# Business Report 2011

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Business Report 2011  

    
    
    Business Report 2011
    For the year ended March 31, 2011
    SIX-YEAR FINANCIAL SUMMARY
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    Years ended March 31, 2011, 2010, 2009, 2008, 2007 and 2006
    Millions of yen, except for per share data
    2011
    2010
    2009
    2008
    2007
    2006
    ¥ 550,669
    ¥ 493,639
    ¥ 538,995
    ¥ 692,656
    ¥ 708,127
    ¥ 709,613
    (Overseas sales)
    407,938
    351,140
    384,329
    498,410
    529,725
    544,063
    Cost of sales
    Selling, general and administrative
    expenses
    Operating income (loss)
    441,498
    415,095
    484,079
    587,210
    596,857
    581,016
    80,299
    73,801
    81,440
    85,570
    89,193
    83,125
    28,872
    4,743
    (26,524)
    19,876
    22,077
    45,472
    21,269
    362
    (57,171)
    18,308
    20,817
    36,164
    5,970
    53
    18,035
    10,560
    10,536
    11,689
    Net income (loss)
    11,137
    570
    (70,064)
    4,418
    4,918
    18,870
    Cash flows (*1)
    28,055
    21,793
    (43,707)
    38,604
    40,403
    52,058
    For the years ended March 31: Net sales
    Income (loss) before income taxes and
    minority interests
    Income taxes
    Amounts per share of common stock:
    Net income (loss)
    3.18
    ¥ (390.93)
    10.00
    ー
    10.00
    20.00
    20.00
    20.00
    ¥ 268,965
    ¥ 246,831
    ¥ 212,612
    ¥ 289,623
    ¥ 321,400
    ¥ 317,604
    Current liabilities
    152,695
    145,732
    154,119
    148,312
    184,474
    203,808
    Working capital
    116,270
    101,099
    58,493
    141,311
    136,926
    113,796
    Long-term debt
    69,134
    66,396
    27,643
    58,841
    57,308
    41,561
    Total net assets
    190,751
    186,462
    184,791
    280,318
    294,018
    285,367
    Total assets
    427,530
    410,945
    375,285
    494,756
    548,044
    543,267
    ¥ 296,153
    ¥ 274,155
    ¥ 291,996
    ¥ 391,424
    ¥ 396,448
    ¥ 412,561
    53.8%
    55.5%
    54.2%
    56.5%
    56.0%
    58.1%
    124,934
    112,522
    ー
    ー
    ー
    ー
    22.7%
    22.8%
    ー
    ー
    ー
    ー
    171,219
    161,633
    ー
    ー
    ー
    ー
    31.1%
    32.7%
    ー
    ー
    ー
    ー
    198,359
    166,199
    193,226
    247,544
    261,274
    251,128
    Cash dividends applicable to the year
    As of March 31:
    Current assets
    Sales by product category: Electronic components (*2):
    Automotive business
    Home, Mobile & Industry business
    Audio equipment
    Logistics
    Other
    Total
    Percentage of sales
    (*1)
    (*2)
    ¥
    62.14
    ¥
    ¥
    24.65
    ¥
    27.40
    ¥
    103.74
    36.0%
    33.7%
    35.8%
    35.7%
    36.9%
    35.4%
    47,505
    44,977
    45,368
    45,496
    42,134
    37,425
    8.6%
    9.1%
    8.4%
    6.6%
    5.9%
    5.3%
    8,652
    8,308
    8,405
    8,192
    8,271
    8,499
    1.6%
    1.7%
    1.6%
    1.2%
    1.2%
    1.2%
    ¥ 550,669
    ¥ 493,639
    ¥ 538,995
    ¥ 692,656
    ¥ 708,127
    ¥ 709,613
    100.0%
    100.0%
    100.0%
    100.0%
    100.0%
    100.0%
    Cash flows for the year ended March 31, 2006 is calculated by subtracting“cash dividends paid”and“bonuses to directors”from the total of“net income”and
    “depreciation and amortization.”
    “Cash flows”for the years ended March 31, 2011, 2010, 2009, 2008 and 2007 is calculated by subtracting“cash dividends paid”from the total of“net income or
    loss”and“depreciation and amortization.”
    The Company began disclosing the breakdown of sales of Electronic components by two categories for the year ended March 31, 2010.
    ALPS Business Report 2011
    02
    Management’
    s Discussion and Analysis of Operating Results
    1. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES
    Consolidated financial statements for the Alps Group
    (the Company and its consolidated subsidiaries) are
    prepared in conformity with accounting principles
    generally accepted in Japan.
    In the preparation of these consolidated financial
    statements, it was necessary to use estimates that are
    affected by the values of assets, liabilities, income and
    expenses for the reporting period. These estimates are
    based on rational consideration of past performance
    and various primary causes. Actual results may
    differ as a result of the uncertainties inherent in these
    estimates.
    ALPS Business Report 2011
    03
    Management’
    s Discussion and Analysis of Operating Results
    2. ANALYSIS OF OPERATING PERFORMANCE DURING THE FISCAL YEAR UNDER REVIEW
    ( 1 ) Overview
    ( 2) Sales
    During the fiscal year under review, the global
    economy moved toward recovery, albeit gradually,
    buoyed by robust demand from emerging markets̶
    notably China̶and other Asian countries. In Japan,
    despite concerns about the economic impact of
    excessive yen appreciation, growing overseas demand
    supported the economy by boosting exports and
    production. The electronics industry experienced
    an increase in demand, centering on emerging
    markets, which pushed up demand for the electronic
    components used in digital products. At the same time,
    although rates of growth differed by country, overall
    automobile production volume grew stably, resulting
    in firm demand for automobile-related products, such
    as automotive electronics and navigation systems.
    As a result, during the fiscal year under review
    the Alps Group posted consolidated net sales of
    ¥550.6 billion, up 11.6% year on year. Operating
    income surged 508.7%, to ¥28.8 billion, and ordinary
    income amounted to ¥23.1 billion̶up sharply from
    the ¥1.6 billion posted in the preceding fiscal year.
    Net income grew to ¥11.1 billion, from ¥0.5 billion
    in the preceding term. During the fiscal year under
    review, average exchange rates were ¥85.72 to the
    U.S. dollar and ¥113.12 to the euro. This represents
    yen appreciation of ¥7.13 and ¥18.03 against these
    respective currencies.
    Net sales during the year came to ¥550.6 billion, up
    ¥57.0 billion, or 11.6%, from the preceding fiscal year.
    Sales in the electronic components segment
    were up ¥21.9 billion, or 8.0%, from the preceding
    fiscal year, to ¥296.1 billion. In the audio equipment
    business, sales came to ¥198.3 billion, up ¥32.1
    billion, or 19.4%, year on year. In the logistics
    segment, meanwhile, sales grew ¥2.5 billion, or 5.6%,
    from the preceding fiscal year, to ¥47.5 billion.
    Sales by product category (Billions of ¥)
    800
    700
    The Group posted operating income of ¥28.8 billion,
    representing a year-on-year rise of ¥24.1 billion, or
    508.7%. The overall effect on the Alps Group of the
    yen’
    s appreciation against the U.S. dollar and the euro
    had a ¥6.1 billion negative impact on income.
    Aside from the effect of exchange rate
    fluctuations, Alps mounted a groupwide effort to
    expand sales and hold down fixed costs, which
    resulted in year-on-year income increases for all
    segments. Increases in operating income amounted to
    ¥16.3 billion in the electronic components segment,
    ¥13.2 billion in the audio equipment business and ¥0.5
    billion in the logistics business.
    Operating Income (Billions of ¥)
    Profitability ratios (%)
    40
    708.1 692.7
    600
    ( 3) Operating Income
    538.9
    500
    493.6
    22.0
    124.9
    2.4
    28.8
    30
    550.6
    9.8
    10
    20
    0
    19.8
    0.9
    2.2
    0.5
    0.8
    2.6
    0.1
    (10)
    400
    171.2
    300
    10
    4.7
    198.3
    0
    100
    47.5
    0
    '07
    '08
    '09
    '10
    (16.1)
    (20)
    200
    (30)
    8.6
    '11
    Electronic Components ■ AUTO
    ■ Communications
    ■ HM&I
    ■ Peripheral Products
    ■ Audio Equipment
    ■ Components ■ Automotive Electronics
    ■ Logistics
    ■ Magnetic Devices
    ■ Other
    (10)
    ROE
    (Return on equity)
    (40)
    (20)
    ROA
    (Return on total assets)
    (26.5)
    (30)
    '07
    '08
    '09
    (45.9)
    (50)
    '10
    '11
    '07
    '08
    '09
    '10
    ALPS Business Report 2011
    '11
    04
    Management’
    s Discussion and Analysis of Operating Results
    2. ANALYSIS OF OPERATING PERFORMANCE DURING THE FISCAL YEAR UNDER REVIEW
    Business Segments
    i. Electronic Components
    The electronics industry experienced an increase in demand, centering on emerging markets, which pushed up
    demand for the electronic components used in digital products. At the same time, although rates of growth
    differed by country, overall automobile production volume grew stably, resulting in firm demand for automobilerelated products, such as automotive electronics and navigation systems.
    In this climate, in our mainstay electronic components segment we made a full-fledged effort to progress
    with the measures outlined in our sixth medium-term management plan, which is in its first year. The plan sets the
    medium- to long-term target of restructuring our product lineup. Aggressive efforts to boost sales of new products
    contributed to performance on the sales front. In manufacturing, we worked to lower the variable cost ratio and
    rationalize fixed costs, thereby improving cost of sales. These efforts contributed to increased income.
    As part of the structural reforms commenced in April 2009, we pared down our reporting segments from four
    to three. From the fiscal under review we have omitted reporting on the MMP division, which has no external sales.
    Results by division are described below.
    ALPS Business Report 2011
    05
    Management’
    s Discussion and Analysis of Operating Results
    2. ANALYSIS OF OPERATING PERFORMANCE DURING THE FISCAL YEAR UNDER REVIEW
    Business Segments
    i. Electronic Components
    AUTO (Automotive) Division
    Multifunctional switches finding growing on-board application
    In the automobile-related markets that are the focus for
    this division, government initiatives to support car
    purchases came to an end. As a result, unit sales in
    Europe fell, but in Japan and the United States, as well
    as in China, India and other emerging markets sales
    generally trended steadily upward. In this operating
    environment, the division’
    s sales of automotive
    electronics and components increased for luxury
    automobiles̶historically an area of strength for
    us̶as well as for such components for compact and
    mid-sized automobiles.
    As a result, sales in this segment climbed 11.0%
    year on year, to ¥124.9 billion.
    HM&I (Home, Mobile & Industry) Division
    Touch panels used in mobile devices, for which orders are robust
    In the consumer market, the main focus for this
    division, concerns mounted about the impact of
    European economic instability and exchange rates,
    as well sharply escalating prices on raw materials.
    From the beginning of the year, however, production
    rebounded sharply. Of particular note were ongoing
    production increases by manufacturers of notebook
    PCs, thin-film televisions and mobile phones.
    This trend underpinned sales in the HM&I Division,
    which manufactures key components for these digital
    products, notably switches, encoders, touch panels and
    connectors, as well as communication modules.
    Consequently, sales in this division came to
    ¥171.2 billion, up 5.9% year on year.
    Owing to the above-mentioned factors, overall sales for the electronic components segment came to ¥296.1
    billion, up 8.0% from the preceding term. Operating income amounted to ¥13.0 billion, up from ¥0.4 billion in the
    preceding fiscal year.
    ALPS Business Report 2011
    06
    Management’
    s Discussion and Analysis of Operating Results
    2. ANALYSIS OF OPERATING PERFORMANCE DURING THE FISCAL YEAR UNDER REVIEW
    Business Segments
    ii. Audio Equipment
    Proactively showing new products at the Beijing Motor Show
    In the audio equipment business (operated by
    Alpine Electronics, Inc., which is listed on the First
    Section of the Tokyo Stock Exchange), the Company
    strove to boost sales by introducing new-model
    navigation systems and strengthening product appeal
    by proposing“model-specific car-life solutions.”
    Moreover, we exhibited at the Beijing Motor Show,
    in an effort to bolster sales in China’
    s expanding
    automobile market. This move had several positive
    effects: it drove awareness of the Alpine brand, and
    moved us down a path of steady business expansion
    by delivering our first products to local automakers.
    Although affected to some degree by yen appreciation
    and a tighter demand/supply balance on in-car display
    panels, which caused parts and materials costs to rise,
    we redoubled efforts to maintain corporate soundness
    and improve operating performance through our
    “CHALLENGE 30 Plus”program of corporate
    reforms.
    Owing to these factors, audio equipment segment
    sales grew 19.4%, to ¥198.3 billion. Operating income
    was also up sharply, to ¥11.1 billion, compared with
    ¥0.2 billion in the preceding fiscal year.
    iii. Logistics
    Proving high-quality logistics services
    Moving toward a rebound in shipments of electronic
    components, Alps’logistics business (operated by
    Alps Logistics Co., Ltd., which is listed on the Second
    Section of the Tokyo Stock Exchange), endeavored to
    expand its cargo handling volume by strengthening its
    global network and reinforcing its bases of operations
    in Japan. By leveraging our new transport system,
    we aim to ensure“undisputed quality,”enhance
    transport efficiency, make progress in rationalizing
    our operations and raise the quality of our business.
    Our execution of these measures, coupled with the
    recovery of the electronic components market, resulted
    in year-on-year increases in both sales and operating
    income.
    Logistics business sales rose 5.6% from the
    preceding fiscal year, to ¥47.5 billion, and operating
    income climbed 9.8%, to ¥3.8 billion.
    ALPS Business Report 2011
    07
    Management’
    s Discussion and Analysis of Operating Results
    2. ANALYSIS OF OPERATING PERFORMANCE DURING THE FISCAL YEAR UNDER REVIEW
    (4) Ordinary Income
    (6) Income Taxes
    The Company posted ordinary income of ¥23.1 billion,
    s figure
    up ¥21.4 billion from the previous fiscal year’
    of ¥1.6 billion. The primary contributor was higher
    operating income, although other expenses also rose
    as a result of higher foreign exchange losses, fueled by
    yen appreciation.
    Income taxes for the fiscal year under review were
    ¥5.9 billion, compared with zero during the preceding
    fiscal year. The main reasons for this rise were
    increased earnings by overseas Group companies and
    a decrease in deferred tax assets.
    (5) Income before Income Taxes
    (7) Minority Interests in Net Income of
    Income before income taxes was ¥21.2 billion, up
    ¥20.9 billion from the preceding fiscal year’
    s figure of
    ¥0.3 billion. Higher ordinary income was the principal
    reason for this improvement. The Company also
    posted higher extraordinary income, owing to ¥2.1
    billion in gains from changes in equity of affiliated
    companies. Extraordinary losses also grew, however,
    owing to the posting of a ¥3.5 billion loss on disaster
    accompanying the Great East Japan Earthquake.
    Consolidated Subsidiaries
    Minority interests in net income of consolidated
    subsidiaries was a positive ¥4.1 billion during the
    fiscal year under review, compared with a negative
    ¥0.2 billion during the preceding fiscal year.
    This situation was due primarily to earnings increases
    attributable to minority interests of Alpine Electronics,
    Inc., and Alps Logistics Co., Ltd.
    (8) Net Income (Loss)
    During the year, net income came to ¥11.1 billion,
    a ¥10.5 billion increase from the ¥0.5 billion posted
    in the preceding fiscal year. Net income per share
    improved to ¥62.14, from ¥3.18 in the previous year.
    Net Income (Loss) (Billions of ¥)
    Ordinary Income (Billions of ¥)
    30
    20
    24.6
    23.1
    20
    15
    13.1
    11.1
    10
    10
    1.6
    0
    5
    (10)
    0
    4.9
    4.4
    0.5
    (20)
    (23.3)
    (30)
    (70.0)
    (80)
    '07
    '08
    '09
    '10
    '11
    '07
    '08
    '09
    '10
    '11
    ALPS Business Report 2011
    08
    Management’
    s Discussion and Analysis of Operating Results
    3. LIQUIDITY AND SOURCES OF FUNDS
    ( 1 ) Cash Flows
    Cash flows from operating activities
    Cash flows from financing activities
    Net cash provided by operating activities came to
    ¥28.5 billion, compared with ¥28.9 billion in the
    previous fiscal year. Major sources of cash were ¥21.2
    billion in income before income taxes, ¥18.7 billion
    in depreciation and amortization and an ¥18.7 billion
    increase in notes and accounts payable. Main uses
    of cash included a ¥7.8 billion increase in notes and
    accounts receivable and a ¥10.9 billion increase in
    inventories.
    During the fiscal year under review, net cash provided
    by investing activities came to ¥5.1 billion, compared
    with ¥12.1 billion provided by these activities in
    the preceding fiscal year. The main source of cash
    was ¥26.8 billion in proceeds from long-term debt.
    The primary use of cash was ¥19.6 billion for the
    repayment of long-term debt.
    As a result of these activities and the impact of
    exchange rate changes on the yen conversions of cash
    and cash equivalents of overseas subsidiaries, cash
    and cash equivalents increased ¥9.7 billion, to ¥98.4
    billion as of the end of the fiscal year under review.
    Cash flows from investing activities
    Net cash used in investing activities during the year
    under review amounted to ¥20.9 billion, compared
    with ¥19.5 billion in the preceding fiscal year.
    The main use of cash was purchases of tangible and
    intangible fixed assets of ¥22.2 billion, mainly in the
    electronic components segment.
    Cash flows and capital expenditures (Billions of ¥)
    Interest coverage (Times)
    60
    60
    *Net cash provided by operating activities÷
    Payments for interest expense
    50
    40
    38.0
    40
    Capital structure (%)
    45.3
    43.1
    40.4
    38.6
    103.9
    27.4
    27.0
    '10
    '11
    47.2
    21.7
    20
    28.1
    24.7
    80
    18.4
    60
    31.0
    30
    103.3
    94.0
    100
    51.8
    0
    39.2
    40
    20
    15.7
    18.5
    14.8
    (20)
    37.1
    Debt/equity ratio
    Equity ratio
    Cash flows
    (43.7)
    Capital expenditures
    (60)
    0
    '07
    '08
    '09
    '10
    '11
    29.6
    20
    (40)
    10
    37.7
    0
    '07
    '08
    '09
    '10
    '11
    '07
    '08
    '09
    ALPS Business Report 2011
    09
    Management’
    s Discussion and Analysis of Operating Results
    3. LIQUIDITY AND SOURCES OF FUNDS
    (2) Assets, Liabilities and Net Assets
    Total assets at the end of the fiscal year were ¥427.5
    billion, up ¥16.5 billion from one year earlier.
    Owing to such factors as the rise in cash and cash
    equivalents and higher inventories, current assets as
    of March 31, 2011, were ¥268.9 billion, ¥22.1 billion
    higher than one year earlier.
    Fixed assets amounted to ¥158.5 billion, down
    ¥5.5 billion, attributable mainly to the revaluation of
    investment securities.
    Current liabilities at the end of the fiscal year
    were ¥152.6 billion, up ¥6.9 billion year on year,
    owing to such factors as an increase in accrued
    bonuses and the recording of a provision for loss on
    disaster.
    Non-current liabilities were up ¥5.3 billion year
    on year, to ¥84.0 billion, owing to such factors as an
    increase in long-term debt.
    ALPS Business Report 2011
    10
    Business and Other Risks
    The following risks pertain to business and accounting conditions and may have a material impact on investors’
    decisions.
    In addition, forward-looking statements contained within this document are based on judgments made at the end
    of the consolidated fiscal year under review.
    1. EFFECT OF WORLD MARKET
    CONDITIONS
    3. CUSTOMER NEEDS AND THE INTRODUCTION
    OF NEW TECHNOLOGIES
    The Alps Group (the Company and consolidated
    subsidiaries) relies principally on markets outside of
    Japan, with overseas net sales accounting for 74.1%
    of the Company’
    s total net sales for the year ended
    March 31, 2011. As such, any economic slowdown
    in the U.S., European and/or Asian markets involving
    a decline in consumer demand and/or corporate
    spending will adversely impact the Company’
    s
    business, financial condition and results of operations.
    In particular, as most of the Company’
    s products
    are components to be sold to manufacturers of end
    products, the level of their production, which may
    experience fluctuations caused by consumer demand
    and corporate spending, has a significant effect on the
    Company’
    s business.
    There can be no assurance that the Company’
    s
    business, financial condition and results of operations
    will not be affected by adverse economic conditions or
    decreases in the production levels of its customers.
    The markets in which the Company operates are
    subject to rapidly changing technology, changes in
    customers’needs and the frequent introduction of new
    products and services, with the development of new
    technologies, products, and services often making
    existing products or services obsolete or unmarketable,
    or significantly reducing their prices within a relatively
    short time frame. The Company may not be successful
    in identifying new technologies or in developing
    new products in response to technological changes
    or changes in customers’requirements. Failure to
    anticipate or respond rapidly to advances or changes
    s
    in technology and failure to adapt the Company’
    products to customer needs or to introduce new
    products in a timely manner could adversely affect the
    s business, operating results and financial
    Company’
    condition.
    2. COMPETITION
    Given its wide range of products and the breadth of
    its international operations, the Company competes
    with various manufacturers. While the Company
    intends to continue to work to satisfy customers
    through developing new products, providing highquality products and enhancing its global network,
    the Company does anticipate increased market
    competition and therefore there can be no assurance
    that the Company will be able to maintain its market
    share, owing to potential losses of orders, or its
    competitive edge.
    ALPS Business Report 2011
    11
    Business and Other Risks
    4. CUSTOMERS’PRODUCTION PLANS
    The Company’
    s business is directly affected by the
    production plans of its customers, who are generally
    manufacturers. Customers’production plans are
    subject to their demand forecasts, which vary with
    the cyclical and seasonal trends of consumers,
    the introduction of new types of products, the
    development of new specifications, the rate of
    technological progress and the introduction of new
    regulations.
    The unpredictability of such plans and orders may
    affect the Company’
    s ability to draw up its production,
    sales, research and development and capital
    expenditure plans in the medium and long term.
    6. SUPPLY STRUCTURE FOR SPECIFIC
    COMPONENTS
    The Company makes every effort to manufacture
    critical components within the Group. Some critical
    components, however, are supplied by external
    companies. Accordingly, due to natural disasters
    or other causes, these suppliers may be unable to
    provide the necessary volume of components to the
    Company on schedule. Such circumstances would lead
    to production delays and lost sales opportunities and
    could affect the performance and financial position of
    the Company.
    5. RISKS INHERENT TO OVERSEAS
    OPERATIONS
    7. FLUCTUATIONS IN OPERATING
    RESULTS
    The Company conducts production and sales activities
    in the United States, Europe, China and other Asian
    countries. There are risks inherent to operating in
    these overseas markets, including unforeseen changes
    in laws and taxation and disadvantageous political
    and economic factors, as well as terrorism, war and
    other social disturbances. Accordingly, the occurrence
    of any of these conditions would interfere with the
    operations of the Company.
    The Company’
    s operating results may vary due to
    factors outside the Company’
    s control. The Company’
    s
    business and operating results are expected to continue
    to be subject to risk from the following factors:
    changes in general economic and business conditions,
    success or failure in introducing sets of products,
    changes in larger customers’strategies, cancellation of
    large orders, and other significant changes, such as the
    bankruptcies of major customers or the disappearance
    from business of large customers as the result of M&A
    activities carried out by other companies.
    Unfavorable changes in any of the above factors
    s business, financial
    could affect the Company’
    condition and operating results.
    ALPS Business Report 2011
    12
    Business and Other Risks
    8. INTELLECTUAL PROPERTY
    9. FOREIGN EXCHANGE RISKS
    Patents and other intellectual property are an important
    competitive factor because of the emphasis on
    product innovation in the markets for a number of the
    Company’
    s products. The Company relies to a large
    extent on technology it has developed, and it seeks
    to protect such technology through a combination of
    patents, trademarks and other intellectual property
    rights. Any interference in the Company’
    s exercise of
    such rights could have a material adverse effect on the
    Company’
    s financial condition and operating results.
    In the course of its business, the Company is
    subject to claims by third parties alleging that the
    Company’
    s products or processes infringe on their
    intellectual property rights. If these claims were to be
    successful, these claims may affect the performance
    and financial position of the Company.
    Moreover, the Company’
    s products incorporate
    intellectual property rights developed by third parties.
    There can be no assurance that, in the future,
    the owners of such patents will extend such patent
    rights to the Company. The Company’
    s business could
    be affected by any of these developments.
    The Company operates in many parts of the world
    and, as a result, is affected by fluctuations in foreign
    exchange rates. The Company’
    s results of operations
    are particularly negatively affected by appreciation of
    the yen against the U.S. dollar and/or the euro.
    The Company engages in foreign exchange
    hedging activities by entering into foreign exchange
    forward contracts and through currency options and
    through measures to minimize foreign exchange risks,
    such as through counterbalancing foreign currency
    obligations. However, exchange rate fluctuations may
    exceed the Company’
    s expectations, and there can be
    no assurance that such hedging activities or measures
    will significantly limit the impact of movements in
    s results of operations.
    exchange rates on the Company’
    In addition, the Company hedges against the risk of
    interest rate fluctuations on certain of its asset and
    liabilities holdings. However, interest rate fluctuations
    could increase the Company’
    s interest rate burden.
    10. PUBLIC LAWS AND REGULATIONS
    In the countries in which it operates, the Company is
    subject to various government laws and regulations,
    including business and investment permits, as well as
    customs duties and other import/export regulations.
    These laws and regulations may restrict the business
    activities of the Company and lead to an increase in
    costs. Accordingly, these laws and regulations may
    affect the performance and financial position of the
    Company.
    ALPS Business Report 2011
    13
    Business and Other Risks
    11. RISKS RELATING TO ENVIRONMENTAL
    POLLUTION
    The Company takes steps to ensure implementation
    of environmental risk prevention measures based on
    the Alps Group’
    s Environmental Charter as a part
    of its CSR activities. Specifically, such measures
    include prevention of chemical substance leakage,
    thorough control of effluents and emissions, and the
    purification of soil and groundwater. However, despite
    the Company’
    s efforts to protect the environment,
    there can be no assurance that future environmental
    pollution will not arise during the course of its
    business activities. Accordingly, unforeseen
    environmental impacts may lead to an increase in costs
    associated with countermeasures taken and adversely
    affect the performance and financial position of the
    Company.
    12. RISK RELATING TO FUND
    MANAGEMENT
    In addition to a syndicated loan from correspondent
    banks, the Group has in place a syndication-method
    commitment line contract. However, in the event that
    an infringement of financial covenants of this contract
    occurs, the Group may be issued a claim to repay
    the borrowed funds in advance, which may affect its
    financial position.
    13. NATURAL DISASTERS
    The Company recognizes the risk of natural disasters
    such as earthquakes and thoroughly implements
    strategies to prevent and protect each of its domestic
    and overseas production facilities from being
    adversely affected by such catastrophes. Although the
    Company was able to effectively minimize adverse
    affects to its business during past natural disasters, in
    the event that it experiences any greater-than-expected
    natural disaster, the Company may incur substantial
    damages.
    The Great East Japan Earthquake, which struck
    on March 11, 2011, presented the possibility that the
    risks described below could materialize, which could
    have a negative impact on the operating performance
    and financial condition of the Alps Group.
    i. Restrictions on the use of or interruptions to electric
    power, gas, water and other infrastructure that
    would slow or halt operations
    ii. The slowdown or halting of operations owing to an
    expanding area of potential radiation contamination
    resulting from accidents at the Fukushima Daiichi
    Nuclear Power Station
    iii. The inability of suppliers to provide sufficient
    materials and other supplies, thereby restricting
    product shipments
    ALPS Business Report 2011
    14
    Business and Other Risks
    14. RISKS RELATED TO IMPAIRMENT
    ACCOUNTING
    The Alps Group owns a variety of assets to facilitate
    its operations. Owing to the application of impairment
    accounting, declines in the market values of such
    assets could affect future cash inflows, affecting the
    Alps Group’
    s operating performance.
    15. MARKET VALUE FLUCTUATION RISK
    ON MARKETABLE SECURITIES
    Although the Alps Group does not hold marketable
    securities for trading purposes, all the securities that
    we do hold are marked to market. Consequently, stock
    market price fluctuations could affect the operating
    performance and financial condition of the Alps
    Group.
    ALPS Business Report 2011
    15
    FORECASTS FOR THE FISCAL YEAR ENDING MARCH 31, 2012
    Underpinned by ongoing growth in China, India and other emerging markets, the world economy is expected to
    recover, albeit gradually. Demand is likely to be sluggish, however, affected by political unrest in the Middle East
    and fiscal austerity in European countries, and the outlook in Japan remain opaque in the aftermath of the Great
    East Japan Earthquake. Owing to negative factors such as these, we expect the first half of the fiscal year to be
    difficult. Until conditions in Japan return to normality following the following the disaster-prompted confusion,
    to prevent disruptions in our supply chain we will redouble our vigilance in procuring parts and materials and in
    managing deliveries to customers. Through these efforts, we plan to get production back on track and proceed as
    planned with our new product introduction and sales expansion plans.
    1. Electronic Components Segment
    2. Audio Equipment Segment
    As our sixth medium-term management plan,
    which commenced in April 2010, enters its second
    year, we will proceed in our efforts to make further
    improvements in the electronic components segment
    that should result in increased sales and a realigned
    product portfolio. In the AUTO division, we will
    leverage the technological expertise we have cultivated
    to accelerate deployment in affordably priced models
    through the standardization and consolidation of parts.
    Concentrating meanwhile on luxury automobiles, we
    aim to expand sales of new modular products. In the
    HM&I division, we plan to move ahead steadily with
    plans to increase production of such components as
    touch panels, compact switches and sensors, to meet
    expected growth in the market for mobile devices.
    In terms of profits, we are working to achieve an
    operating margin of more than 7%. To this end, we
    will focus on new product launches, development and
    sales expansion. Meanwhile, we will push forward
    aggressively with initiatives designed to lower cost
    of sales on existing products, thereby boosting their
    profitability.
    In the fiscal year ending March 31, 2012, we
    anticipate sales in this segment of ¥300.0 billion, up
    1.3% year on year, and operating income of ¥15.0
    billion, up 15.7%.
    We expect the operating environment surrounding the
    audio equipment segment to grow more challenging,
    owing to escalating raw materials costs and ongoing
    yen appreciation coupled with the lingering effects
    of the disasters in Japan. Although the direct impact
    of the Great East Japan Earthquake on our operations
    has been slight, forecasting future conditions is
    problematic, confounded by the potential difficulties
    in sourcing parts and materials from suppliers, the
    likelihood that electricity shortages during the summer
    months could affect production line operations and a
    possible drop in consumer purchasing propensity.
    In the audio equipment segment, we forecast sales
    of ¥188.0 billion, a 5.2% decrease from the previous
    year, and operating income of ¥5.0 billion, down 55.1%.
    ALPS Business Report 2011
    16
    FORECASTS FOR THE FISCAL YEAR ENDING MARCH 31, 2012
    3. Logistics Segment
    We anticipate numerous uncertainties for the logistics
    segment in the upcoming year. In addition to customer
    supply chain revisions and lower utilization ratios
    caused by restricted electrical supply, this segment
    is affected by high fuel costs and shifts in personal
    consumption. We will work to secure sales and
    profits in this segment by promoting operational
    efficiencies as cargo volumes recover. Furthermore,
    we will continue with our deployment of key measures
    designed to generate new growth, such as expansion
    of our global network. We will work to commence
    operations in a timely manner at Alps Electric Korea
    Co., Ltd., which we established in March 2011, and
    will forge ahead with the establishment of bases to
    fortify our operations in inland China.
    For the fiscal year ending March 31, 2012, we
    forecast sales of ¥45.3 billion, up 4.6% year on year,
    and operating income of ¥3.3 billion, down 14.1%, for
    the logistics segment.
    Adding forecast figures for the Others segment to
    the above, the Alps Group forecasts the following
    consolidated operating results for the fiscal year
    ending March 31, 2012.
    Net sales
    Operating income
    Ordinary income
    Net income
    ¥540.0 billion
    (down 1.9% year on year)
    ¥24.0 billion
    (down 16.9% year on year)*
    ¥22.0 billion
    (down 5.1% year on year)
    ¥12.0 billion
    (down 7.8% year on year)
    These forecasts assume exchange rates of US$1.00 =
    ¥80 and €1.00 = ¥120.
    * After deducting operating income derived from intersegment sales.
    ALPS Business Report 2011
    17
    CONSOLIDATED BALANCE SHEETS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    As of March 31, 2011 and 2010
    Thousands of
    U.S. dollars (Note 1)
    Millions of yen
    ASSETS
    Current assets:
    2011
    Cash and time deposits (Notes 16 and 17)
    Investment securities (Notes 4 and 16)
    ¥
    99,031
    ー
    2010
    ¥
    89,287
    2011
    $
    1,190,276
    0
    ー
    Notes and accounts receivable-trade (Note 17):
    Unconsolidated subsidiaries and affiliated companies
    Other
    Allowance for doubtful accounts
    Inventories (Note 5)
    Deferred tax assets (Note 15)
    Other current assets
    Total current assets
    Property, plant and equipment (Note 6):
    Land (Note 10)
    1,196
    8,786
    88,638
    1,117,572
    (1,179)
    (874)
    (14,171)
    56,567
    48,150
    679,892
    7,526
    4,538
    90,457
    13,307
    15,896
    159,940
    268,965
    246,831
    3,232,752
    29,511
    29,952
    354,699
    Buildings and structures
    115,060
    116,838
    1,382,933
    Machinery and equipment
    254,780
    267,640
    3,062,260
    5,597
    2,655
    67,272
    404,948
    417,085
    4,867,164
    (295,654)
    (308,394)
    (3,553,534)
    109,294
    108,691
    1,313,630
    9,867
    11,697
    118,594
    Construction in progress
    Less accumulated depreciation and impairment losses
    Property, plant and equipment, net
    Investments and other assets:
    731
    92,982
    Intangible assets, net
    Investments in and advances to unconsolidated subsidiaries and
    affiliated companies (Notes 4 and 17)
    Investment securities (Notes 4 and 17)
    Deferred tax assets (Note 15)
    Other assets (Note 7)
    Total investments and other assets
    Total assets
    6,325
    6,406
    76,022
    16,908
    18,443
    203,221
    5,458
    5,712
    65,601
    10,713
    13,165
    128,762
    49,271
    55,423
    ¥ 427,530
    ¥ 410,945
    592,200
    $
    5,138,582
    See accompanying notes.
    ALPS Business Report 2011
    18
    CONSOLIDATED BALANCE SHEETS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    As of March 31, 2011 and 2010
    Thousands of
    U.S. dollars (Note 1)
    Millions of yen
    LIABILITIES AND NET ASSETS
    Current liabilities:
    2011
    Short-term loans payable (Notes 6 and 17)
    ¥
    Long-term debt due within one year (Notes 6 and 17)
    31,754
    2010
    ¥
    19,059
    35,792
    2011
    $
    14,211
    381,659
    229,074
    Notes and accounts payable-trade (Note 17) :
    Unconsolidated subsidiaries and affiliated companies
    Other
    Income taxes payable
    Accrued expenses
    Deferred tax liabilities (Note 15)
    Non-current liabilities:
    774
    1,476
    9,303
    49,427
    50,789
    594,074
    2,428
    3,226
    29,183
    31,106
    26,126
    373,870
    282
    65
    3,389
    Other current liabilities (Note 17)
    17,865
    14,047
    214,724
    Total current liabilities
    152,695
    145,732
    1,835,276
    Long-term debt (Notes 6 and 17)
    69,134
    66,396
    830,937
    Accrued employees' severance and pension costs (Note 7)
    3,012
    2,955
    36,202
    Deferred tax liabilities (Note 15)
    5,343
    4,719
    64,219
    Other non-current liabilities (Note 17)
    6,595
    4,681
    79,267
    Total non-current liabilities
    84,084
    78,751
    1,010,625
    236,779
    224,483
    2,845,901
    Total liabilities
    Contingent liabilities (Note 8)
    Net assets (Note 9):
    Shareholders’equity:
    Common stock:
    Authorized - 500,000,000 shares
    23,624
    23,624
    283,942
    Capital surplus
    45,587
    45,587
    547,921
    Retained earnings
    69,808
    60,494
    839,039
    Treasury stock - 2,327,535 shares in 2011 and 2,335,649 shares in 2010
    (3,528)
    (3,542)
    (42,404)
    135,491
    126,163
    1,628,498
    Net unrealized gains on securities
    3,326
    4,018
    39,976
    Revaluation reserve for land (Note 10)
    (526)
    (569)
    (6,322)
    (22,821)
    (16,907)
    (274,291)
    (20,021)
    (13,458)
    (240,637)
    75,281
    73,757
    904,820
    190,751
    186,462
    2,292,681
    ¥ 427,530
    ¥ 410,945
    Issued - 181,559,956 shares in 2011 and 2010
    Total shareholders’equity
    Accumulated other comprehensive income
    Foreign currency translation adjustments
    Total accumulated other comprehensive income
    Minority interests
    Total net assets
    Total liabilities and net assets
    Net assets
    ¥
    644.24
    5,138,582
    U.S. dollars (Note 1)
    Yen
    2011
    Amounts per share of common stock:
    $
    2010
    ¥
    628.85
    2011
    $
    7.74
    See accompanying notes.
    ALPS Business Report 2011
    19
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    For the years ended March 31, 2011, 2010 and 2009
    Thousands of
    U.S. dollars (Note 1)
    Millions of yen
    2011
    2010
    Unaudited
    2009
    550,669
    ¥ 493,639
    ¥ 538,995
    441,498
    415,095
    484,079
    80,299
    73,801
    81,440
    965,132
    521,797
    488,896
    565,519
    6,271,599
    28,872
    4,743
    (26,524)
    347,019
    520
    543
    1,326
    6,250
    Interest expense
    (1,836)
    (1,802)
    (972)
    (22,067)
    Foreign exchange (losses) gains, net
    (4,011)
    (1,839)
    1,815
    (48,209)
    Loss on disaster (Notes 21)
    (3,443)
    ー
    ー
    (41,382)
    1,167
    (1,283)
    (32,816)
    14,026
    (7,603)
    (4,381)
    (30,647)
    (91,382)
    21,269
    362
    (57,171)
    255,637
    7,160
    4,150
    3,471
    86,058
    (1,190)
    (4,097)
    14,564
    (14,303)
    ¥
    Net sales
    Costs and expenses (Note 12):
    Cost of sales
    Selling, general and administrative expenses (Notes 11 and 12)
    Operating income (loss)
    Other income (expenses):
    Interest and dividend income
    Other, net (Notes 13 and 14)
    Income (loss) before income taxes and minority interests
    Income taxes (Note 15) :
    Current
    Deferred
    2011
    $
    6,618,618
    5,306,467
    5,970
    53
    18,035
    71,755
    15,299
    309
    (75,206)
    183,882
    Minority interests in (earnings) losses of consolidated subsidiaries
    (4,162)
    261
    5,142
    (50,024)
    Net income (loss)
    11,137
    570
    (70,064)
    133,858
    4,162
    (261)
    ー
    50,024
    15,299
    309
    ー
    183,882
    Income (loss) before minority interests
    Minority interests in earnings (losses) of consolidated subsidiaries
    Income before minority interests
    Other comprehensive income
    Net unrealized (losses) gains on securities
    Foreign currency translation adjustments
    Share of other comprehensive income of affiliated companies accounted for by the equity method
    Comprehensive income (*1)
    (903)
    3,363
    ー
    (10,853)
    (7,867)
    (1,100)
    ー
    (94,555)
    (354)
    (903)
    ー
    (9,124)
    1,360
    (4,255)
    (109,663)
    ¥
    6,175
    ¥
    1,669
    ¥
    ー
    $
    74,219
    ¥
    3,881
    ¥
    788
    ¥
    ー
    $
    46,647
    Comprehensive income attributable to
    Shareholders
    Minority interests
    (*1)
    2,294
    881
    27,572
    ー
    Effective the year ended March 31, 2011, the Company and its consolidated subsidiaries adopted the Accounting Standard for Presentation of Comprehensive
    Income (Accounting Standards Board of Japan (ASBJ) Statement No.25 issued on June 30, 2010). Since the standard requires disclosure of comparable information
    for the immediately preceding year only, comprehensive income for the year ended March 31, 2009 is not presented.
    U.S. dollars (Note 1)
    Yen
    2011
    Amounts per share of common stock: Net income (loss)
    Diluted net income
    Cash dividends applicable to the year
    ¥
    2010
    2009
    3.18
    ¥ (390.93)
    ー
    2.74
    ー
    ー
    10.00
    ー
    10.00
    0.12
    62.14
    ¥
    2011
    $
    0.75
    See accompanying notes.
    ALPS Business Report 2011
    20
    CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    For the years ended March 31, 2011, 2010 and 2009
    Millions of yen
    Accumulated other comprehensive income
    Shareholders’equity
    Number of
    shares of
    common stock
    Balance at March 31, 2008
    181,559,956
    Common
    stock
    Capital
    surplus
    Retained
    earnings
    Treasury
    stock
    ¥ 23,624 ¥ 45,587 ¥ 133,450 ¥ (3,551)
    Net loss
    Cumulative effect on prior years of changes
    in accounting policies applied to foreign
    subsidiaries
    Net
    unrealized
    gains on
    securities
    ¥
    Foreign
    Revaluation
    currency
    reserve translation
    for land adjustments
    2,396 ¥
    (569)
    Minority
    interests
    ¥ (7,083) ¥ 86,464 ¥ 280,318
    (70,064)
    (70,064)
    144
    144
    (3,585)
    Dividends
    Purchase of treasury stock
    (0)
    Disposal of treasury stock
    (5)
    (3,585)
    (4)
    (4)
    14
    9
    Changes in items other than
    shareholders’equity, net
    (428)
    Balance at March 31, 2009
    181,559,956
    23,624
    45,587
    Total
    net assets
    59,940
    (3,541)
    (569)
    1,968
    (8,799)
    (12,800)
    (22,027)
    (15,882)
    73,664
    184,791
    Net income
    570
    570
    Cumulative effect on prior years of
    adopting a new U.S. accounting standard to
    foreign subsidiaries
    (16)
    (16)
    Dividends
    ー
    Purchase of treasury stock
    (0)
    Disposal of treasury stock
    (2)
    (2)
    1
    1
    Changes in items other than
    shareholders' equity, net
    2,050
    Balance at March 31, 2010
    181,559,956
    23,624
    45,587
    60,494
    Net income
    11,137
    Dividends
    (1,792)
    (3,542)
    93
    1,118
    (16,907)
    73,757
    186,462
    11,137
    (1,792)
    (2)
    Purchase of treasury stock
    (9)
    Disposal of treasury stock
    (2)
    16
    7
    (22)
    Reversal of revaluation reserve for land
    (22)
    Changes in items other than
    shareholders' equity, net
    Balance at March 31, 2011
    (569)
    4,018
    (1,025)
    (692)
    181,559,956
    ¥ 23,624 ¥ 45,587 ¥ 69,808 ¥ (3,528)
    ¥
    43
    3,326 ¥
    (5,914)
    1,524
    (5,039)
    (526) ¥ (22,821) ¥ 75,281 ¥ 190,751
    Thousands of U.S. dollars (Note 1)
    Accumulated other comprehensive income
    Shareholders’equity
    Common
    stock
    Balance at March 31, 2010
    Capital
    surplus
    Retained
    earnings
    Treasury
    stock
    $ 283,942 $ 547,921 $ 727,091 $ (42,572)
    Net income
    133,858
    Dividends
    (21,538)
    Foreign
    Revaluation
    currency
    reserve translation
    for land adjustments
    $ 48,293 $
    Minority
    interests
    Disposal of treasury stock
    (108)
    Reversal of revaluation reserve for land
    (264)
    Total
    net assets
    (6,839) $ (203,209) $ 886,502 $ 2,241,129
    133,858
    (21,538)
    (24)
    Purchase of treasury stock
    (24)
    192
    84
    (264)
    (8,317)
    Changes in items other than shareholders' equity, net
    Balance at March 31, 2011
    Net
    unrealized
    gains on
    securities
    $ 283,942 $ 547,921 $ 839,039 $ (42,404)
    517
    (71,082)
    18,318
    (60,564)
    $ 39,976 $ (6,322) $ (274,291) $ 904,820 $ 2,292,681
    See accompanying notes.
    ALPS Business Report 2011
    21
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    For the years ended March 31, 2011, 2010 and 2009
    Thousands of
    U.S. dollars (Note 1)
    Millions of yen
    2011
    2010
    Cash flows from operating activities:
    Income (loss) before income taxes and minority interests
    Depreciation and amortization
    Impairment loss
    Increase (decrease) in allowance for doubtful accounts
    Increase (decrease) in accrued bonuses
    Increase (decrease) in accrued product warranties
    Increase in reserve for loss on disaster
    Decrease in prepaid pension costs
    Increase (decrease) in accrued expenses
    Interest and dividend income
    Interest expense
    Net gains on sales and disposal of fixed assets
    Loss on write-down of investment securities
    Gain on change in share of net assets of a consolidated subsidiary resulted
    from stock issuance by the subsidiary
    (Increase) decrease in notes and accounts receivable-trade
    (Increase) decrease in inventories
    Increase (decrease) in notes and accounts payable-trade
    Business structure improvement expenses
    (Increase) decrease in income taxes receivable
    Gain on valuation of options
    Other, net
    Subtotal
    Interest and dividends received
    Interest expense paid
    Payments for income taxes
    Net cash provided by operating activities
    ¥
    ¥
    Cash flows from financing activities:
    Net (decrease) increase in short-term loans payable
    Proceeds from long-term loans payable
    Repayment of long-term loans payable
    Redemption of bonds
    Proceeds from stock issuance to minority shareholder of a consolidated subsidiary
    Cash dividends paid
    Cash dividends paid to minority shareholders
    Repayments of lease obligations
    Proceeds from sale and leaseback transactions
    Proceeds from sales of property, plant and equipment with installment buy-back obligation
    Other, net
    Net cash provided by financing activities
    ¥ (57,171)
    29,942
    27,164
    2,848
    (2,863)
    (815)
    $
    ー
    ー
    1,698
    (406)
    (543)
    1,802
    (236)
    263
    1,218
    (3,940)
    (1,326)
    972
    (533)
    4,557
    (2,191)
    ー
    ー
    (26,334)
    (7,900)
    (21,028)
    (10,966)
    3,479
    20,224
    1,525
    2,731
    ー
    ー
    6,042
    37,964
    843
    (1,935)
    (8,320)
    28,552
    1,947
    32,735
    497
    (1,568)
    (2,694)
    28,970
    30,605
    20,082
    (22,748)
    1,224
    (3,556)
    (2,578)
    1,304
    24,386
    1,353
    (955)
    (9,779)
    15,005
    (19,877)
    (17,523)
    (41,145)
    1,776
    (2,340)
    (37)
    262
    (0)
    (127)
    (3,000)
    3,000
    (598)
    (20,941)
    1,311
    (2,419)
    (51)
    275
    (0)
    (44)
    941
    (5,144)
    (685)
    386
    (1,761)
    (789)
    ー
    ー
    (3,347)
    26,837
    (19,629)
    ー
    3,000
    (1,792)
    (939)
    (951)
    17
    2,000
    (73)
    5,123
    (2,960)
    ¥
    362
    21,223
    87
    (1,104)
    196
    515
    2011
    255,637
    224,880
    445
    1,094
    28,101
    13,822
    19,832
    21,526
    4,868
    (6,250)
    22,067
    (626)
    421
    4,379
    148
    (288)
    Cash flows from investing activities:
    Purchase of property, plant and equipment
    Proceeds from sales of property, plant and equipment
    Purchase of intangible assets
    Purchase of investment securities
    Proceeds from sales of investment securities
    Payments for capital investments
    Purchase of stocks of subsidiaries and affiliates
    Purchase of short-term investment securities
    Proceeds from sales of short-term investment securities
    Other, net
    Net cash used in investing activities
    Effect of exchange rate change on cash and cash equivalents
    Net increase (decrease) in cash and cash equivalents
    Cash and cash equivalents at beginning of period
    Cash and cash equivalents at end of period (Note 16)
    21,269
    18,710
    37
    91
    2,338
    1,150
    1,650
    1,791
    405
    (520)
    1,836
    (52)
    35
    2009
    9,774
    88,722
    98,496
    ¥
    (94,952)
    (131,803)
    52,632
    1,779
    (3,462)
    ー
    72,621
    456,298
    10,132
    (23,257)
    (100,000)
    343,173
    (238,906)
    21,346
    (28,125)
    ー
    ー
    (1,081)
    (868)
    (19,532)
    (49,065)
    (445)
    3,149
    (0)
    (1,526)
    (36,058)
    36,058
    (7,188)
    (251,695)
    (7,000)
    53,587
    (5,568)
    (28,600)
    30,673
    3,353
    (851)
    (40,228)
    322,560
    (235,925)
    ー
    ー
    ー
    ー
    36,058
    (21,539)
    (11,286)
    (11,430)
    204
    24,038
    (877)
    61,575
    ー
    (3,584)
    (636)
    (1,201)
    (635)
    (317)
    1,031
    ー
    ー
    ー
    16
    12,195
    (47)
    (1,236)
    20,397
    68,325
    88,722
    28,026
    (4,820)
    (10,854)
    ¥
    79,179
    68,325
    $
    (35,577)
    117,476
    1,066,370
    1,183,846
    See accompanying notes.
    ALPS Business Report 2011
    22
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    1. BASIS OF PREPARATION OF
    CONSOLIDATED FINANCIAL STATEMENTS
    The accompanying consolidated financial statements
    of Alps Electric Co., Ltd. (the“Company”) and
    consolidated subsidiaries are prepared on the basis
    of accounting principles generally accepted in
    Japan, which are different in certain respects as
    to the application and disclosure requirements of
    International Financial Reporting Standards, and are
    compiled from the consolidated financial statements
    prepared by the Company as required by the Financial
    Instruments and Exchange Law of Japan.
    In preparing the accompanying consolidated
    financial statements, certain reclassifications have been
    made to the consolidated financial statements issued
    domestically in order to present them in a form which
    is more familiar to readers outside Japan. In addition,
    the notes to the accompanying consolidated financial
    statements include information which is not required
    under accounting principles generally accepted in
    Japan but is presented herein as additional information.
    The accompanying consolidated financial
    statements are stated in Japanese yen. The translation
    of Japanese yen amounts into U.S. dollar amounts is
    included solely for the convenience of readers outside
    Japan at the prevailing exchange rate on March 31,
    2011 which was ¥83.2 to U.S. $1.00. The translation
    should not be construed as a representation that the
    Japanese yen could be converted into U.S. dollars at
    the above or any other rate of exchange.
    ALPS Business Report 2011
    23
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ( a ) Consolidation
    ( f ) Inventories
    The accompanying consolidated financial statements
    include the accounts of the Company and substantially
    all of its subsidiaries (collectively, the“Companies”).
    All significant intercompany transactions and accounts
    are eliminated in consolidation.
    ( b ) Equity method
    Inventories held by the Company, its domestic
    consolidated subsidiaries and its foreign consolidated
    subsidiaries in Asia are principally stated at the lower
    of average cost or net selling value. Inventories held
    by its foreign consolidated subsidiaries in the United
    States and Europe are stated at the lower of moving
    average cost or market.
    Investments in affiliated companies are accounted for
    by the equity method.
    ( g ) Property, plant and equipment and
    depreciation (excluding leased assets)
    ( c ) Cash equivalents
    In preparing the accompanying consolidated
    statements of cash flows, the Company considers all
    highly liquid investments with a maturity of three
    months or less when purchased to be cash equivalents.
    ( d ) Investment securities
    The Company classifies investment securities
    other than those in subsidiaries and affiliates into
    three categories: trading, held-to-maturity or other
    securities. Trading securities are carried at fair value
    and held-to-maturity securities are carried at amortized
    cost. Marketable securities classified as other
    securities are carried at fair value with any changes in
    unrealized gain or loss, net of income taxes, included
    directly in net assets. Non-marketable securities
    classified as other securities are carried at cost.
    Cost of securities sold is determined by the moving
    average method.
    Property, plant and equipment is stated at cost.
    The Company and its foreign consolidated subsidiaries
    compute depreciation of property, plant and equipment
    by the straight-line method over the estimated useful
    lives of the respective assets, while its domestic
    consolidated subsidiaries apply the declining-balance
    method, except with respect to certain buildings, at
    rates based on their respective estimated useful lives.
    Depreciation of buildings purchased after March 31,
    1998 is computed by the straight-line method by the
    domestic consolidated subsidiaries.
    The estimated useful lives are summarized as
    follows:
    Buildings and structures
    2 - 80 years
    Machinery and equipment 1 - 25 years
    ( e ) Allowance for doubtful accounts
    The allowance for doubtful accounts is provided
    at an amount sufficient to cover possible losses on
    collection. The allowance consists of the estimated
    uncollectible amounts with respect to specific
    receivables plus a percentage based on historical credit
    losses.
    ALPS Business Report 2011
    24
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ( h ) Intangible assets and amortization
    (excluding leased assets)
    Intangible assets consist of software and goodwill.
    Goodwill means the net excess of the acquisition
    cost of the Company’
    s investments in consolidated
    subsidiaries over the fair value of the net assets of
    those companies and is amortized by the straight-line
    method over a period of 5 years. Software for internal
    use is amortized by the straight-line method over
    its estimated useful lives ranging from 3 to 5 years.
    Software for sale to the market is amortized at the
    greater of either the amount based on sales in the year,
    as a proportion of total estimated sales, or the amount
    calculated on a straight-line basis over the remaining
    salable period.
    ( j ) Foreign currency translation
    Foreign currency transactions
    All receivables and payables denominated in foreign
    currencies are translated into Japanese yen at the
    exchange rates prevailing at the balance sheet date.
    Foreign currency financial statements
    The assets and liabilities of the foreign consolidated
    subsidiaries are translated into Japanese yen at current
    exchange rates prevailing at the balance sheet date.
    Revenue and expense accounts are translated at the
    average exchange rates prevailing during the year.
    Foreign currency translation adjustments are included
    in net assets.
    ( k ) Accrued employees’bonuses
    ( i ) Leased assets
    Assets held under finance leases, those leases which
    transfer the ownership of the leased assets to the
    lessees, are depreciated by the same method as used
    for other property, plant and equipment.
    Assets held under finance leases, except those leases
    which transfer the ownership of the leased assets to
    the lessees, are depreciated by the straight-line method
    over their useful lives, which are the same as the term
    of the lease. Finance leases entered into on or before
    March 31, 2008 which do not transfer the ownership
    of the leased assets to the lessees, are accounted for as
    operating leases.
    Accrued employees’bonuses at the balance sheet
    date are based on an estimate of the amounts to be
    paid as bonuses by the Company and certain of its
    consolidated subsidiaries for services rendered by
    employees by that date.
    ( l ) Accrued directors’bonuses
    Accrued directors’bonuses at the balance sheet
    date are based on an estimate of the amounts to be
    paid as bonuses by the Company and certain of its
    consolidated subsidiaries for services rendered by
    directors by that date.
    (m) Accrued warranty costs
    The Company provides accrued warranty costs for any
    specific claims on goods sold. Certain subsidiaries
    provide accrued warranty costs for goods sold based
    on historical experience of actual warranty claims.
    ( n ) Reserve for losses on purchases of inventories
    The Company provides reserve for losses on purchases
    of inventories at an amount sufficient to cover possible
    losses on open purchase orders.
    ALPS Business Report 2011
    25
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ( o ) Accrued employees’severance and pension
    costs
    The Company and certain of its domestic and foreign
    consolidated subsidiaries accrue employees’severance
    and pension costs at an amount calculated based on
    the projected benefit obligation and the fair value of
    plan assets as adjusted for unrecognized actuarial gain
    or loss and unrecognized prior service cost. Actuarial
    gain or loss is amortized by the straight-line method
    over a period within the average remaining years of
    service of the eligible employees (mainly 15 or 16
    years). Prior service cost is being amortized by the
    straight-line method over a period within the average
    remaining years of service of the eligible employees
    (1 year except for certain domestic consolidated
    subsidiaries for which it ranges from 4 to 13 years).
    ( s ) Basis for revenue recognition on finance leases
    With respect to finance leases for which the ownership
    of the leased assets is not transferred to the lessees,
    the Company, as a lessor, recognizes sales at the
    amount of lease income and cost of sales at the amount
    of lease income less interest at the time the Company
    receives the lease fee.
    ( t ) Income taxes
    The Company and its domestic consolidated
    subsidiaries provide accrued directors’severance costs
    based on their internal corporate policies.
    Deferred tax assets and liabilities are recorded based
    on the temporary differences between the tax bases
    of assets and liabilities and their reported amounts in
    the accompanying consolidated financial statements
    using the enacted tax rates in effect for the years
    in which the temporary differences are expected to
    reverse. Deferred tax assets are also recognized for
    the estimated future tax effects attributable to tax loss
    carryforwards. A valuation allowance is recorded to
    reduce deferred tax assets if it is more likely than not
    that some or all of the deferred tax assets will not be
    realized.
    ( q ) Allowance for environmental preservation
    ( u ) Amounts per share of common stock
    ( p ) Accrued directors’severance costs
    costs
    Allowance for environmental preservation costs is
    provided at the estimated amount needed to restore
    certain land from soil pollution and to dispose of
    polluted soil and poisonous material.
    ( r ) Reserve for loss on disaster
    Reserve for loss on disaster is provided at an estimated
    amount to be paid in the next fiscal year for the
    removal and the restoration of assets damaged by the
    Great East Japan Earthquake.
    Basic net income per share is computed based on the
    net income available for distribution to stockholders of
    common stock and the weighted average number of
    shares of common stock outstanding during the year.
    Diluted net income per share is computed based
    on the net income available for distribution to the
    stockholders and the weighted average number of
    shares of common stock outstanding during each year
    after giving effect to the dilutive potential of shares
    of common stock to be issued upon the conversion of
    convertible bonds.
    Net assets per share are computed based on the
    net assets excluding minority interests and the number
    of common stock outstanding at the year end.
    Cash dividends per share of common stock reflect
    the actual amounts declared for each of the fiscal years.
    ALPS Business Report 2011
    26
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    ( v ) Derivative financial instruments
    (w) Accounting for consumption taxes
    In the normal course of business, the Company and
    certain of its consolidated subsidiaries enter into various
    derivative transactions to manage their exposure to
    risks arising from fluctuations in foreign currency
    exchange rates and interest rates. The Company and
    its consolidated subsidiaries generally recognize all
    derivatives in the balance sheet at fair value.
    Transactions subject to consumption taxes are
    recorded at amounts exclusive of consumption taxes.
    Changes in the fair value of derivatives
    Changes in the fair value of forward foreign exchange
    contracts, currency swaps, currency options and
    coupon swaps designated as hedges of recognized
    assets or liabilities are recognized in earnings and
    losses. Changes in the fair value of these derivatives
    which are designated as hedges of forecasted
    transactions are deferred until the corresponding hedged
    transactions are recognized in earnings and losses.
    ( x ) Adoption of consolidated taxation system
    The Company and certain of its consolidated
    subsidiaries have received approval from the
    Commissioner of the National Tax Agency of Japan
    to adopt the consolidated taxation system effective the
    year ending March 31, 2012. From the year ended
    March 31, 2011, accounting treatment and presentation
    regarding deferred taxes have been based on the
    Practical Solution on Tax Effect Accounting under
    the Consolidated Taxation System (Part 1) (Practical
    Issues Task Force (PITF) No.5), and the Practical
    Solution on Tax Effect Accounting under the
    Consolidated Taxation System (Part 2) (PITF No.7),
    under the assumption that the Company would adopt
    the consolidated taxation system.
    Interest rate swap agreements
    Interest rate swap agreements are not recognized
    at fair value if the agreements meet the criteria for
    application of the exceptional treatment for the
    recognition of derivatives at fair value.
    The differentials to be paid or received relating to
    the interest rate swap agreements are recognized as
    interest over the life of each of the agreements.
    ( y ) Reclassifications
    Certain prior-year amounts have been reclassified to
    conform to the 2011 presentation.
    ALPS Business Report 2011
    27
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    3. ACCOUNTING CHANGES
    ( a ) Accounting standard for equity method of
    accounting for investments
    Effective the year ended March 31, 2011, the
    Accounting Standard for Equity Method of
    Accounting for Investments (ASBJ Statement No.16
    issued on March 10, 2008) and the Practical Solution
    on Unification of Accounting Policies Applied to
    Associates Accounted for Using the Equity Method
    (PITF No.24 issued on March 10, 2008) were applied.
    There was no impact on income before income
    taxes and minority interests for the year ended March
    31, 2011 as a result of the adoption of this standard.
    ( b ) Accounting standard for asset retirement
    obligations
    Effective the year ended March 31, 2011, the
    Accounting Standard for Asset Retirement Obligations
    (ASBJ Statement No.18 issued on March 31, 2008)
    and the Guidance on Accounting Standard for Asset
    Retirement Obligations (Guidance No.21 issued on
    March 31, 2008) were applied.
    There was no impact on operating income and
    income before income taxes and minority interests
    for the year ended March 31, 2011 as a result of the
    adoption of this standard.
    ( c ) Accounting standard for business
    combinations and other accounting standards
    Effective the year ended March 31, 2011, the
    following standards issued on December 26, 2008
    were applied.
    • Accounting Standard for Business Combinations
    (ASBJ Statement No.21)
    • Accounting Standard for Consolidated Financial
    Statements (ASBJ Statement No.22)
    • Partial Amendments to Accounting Standard for
    Research and Development Costs (ASBJ Statement
    No.23)
    • Revised Accounting Standard for Business
    Divestitures (ASBJ Statement No.7 (Revised 2008))
    • Revised Accounting Standard for Equity Method of
    Accounting for Investments (ASBJ Statement No.16
    (Revised 2008))
    • Revised Guidance on Accounting Standard for
    Business Combinations and Accounting Standard
    for Business Divestitures (ASBJ Guidance No.10
    (Revised 2008)).
    ( d ) Accounting standard for presentation of
    comprehensive income
    Effective the year ended March 31, 2011, the
    Accounting Standard for Presentation of
    Comprehensive Income (ASBJ Statement No.25
    issued on June 30, 2010) was applied.
    ( e ) Partial amendments to accounting standard
    for retirement benefits (Part 3)
    Effective the year ended March 31, 2010, the
    Company and its domestic consolidated subsidiaries
    adopted the Partial Amendments to Accounting
    Standard for Retirement Benefits (Part 3) (ASBJ
    Statement No. 19 issued on July 31, 2008).
    There was no impact on operating income and
    income before income taxes and minority interests
    for the year ended March 31, 2010 as a result of the
    adoption of this standard.
    ALPS Business Report 2011
    28
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    3. ACCOUNTING CHANGES
    ( f ) Accounting standard for measurement of
    inventories
    Effective the year ended March 31, 2009, the
    Company and its domestic consolidated subsidiaries
    adopted the Accounting Standard for Measurement of
    Inventories (ASBJ Statement No.9 issued on July 5,
    2006). Under this standard, inventories held for sale
    in the ordinary course of business are measured at the
    lower of cost or net selling value, which is defined as
    the selling price less additional estimated direct selling
    expenses. The replacement cost may be used in place
    of the net selling value, if appropriate. The standard
    also requires that inventories held for trading purposes
    be measured at the market price.
    As a result of the adoption of this standard,
    operating loss and loss before income taxes and
    minority interests increased by ¥118 million and
    ¥3,564 million, respectively, for the year ended March
    31, 2009 from the corresponding amounts which
    would have been recorded under the previous method.
    ( g ) Accounting standard for lease transactions
    Effective the year ended March 31, 2009, the
    Company and its domestic consolidated subsidiaries
    adopted the Accounting Standard for Lease
    Transactions (ASBJ Statement No.13 issued on March
    30, 2007, which revised the previous accounting
    standard for lease transactions issued on June 17,
    1993). Under the revised standard, the Company and
    its domestic consolidated subsidiaries changed their
    accounting method for finance lease transactions with
    no transfer of ownership from the previous one in
    which finance leases are accounted for as operating
    lease transactions to the revised one in which all
    finance lease transactions are capitalized, recognizing
    leased assets and lease obligations in the balance
    sheet. However, for lease transactions with no transfer
    of ownership entered into on or before March 31,
    2008 with the Company or its domestic consolidated
    subsidiaries as the lessees, the previous accounting
    method is used.
    The effect of the change on net loss was
    immaterial for the year ended March 31, 2009 as a
    result of the adoption of this standard.
    ( h ) Practical solution on unification of accounting
    policies applied to foreign subsidiaries for
    consolidated financial statements
    Effective the year ended March 31, 2009, the
    Company adopted the Practical Solution on
    Unification of Accounting Policies Applied to Foreign
    Subsidiaries for Consolidated Financial Statements
    (PITF No.18 issued on May 17, 2006).
    The effect of the change on net loss was
    immaterial for the year ended March 31, 2009 as a
    result of the adoption of this standard.
    ALPS Business Report 2011
    29
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    3. ACCOUNTING CHANGES
    ( i ) Change in useful life
    Effective the year ended March 31, 2011, the
    Company and certain of its domestic and overseas
    consolidated subsidiaries have changed their useful
    lives of machinery from 4-7 years to 4-9 years
    because it became clear that, except for certain
    items, machinery has utilization periods longer than
    conventional useful lives as a result of reviewing
    the actual useful lives for prior years with the
    development of a mid-term plan.
    As a result of this change, depreciation decreased
    by ¥1,696 million ($20,385 thousand) compared with
    what would have been recorded under the previous
    useful lives, and operating income, and income before
    income taxes and minority interests each increased by
    ¥1,211 million ($14,555 thousand) for the year ended
    March 31, 2011.
    Effective the year ended March 31, 2009, certain
    of the Company’
    s domestic consolidated subsidiaries
    have changed their useful lives of machinery with an
    amendment of the Corporation Tax Law. The effect
    of the change on net loss was immaterial for the year
    ended March 31, 2009.
    ALPS Business Report 2011
    30
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    4. INVESTMENT SECURITIES
    Securities classified as other securities at March 31, 2011 and 2010 are summarized as follows:
    Millions of yen
    Thousands of U.S. dollars
    2011
    Fair value
    Securities for which fair value exceeds cost: Equity securities
    ¥
    Securities for which cost exceeds fair value: Equity securities
    Total
    ¥
    Cost
    2011
    Unrealized
    gains (losses)
    15,891 ¥
    5,513 ¥
    291
    391
    16,182 ¥
    5,904 ¥
    10,378
    Fair value
    $
    (100)
    10,278
    190,998 $
    3,498
    $
    194,496 $
    Cost
    Unrealized
    gains (losses)
    66,262 $
    124,736
    (1,202)
    4,700
    70,962 $
    123,534
    Millions of yen
    2010
    Fair value
    Securities for which fair value exceeds cost: Equity securities
    ¥
    Securities for which cost exceeds fair value: Equity securities
    Total
    ¥
    Cost
    Unrealized
    gains (losses)
    17,432 ¥
    5,561 ¥
    189
    307
    17,621 ¥
    5,868 ¥
    11,871
    (118)
    11,753
    (Note) Unlisted stocks and other at March 31, 2011 and 2010 in the amounts of ¥726 million ($8,725 thousand) and ¥822 million, respectively, have been excluded from
    other securities listed above because it is extremely difficult to determine the fair value.
    Proceeds from sales of securities classified as other
    securities for the years ended March 31, 2011, 2010
    and 2009 were ¥259 million ($3,113 thousand), ¥275
    million and ¥386 million, respectively. Gross realized
    gains and losses for the year ended March 31, 2011
    were ¥161 million ($1,935 thousand) and ¥9 million
    ($108 thousand), respectively. Gross realized gains
    and losses for the year ended March 31, 2010 were
    ¥243 million and ¥2 million, respectively. Gross
    realized gains and losses for the year ended March 31,
    2009 were ¥285 million and ¥56 million, respectively.
    The impairment losses of ¥35 million ($421 thousand),
    ¥263 million and ¥4,557 million on securities for the
    years ended March 31, 2011, 2010 and 2009 were
    recorded for foreign non-marketable equity securities
    at ¥22 million ($264 thousand), nil and ¥305 million,
    respectively; and for non-marketable equity securities
    at ¥13 million ($156 thousand), ¥12 million and
    ¥36 million, respectively; for the shares of companies
    that have business relationships with the Company
    at ¥0 million ($0 thousand), nil and ¥3,836 million,
    respectively; for foreign marketable equity securities
    at ¥0 million ($0 thousand), nil and ¥10 million,
    respectively; and for unconsolidated subsidiaries and
    affiliated companies at nil, and ¥251 million, ¥370
    million, respectively.
    As for securities whose fair values at the year
    end are less than 50% of the acquisition costs, or are
    more than 50% but less than 70% and deemed to be
    unrecoverable, the impairment losses are recognized.
    ALPS Business Report 2011
    31
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    5. INVENTORIES
    Inventories at March 31, 2011 and 2010 consisted of the following:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Finished products
    ¥
    Work in process
    Raw materials and supplies
    ¥
    2010
    33,172 ¥
    28,934
    8,688
    7,634
    14,707
    11,582
    56,567 ¥
    48,150
    2011
    $
    398,702
    104,423
    176,767
    $
    679,892
    6. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
    Short-term loans payable consisted primarily of overdrafts with banks at interest rates ranging from 0.69% to
    3.56% and 0.87% to 2.14% at March 31, 2011 and 2010, respectively.
    Long-term debt at March 31, 2011 and 2010 is summarized as follows:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Loans principally from banks and insurance companies due through 2020 at
    interest rates ranging from 0.07% to 3.00% and 1.81% to 4.10% at March 31,
    2011 and 2010, respectively
    ¥
    Less amounts due within one year
    ¥
    2010
    88,193 ¥
    80,607
    2011
    $
    1,060,011
    88,193
    80,607
    1,060,011
    (19,059)
    (14,211)
    (229,074)
    69,134 ¥
    66,396
    $
    830,937
    At March 31, 2011 and 2010, the following assets were pledged as collateral for bank loans and long-term debt:
    Thousands of
    U.S. dollars
    Millions of yen
    Property, plant and equipment, at net book value
    ¥
    2011
    5,975 ¥
    2010
    6,002
    2011
    $
    71,815
    The aggregate annual maturities of long-term debt subsequent to March 31, 2011 are summarized as follows:
    Year ending March 31,
    Millions of yen
    2012
    ¥
    19,059
    Thousands of
    U.S. dollars
    $
    229,074
    2013
    56,110
    674,399
    2014
    9,517
    114,387
    2015
    2,074
    24,928
    2016
    877
    10,541
    2017 and thereafter
    Total
    556
    ¥
    88,193
    6,682
    $
    1,060,011
    ALPS Business Report 2011
    32
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    7. EMPLOYEES’SEVERANCE AND PENSION COSTS
    The Company and certain of its domestic consolidated subsidiaries have defined benefit plans, i.e., welfare
    pension fund plan, defined benefit pension plan, tax-qualified pension plans and lump-sum payment plans. Under
    these defined benefit plans, employees are generally entitled to lump-sum payments and/or annuity payments, the
    amounts of which are determined by reference to their basic salary, length of service, and the conditions under
    which termination occurs. Certain of the foreign consolidated subsidiaries have defined contribution pension
    plans. In addition, a foreign consolidated subsidiary has a public pension plan.
    The following table sets forth the funded and accrued status of the defined benefit pension plans, and the
    amounts recognized in the accompanying consolidated balance sheets at March 31, 2011 and 2010 for the
    Company and its consolidated subsidiaries:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Projected benefit obligation
    ¥
    (56,308) ¥
    2010
    2011
    (58,533)
    $ (676,779)
    Plan assets at fair value
    46,356
    49,432
    557,163
    Funded status
    (9,952)
    (9,101)
    (119,616)
    Unrecognized actuarial net loss
    11,790
    12,817
    141,707
    Unrecognized prior service cost
    (2)
    (32)
    (24)
    1,836
    3,684
    22,067
    Amounts recognized in the consolidated balance sheets, net
    Prepaid pension cost
    Accrued employees’severance and pension costs
    4,848
    ¥
    6,639
    (3,012) ¥
    58,269
    (2,955)
    $
    (36,202)
    Certain of the Company’
    s consolidated subsidiaries have adopted the simplified method in calculating their
    projected benefit obligation as set forth in the accounting standard applicable to retirement benefits.
    The components of retirement benefits expenses for the years ended March 31, 2011, 2010 and 2009 were as
    follows:
    Thousands of
    U.S. dollars
    Millions of yen
    Service cost
    ¥
    Interest cost
    Expected return on plan assets
    Amortization of actuarial loss
    2011
    2010
    2009
    2,357 ¥
    2,392 ¥
    2,336
    2011
    $
    28,329
    1,315
    1,440
    1,456
    15,805
    (1,144)
    (1,234)
    (1,402)
    (13,750)
    19,676
    1,637
    1,653
    1,329
    Amortization of prior service cost
    (6)
    (8)
    (8 )
    (72)
    Additional accrued severance cost
    38
    721
    5
    457
    8,017
    Settlement loss on certain pension plans
    667
    ー
    ー
    Other
    785
    804
    786
    5,649 ¥
    5,768 ¥
    Total
    ¥
    4,511
    9,435
    $
    67,897
    The assumptions used in accounting for the defined benefit pension plans for the years ended March 31, 2011,
    2010 and 2009 were as follows:
    2011
    2010
    2009
    Discount rate
    Mainly 2.5%
    Mainly 2.5%
    Mainly 2.5%
    Expected rate of return on plan assets
    Mainly 2.5%
    Mainly 2.5%
    Mainly 2.5%
    ALPS Business Report 2011
    33
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    7. EMPLOYEES’SEVERANCE AND PENSION COSTS
    A consolidated subsidiary of the Company participates in multi-employer defined benefit pension plan and
    recognizes as net pension cost the related required contributions for the period. Information regarding the multiemployer pension plan is summarized as follows:
    ( 1 ) Funded status
    Japan Travel Agents Employees Pension Funds
    Pension assets
    Millions of yen
    As of March 31, 2010 As of March 31, 2009
    Thousands of
    U.S. dollars
    As of March 31, 2010
    ¥
    $
    Pension liabilities
    Funded status
    ¥
    19,426 ¥
    17,352
    23,409
    24,781
    (3,983) ¥
    (7,429)
    233,485
    281,358
    $
    (47,873)
    ( 2 ) Number of participants of the multi-employer pension plan who are employees of the Company’
    s
    consolidated subsidiary as a percentage of total participants of such plan
    As of March 31, 2010 As of March 31, 2009
    Japan Travel Agents Employees Pension Funds
    0.57%
    0.55%
    ALPS Business Report 2011
    34
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    8. CONTINGENT LIABILITIES
    9. NET ASSETS
    The Company and certain of its consolidated
    subsidiaries were contingently liable as guarantors
    for loans of other companies and employees in the
    aggregate amount of ¥39 million ($469 thousand) at
    March 31, 2011.
    The Corporation Law of Japan provides that an
    amount equal to 10% of the amount to be disbursed as
    distributions of capital surplus (other than the capital
    reserve) and retained earnings (other than the legal
    reserve) be transferred to the capital reserve and the
    legal reserve, respectively, until the sum of the capital
    reserve and the legal reserve equals 25% of the capital
    stock account. Such distributions can be made at any
    time by resolution of the stockholders, or by the Board
    of Directors if certain conditions are met.
    When part of a UK subsidiary withdraws from
    the current pension scheme, a debt under application
    of the UK pension law (Section 75) is generated.
    The debt amount has not yet been determinable at this
    moment. Assuming the UK pension law (Section 75)
    was actually applied to the subsidiary in December
    2010, the debt generated at that time was ¥921 million
    ($11,070 thousand).
    The Company and certain of its consolidated
    subsidiaries have entered into loan commitment
    agreements amounting to ¥51,600 million ($620,192
    thousand) with certain financial institutions for the
    year ended March 31, 2011. The related outstanding
    loans payable amounted to nil as the credit facilities
    remained unused in the full amount as of March 31,
    2011.
    10. REVALUATION OF LAND
    On March 31, 2002, a domestic consolidated
    subsidiary revalued its land held for business purposes
    in accordance with the“Law on Land Revaluation.”
    The method followed for this land revaluation was
    determined in accordance with the“Enforcement Act
    Concerning Land Revaluation.”Differences arising
    from the land revaluation have been accounted for as
    revaluation reserve for land under net assets.
    The excess of the carrying value of this land after
    the revaluation over its fair value as of March 31, 2010
    was ¥1,230 million. That as of March 31, 2011 cannot
    be presented because its fair value as of March 31,
    2011 cannot be determined due to the Great East Japan
    Earthquake. The excess of the carrying value of this
    land after the revaluation as of March 31, 2011 over
    its fair value as of March 31, 2010 was ¥1,201 million
    ($14,435 thousand).
    ALPS Business Report 2011
    35
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    11. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    Major items included in selling, general and administrative expenses for the years ended March 31, 2011, 2010
    and 2009 were as follows:
    Thousands of
    U.S. dollars
    Millions of yen
    Salaries
    ¥
    2011
    2010
    26,400 ¥
    25,431 ¥
    2009
    26,588
    2011
    $
    317,308
    Employees’bonuses
    3,443
    2,230
    1,889
    41,382
    Employees’severance and pension costs
    1,391
    1,354
    995
    16,719
    522
    98
    2,888
    6,274
    2,668
    1,122
    268
    32,067
    Provision for doubtful accounts
    Warranty costs
    Commission expenses
    Research and development expenses
    6,427
    6,983
    7,125
    77,248
    12,362
    10,844
    10,446
    148,582
    12. RESEARCH AND DEVELOPMENT EXPENSES
    Research and development expenses included in cost of sales and general and administrative expenses were
    ¥28,124 million ($338,029 thousand), ¥27,843 million and ¥40,304 million for the years ended March 31, 2011,
    2010 and 2009, respectively.
    13. OTHER INCOME (EXPENSES)
    The components of other, net, in the accompanying consolidated statements of comprehensive income for the
    years ended March 31, 2011, 2010 and 2009 were as follows:
    Thousands of
    U.S. dollars
    Millions of yen
    Loss on sale and disposal of fixed assets
    ¥
    2011
    2010
    (748) ¥
    (791) ¥
    2009
    (1,162)
    2011
    $
    (8,990)
    Gain on sale of fixed assets
    800
    1,027
    1,696
    9,616
    Gain on sale of investment securities
    161
    243
    285
    1,935
    Write-offs of investment securities
    (35)
    (263)
    (4,557)
    (421)
    Equity in earnings of affiliated companies
    385
    551
    463
    4,627
    Settlement loss on certain pension plans
    (667)
    ー
    ー
    (8,017)
    (37)
    (87)
    (27,164)
    (445)
    2,191
    ー
    ー
    26,334
    Impairment losses on fixed assets
    Gain on change in share of net assets of a consolidated subsidiary
    resulted from stock issuance by the subsidiary
    Gain on valuation of options
    Business structure improvement expenses
    Cumulative effect on prior years of adopting the accounting
    standard for measurement of inventories
    Commission fee
    Reversal of allowance for doubtful accounts
    Warranty costs for prior periods
    Cumulative effect on prior years of adopting the accounting
    standard for asset retirement obligations
    Other
    ー
    ー
    2,578
    ー
    (148)
    (1,525)
    (1,224)
    (1,779)
    ー
    ー
    (3,446)
    ー
    (842)
    (833)
    (97)
    (10,120)
    194
    616
    78
    2,332
    ー
    (434)
    ー
    ー
    (92)
    ー
    ー
    (1,106)
    5
    ¥
    1,167 ¥
    213
    (1,283) ¥
    (266)
    (32,816)
    60
    $
    (14,026)
    ALPS Business Report 2011
    36
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    14. IMPAIRMENT LOSSES ON FIXED ASSETS
    To adopt the accounting treatment for the impairment of fixed assets, the Companies determined asset groups
    based on the categories used for their managerial accounting considering the relevance of product categories
    and production processes. With respect to idle assets and leased assets, each asset is treated as an individual unit
    when applying the accounting treatment for impairment of fixed assets because cash inflows and outflows can be
    measured at the asset.
    The Companies recognized impairment losses on the asset groups for the year ended March 31, 2009 as
    follows:
    Millions of yen
    Asset group
    Asset type
    Location
    Automotive electronics business
    Machinery, construction in progress, etc.
    (Note 1)
    2009
    Peripheral products business for home
    Buildings, machinery, etc.
    (Note 2)
    Peripheral products business for mobile devices
    Machinery, construction in progress, etc. Japan
    Printer business
    Buildings, machinery, etc.
    (Note 3)
    381
    Communication business
    Machinery, tools, etc.
    (Note 4)
    5,835
    ¥
    13,027
    6,403
    1,111
    HDD heads business
    Buildings and machinery
    China
    30
    Idle assets
    Buildings, land, etc.
    Japan
    377
    Total
    ¥
    27,164
    (Note 1) Japan, Germany, South Korea, Hong Kong, China, U.S.A, the Czech Republic and Ireland
    (Note 2) Japan, Germany, South Korea, Hong Kong, Malaysia, China and the Czech Republic
    (Note 3) Japan, Hong Kong and the Czech Republic
    (Note 4) Japan, South Korea, Hong Kong, China, Malaysia and the Czech Republic
    With respect to assets categorized in Automotive
    electronics business group, Peripheral products
    business for home group, Peripheral products business
    for mobile devices group, Printer business group,
    Communications business group, HDD heads business
    group, AV-head business group and LCD business
    group, the Companies reduced the book value of these
    assets to their respective recoverable amounts and
    recognized impairment losses of ¥26,787 million,
    as other expenses because the business environment
    deteriorated mainly due to the related market
    shrinkage. The impairment losses were recorded
    for buildings at ¥5,251 million, for machinery and
    equipment at ¥15,717 million, for land at ¥296 million,
    for lease assets at ¥1 million, for construction in
    progress at ¥4,321 million, for intangible assets, net at
    ¥1,044 million, for other assets at ¥140 million and for
    accumulated impairment loss on leased assets at ¥17
    million. The rate used in calculating discounted future
    cash flows was 4.6%.
    With respect to the idle assets whose fair value
    declined, since the future use of those assets had not
    been determined, the Companies reduced the book
    value of those assets to their respective recoverable
    amounts and recognized impairment losses of ¥377
    million, as other expenses.
    The impairment losses of ¥377 million on idle
    assets were for buildings at ¥345 million and for other
    assets at ¥32 million. Net realizable value computed
    based on property tax value was used for determining
    the recoverable value of the idle assets.
    ALPS Business Report 2011
    37
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    15. INCOME TAXES
    The Company is subject to a number of taxes in Japan based on income, which, in the aggregate, resulted in a
    statutory tax rate of approximately 40.5% for the years ended March 31, 2011, 2010 and 2009.
    s
    The following table summarizes the reconciliations between the statutory tax rate and the Company’
    effective tax rates reflected in the accompanying consolidated statements of comprehensive income for the years
    ended March 31, 2011 and 2010. A reconciliation between the statutory tax rate and the Company’
    s effective tax
    rate reflected in the accompanying consolidated statement of comprehensive income for the year ended March 31,
    2009 is not presented because the Company recorded loss before income taxes and minority interests.
    Statutory tax rate
    2011
    2010
    40.5%
    40.5%
    Change in valuation allowance
    (5.1)
    256.3
    Lower tax rates at foreign subsidiaries
    (6.8)
    (554.1)
    9.4
    212.7
    Non-deductible expenses
    Non-taxable income
    Other
    Effective tax rates
    (10.0)
    ー
    0.1
    59.2
    28.1%
    14.6%
    The significant components of deferred tax assets and liabilities at March 31, 2011 and 2010 were as follows:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    2010
    2011
    Deferred tax assets:
    Tax loss carryforwards
    ¥
    Accrued employees’severance and pension costs
    25,889 ¥
    26,501
    $
    311,166
    951
    884
    11,430
    3,839
    3,926
    46,142
    998
    1,394
    11,995
    11,452
    13,196
    137,644
    Accrued employees’bonuses
    3,356
    2,373
    40,337
    Write-offs of investment securities
    2,572
    2,246
    30,913
    Accrued warranty costs
    923
    873
    11,094
    Accrued expenses
    656
    497
    7,885
    6,485
    5,735
    77,944
    Intercompany profit
    Write-offs of inventories
    Depreciation
    Other
    Gross deferred tax assets
    Valuation allowance
    57,121
    57,625
    686,550
    (39,074)
    (40,160)
    (469,639)
    Less deferred tax liabilities in the same tax jurisdiction
    (5,063)
    (7,215)
    (60,853)
    Total deferred tax assets
    12,984
    10,250
    156,058
    Unrealized gain on investment securities
    (3,803)
    (4,387)
    (45,709)
    Prepaid pension cost
    (1,644)
    (2,301)
    (19,760)
    (0)
    (56)
    (0)
    (955)
    (1,530)
    (11,478)
    Deferred tax liabilities:
    Accelerated depreciation of property, plant and equipment
    Undistributed retained earnings of foreign subsidiaries
    Other
    Gross deferred tax liabilities
    Less deferred tax assets in the same tax jurisdiction
    Total deferred tax liabilities
    Net deferred tax assets
    ¥
    (4,286)
    (3,725)
    (51,514)
    (10,688)
    (11,999)
    (128,461)
    5,063
    7,215
    60,853
    (5,625)
    (4,784)
    (67,608)
    7,359 ¥
    5,466
    $
    88,450
    ALPS Business Report 2011
    38
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    16. CASH AND CASH EQUIVALENTS
    A reconciliation between cash and time deposits in the accompanying consolidated balance sheets, and cash and
    cash equivalents in the accompanying statements of cash flows at March 31, 2011 and 2010 is as follows:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Cash and time deposits
    ¥
    Investment securities
    Subtotal
    Less: Time deposits with a maturity of more than three months
    when purchased
    Add:
    Repurchase agreement maturing within three months
    Cash and cash equivalents
    99,031 ¥
    2011
    $
    1,190,276
    ー
    0
    ー
    99,031
    89,287
    1,190,276
    (535)
    (647)
    (6,430)
    ー
    ¥
    2010
    89,287
    98,496 ¥
    82
    88,722
    ー
    $
    1,183,846
    ALPS Business Report 2011
    39
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    17. FINANCIAL INSTRUMENTS
    Effective the year ended March 31, 2010, the Company adopted the Accounting Standard for Financial
    Instruments (ASBJ Statement No.10 issued on March 10, 2008).
    Overview
    ( 1 ) Policy for financial instruments
    ( 2 ) Types of financial instruments and related risk
    In consideration of plans for capital investment
    mainly in manufacturing, marketing and sales of
    electric devices, the Company and its consolidated
    subsidiaries (collectively, the“Group”) raise funds
    through bank borrowings. The Group manages
    temporary cash surpluses through low-risk financial
    assets. Further, the Group raises short-term capital
    through bank borrowings. The Group uses derivatives
    for the purpose of reducing risk and does not enter
    into derivative transactions for speculative or trading
    purposes.
    Trade receivables̶trade notes and accounts
    receivable̶are exposed to credit risk in relation to
    customers. In addition, the Group is exposed to foreign
    currency exchange risk arising from receivables
    denominated in foreign currencies. In principle,
    the foreign currency exchange risks deriving from the
    trade receivables denominated in foreign currencies,
    net of trade payables denominated in the same
    currencies are hedged by forward foreign exchange
    contracts and currency swaps.
    Marketable securities and investment securities
    are exposed to market risk. Those securities are
    mainly composed of shares of common stock of
    other companies with which the Group has business
    relationships.
    Substantially all trade payables̶trade notes and
    accounts payable̶have payment due dates within four
    months.
    Long-term debt is taken out principally for the
    purpose of making capital investments.
    To reduce the risk of long-term debt bearing
    interest at variable rates, the Group utilizes interest
    rate swap transactions as a hedging instrument.
    Regarding derivatives, the Group enters into
    forward foreign exchange contracts and currency swap
    transactions to reduce the foreign currency exchange
    risk arising from the receivables and payables
    denominated in foreign currencies.
    Information regarding the method of hedge
    accounting, hedging instruments and hedged items and
    hedging policy is found in Note 2 SUMMARY OF
    SIGNIFICANT ACCOUNTING POLICIES.
    ALPS Business Report 2011
    40
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    17. FINANCIAL INSTRUMENTS
    ( 3 ) Risk management for financial instruments
    ( a ) Monitoring of credit risk
    (the risk that customers or counterparties may default)
    In accordance with the internal policies for managing
    credit risk of the Group arising from receivables,
    related Sales Department manager monitors credit
    worthiness of their main customers, and the Credit
    Control Department assesses the financial situation
    periodically. In addition, the Group is making efforts
    to identify and mitigate risks of bad debts.
    The Group believes that the credit risk of
    derivatives is insignificant as it enters into derivative
    transactions only with financial institutions which have
    a sound credit profile.
    ( b ) Monitoring of market risks
    (the risks arising from fluctuations in foreign
    exchange rates, interest rates and others)
    For trade receivables and payables denominated in
    foreign currencies, the Group identifies the foreign
    currency exchange risk for each currency on a monthly
    basis and enters into forward foreign exchange
    contracts and currency swaps to hedge such risk.
    In order to mitigate the interest rate risk for loans
    payable bearing interest at variable rates, the Group
    may also enter into interest rate swap transactions.
    For marketable securities and investment
    securities, the Group periodically reviews the fair
    values of such financial instruments and the financial
    position of the issuers. In addition, the Group
    continuously evaluates whether securities other
    than those classified as held-to-maturity should be
    maintained taking into account their fair values and
    relationships with the issuers.
    In conducting derivative transactions, the division
    in charge of each derivative transaction follows
    the internal policies, which set forth delegation of
    authority and maximum upper limit on positions.
    Monthly reports including actual transaction data are
    submitted to the Board of Directors for their review.
    ( c ) Monitoring of liquidity risk
    (the risk that the Group may not be able to
    meet its obligations on scheduled due dates)
    Based on the business plan, the Group prepares and
    updates its cash flow plans on a timely basis to manage
    liquidity risk.
    ( 4 ) Supplementary explanation of the estimated
    fair value of financial instruments
    The fair value of financial instruments is based on
    their quoted market price, if available. When there
    is no quoted market price available, fair value is
    reasonably estimated. Since various assumptions
    and factors are reflected in estimating the fair value,
    different assumptions and factors could result in
    different fair value. In addition, the notional amounts
    of derivatives in Note 18 DERIVATIVE FINANCIAL
    INSTRUMENTS are not necessarily indicative of the
    actual market risk involved in derivative transactions.
    ALPS Business Report 2011
    41
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    17. FINANCIAL INSTRUMENTS
    Estimated Fair Value of Financial Instruments
    Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2011 and 2010
    and unrealized gains (losses) are shown in the following table. The following table does not include financial
    instruments for which it is extremely difficult to determine the fair value. (Please refer to Note 2 below).
    Millions of yen
    Thousands of U.S. dollars
    2011
    Carrying
    value
    Assets:
    2011
    Unrealized
    gain (loss)
    Carrying
    value
    Estimated
    fair value
    Unrealized
    gain (loss)
    99,031 ¥
    99,031 ¥
    ー
    1,190,276 $
    1,190,276 $
    Notes and accounts receivable-trade
    93,713
    93,713
    ー
    1,126,358
    1,126,358
    ー
    Investment securities
    21,717
    31,463
    9,747
    261,022
    378,161
    117,151
    Cash and time deposits
    ¥
    $
    ー
    ¥
    214,461 ¥
    224,207 ¥
    9,747
    $
    2,577,656 $
    2,694,795 $
    117,151
    ¥
    50,201 ¥
    50,201 ¥
    ー
    $
    603,377 $
    603,377 $
    ー
    Short-term loans payable
    31,754
    31,754
    ー
    381,659
    381,659
    ー
    Long-term debt due within one year
    19,059
    19,059
    ー
    229,074
    229,074
    ー
    Long-term debt
    69,134
    70,133
    999
    830,937
    842,945
    12,007
    Total assets
    Liabilities:
    Estimated
    fair value
    Notes and accounts payable-trade
    Total liabilities
    ¥
    170,148 ¥
    171,147 ¥
    999
    $
    2,045,047 $
    2,057,055 $
    12,007
    Derivatives*
    ¥
    (413) ¥
    (413) ¥
    ー
    $
    (4,964) $
    (4,964) $
    ー
    Millions of yen
    2010
    Carrying
    value
    Assets:
    Cash and time deposits
    Liabilities:
    Unrealized
    gain (loss)
    89,287 ¥
    89,287 ¥
    ー
    Notes and accounts receivable-trade
    89,834
    89,834
    ー
    Investment securities
    17,621
    17,621
    ー
    Total assets
    ¥
    Estimated
    fair value
    ¥
    196,742 ¥
    196,742 ¥
    ー
    ¥
    52,265 ¥
    52,265 ¥
    ー
    Short-term loans payable
    35,792
    35,792
    ー
    Long-term debt due within one year
    14,211
    14,211
    ー
    Long-term debt
    66,396
    66,939
    543
    Notes and accounts payable-trade
    Total liabilities
    ¥
    168,664 ¥
    169,207 ¥
    543
    Derivatives*
    ¥
    403 ¥
    403 ¥
    ー
    *The value of assets and liabilities arising from derivatives is shown at net value, and with the amount in parentheses representing a net liability position.
    ALPS Business Report 2011
    42
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    17. FINANCIAL INSTRUMENTS
    Note1: Methods to determine the estimated fair value of financial instruments and other matters related
    to securities and derivative transactions
    ( a ) Cash and time deposits, and notes and accounts receivable-trade
    Since these items are settled in a short period of time, their carrying value approximates fair value.
    ( b ) Investment securities
    The fair value of the investment securities is based on quoted market price. For information on securities
    classified by holding purpose, please refer to Note 4 INVESTMENT SECURITIES.
    ( c ) Notes and accounts payable-trade, short-term loans payable and long-term debt due within one year
    Since these items are settled in a short period of time, their carrying value approximates fair value.
    ( d ) Long-term debt
    The fair value of each long-term debt instrument is based on the present value of the total of principal and interest
    discounted by the interest rate that would be applied if similar new borrowings or lease agreements were entered
    into.
    ( e ) Derivatives
    Please refer to Note 18 DERIVATIVE FINANCIAL INSTRUMENTS.
    Note 2: Financial instruments for which it is extremely difficult to determine the fair value
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Carrying
    value
    2011
    2010
    Carrying
    value
    Carrying
    value
    Investment in unconsolidated subsidiaries and affiliated companies
    ¥
    582
    ¥
    6,197
    $
    6,995
    Unlisted stocks and other included in investment securities
    ¥
    725
    ¥
    822
    $
    8,714
    Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in the preceding
    table which presents the estimated fair value of financial instruments.
    Note 3: Redemption schedule for receivables and marketable securities with maturities at March 31, 2011
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Due in one year or less
    Cash and time deposits
    ¥
    99,031
    ¥
    192,744
    Notes and accounts receivable-trade
    Total
    2010
    ¥
    89,287
    ¥
    179,121
    93,713
    2011
    $
    89,834
    1,190,276
    1,126,358
    $
    2,316,634
    ALPS Business Report 2011
    43
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    17. FINANCIAL INSTRUMENTS
    Note 4: The redemption schedule for long-term debt is disclosed in Note 6 SHORT-TERM LOANS
    PAYABLE AND LONG-TERM DEBT. The aggregate annual maturities of finance lease obligations
    subsequent to March 31, 2011 are summarized as follows:
    2012
    Thousands of
    U.S. dollars
    Millions of yen
    Year ending March 31,
    ¥
    744
    $
    8,942
    2013
    762
    9,159
    2014
    156
    1,875
    2015
    105
    1,262
    2016
    48
    577
    2017 and thereafter
    24
    Total
    ¥
    1,839
    288
    $
    22,103
    ALPS Business Report 2011
    44
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    18. DERIVATIVE FINANCIAL INSTRUMENTS
    The Company and certain of its consolidated subsidiaries have entered into forward foreign exchange contracts,
    currency option contracts, currency swap agreements and coupon swap agreements with banks to hedge
    transactions and balances denominated in foreign currencies. In addition, to hedge their exposure to fluctuations
    in interest rates, the Company and certain of its consolidated subsidiaries have entered into interest rate swap
    agreements to effectively change the floating rates on the principal balance of their debt to fixed interest rates.
    These derivative transactions are utilized solely for hedging purposes under the Company’
    s internal control
    rules and are subject to oversight by the Board of Directors. The Company does not anticipate any credit loss
    from nonperformance by the counterparties to the forward foreign exchange contracts and interest rate swap
    agreements.
    The notional amounts and estimated fair value of the derivative instruments outstanding at March 31, 2011
    and 2010, to which hedge accounting has not been applied, are summarized as follows:
    Millions of yen
    Thousands of U.S. dollars
    2011
    Notional
    amounts
    Forward foreign exchange contracts:
    Sell:
    U.S. dollars
    ¥
    Euro
    2011
    Estimated
    fair value
    Unrealized
    gains (losses)
    9,832 ¥
    (103) ¥
    (103)
    7,237
    (310)
    (310)
    Notional
    amounts
    $
    Estimated
    fair value
    118,173 $
    86,983
    Unrealized
    gains (losses)
    (1,238) $
    (1,238)
    (3,726)
    (3,726)
    Millions of yen
    2010
    Notional
    amounts
    Forward foreign exchange contracts:
    Sell:
    U.S. dollars
    ¥
    Euro
    Currency option contracts:
    6,290 ¥
    Estimated
    fair value
    Unrealized
    gains (losses)
    (127) ¥
    4,754
    34
    (127)
    34
    Sell:
    Call-Euro
    ¥
    4,115 ¥
    ー ¥
    ー
    Buy:
    Put-Euro
    ¥
    2,058 ¥
    496 ¥
    496
    Note: With regard to interest rate swap agreements, the notional amounts and the estimated fair value have been excluded since hedge accounting has been applied.
    Option premiums are not given and received because all currency option contracts are zero cost option contracts.
    The notional amounts and estimated fair value of interest rate swaps that meet the criteria for the exceptional
    treatment at March 31, 2011 and 2010, to which hedge accounting has not been applied, are summarized as follows:
    Millions of yen
    2011
    Notional
    amounts
    Thousands of U.S. dollars
    2010
    Estimated
    fair value
    Notional
    amounts
    2011
    Estimated
    fair value
    Notional
    amounts
    Estimated
    fair value
    Interest-rate swaps which meet specific criteria:
    Interest-rate swap agreement:
    Pay / fixed and receive / floating
    Long-term debt
    ¥
    6,581 ¥
    ー
    ¥
    8,799 ¥
    ー
    $
    79,099 $
    ー
    Note: Since interest rate swaps for long-term debt meeting specific criteria for hedge accounting are accounted for as part of long-term debt, fair value of the interest
    swaps are measured and included as part of the long-term debt.
    ALPS Business Report 2011
    45
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    19. LEASES
    As lessee:
    The Company and certain of its consolidated subsidiaries lease certain machinery and equipment. These lease
    agreements are finance leases but have been accounted for as operating leases as permitted if the lease
    transactions began on or before March 31, 2008 under accounting principles generally accepted in Japan.
    The following pro forma amounts represent the acquisition costs, accumulated depreciation/impairment
    and net book value of the leased assets at March 31, 2011 and 2010, which would have been reflected in the
    accompanying consolidated balance sheets if these agreements had been accounted for as finance leases:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Acquisition costs of machinery and equipment
    ¥
    2010
    104 ¥
    558
    Accumulated depreciation of machinery and equipment
    94
    516
    Accumulated impairment of machinery and equipment
    ー
    ー
    10 ¥
    42
    Net book value
    ¥
    2011
    $
    1,250
    1,130
    ー
    $
    120
    Future minimum lease payments (including the interest portion thereon) subsequent to March 31, 2011 for finance
    leases accounted for as operating leases are summarized as follows:
    Year ending March 31,
    Millions of yen
    2012
    ¥
    2013 and thereafter
    6
    Thousands of
    U.S. dollars
    $
    72
    $
    120
    4
    ¥
    10
    48
    There is no accumulated impairment loss on leased assets as of March 31, 2011 for finance leases accounted for
    as operating leases.
    Lease payments relating to finance leases accounted for as operating leases in the accompanying consolidated
    financial statements for the years ended March 31, 2011, 2010 and 2009 totaled ¥31 million ($373 thousand),
    ¥121 million and ¥299 million, respectively. The pro forma depreciation/amortization of the assets leased under
    finance leases accounted for as operating leases for the years ended March 31, 2011, 2010 and 2009 amounted to
    ¥31 million ($373 thousand), ¥121 million and ¥299 million, respectively. The pro forma impairment of the
    assets leased under finance leases accounted for as operating leases for the year ended March 31, 2009 amounted
    to ¥15 million.
    ALPS Business Report 2011
    46
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    19. LEASES
    The Company’
    s future minimum lease payments subsequent to March 31, 2011 for non-cancelable operating
    leases are summarized as follows:
    Year ending March 31,
    Millions of yen
    2012
    ¥
    2013 and thereafter
    1,112
    Thousands of
    U.S. dollars
    $
    13,353
    $
    38,149
    2,063
    ¥
    3,175
    24,796
    As lessor:
    Investment in lease assets consisted of the following:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Lease receivables
    ¥
    Estimated residual value
    Interest portion of lease receivables
    Investment in lease assets
    ¥
    2010
    698 ¥
    938
    2011
    $
    8,389
    3
    ー
    36
    (63)
    (87)
    (757)
    638 ¥
    851
    $
    7,668
    The collection schedule of lease receivables related to investment in lease assets at March 31, 2011 is summarized
    as follows:
    Year ending March 31,
    Millions of yen
    2012
    ¥
    255
    Thousands of
    U.S. dollars
    $
    3,065
    2013
    171
    2,055
    2014
    100
    1,202
    2015
    69
    829
    2016
    52
    625
    2017 and thereafter
    51
    613
    ALPS Business Report 2011
    47
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    19. LEASES
    Certain domestic consolidated subsidiaries of the Company entered into lease agreements to lease machinery and
    equipment on or before March 31, 2008. Under the revised accounting standard, for lease transactions with no
    transfer of ownership commencing on or before March 31, 2008, it is permitted to account for the finance leases
    as operating leases.
    The following amounts represent the acquisition costs, accumulated depreciation and net book value of the
    lease assets under finance leases accounted for as operating leases at March 31, 2011 and 2010:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    Acquisition costs of machinery and equipment
    ¥
    Accumulated depreciation of machinery and equipment
    Net book value
    ¥
    2010
    4 ¥
    4
    3
    2
    1 ¥
    2
    2011
    $
    48
    36
    $
    12
    The future minimum lease income subsequent to March 31, 2011 under finance leases accounted for as operating
    leases is summarized as follows:
    Year ending March 31,
    Millions of yen
    2012
    ¥
    2013 and thereafter
    1
    Thousands of
    U.S. dollars
    $
    12
    $
    12
    ー
    ¥
    1
    ー
    Lease income, depreciation/amortization and the interest portion of lease income for finance leases accounted for
    as operating leases for the years ended March 31, 2011, 2010 and 2009 were as follows:
    Thousands of
    U.S. dollars
    Millions of yen
    2011
    2010
    2009
    2011
    Lease income
    ¥
    1 ¥
    1 ¥
    33
    $
    12
    Depreciation/amortization
    ¥
    1 ¥
    1 ¥
    6
    $
    12
    Interest portion of lease income
    ¥
    0 ¥
    0 ¥
    2
    $
    0
    The Company’
    s future minimum lease receivables subsequent to March 31, 2011 for non-cancelable operating
    leases are summarized as follows:
    Year ending March 31,
    Millions of yen
    2012
    ¥
    2013 and thereafter
    12
    Thousands of
    U.S. dollars
    $
    144
    $
    156
    1
    ¥
    13
    12
    ALPS Business Report 2011
    48
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    20. RELATED PARTY TRANSACTIONS
    Transactions of the Company with related parties for the year ended March 31, 2011 were as follows:
    Directors and their close relatives:
    Millions of yen
    Masataka Kataoka
    Thousands of
    U.S. dollars
    Purchase of residential land and building
    Transaction amount
    ¥
    282
    $
    3,389
    Receipt of donation
    Transaction amount
    ¥
    100
    $
    1,202
    Millions of yen
    Tomoko Ishiguro
    Purchase of residential land and building
    Transaction amount
    ¥
    188
    Thousands of
    U.S. dollars
    $
    2,260
    Masataka Kataoka is president of the Company and directly owns 0.50% of its shares. Tomoko Ishiguro is a
    relative of Mr. Kataoka and directly owns 0.02% of the Company’
    s shares. The purpose of this transaction
    is to establish a new memorial hall. In the above table, the transaction amounts exclude consumption taxes.
    Transaction conditions are decided considering appraisal values. The donation will be used to help establish the
    new hall.
    21. LOSS ON DISASTER
    Loss on disaster represents loss caused by the Great East Japan Earthquake and consists of labor cost and
    depreciation in the period factories were closed down in the amount of ¥1,208 million ($14,519 thousand), repair
    expenses of ¥1,634 million ($19,639 thousand), loss on inventories of ¥274 million ($3,293 thousand), loss on
    fixed assets of ¥76 million ($914 thousand) and others of ¥251 million ($3,017 thousand).
    ALPS Business Report 2011
    49
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    22. BUSINESS COMBINATIONS
    Year ended March 31, 2011
    Transaction under common control
    1.Outline of business combination
    (1) Type and nature of business
    Type of business: Power supply inductor business
    and current sensor business
    Nature of business: Development, manufacture and
    sales of parts, semi-finished
    products and materials used for
    power conversion devices, power
    control devices, and electric
    measurement equipment
    (2) Effective date of the business combination
    May 17, 2010
    (3) The legal structure of the business combination
    The business combination was accomplished
    utilizing an incorporation-type corporate split with
    the Company as the corporate parent and Alps Green
    Devices Co., Ltd. as the newly established subsidiary.
    2. Outline of the accounting treatment
    The transaction was treated as a common control
    transaction pursuant to the Accounting Standard for
    Business Combinations (ASBJ Statement No.21 issued
    on December 26, 2008) and the Revised Guidance
    on Accounting Standard for Business Combinations
    and Accounting Standard for Business Divestitures
    (Guidance No.10 issued on December 26, 2008).
    ALPS Business Report 2011
    50
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    ALPS ELECTRIC CO., LTD. AND CONSOLIDATED SUBSIDIARIES
    March 31, 2011
    23. SEGMENT INFORMATION
    Business segments
    The Companies are engaged in the manufacturing and sales of (1) electronic components, (2) audio equipment,
    (3) logistics, and (4) other. The business segment information of the Companies for the years ended March 31,
    2011, 2010 and 2009 is summarized as follows:
    Millions of yen
    Year ended March 31, 2011
    Net sales
    External customers
    Electronic
    components
    ¥
    Inter-segment sales and transfers
    Subtotal
    296,153
    Audio
    equipment
    ¥
    198,359
    Logistics
    ¥
    47,505
    Other
    ¥
    8,652
    Eliminations
    ¥
    ー
    Consolidated
    ¥
    550,669
    7,522
    2,898
    19,398
    8,579
    (38,397)
    ー
    303,675
    201,257
    66,903
    17,231
    (38,397)
    550,669
    Operating income
    ¥
    12,966
    ¥
    11,141
    ¥
    3,841
    ¥
    444
    ¥
    480
    ¥
    28,872
    Total assets
    ¥
    242,861
    ¥
    153,495
    ¥
    52,167
    ¥
    31,252
    ¥
    (52,245)
    ¥
    427,530
    Total liabilities
    ¥
    162,041
    ¥
    54,850
    ¥
    19,679
    ¥
    25,503
    ¥
    (25,294)
    ¥
    236,779
    Depreciation and amortization
    ¥
    9,127
    ¥
    7,442
    ¥
    1,714
    ¥
    571
    ¥
    (144)
    ¥
    18,710
    Capital expenditures
    ¥
    16,671
    ¥
    4,882
    ¥
    1,327
    ¥
    709
    ¥
    (44)
    ¥
    23,545
    ¥
    274,155
    ¥
    166,199
    ¥
    44,977
    ¥
    8,308
    ¥
    ー
    ¥
    493,639
    Year ended March 31, 2010
    Net sales
    External customers
    Inter-segment sales and transfers
    Subtotal
    7,097
    2,387
    15,830
    7,432
    (32,746)
    ー
    281,252
    168,586
    60,807
    15,740
    (32,746)
    493,639
    Operating income
    ¥
    396
    ¥
    227
    ¥
    3,497
    ¥
    294
    ¥
    329
    ¥
    4,743
    Total assets
    ¥
    226,276
    ¥
    153,428
    ¥
    52,269
    ¥
    30,482
    ¥
    (51,510)
    ¥
    410,945
    Total liabilities
    ¥
    149,148
    ¥
    56,513
    ¥
    20,388
    ¥
    22,780
    ¥
    (24,346)
    ¥
    224,483
    Depreciation and amortization
    ¥
    10,771
    ¥
    8,352
    ¥
    1,639
    ¥
    600
    ¥
    (139)
    ¥
    21,223
    Capital expenditures
    ¥
    11,914
    ¥
    4,379
    ¥
    2,074
    ¥
    434
    ¥
    (321)
    ¥
    18,480
    ¥
    291,996
    ¥
    193,226
    ¥
    45,368
    ¥
    8,405
    ¥
    ー
    ¥
    538,995
    Year ended March 31, 2009
    Net sales
    External customers
    Inter-segment sales and transfers
    Subtotal
    5,952
    3,441
    15,409
    11,106
    (35,908)
    ー
    297,948
    196,667
    60,777
    19,511
    (35,908)
    538,995
    Operating (loss) income
    ¥
    (20,062)
    ¥
    (10,645)
    ¥
    3,321
    ¥
    671
    ¥
    191
    ¥
    (26,524)
    Total assets
    ¥
    213,941
    ¥
    132,422
    ¥
    46,527
    ¥
    27,065
    ¥
    (44,670)
    ¥
    375,285
    Total liabilities
    ¥
    137,705
    ¥
    35,671
    ¥
    16,115
    ¥
    18,551
    ¥
    (17,548)
    ¥
    190,494
    Depreciation and amortization
    ¥
    17,283
    ¥
    10,336
    ¥
    1,781
    ¥
    632
    ¥
    (90)
    ¥
    29,942
    Capital expenditures
    ¥
    34,363
    ¥
    10,160
    ¥
    2,359
    ¥
    713
    ¥
    (393)
    ¥
    47,202
    Thousands of U.S. dollars
    Year ended March 31, 2011
    Net sales
    External customers
    Electronic
    components
    Audio
    equipment
    $ 3,559,531
    $ 2,384,123
    Inter-segment sales and transfers
    Subtotal
    Logistics
    $
    570,974
    Other
    $
    103,990
    Eliminations
    $
    ー
    Consolidated
    $ 6,618,618
    90,409
    34,831
    233,149
    103,113
    (461,502)
    ー
    3,649,940
    2,418,954
    804,123
    207,103
    (461,502)
    6,618,618
    Operating income
    $
    133,906
    $
    46,166
    $
    5,337
    $
    5,769
    Total assets
    $ 2,919,003
    155,841
    $
    $ 1,844,892
    $
    627,007
    $
    375,625
    $
    (627,945)
    $
    $ 5,138,582
    347,019
    Total Liabilities
    $ 1,947,608
    $
    659,255
    $
    236,526
    $
    306,526
    $
    (304,014)
    $ 2,845,901
    Depreciation and amortization
    $
    109,700
    $
    89,447
    $
    20,601
    $
    6,863
    $
    (1,731)
    $
    224,880
    Capital expenditures
    $
    200,373
    $
    58,678
    $
    15,949
    $
    8,522
    $
    (529)
    $
    282,993
    ALPS Business Report 2011
    51
    ALPS Business Report 2011
    52
    Corporate Communication Group, CSR Dept.
    1-7, Yukigaya-otsukamachi, Ota-ku, Tokyo, 145-8501, JAPAN
    Tel: +81(3)5499-8026
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