current liabilities

3,991

Millions of yen
2018
2017

\

Noncurrent Liabilities
Long-term loans payable（Note 8 and 11）
Lease obligations （Note 8 and 11）
Deferred income tax liabilities（Note 4, 5 and 13）
Net defined benefit liability（Note 12）
Other noncurrent liabilities（Note 10）
Total liabilities
Net Assets（Note 14）
Shareholders' equity
Common stock
Authorized - 12,000,000 shares
Issued - 6,908,359 shares
Capital surplus
Retained earnings
Treasury stock, at cost
25,753 shares in Mar 201825,296 shares in Mar 2017
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gains on securities
Net unrealized holding gains on derivatives
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

36
8,111
91
297
596
(15)
9,116
72,635

See accompanying Notes.

1\

20,107
1,156
110

\

5,825
1,091
99

10,575
272
299
56
1,124
279
6,575
1,118
695
42,366

8,485
1,362
5,201
80
1,419
258
14,407759
633
39,619

9,422
656
1,744
2,635
958
15,41557,781

10,516
726
1,653
2,490
1,072
16,45756,076

5,253

5,253

3,125
8,982
(104)

3,125
3,816
(102)

17,256

12,092

3,343
261
1,286
(257)
4,633
21,88979,670

3,255
130
1,371
(289)
4,467
16,55972,635\

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
Years ended March 31, 2018 and 2017
Millions of yen
2018
2017
\
61,677\45,54453,782
56,670
7,895(11,126)
2,975
3,099
4,920
(14,225)

Net sales
Cost of sales
Gross profit (loss)
Selling, general and administrative expenses
Operating profit (loss)

Other income (expenses)
Interest and dividend income
Interest expense
Foreign exchange gain (loss)
Commission fees
Gain on sales of investment securities（Note 9）
Gain on sales of noncurrent assets（Note 21）
Other, net

Income (loss) before income taxes
Income taxes（Note 13）
Current
RefundDeferred（Note 4 and 5）
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to owners of the parent

\

281
(322)
(487)
405
204
62
143

126
(165)
170
(614)
342
64
(273)
(350)

5,063

(14,575)

(46)
149
5,166
5,166

(25)
109
(119)
(14,610)(14,610)\

Yen
Amounts per share（Note 20）
Net income (loss)
Cash dividends applicable to the year（Note 14）
See accompanying Notes.

2\\

750.50-\ (2,122.49)\-

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2018 and 2017
Millions of yen
2018
2017
\
5,166
\ (14,610)

Net income (loss)
Other comprehensive income
Net unrealized holding gains (losses) on securities
Net unrealized holding gains on derivatives
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (Note 6)
Comprehensive income
Comprehensive income attributable toowners of the parent
Comprehensive income attributable tonon-controlling interests

\

88
131
(85)
32
166
5,332

5,332

(15,060)-

See accompanying Notes.

3

\

(254)
130
(385)
59
(450)
(15,060)-

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2018 and 2017
Millions of yen
Accumulated other comprehensive income
Net
Net
Remeasureunrealized
Foreignunrealized
ments ofholding
currency
holdingdefinedgains
translation
gains
onadjustments benefit planson securities
derivatives

Shareholders' equity

Balance at April 1, 2016

Number ofshares ofcommonstock

Commonstock

69,083,597\

Capitalsurplus

5,253\

Retainedearnings

3,125\

Treasurystock

18,633

\

(101)

\

3,509

\

-

\

1,756

\

(348)

Total

\

31,827

Cash dividends paid at ￥3.00 per share（Note 14）

-

-

-

(207)

-

-

-

-

-

(207)

Net loss---(14,610)

-

-

-

-

-

(14,610)Purchase of treasury stock

-

-

-

-

(1)

-

-

-

-

(1)

(62,175,238)

-

-

-

-

(254)

130

(385)

59

(450)

Net changes during the year
Balance at March 31, 2017

6,908,359

Number ofshares ofcommonstock
Balance at April 1, 2017

6,908,359

\

5,253

3,125

Capitalsurplus

Common
stock

\

\

5,253

\

\

3,816

Retainedearnings

3,125

\

\

(102)

\

3,255

Net
unrealized
holding
gains
on securities

Treasury
stock

3,816

\

(102)

\

3,255

\

130

Net
unrealized
holding
gains
onderivatives
\

130

\

1,371

Foreigncurrencytranslation
adjustments
\

1,371

\

(289)

\

Remeasurements ofdefinedbenefit plans
\

(289)

16,559Total\

16,559Net income

-

-

-

5,166

-

-

-

-

-

5,166

Purchase of treasury stock

-

-

-

-

(2)

-

-

-

-

(2)

Net changes during the year

-

-

-

-

-

88

131

(85)

32

166

Balance at March 31, 2018

6,908,359

\

5,253

\

3,125

\

8,982

\

See accompanying Notes.

4

(104)

\

3,343

\

261

\

1,286

\

(257)

\

21,889

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2018 and 2017
Millions of yen
2018
2017
Cash flows from operating activities
Income (loss) before income taxes
Adjustments to reconcile income (loss) before income taxes
to net cash provided by (used in) operating activities
Depreciation and amortization
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for product warranties
Increase (decrease) in allowance for losses on contracts
Interest and dividend income
Interest expense
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade accounts payable
Increase (decrease) in accounts payable and accrued expenses
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Income taxes refund
Net cash provided by (used in) operating activities

\

5,063

\

(14,575)

1,434
178
360
(7,833)(281)
323(15,264)
507
3,527
(301)
311
(11,976)
281
(295)
(55)
54
(11,991)

1,157
110
209
13,088(126)
165(8,931)(3,672)
2,180
505(1,008)(10,898)
126
(144)
(107)
(11,023)

(29)

(10)

(1,657)(4,016)

208
689
(789)

960
626
(2,440)Cash flows from financing activities
Net increase in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of lease obligations
Cash dividends paid
Purchases of treasury stock
Net cash provided by (used in) financing activities

14,45787(1,003)
(59)
(0)
(1)
13,481

4,351
9,408
(694)
(49)
(207)
(2)
12,807

Effect of exchange rate changes on cash and cash equivalents

(119)

84

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year（Note 7）

582
3,981
4,563

(572)
4,553
3,981

Cash flows from investing activities
Payments into time deposits
Acquisitions of property, plant and equipment
and intangible assets
Proceeds from sales of property, plant and equipment
and intangible assets
Proceeds from sales of investment securities
Net cash provided by (used in) investing activities\

See accompanying Notes.

5\THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of THE KINKI SHARYO CO., LTD. (the“Company”) and its consolidated subsidiaries have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Law and its related
accounting regulations and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”) which are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on their accounting records
maintained in conformity with generally accepted accounting principles in the United States ofAmerica (“US GAAP”) and partially reflect the adjustments which are necessary to conformwith Japanese GAAP.

The accompanying consolidated financial statements have been

restructured and translated into English from the consolidated financial statements of theCompany prepared in accordance with Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by the Japanese Financial Instruments
and Exchange Law. Certain supplementary information included in the statutory Japanese
language consolidated financial statements, but not required for fair presentation, is notpresented in the accompanying consolidated financial statements.
2. Significant accounting policies(a) Consolidation - The consolidated financial statements include the accounts of the Company
and three significant companies over which the Company has power of control throughmajority voting rights or the existence of certain other conditions evidencing control. There areno equity method affiliates. Intercompany transactions and accounts have been eliminated.
(b) Consolidated subsidiaries’ fiscal year-ends - The consolidated overseas subsidiaries havefiscal years ending on December 31. Significant transactions between December 31 and March
31, the fiscal year-end of the Company, are reflected in the consolidated financial statements.
(c) Cash flow statements - In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term highly liquid investments with maturities notexceeding three months at the time of purchase are considered to be cash and cash equivalents.

6

2. Significant accounting policies (cont’d.)(d) Allowance for doubtful receivables - The Company and its consolidated subsidiaries (the“Companies”) provide for doubtful accounts principally at an amount based on management’s
estimate of the bad debt ratio plus the estimated uncollectible amount of certain individual
receivables.
(e) Securities - Available-for-sale securities with available fair market values are stated at fairmarket value. Unrealized gains and unrealized losses on these securities are reported, net of
applicable income taxes, as a separate component of net assets. Realized gains and losses on thesale of such securities are computed using moving average cost. Securities with no available fairmarket values, including equity securities issued by subsidiaries and affiliates which are notconsolidated or accounted for using the equity method, are stated at moving average cost.
(f) Derivatives and hedge accounting - The Companies state derivative financial instruments atfair value and recognize a change in the fair value as gain or loss unless the derivative financial
instrument was accounted for with hedge accounting. If derivative financial instruments areused as hedges and meet certain hedging criteria, the Companies defer recognition of gain orloss resulting from a change in the fair value of the derivative financial instrument until the
related loss or gain on the hedged item is recognized. However, in cases in which forward
foreign exchange contracts are used as hedges and meet certain hedging criteria, the contracts
and the hedged items are accounted for in the following manner:① If a forward foreign exchange contract is executed to hedge an existing foreign currency
receivable or payable,(i) the difference, if any, between the Japanese yen amount of the hedged foreign currency
receivable or payable translated using the spot rate at the inception date of the contract andthe book value of the receivable or payable is recognized in the statement of operations in
the period which includes the inception date, and(ii) the discount or premium on the contract (the difference between the Japanese yen amountof the contract translated using the contracted forward rate and that translated using the
spot rate at the inception date of the contract) is recognized over the term of the contract.
② If a forward foreign exchange contract is executed to hedge a future transaction denominatedin a foreign currency, the future transaction is recorded using the contracted forward rate,
and no gain or loss on the forward foreign exchange contract is recognized.

7

2. Significant accounting policies (cont’d.)(g) Inventories - Work-in-process is stated mainly at identified cost. Raw materials and supplies
are stated at cost determined by the moving average method. For balance sheet valuation, in theevent that an impairment in the value of inventory is determined, the inventory is written down
to the lower of cost or market using net realizable value.
(h) Property, plant and equipment (except for capitalized leases) - Property, plant andequipment are carried at cost. Depreciation is calculated by the straight-line method over theestimated useful life of the asset.
(i) Intangible assets (except for capitalized leases) - Intangible assets are amortized by thestraight-line method over the estimated useful life of the asset.
(j) Software costs - The Companies include software used for internal purposes in intangible
assets and amortize it using the straight-line method over the estimated useful life of five years.
(k) Capitalized leases - Property, plant and equipment capitalized under finance leases are
depreciated over the term of the lease.
(l) Research and development expenses - The Companies charge research and development
expenses to selling, general and administrative expenses as incurred. Research anddevelopment expenses amounted to ¥128 million and ¥237 million for the years ended March
31, 2018 and 2017, respectively.
(m) Retirement and severance benefits for employees - Under the terms of the Company’s andits consolidated domestic subsidiary’s unfunded lump-sum retirement plans, substantially all
employees are entitled to a lump-sum payment at the time of retirement.

The amount of theretirement benefit is, in general, based on the length of service, base salary at the time ofretirement and the reason for retirement. The Company also has a funded noncontributory
pension plan which covers a portion of total retirement benefits.
In order to provide for the employees’ retirement benefits, the Company and its consolidated
domestic subsidiary accrue the liability as of the end of the fiscal year in an amount based on
the estimated projected benefit obligation and value of plan assets. Actuarial gains and losses
are recognized in expenses using the straight-line method over 10 years, which is within the
average of the estimated remaining service years of employees, commencing from the following
period.

8

2. Significant accounting policies (cont’d.)(m) Retirement and severance benefits for employees (cont’d.)Prior service cost is also recognized in expenses using the straight-line method over 10 years,
commencing from the following period.
(n) Provision for bonuses - Provision for bonuses at the balance sheet date are based on theestimated amounts to be paid to employees in the future.
(o) Provision for product warranties - A provision for product warranties is provided at thebalance sheet date when future losses for product warranties can be reasonably estimated andat an amount based on management's estimate of the past expense ratio for sales.
(p) Allowance for losses on contracts - An allowance for losses on contracts is provided at thebalance sheet date when future losses on particular contracts can be reasonably estimated.
(q) Income taxes - Income taxes comprise corporate tax, prefectural and municipal inhabitants
taxes and enterprise tax. The asset-liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes.
(r) Translation of foreign currencies - Monetary assets and liabilities denominated in foreign
currencies are translated into Japanese yen at exchange rates prevailing at the balance sheet date.
Financial statements of the consolidated overseas subsidiaries are translated at the rates in effectat the balance sheet date, except for net assets accounts, which are translated at historical rates,
and revenue and expense accounts, which are translated at the average exchange rates in effectduring the year. The resulting translation adjustments are reflected in the consolidated financial
statements as “foreign currency translation adjustments.”(s) Net income (loss) and cash dividends per share - Basic net income (loss) per share iscomputed by dividing income (loss) available to common shareholders by the weighted average
number of shares of common stock outstanding during the respective year. Diluted net income
per share for the years ended March 31, 2018 and 2017 was not applicable because the Company
had no dilutive common shares. Cash dividends per share presented in the accompanying
consolidated statements of operations are dividends applicable to the respective years,
including dividends to be paid after the end of the year.

92. Significant accounting policies (cont’d.)(t) Revenue and related cost recognition – The Company generally records the revenues andrelated costs on construction contracts by the percentage-of-completion method if the progressof the construction activity can be reliably measured, otherwise, the completed contract method
is applied. The progress, or percent of the contract completed, as of the end of the reporting
period is measured by the proportion of the cost incurred as of the end of the period to theestimated total cost.
The consolidated overseas subsidiaries also apply the percentage-of-completion method, andthe progress or percent of the contract completed as of the end of the reporting period ismeasured by the proportion of the physical contract work completed.
(u) Reclassifications - Certain prior year amounts have been reclassified to conform to the 2018presentation.

10

3. Accounting standard issued but not yet adopted
The Company and its consolidated domestic subsidiaries
The following standard and guidance were issued but not yet adopted.
-“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 30, 2018)-“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance
No. 30, March 30, 2018)(a) Overview
The above standard and guidance provide comprehensive principles for revenue recognition. Under the
standard and guidance, revenue is recognized by applying following 5 steps:
Step1: Identify contract(s) with customers.
Step2: Identify the performance obligations in the contract.
Step3: Determine the transaction price.
Step4: Allocate the transaction price to the performance obligation in the contract.
Step5: Recognize revenue when (or as) the entity satisfies a performance obligation.
(b) Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(c) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently in the process ofdetermining the effects of these new standards on the consolidated financial statements.

Consolidated US subsidiaries
A newly established or revised major accounting standard published before March 31, 2018,
which has not been adopted, is set forth in the table belows.
The potential impact on the company’s financial statements from the adoption of the standard
is under evaluation at the time of the preparation of the consolidated financial statements.
Standard
Revenue fromContracts with
Customers(ASU 2014-09)

Outline of the new / revised standards
ASU 2014-09 introduces a single comprehensivemodel that entities use to account for revenues
from contracts with customers.

11

Adoption Date
From the beginning of
the year ending March
31, 2020

4. Additional information
Previous fiscal year (April 1, 2016 to March 31, 2017)(Adoption of implementation guidance on recoverability of deferred tax assets)
The Company and its consolidated domestic subsidiary have adopted “Revised Implementation
Guidance on Recoverability of Deferred Tax Assets”(ASBJ Guidance No. 26, March 28, 2016)
from the year ended March 31, 2017.
5. Changes in presentation method
Current fiscal year（April 1, 2017 to March 31, 2018）(Changes due to early application of “Partial Amendments to Accounting Standard for Tax
Effect Accounting”)“Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No.
28, February 16, 2018 (hereinafter, “Statement No. 28”)) became applicable for the consolidated
financial statements from the current fiscal year end. As a result, the Company adopted
Statement No.28 and changed the presentation and related notes of deferred tax assets anddeferred tax liabilities, such that deferred tax assets and deferred tax liabilities are classified aspart of ‘investments and other assets’ and ‘noncurrent liabilities’, respectively.
As a result, in the consolidated balance sheet of the previous fiscal year, “deferred tax assets” in“current assets” decreased by ¥311 million, “deferred tax assets” in “investments and otherassets” increased by ¥297 million, “deferred tax liabilities” in “current liabilities” decreased by¥31 million, and “deferred tax liabilities” in “noncurrent liabilities” increased by ¥17 million.
The notes related to tax effect accounting additionally included those described in notes 8(excluding total amount of valuation reserves) and 9 of “Accounting Standard for Tax EffectAccounting”, which are required in paragraphs 3 to 5 of Statement No. 28. However, thoseadditional information corresponding to the previous fiscal year is not disclosed, following thetransitional treatments prescribed in paragraph 7 of Statement No. 28.

126. Comprehensive income information
Amounts reclassified to net income (loss) in the current period that were recognized in othercomprehensive income in the current or previous periods and the tax effects for each componentof other comprehensive income were as follows:
Millions of yen
2018
Net unrealized holding gains (losses) on
securities
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Net unrealized holding gains on derivatives
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Foreign currency translation adjustments
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Remeasurements of defined benefit plans
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Total other comprehensive income

¥

2017

533
(405)
128
(40)
88

¥

¥

(20)
(343)
(363)
109
(254)

188
188
(57)
131

188
188
(58)
130

(85)
(85)
(85)

(385)
(385)
(385)

(43)
75
32
32
166

(19)
78
59
59
(450)

¥

7. Cash flow information
The reconciliations of cash and time deposits in the consolidated balance sheets and cash andcash equivalents in the consolidated statements of cash flows at March 31, 2018 and 2017 wereas follows:
Millions of yen
2018
2017
Cash and time deposits (in balance sheets)¥

Time deposits maturing after three months
Cash and cash equivalents (in statements of cash flows)

13

4,602

¥

(39)
¥

4,563

3,991
(10)

¥

3,981

8. Financial instruments: disclosure(a) Qualitative information on financial instruments
Short-term deposits - The Companies use short-term deposits to manage excess funds.
Trade notes and accounts receivable - Because of the nature of the business, the credit risk
associated with trade notes and accounts receivable is concentrated with a limited numberof major customers with high creditworthiness. At March 31, 2018, 99.4% of the operatingreceivables were due from specific major customers with high creditworthiness. The
Companies decrease the risk by managing the notes and receivables according to internal
credit control rules.
Foreign currency forward exchange contracts - The Company uses foreign currency
forward exchange contracts only to hedge foreign currency exchange risk associated withtrade accounts receivables and payables, not for speculative purposes, and enters into suchcontracts according to the Company’s internal rules.
Investment securities - Investment securities comprise mostly stocks and are evaluated forfair value or prices provided by the financial condition of corporations on a quarterly basis.
Trade accounts payable - Payment terms of payable are less than one year.
Loans payable - Short-term loans payable are mainly used for financing operating capitaland long-term loans payable are primarily used for financing capital investments.
Lease obligations - Lease obligations are primarily used for financing capital investments.

148. Financial instruments: disclosure (cont’d.)(b) Fair values of financial instruments
The book values of the financial instruments included in the consolidated balance sheets
and their fair values at March 31, 2018 and 2017 were as follows:
Millions of yen
2018
Cash and time deposits

Book value

Fair value

Difference

¥

¥

¥

4,602

4,602

-

Notes and accounts receivable - trade ＊1

27,37627,376-

Investment securities

7,916

7,916

-

Trade accounts payable(10,575)(10,575)-

Short-term loans payable(20,107)(20,107)-

Long-term loans payable(10,578)(10,554)

(24)

(766)

(766)

-

Not applying hedge accounting

(13)

(13)

-

Applying hedge accounting

376

376

-

Lease obligations
Derivatives

Millions of yen
2017
Cash and time deposits

Book value

Fair value

Difference

¥

¥

¥

3,991

3,991

-

Notes and accounts receivable - trade ＊1

17,35817,358-Investment securities

7,972

7,972

-

Trade accounts payable(8,485)(8,485)-

Short-term loans payable(5,825)(5,825)-Long-term loans payable(11,607)(11,581)

(26)

(825)

(825)

-

-

-

-

188

188

-

Lease obligations
Derivatives
Not applying hedge accounting
Applying hedge accounting
Notes＊1 Allowance for doubtful receivables associated with notes and accounts receivablehas been deducted.
＊2 The figures in parenthesis indicate liabilities.

158. Financial instruments: disclosure (cont’d.)
The fair value of the financial instruments in the table above approximates the book value
because the maturities are short. Derivatives are valuated with the rate of the foreign
currency forward exchange contract, and long-term loans payable and lease obligations arecalculated by discounting the principal and interest payments by the assumed discount rates
for similar new loans or lease transactions.
Financial instruments for which the fair value was difficult to determine were as follows:

Unlisted stocks

Millions of yen
2018
2017
40
¥
139

¥

Stocks of subsidiaries and affiliates (unlisted stocks)

36

36

Unlisted stocks and stocks of subsidiaries and affiliates (unlisted stocks) were not included ininvestment securities above because they had no fair value.
Maturity value after closing dateMillions of yen
2018
Within a year
Cash and time deposits¥

Trade notes and trade accounts

Over a year

4,602

¥

-

27,393-

Millions of yen
2017
Within a year
Cash and time deposits¥

Trade notes and trade accounts

3,991
17,37416

Over a year¥-

9. Securities
At March 31, 2018 and 2017, information on securities was as follows:(a)

Trading securities: None(b)

Bonds intended to be held to maturity with readily determinable fair values: None(c)

Available-for-sale securities with readily determinable fair value as of March 31, 2018and 2017 were as follows:
Securities with book value (fair value) that exceeded acquisition cost

Equity securities
Total

Equity securities
Total

Acquisition cost
¥
3,002
¥
3,002

Millions of yen
2018Book value
¥
7,835
¥
7,835

¥
¥

Acquisition cost
¥
3,185
¥
3,185

Millions of yen
2017Book value
¥
7,883
¥
7,883

Difference
¥
4,698
¥
4,698

Difference
4,833
4,833

Securities with book value (fair value) that did not exceed acquisition cost

Equity securities
Total

Equity securities
Total

Acquisition cost
¥
98
¥
98

Millions of yen
2018Book value
¥
81
¥
81

Difference
¥
(17)
¥
(17)

Acquisition cost
¥
98
¥
98

Millions of yen
2017Book value
¥
89
¥
89

Difference
¥
(9)
¥
(9)

17

9. Securities (cont’d.)(d)

For the year ended March 31, 2018 and 2017, total sales of available-for-sale securities(equity securities and other) were ¥689 million and ¥627 million, and gain on the sales
were ¥405 million and ¥342 million.

(e)

Loaned securities classified as securities as of March 31, 2018 and 2017 were as follows:
Millions of yen
2018
Equity securities

¥

2017

6,987

¥

7,843

10. Pledged assets
At March 31, 2018, the following assets were pledged as collateral for short-term loans payableof ¥2,000 million:

Land

¥

Millions of yen
2018
2017
179
¥
-

At March 31, 2018 and 2017, the following assets were pledged as collateral for deposits oncontracts of ¥328 million and ¥408 million, respectively, and deposits from tenants of ¥70 million(included in other noncurrent liabilities):

Buildings, net book value¥

Millions of yen
2018
2017
414
¥
437

11. Short-term loans payable , long-term loans payable and lease obligations
Short-term loans payable substantially represents short-term loans from banks at a weighted
average annual rate of 1.6% and 2.0% at March 31, 2018 and 2017, respectively.
Long-term loans payable as of March 31, 2018 were as follows:
Millions of yen
2018
Loans from banks, due through 2023 at weighted¥

10,578average rate of 0.9% in 2018
Less current portion

1,156
¥

18

9,422

11. Short-term loans payable, long-term loans payable and lease obligations (cont’d.)
The aggregate annual maturities of long-term loans payable outstanding at March 31, 2018 wereas follows:
Millions of yen
Years ending March 31,

2018

2020

¥

7,086

2021

1,088

2022

1,246

2023

2

2024 and after

¥

9,422

The aggregate annual maturities of finance lease obligations subsequent to March 31, 2018
were summarized as follows:
Millions of yen
Years ending March 31,

2018

2020

¥

111

2021

112

2022

429

2023

4

2024 and after¥

656

Long-term loans payable as of March 31, 2017 were as follows:
Millions of yen
2017Loans from banks, due through 2022 at weighted¥

11,607average rate of 1.2% in 2017
Less current portion

1,091
¥

19

10,516

11. Short-term loans payable, long-term loans payable and lease obligations (cont’d.)
The aggregate annual maturities of long-term loans payable outstanding at March 31, 2017 wereas follows:
Millions of yen
Years ending March 31,

2017

2019

¥

1,093

2020

7,094

2021

1,096

2022

1,233

2023 and after¥

10,516

The aggregate annual maturities of finance lease obligations subsequent to March 31, 2017
were summarized as follows:
Millions of yen
Years ending March 31,

2017

2019

¥

100

2020

102

2021

103

2022

421

2023 and after¥

726

The Company entered into contracts with financial institutions for committed credit lines.
As of March 31, 2018 and 2017, the amounts of unexercised committed credit lines were as
follows:
Millions of yen
Total committed credit lines
Unexercised committed credit lines

20

¥
¥

2018
17,00011,000¥¥2017
17,00017,00012. Retirement and severance benefits
The Company provides for employees’ retirement and severance benefits under two plans, adefined contribution pension plan and unfunded lump-sum benefits plan. The Company’s
consolidated domestic subsidiary provides an unfunded lump-sum benefits plan, and its
consolidated overseas subsidiaries provide a defined contribution pension plan.
Defined benefit plans(a) Movement in retirement benefit obligations, except for plans that applied the simplified
methodBalance at April 1, 2017 and 2016
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Balance at March 31, 2018 and 2017¥¥

Millions of yen
2018
2017
2,490
¥
2,439
178
154
19
19
43
19
(95)
(141)
2,635
¥
2,490

(b) Reconciliation from retirement benefit obligations to liability for retirement benefits
Millions of yen
2018
2017
¥
Unfunded retirement benefit obligations
¥
2,490
2,635
Total net liability (asset) for retirement benefits at ¥
¥
2,635
2,490
March 31, 2018 and 2017
Net defined benefit liability
Total net liability (asset) for retirement benefits at ¥March 31, 2018 and 2017

2,635
2,635

2,490
¥

2,490

(c) Retirement benefit costs

Service cost
Interest cost
Net actuarial loss amortization
Net prior service cost amortization

¥

¥

21

Millions of yen
2018
2017
178
¥
154
19
19
61
64
14
14
272
¥
251

12. Retirement and severance benefits (cont’d.)(d) Remeasurements of defined benefit plans

Prior service cost
Actuarial loss¥¥

Millions of yen
2018
2017
14
¥
14
18
45
32
¥
59

(e) Accumulated remeasurements of defined benefit plans

Unrecognized prior service cost
Unrecognized actuarial loss¥¥

Millions of yen
2018
2017
(11)
¥
(25)
(246)
(264)
(257)
¥
(289)

(f) Actuarial assumptions
The principal actuarial assumptions at March 31, 2018 and 2017 (expressed as weighted
averages) were as follows:
2018
0.8%
1.9%

Discount rate
Expected salary increase rate

2017
0.8%
2.1%

Defined contribution plans
Contributions for the defined contribution plans in 2018 and 2017 were ¥321 million and ¥264
million, respectively.

2213. Income taxes(a) Significant components of the Companies’ deferred tax assets and liabilities as of March 31,2018 and 2017 were as follows:
Millions of yen
2018
2017
Deferred income tax assets:
Net operating loss carryforwards ＊2
Allowance for losses on contracts
Net defined benefit liability
Valuation loss on inventories
Research and development expenses
Provision for product warranties
Excess depreciation
Provision for bonuses
Other

¥

Valuation reserve for net operating loss
carryforwards ＊2
Valuation reserve for deductible
temporary differences
Valuation reserve -total ＊1
Total deferred income tax assets
Deferred income tax liabilities:
Net unrealized holding gains on securities
Accelerated depreciation
Net unrealized holding gains on derivatives
Other
Total deferred income tax liabilities
Net deferred income tax liabilities
¥
Notes

2,907
2,014
809
369
355
343
242
86
375
7,500

¥

2,167
4,450
764
274
205
232
284
80
645
9,101

(2,904)-(3,999)-(6,903)597(8,555)546(1,474)
(120)
(115)
(209)
(1,918)(1,321)(1,434)
(209)
(58)
(201)
(1,902)(1,356)¥＊1 Valuation reserve amount decreased by ¥1,651 Million. The main reason of thisdecrease is due to the fact that ¥2,432 Million decreased the company’s valuation
reserve for future deductible amount.
＊2 Net operating loss carryforwards and its deferred income tax assets by expiration
periods were as follows:2313. Income taxes (cont’d.)Current fiscal year (April 1, 2017 to March 31, 2018)
Millions of yen
Year ending
2019
2020
2021
2022
2023
March 31,
Net operating
loss
－
－
－
－ ¥ 907
Carryforwards＊3
Valuation reserve
(907)
－
－
－
－
Net deferred
－
－
－
－
－
income tax assets

2024 andafter¥ 2,000

Total¥(1,997)¥3

2,907(2,904)¥3＊3 Net operating loss carryforwards shown in the above table is after multiplying thestatutory tax rate.
(b) The following table summarizes the significant differences between the statutory tax rate
and the effective tax rate for the year ended March 31, 2018 after tax effect accounting wasapplied.

Statutory tax rate
Permanently nondeductible expenses
Taxation on per capita basis
Change in valuation allowance for deferredincome tax assets
Other
Effective tax rate

2018
30.9 %
0.3
0.2(32.6)(0.8)(2.0) %For the year ended March 31, 2017, the difference between the statutory tax rate and the effective
tax rate after tax effect accounting was not described because the Company declared a loss
before income taxes.

2414. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock.

However, a company may, by a resolution of the Board of

Directors, designate an amount not exceeding one half of the price of the new shares asadditional paid-in capital, which is included in capital surplus.
Under the Japanese Corporate Law (the “Law”), in cases in which a dividend distribution of
surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of
25% of common stock over the total of additional paid-in capital and legal earnings reserve must
be set aside as additional paid-in capital or legal earnings reserve.

Legal earnings reserve wasincluded in retained earnings in the accompanying consolidated balance sheets.
Under the Law, both of these appropriations generally require a resolution of the shareholders’meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends.
Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred
to other capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on thenonconsolidated financial statements of the Company in accordance with Japanese laws andregulations.
(a) Number and type of shares issued and number and type of shares of treasury stock

Common stock
Treasury stock

2018
Number of shares
Increase
Decrease
457-

April 1, 2017
6,908,359
25,296

March 31, 2018
6,908,359
25,753The increase in treasury stock of 457 shares was due to the acquisition of fractional shares.

2514. Net assets (cont’d)Common stock
Treasury stock2017
Number of shares
Increase
Decrease(62,175,238)
3,004(223,839)

April 1, 2016
69,083,597
246,131

March 31, 2017
6,908,359
25,296The Company consolidated every 10 shares into one share on October 1, 2016 based on thenumber of shares held by shareholders listed in the shareholders' register as of September 30,
2016. As a result, the number of issued shares decreased by 62,175,238 shares. The increase intreasury stock of 3,004 shares was due to the acquisition of fractional shares. The decrease intreasury stock of 223,839 shares was due to the consolidation of shares.
(b) Dividends
Dividends paid
(March 31, 2017)
Resolution

Type ofsharesTotal amountof dividends(Millions of
yen)
207

Dividend
per share(Yen)

Recorddate

Effectivedate

Board of Directors
Common3.00
March 31,
June 13,
meeting, May 11, 2016
stock
2016
2016
Note: Consolidation of 10 shares into one share was implemented on October 1, 2016. For
the dividend per share based on a resolution of the Board of Directors meeting held on
May 11, 2016, the actual amount of dividends before the consolidation of shares is stated.
At March 31, 2018, there were no dividends paid.
15. Related party transactions
At March 31, 2017, Kintetsu Track Engineering (“KTE”) was the subsidiary of other relatedcompany. The Company’s purchases related to construction of a new factory from KTE for theyear ended March 31, 2017 were ¥1,534 million. Payables to KTE at March 31, 2017 were ¥410
million.
At March 31, 2018, there were no significant related party transaction.

26

16. Derivative transactions
Information on derivatives for which hedge accounting had not been applied at March 31, 2018is as follows:
Millions of yen
2018
Contract amountDue after

Total

Fair valueGain(loss)

one year

Non-market transactions:
Selling
US dollar

¥

1,460

¥

-

¥

(13)

¥

(13)

Total

¥

1,460

¥

-

¥

(13)

¥

(13)

Fair values in the above table were calculated based on future exchange rates.
At March 31, 2017, there were no derivatives for which hedge accounting had not been applied.
Information on derivatives for which hedge accounting had been applied at March 31, 2018 is
as follows:
Millions of yen
2018
Contract amount
Fair value

Due after

Total

one year

Foreign currency forward exchange
contracts:
Selling
US dollar（forecasted transaction）¥

US dollar（receivables – trade）＊1
Total

6,003

¥

10,045

3,141

¥

-

283
-

¥

16,048

¥

3,141

¥

283

¥

750

¥

-

¥

81

BuyingEuro（forecasted transaction）
GB pound（forecasted transaction）

82

-

12

Euro（payables - trade）＊1

87

-

-

GB pound（payables - trade）＊1

16

-

-

Total

¥

935

¥

-

Fair values in the above table were calculated based on future exchange rates.

27

¥

93

16. Derivative transactions (cont’d)Information on derivatives for which hedge accounting had been applied at March 31, 2017 is
as follows:
Millions of yen
2017
Contract amount
Fair value

Due after

Total

one year

Foreign currency forward exchange
contracts:
Selling
US dollar（forecasted transaction）¥

13,230¥10,522¥106

HK dollar（forecasted transaction）

829

-

1

HK dollar（receivables – trade）＊1

1,046

-

-

Total

¥

15,105¥

10,522

¥

107

¥

3,286

¥

810

¥

60

BuyingEuro（forecasted transaction）
GB pound（forecasted transaction）
Total

272
¥

3,558

103
¥

913

21
¥

81

Fair values in the above table were calculated based on future exchange rates.
Note ＊1 Foreign currency forward exchange contracts for which the designation method isapplied are accounted for together with the receivables - trade that are the hedged
items. As a result, the fair values of those contracts are included in the fair values of
the receivables - trade.
17. Fair value of investment and rental property
The Company owns real estate for lease in Osaka and other prefectures. The income from thereal estate for lease was ¥688 million and ¥693 million for the years ended March 31, 2018 and2017, respectively. The book value (balance), net changes during the year and fair value of thereal estate for lease were as follows:
Millions of yen
2018
Balance at April 1, 2017¥

Net changes during the year
Balance at March 31, 2018(27)¥

Fair value at March 31, 2018

28

1,644
1,617
9,921

17. Fair value of investment and rental property (cont’d)Millions of yen
2017
Balance at April 1, 2016

¥

1,715

Net changes during the year

(71)

Balance at March 31, 2017

¥

1,644

Fair value at March 31, 2017

9,971

Note: The decrease represents primarily the sale of real estate, in the amountof ¥48 million.
18. Leases(a) Finance leases(As lessee)
Non-ownership-transfer finance lease transactions
Leased assets consist mainly of machinery and equipment.
(b) Operating leases
Obligations under operating leases at March 31, 2018 and 2017 were as follows:
Millions of yen
2018
Payments due within one year¥

Payments due after one year

2017
120

¥

808

Total payments remaining

¥

928

205
683

¥

888

19. Segment information(a) General information about reportable segments
Reportable segment information of the Company is the obtainable financial information which
is made available to and used by the Officers Committee and Board of Directors to determine
the allocation of management resources and to evaluate business performance. The Company
has a Rail Transit Division that focuses on manufacturing rolling stock. It formulates strategy
and deals with business concerning trains and the related parts and maintenance for the JRgroup, public and private railways and subways. In addition, the Company deals with the leaseof real estate. Therefore, the reportable segments of the Company are that of “Rolling Stock”
and “Lease of Real Estate.”2919. Segment information (cont’d)(b) Basis of measurement for reportable segment profit or loss, segment assets, segment
liabilities and other material items
The accounting policies for reportable segment information are basically the same as in Note 2,“Significant accounting policies.”(c) Information about reported segment profit or loss, segment assets, segment liabilities andother material items
Current fiscal year（April 1, 2017 to March 31, 2018）:
Millions of yen
Reportable segments
Rolling Stock
Net sales¥

60,884

Lease of Real Estate¥

793

Adjustment¥

Consolidated(0)¥61,677

Segment
Profit

5,156

688

(924)

4,920

Segment assets

74,569

1,635

3,466

79,670

Segment liabilities

27,564

999

29,21857,781

1,368

27

39

1,434

552

-

15

567

Depreciation andamortization
Increase in tangible
and intangible assets

1. Adjustments are as follows:(a) Adjustment of segment profit of ¥(924) million is corporate expenses of ¥(924) million not
attributable to reportable segments and represents administrative expenses of the Company.
(b) Adjustment of segment assets of ¥3,466 million is for surplus funds and assets that are notallocable to any reportable segments.
(c) Adjustment of segment liabilities of ¥29,218 million is for liabilities that are not allocable toany reportable segments.
(d) Depreciation and amortization of ¥39 million is depreciation and amortization that are notallocable to any reportable segments.
(e) Increase in tangible and intangible assets of ¥15 million is equipment investment that is notallocable to any reportable segments.
2. Segment profit is adjusted to operating profit in the consolidated statements of operations.

30

19. Segment information (cont’d)Previous fiscal year（April 1, 2016 to March 31, 2017）:
Millions of yen
Reportable segments
Rolling Stock
Net sales¥

44,745

Lease of Real Estate¥

800

Adjustment¥

Consolidated(1)¥

45,544

Segment
profit (loss)(13,858)693(1,061)(14,226)

Segment assets

66,571

1,662

4,402

72,635

Segment liabilities

38,917

1,100

16,05956,076

1,093

27

37

1,157

4,514

-

68

4,582

Depreciation andamortization
Increase in tangible
and intangible assets

1. Adjustments are as follows:(a) Adjustment of segment profit (loss) of ¥(1,061) million is corporate expenses of ¥(1,061)
million not attributable to reportable segments and represents administrative expenses of theCompany.
(b) Adjustment of segment assets of ¥4,402 million is for surplus funds and assets that are notallocable to any reportable segments.
(c) Adjustment of segment liabilities of ¥16,059 million is for liabilities that are not allocable toany reportable segments.
(d) Depreciation and amortization of ¥37 million is depreciation and amortization that are notallocable to any reportable segments.
(e) Increase in tangible and intangible assets of ¥68 million is equipment investment that is notallocable to any reportable segments.
2. Segment profit (loss) is adjusted to operating profit (loss) in the consolidated statements ofoperations.

31

19. Segment information (cont’d)Related information
Information for each country and area for the year ended March 31, 2018 is as follows:(a) Net sales
Millions of yenJapan¥15,115

United States

State ofof America

Qatar

¥

24,073¥

17,797

Other

Consolidated

4,692

¥

¥

61,677

The principal countries and areas in each segment were as follows:
Other

China (Hong Kong), United Arab Emirates,
Arab Republic of Egypt, Republic of the Philippines（Changes in presentation method）
Net sales of "State of Qatar," which was included in "Others" in the previous consolidated fiscal
year, is separately presented in this consolidated fiscal year due to its increased quantitative
materiality.
Africa" and "Asia", which had been presented separately in the previous consolidated fiscal year,
are included in "Others" in this consolidated fiscal year due to its decreased quantitative
materiality.
To reflect this change in presentation, "Related information (1) Net sales" in the previous
consolidated fiscal year has been reclassified.
(b) Property, plant and equipment
Millions of yen
Japan¥

10,965

United Statesof America
¥

2,505

Consolidated¥

13,470Information for major customers for the year ended March 31, 2018 is as follows:
Customer

Net sales (millions of yen)

Los Angeles County Metropolitan¥

Segment

20,989Rolling stock

18,044

Rolling stock

Transit Authority
Mitsubishi Corporation32

19. Segment information (cont’d)Information for each country and area for the year ended March 31, 2017 is as follows:(a) Net sales
Millions of yenJapan¥17,167

United States

State ofof America

Qatar

¥

23,422

¥

241

Other

Consolidated

4,714

¥

¥

45,544The principal countries and areas in each segment were as follows:
Other

China (Hong Kong), United Arab Emirates,
Arab Republic of Egypt, Republic of the Philippines(b) Property, plant and equipment
Millions of yenJapan¥

11,444

United Statesof America
¥

2,986

Consolidated¥

14,430Information for major customers for the year ended March 31, 2017 is as follows:
Customer

Net sales (millions of yen)

Los Angeles County Metropolitan¥

Segment

18,252

Rolling stockWest Japan Railway Company

8,274

Rolling stock

New Jersey Transit

4,818

Rolling stock

Transit Authority

33

20. Per share information
Per share information for the years ended March 31, 2018 and 2017 was as follows:
Yen
2018
2017
Net assets per share¥
3,180.32¥
2,405.68
Net income (loss) per share
750.50(2,122.49)
Notes :(1) Diluted net income per share was not disclosed because there were no dilutive
shares.
(2) The Company consolidated every 10 shares into one share on October 1, 2016 basedon the number of shares held by shareholders listed in the final shareholders’register as of September 30, 2016.
Per share information for the year ended March 31, 2017 is based on the assumptionthat the consolidation of shares had been implemented as of April 1, 2016.
(3) Net income (loss) per share was calculated on the following basis.

Net income (loss) (millions of yen)Amounts not attributable to ordinary shares(millions of yen)
Net income (loss) attributable to ordinary shares(millions of yen)
Average number of shares outstanding during eachyear (shares)

2018
5,166

2017
(14,610)

-

-

5,166

(14,610)

6,882,859

6,883,445

21. Gain on sales of noncurrent assets
For the fiscal years ended March 31, 2018 and 2017, gain on the sales of noncurrent assets
was mainly gain on the sales of land.
22. Deferred payment contracts treated as financial transactions
Deferred payment contracts have been treated as financial transactions, and the amounts ofthe contracts as of March 31, 2018 were included as follows:¥

Work-in-process
Short-term loans payable

34

Millions of yen
2018
957
¥
957

2017
-

23. Subsequent Events(Transfer of fixed assets)
On April 27, 2018, the Company transferred the fixed asset as follows.
(a) Reason for the transfer① To make effective utilization of the Company’s resources② To make improvement of the Company’s financial position(b) Summary of assets transferred

Description of asset
and location
Inadauemachi,
Higashiosaka,Osaka
Land：2,971.74 ㎡

Transfer
price

¥

425

Millions of yen
CarryingNet
amountgain(estimated)(Note)
¥

83

¥

320

Current
conditions
Bicycle parking,etc.

Note：Net gain is the amount of transfer price less carrying amount and expected expenses
relating to the transfer.
(c) Name of the transferee
Ichinen Facilities Co., LTD.
(d) Schedule
Resolution by the Board of Directors : February 27, 2018
Conclusion of transfer agreement :February 27, 2018
Date of transfer :April 27, 2018(e) Impact on consolidated profit/loss of the relevant event
With regard to the transferred fixed asset, gain on sales of property, plant and equipmentin the amount of ¥320 million is expected to be recognized as “Gain on sales of noncurrent
assets” in the year ending March 31, 2019.

35