THE KINKI SHARYO CO., LTD.
AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
Years ended March 31, 2017 and 2016

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED BALANCE SHEETSMarch 31, 2017 and 2016
Millions of yen
2017
2016
LIABILITIES AND NET ASSETSASSETS
Current Assets
Cash and time deposits（Note 5 and 6）
Receivables
Notes and accounts - trade
Other accounts
Allowance for doubtful receivables\

Inventories
Work-in-process
Raw materials and supplies

Deferred income tax assets（Note 11）
Other current assets
Total current assets

Property, Plant and Equipment
Land（Note 15）
Buildings and structures（Note 8 and 15）
Machinery and equipment
Leased assets
Construction in progress\

Investments and Other Assets
Unconsolidated subsidiaries and affiliates（Note 6 and 7）
Investment securities（Note 6 and 7）
Intangible assets
Deferred income tax assets（Note 11）
Other assets
Allowance for doubtful receivables

7,316
109
(9)
7,416

23,986780
24,766

21,101621
21,722311
2,194
49,400287
2,375
36,353\\

Net Assets（Note 12）
Shareholders' equity
Common stock
Authorized - 12,000,000 shares in 2017
120,000,000 shares in 2016
Issued - 6,908,359 shares in 2017
69,083,597 shares in 2016
Capital surplus
Retained earnings
Treasury stock, at cost
25,296 shares in 2017
246,131 shares in 2016
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
8,759
81
161
512
(66)
9,483
57,564

See accompanying Notes.
1

5,825
1,091
99

\

\

1,206
589
-

8,485
1,362
5,201
80
31
1,419
258
14,407759
633
39,650Total liabilities

3,447
27,195(15,467)
11,728-\

Noncurrent Liabilities
Long-term loans payable（Note 6 and 9）
Lease obligations （Note 6 and 9）
Deferred income tax liabilities（Note 11）
Net defined benefit liability（Note 10）
Other noncurrent liabilities（Note 8）

2,718
9,929
11,101

36
8,111
91
596
(15)
8,819
72,649Current Liabilities
Short-term loans payable（Note 6 and 9）
Current portion of long-term loans payable（Note 6 and 9）
Lease obligations （Note 6 and 9）
Payables（Note 13）
Trade accounts（Note 6）
Construction
Advances received
Income and enterprise taxes payable
Deferred income tax liabilities（Note 11）
Accrued expenses
Provision for bonuses
Allowance for losses on contracts
Provision for product warranties
Other current liabilities
Total current liabilities

4,553

17,374780(16)
18,1382,666
14,612
12,435831
1330,557(16,127)
14,430

Accumulated depreciation

Total assets

3,991

Millions of yen
2017
2016

6,515
1,234
4,456
131
1,134
335
1,319
550
569
18,03810,516
726
1,636
2,490
1,072
16,44056,090

2,354
1,712
2,439
1,194
7,699
25,737

5,253

5,253

3,125
3,816
(102)

3,125
18,633(101)

12,092

26,910

3,255
130
1,371
(289)
4,467
16,55972,649

3,509

-

\

1,756
(348)
4,917
31,82757,564

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
Years ended March 31, 2017 and 2016
Millions of yen
2017
2016
\
45,544\44,021
56,67039,082(11,126)
4,939
3,099
3,515
(14,225)
1,424

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
Gain on sales of noncurrent assets（Note 19）
Other, net

Income (loss) before income taxes
Income taxes（Note 11）
Current
RefundDeferred
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to owners of the parent

\

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

127
(13)
(283)
(47)
(216)

(14,575)

1,208

(25)
109
(119)
(14,610)―(14,610)

\

(352)
―
10
866
―
866

\
\

125.75
3.00

Yen
Amounts per share
Net income (loss)
Cash dividends applicable to the year（Note 12）
See accompanying Notes.

2\ (2,122.49)\―

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended March 31, 2017 and 2016
Millions of yen
2017
2016
\ (14,610)\866

Net income (loss)
Other comprehensive income
Net unrealized holding gains (losses) on securities
Net unrealized holding gains (losses) on derivatives
Foreign currency translation adjustments
Remeasurements of defined benefit plan
Total other comprehensive income (Note 4)
Comprehensive income
Comprehensive income attributable toowners of the parent
Comprehensive income attributable tonon-controlling interests

\

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

See accompanying Notes.

3

\

(46)
(4)
211
84
245
1,111

1,111
-

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years ended March 31, 2017 and 2016
Millions of yen
Accumulated other comprehensive income
Net
Net
Foreign
Remeasureunrealized
unrealized
currency
ments ofholding
holdingtranslation
definedgains
gains
adjustments benefit plansonon securities
derivatives

Shareholders' equity

Balance at April 1, 2015

Number ofshares ofcommonstock

Commonstock

69,083,597\

Capitalsurplus

5,253\

Retainedearnings

3,125\

Treasurystock

17,767

\

(99)

\

3,555

\

4

\

1,545

\

(432)

Total

\

30,718Net income (loss)

-

-

-

866

-

-

-

-

-

866

Purchase of treasury stock

-

-

-

-

(2)

-

-

-

-

(2)

Net changes during the year

-

-

-

-

-

(46)

(4)

211

84

245

Balance at March 31, 2016

Balance at April 1, 2016

69,083,597

\

5,253

Number ofshares ofcommonstock

Commonstock

69,083,597

\

\

3,125

Capitalsurplus

5,253

\

\

18,633Retainedearnings

3,125

\

\

(101)

\

3,509

Net
unrealized
holding
gains
on securities

Treasurystock

18,633

\

(101)

\

3,509

\

-

\

Net
unrealized
holding
gains
onderivatives

Foreigncurrencytranslation
adjustments
-

\

1,756

\

1,756

\

(348)

\

Remeasurements ofdefinedbenefit plans
\

(348)

31,827

Total\

31,827

Cash dividends paid at ￥3.00 per share（Note 12）

-

-

-

(207)

-

-

-

-

-

(207)

Net income (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

\

5,253

\

3,125

\

3,816

\

See accompanying Notes.

4

(102)

\

3,255

\

130

\

1,371

\

(289)

\

16,559

THE KINKI SHARYO CO., LTD. AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 2017 and 2016
Millions of yen
2017
2016
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 Notes and trade accounts payable
Increase (decrease) in accounts payable and accrued expenses
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities\

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

\

5

1,208

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

762
74
(88)
252
(127)
13
(4,628)(1,296)(2,128)24
1,172(4,762)
127
(7)
(396)
(5,038)

(10)
-

28

(4,016)(3,741)

960

2
(10)
(3,721)-626(2,440)Effect of exchange rate changes on cash and cash equivalents

See accompanying Notes.

\-

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

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 5）(14,575)

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

1,211
2,955

84

22

(572)
4,553
3,981

(4,575)
9,128
4,553

(2)
(2)
4,162

\

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 anddisclosure 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 Statesof America (“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 ofcertain 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
the sale of such securities are computed using moving average cost. Securities with noavailable fair market values, including equity securities issued by subsidiaries and affiliates
which are not consolidated 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 are used as hedges and meet certain hedging criteria, the Companies defer
recognition of gain or loss 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
denominated in 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 andsupplies are stated at cost determined by the moving average method. For balance sheet
valuation, in the event that an impairment in the value of inventory is determined, theinventory 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 ¥237 million and ¥631 million for the years ended March
31, 2017 and 2016, 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 thefollowing 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
and liabilities 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.

92. Significant accounting policies (cont’d.)(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 effect at the balance sheet date, except for net assets accounts, which are translated athistorical rates, and revenue and expense accounts, which are translated at the averageexchange rates in effect during 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, 2017 and 2016 was not applicable because
the Company had no dilutive common shares. Cash dividends per share presented in theaccompanying consolidated statements of operations are dividends applicable to therespective years, including dividends to be paid after the end of the year.
(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 thereporting period is measured by the proportion of the cost incurred as of the end of the period
to the estimated 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 2017presentation.

10

3. Change in accounting policies
Previous fiscal year (April 1, 2015 to March 31, 2016)(Adoption of accounting standard for business combinations)
The Company and its domestic subsidiaries adopted “Revised Accounting Standard forBusiness Combinations” (ASBJ Statement No.21, September 13, 2013 (hereinafter, “Statement
No.21”)), “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ
Statement No.22, September 13, 2013 (hereinafter, “Statement No.22”)) and “Revised
Accounting Standard for Business Divestitures” (ASBJ Statement No.7, September 13, 2013
(hereinafter, “Statement No.7”)) (together, the “Business Combination Accounting Standards”),
from the year ended March 31, 2016. As a result, the Company changed its accounting policies
to recognize in capital surplus the differences arising from the changes in the Company’sownership interest of subsidiaries over which the Company continues to maintain control andto record acquisition related costs as expenses in the fiscal year in which the costs are incurred.
In addition, the Company changed its accounting policy for the reallocation of acquisition
costs due to the completion following provisional accounting to reflect such reallocation in the
consolidated financial statements for the fiscal year in which the business combination took
place. The Company also changed the presentation of net income and the term
“non-controlling interests” is used instead of “minority interests.” Certain amounts in theprior year comparative information were reclassified to conform to such changes in thecurrent year presentation.
With regard to the application of the Business Combination Accounting Standards, theCompany followed the provisional treatments in article 58-2 (4) of Statement No.21, article
44-5 (4) of Statement No.22 and article 57-4 (4) of Statement No.7 with application from the
beginning of the beginning of the year ended March 31, 2016, prospectively.
In the consolidated statement of cash flows, cash flows from acquisition or disposal of sharesof subsidiaries with no changes in the scope of consolidation are included in “Cash flows fromfinancing activities” and cash flows from acquisition related costs for shares of subsidiaries
with changes in the scope of consolidation or costs related to acquisition or disposal of sharesof subsidiaries with no changes in the scope of consolidation are included in “Cash flows fromoperating activities. ”
There was no effect on the consolidated financial statements of the year ended March 31, 2016.
(Additional Information)
Current fiscal year (April 1, 2016 to March 31, 2017)(Adoption of implementation guidance on recoverability of deferred tax assets)
The

Company

andits

consolidated

domestic

subsidiaryhave

adopted“Revised

Implementation Guidance on Recoverability of Deferred Tax Assets”(ASBJ Guidance No. 26,
March 28, 2016) from the year ended March 31, 2017.

11

4. 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 eachcomponent of other comprehensive income were as follows:
Millions of yen
2017
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 (losses) 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 plan
Increase (decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax (expense) or benefit
Subtotal, net of tax
Total other comprehensive income

¥

¥

2016

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

¥

(188)
(188)
142
(46)

188
188
(58)
130

(8)
(8)
4
(4)

(385)
(385)
(385)

211
211
211

(19)
78
59
59
(450)

(0)
84
84
84
245

¥

5. 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, 2017 and 2016 wereas follows:
Millions of yen
2017
2016
Cash and time deposits (in balance sheets)¥

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

12

3,991

¥

(10)
¥

3,981

4,553
-

¥

4,553

6. 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
number of major customers with high creditworthiness. The Companies decrease therisk 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 associatedwith trade accounts receivables and payables, not for speculative purposes, and enters
into such contracts according to the Company’s internal rules.
Investment securities－Investment securities comprise mostly stocks and are evaluatedfor fair value or prices provided by the financial condition of corporations on a quarterly
basis.
(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, 2017 and 2016 were as follows:
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

13

6. Financial instruments: disclosure (cont’d.)Millions of yen
2016
Cash and time deposits

Book value

Fair value

Difference

¥

¥

¥

4,553

4,553

-

Notes and accounts receivable - trade ＊1

7,308

7,308

-

Investment securities

8,619

8,619

-

Trade accounts payable(6,515)(6,515)-

Short-term loans payable(1,206)(1,206)-Long-term loans payable(2,943)(2,952)(9)

Not applying hedge accounting

48

48

-

Applying hedge accounting

-

-

-

Derivatives

Notes＊1 Allowance for doubtful receivables associated with notes and accounts receivablehas been deducted.
＊2 The figures in parenthesis indicate liabilities.

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 discountrates for similar new loans or lease transactions.
Financial instruments for which the fair value was difficult to determine were as follows:

Unlisted stocks¥

Stocks of subsidiaries and affiliates (unlisted stocks)

Millions of yen
2017
2016
139
¥
139
36

36

Unlisted stocks were not included in investment securities, nonconsolidated subsidiaries andaffiliates above because they had no fair value.

146. Financial instruments: disclosure (cont’d.)Maturity value after closing dateMillions of yen
2017
Within a year
Cash and time deposits¥

Trade notes and trade accounts

Over a year

3,991

¥

-

17,374-

Millions of yen
2016
Within a year
Cash and time deposits¥

Trade notes and trade accounts

4,553
7,316

15

Over a year¥-

7. Securities
At March 31, 2017 and 2016, information on securities was as follows:a.

Trading securities: Noneb.

Bonds intended to be held to maturity with readily determinable fair values: Nonec.

Available-for-sale securities with readily determinable fair value as of March 31, 2017and 2016 were as follows:
Securities with book value (fair value) that exceeded acquisition cost

Equity securities
Other
Total

Equity securities
Other
Total

Acquisition cost
¥
3,185
¥
3,185

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

Acquisition cost
3,461
9
¥
3,470

Millions of yen
2016Book value
¥
8,519
16
¥
8,535

¥

Difference
4,698
4,698

¥
¥

Difference
5,058
7
¥
5,065
¥

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

Equity securities
Other
Total

Equity securities
Other
Total

Acquisition cost
¥
98
98
¥

Millions of yen
2017Book value
¥
89
¥
89

Difference
¥
(9)
¥
(9)

Acquisition cost
¥
98
98
¥

Millions of yen
2016Book value
¥
84
¥
84

Difference
(14)
¥
(14)

16

¥

7. Securities (cont’d.)d. For the year ended March 31, 2017, total sales of available-for-sale securities (equity
securities and other) were ¥627 million, and profits on the sales were ¥342 million.
e.

Loaned securities classified as securities as of March 31, 2017 and 2016 were as follows:
Millions of yen
2017
Equity securities

¥

2016

7,843

¥

-

8. Pledged assets
At March 31, 2017 and 2016, the following assets were pledged as collateral for deposits oncontracts of ¥408 million and ¥489 million, respectively, and deposits from tenants of ￥70
million (included in other noncurrent liabilities ):Buildings, net book value¥

Millions of yen
2017
2016
437
¥
460

9. 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 2.0% and 1.2% at March 31, 2017 and 2016, respectively.
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
¥

17

10,516

9. 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
were as 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

Long-term loans payable as of March 31, 2016 were as follows:
Millions of yen
2016
Loans from banks, due through 2020 at weighted

¥

2,943

average rate of 3.9% in 2016
Less current portion

589
¥

18

2,354

9. 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, 2016
were as follows:
Millions of yen
Years ending March 31,

2016

2018

¥

589

2019

589

2020

588

2021

588

2022 and after

¥

2,354

The aggregate annual maturities of finance lease obligations subsequent to March 31, 2016
were summarized as follows:
Millions of yen
Years ending March 31,

2016

2018

¥

-

2019

-

2020

-

2021

-

2022 and after¥-

The Company entered into contracts with financial institutions for committed credit lines.
As of March 31, 2017 and 2016, the amounts of unexercised committed credit lines were as
follows:
Millions of yen
Total committed credit lines
Unexercised committed credit lines

19

¥
¥

2017
17,00017,000

¥
¥

2016
-

10. 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(1) Movement in retirement benefit obligations, except for plans that applied the simplified
methodBalance at April 1, 2016 and 2015
Service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Balance at March 31, 2017 and 2016¥¥

Millions of yen
2017
2016
2,439
¥
2,449
154
146
19
18
19
0
(141)
(174)
2,490
¥
2,439

(2) Reconciliation from retirement benefit obligations to liability for retirement benefits
Millions of yen
2016
2017
¥
Unfunded retirement benefit obligations
¥
2,439
2,490
Total net liability (asset) for retirement benefits at ¥
¥
2,439
2,490
March 31, 2017 and 2016
Net defined benefit liability
Total net liability (asset) for retirement benefits at ¥March 31, 2017 and 2016

2,490
2,490

2,439
¥

2,439

(3) Retirement benefit costs

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

¥

¥

20

Millions of yen
2017
2016
154
¥
146
19
19
64
70
14
14
251
¥
249

10. Retirement and severance benefits (cont’d.)(4) Remeasurements of defined benefit plans

Prior service cost
Actuarial loss¥¥

Millions of yen
2017
2016
14
¥
14
45
70
59
¥
84

(5) Accumulated remeasurements of defined benefit plans

Unrecognized prior service cost
Unrecognized actuarial loss¥¥

Millions of yen
2017
2016
(25)
¥
(40)
(264)
(308)
(289)
¥
(348)

(6) Actuarial assumptions
The principal actuarial assumptions at March 31, 2017 and 2016 (expressed as weighted
averages) were as follows:
2017
0.8%
2.1%

Discount rate
Expected salary increase rate

2016
0.8%
2.1%

Defined contribution plans
Contributions for the defined contribution plans in 2017 and 2016 were ¥264 million and ¥212
million, respectively.

21

11. Income taxes(a) Significant components of the Companies’ deferred tax assets and liabilities as of March 31,2017 and 2016 were as follows:
Millions of yen
2017
2016
Deferred income tax assets:
Allowance for losses on contracts
Net operating loss carryforwards
Net defined benefit liability
Excess depreciation
Valuation loss on inventories
Provision for product warranties
Provision for bonuses
Research and development expenses
Other

¥

Valuation allowance
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

¥

4,450
2,167
764
284
274
232
80
43
807
9,101
(8,555)546(1,434)
(209)
(58)
(201)
(1,902)(1,356)

¥

¥

407
1,938
746
162
94
169
103
280
647
4,546
(4,098)448(1,543)(169)(1,712)(1,264)(b) The following table summarizes the significant differences between the statutory tax rate
and the effective tax rate for the year ended March 31, 2016 after tax effect accounting wasapplied.

Statutory tax rate
Permanently nondeductible expenses
Taxation on per capita basis
Change in valuation allowance for deferredincome tax assets
Difference of tax rates applied to income of foreignsubsidiaries
Other
Effective tax rate

22

2016
33.1 %
0.8
0.8(10.7)
3.3
1.0
28.3 %

11. Income taxes (cont’d.)
For the year ended March 31, 2017, the difference between the statutory tax rate and theeffective tax rate after tax effect accounting was not described because the Company declareda loss before income taxes.
Adjustment of deferred income tax assets and liabilities for enacted changes in tax laws andrates:
Following the enactment on March 29, 2016 of "Act for Partial Amendment of the Income Tax
Act, etc." (Act No. 15 of 2016) and "Act for Partial Amendment of the Council Tax Act, etc."(Act No. 13 of 2016), the effective statutory tax rate used to measure deferred income tax assets
and liabilities was changed from 32.3% to 30.9% for temporary differences expected to beeliminated in the fiscal year beginning on or after April 1, 2016 and to 30.6% for temporary
differences expected to be eliminated in the fiscal year beginning on or after April 1, 2018.
As a result, deferred income tax liabilities decreased by ¥91 million and income taxes deferred decreased by ¥9 million. Net unrealized holding gains on securities increased by ¥83
million.

23

12. 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 was included in retained earnings in the accompanying consolidated balance sheets.
Under the Law, both of these appropriations generally require a resolution of theshareholders’ 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
the nonconsolidated financial statements of the Company in accordance with Japanese laws
and regulations.
1. Number and type of shares issued and number and type of shares of treasury stock

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.

2412. Net assets (cont’d)Common stock
Treasury stock

2016
Number of shares
Increase
Decrease
4,154-

April 1, 2015
69,083,597
241,977

March 31, 2016
69,083,597
246,131

The increase in treasury stock of 4,154 shares was due to the acquisition of fractional shares.
2. Dividends
Dividends paid
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
2017
2017
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 isstated.
13. 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, 2016, 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, 2016 were ¥1,431 million. Payables to KTE at March 31, 2016 were ¥764
million.

25

14. Derivative transactions
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）
HK dollar（forecasted transaction）

13,230829

HK dollar (receivables - trade)

1,046

Total

¥

¥

10,522
-

¥

106
1

-

(Note)¥

15,105¥

10,522

¥

107

¥

3,286

¥

810

¥

60

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

272
¥

3,558

103
¥

913

21
¥

81

Note: Forward foreign exchange contracts for which the designation method is applied areaccounted for together with the receivables - trade that are the hedged items. As a result, thefair values of those contracts are included in the fair values of the receivables - trade.
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.
At March 31, 2016, there were no derivatives for which hedge accounting had been applied.

26

14. Derivative transactions (cont’d)Information on derivatives for which hedge accounting had not been applied at March 31,
2016 is as follows:
Millions of yen
2016
Contract amount
Total

Fair value

Due after
one year

Realized
gain (loss)

Foreign currency forward exchange
contracts:
Selling
US dollar

¥

516

¥

-

¥

48

¥

48

Total

¥

516

¥

-

¥

48

¥

48

Fair values in the above table were calculated based on future exchange rates.
15. 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 ￥693 million and ￥692 million for the years ended March 31, 2017and 2016, respectively. The book value (balance), net changes during the year and fair value ofthe real estate for lease were as follows:

Millions of yen
2017
Balance at April 1, 2016¥

Net changes during the year
Balance at March 31, 2017

1,715
(71)

¥

Fair value at March 31, 2017

1,644
9,971

Note: The decrease represents primarily the sale of real estate, in the amountof ¥48 million.
Millions of yen
2016
Balance at April 1, 2015¥

Net changes during the year
Balance at March 31, 2016(26)¥

Fair value at March 31, 2016

27

1,741
1,715
8,616

16. Leases(1) Finance leases(As lessee)
Non-ownership-transfer finance lease transactions
Leased assets consist mainly of machinery and equipment.
(2) Operating leases
Obligations under operating leases at March 31, 2017 and 2016 were as follows:
Millions of yen
2017
Payments due within one year¥

Payments due after one year

2016
205

¥

683

Total payments remaining

¥

888

262
862

¥

1,124

17. 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 todetermine 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 andmaintenance for the JR group, public and private railways and subways. In addition, theCompany deals with the lease of real estate. Therefore, the reportable segments of theCompany are that of “Rolling Stock” and “Lease of Real Estate.”(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.”28

17. Segment information (cont’d)(c) Information about reported segment profit or loss, segment assets, segment liabilities andother material items
Year ended 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(1,060)(14,225)

Segment assets

66,585

1,662

4,402

72,649Segment liabilities

38,962

1,100

16,02856,090

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 ¥(1,060) million is corporate expenses of ¥(1,060)
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 ¥16,028 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.

29

17. Segment information (cont’d)Year ended March 31, 2016:
Millions of yen
Reportable segments
Rolling Stock
Net sales¥

43,222

Lease of Real Estate¥

800

Adjustment¥

Consolidated(1)¥

44,021

Segment
profit (loss)

1,638

693

(907)

1,424

Segment assets

51,913

1,732

3,919

57,564

Segment liabilities

17,505

1,201

7,031

25,737

702

26

34

762

4,569

-

33

4,602

Depreciation andamortization
Increase in tangible
and intangible assets

1. Adjustments are as follows:(a) Adjustment of segment profit (loss) of ¥(907) million is corporate expenses of ¥(907) million
not attributable to reportable segments and represents administrative expenses of theCompany.
(b) Adjustment of segment assets of ¥3,919 million is for surplus funds and assets that are notallocable to any reportable segments.
(c) Adjustment of segment liabilities of ¥7,031 million is for liabilities that are not allocable toany reportable segments.
(d) Depreciation and amortization of ¥34 million is depreciation and amortization that are notallocable to any reportable segments.
(e) Increase in tangible and intangible assets of ¥33 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.

30

17. Segment information (cont’d)Related information
Information for each country and area for the year ended March 31, 2017 is as follows:(1) Net sales
Millions of yenJapan¥17,167

United States

Africaof America¥

23,422

¥

226

¥

Asia

Consolidated

4,729

¥

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

Arab Republic of Egypt
China (Hong Kong), State of Qatar, United Arab Emirates,

Republic of the Philippines(2) 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 Authority31

17. Segment information (cont’d)Information for each country and area for the year ended March 31, 2016 is as follows:(1) Net sales
Millions of yen
UnitedJapan

States of

AfricaAsia

Consolidated

3,354

¥

America¥

19,504¥

20,769¥394¥

44,021The principal countries and areas in each segment were as follows:
Arab Republic of Egypt

AfricaAsia

China (Hong Kong), State of Qatar, United Arab Emirates(2) Property, plant and equipment
Millions of yen
UnitedJapan

States ofConsolidated

America
¥

8,982

¥

2,746

¥

11,728

Information for major customers for the year ended March 31, 2016 is as follows:
Customer

Net sales (millions of yen)

Los Angeles County Metropolitan¥

Segment

14,849Rolling stock

Sendai City Transportation Bureau

7,063

Rolling stockWest Japan Railway Company

6,293

Rolling stock

New Jersey Transit

5,651

Rolling stock

Transit Authority32

18. Per share information
Per share information for the years ended March 31, 2017 and 2016 was as follows:
Yen
2017
2016
Net assets per share¥
2,405.68¥
4,623.49
Net income (loss) per share(2,122.49)
125.75
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
based on the number of shares held by shareholders listed in the final shareholders’register as of September 30, 2016.
Per share information for the years ended March 31, 2017 and 2016 is based on theassumption that the consolidation of shares had been implemented as of April 1,
2015.
(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)

2017(14,610)

2016
866

-

-

(14,610)866

6,883,445

6,883,945

19. Gain on sales of noncurrent assets
For the fiscal year ended March 31, 2017, gain on the sales of noncurrent assets was mainly
gain on the sales of land.

33