meidensha report 2019 · 2021. 2. 27. · investment securities (notes 4 and 8) 18,824 20,509...

MEIDENSHA REPORT

2019

FINANCIALS

For the year ended March 31, 2019

01

Contents

Financial Highlights 02

CONSOLIDATED BALANCE SHEETS 03

CONSOLIDATED STATEMENTS OF INCOME/CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 05

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS 06

CONSOLIDATED STATEMENTS OF CASH FLOWS 07

Notes to Consolidated Financial Statements 08

Independent Auditor’s Report 38

Forward-Looking StatementsThis financial report contains forward-looking statements regarding the future results and performance of the Meiden Group. Such statements are based on information available at the time of preparation of this report, and include various potential risks and uncertainties. As a result, actual results could differ materially from those anticipated by these forward-looking statements.

02

Millions of Yen(except per share data)

Thousands of U.S. Dollars(except per share data)

2015 2016 2017 2018 2019 2019

For the year:Order received ¥ 241,232 ¥ 247,747 ¥ 224,137 ¥ 273,568 ¥ 240,310 $ 2,164,955

Net sales 230,299 237,404 220,141 241,833 245,033 2,207,505

Operating income 9,997 10,518 8,849 11,381 10,336 93,117

Net income attributable to owners of the parent 6,868 6,962 5,743 7,057 7,654 68,955

Capital expenditures 8,887 8,314 7,355 7,584 7,896 71,135

Depreciation and amortization 8,543 8,574 8,664 8,898 9,204 82,919

R&D expenses 10,262 9,970 9,462 9,403 9,458 85,207

Per share data (yen and U.S. dollars):Net income 151.34 153.42 126.56 155.52 168.68 1.52

Cash dividends 7.00 8.00 8.00 9.00 29.00 0.26

At year-end:Total assets 255,519 255,025 247,647 264,457 265,586 2,392,667

Total net assets 67,406 68,772 74,313 81,229 84,498 761,243

Number of employees 8,173 8,408 8,474 8,995 9,297 —

Notes: 1. The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan, using the prevailing exchange rate on March 31, 2019, which was ¥111 to U.S $1.

2. Figures for employee numbers exclude those employees on temporary contracts. 3. A reverse split of stocks was conducted on October 1.2018 at a ratio of 1-for-5 common stocks.

The amount of net income per share was calculated by assuming the reverse split of stocks was conducted at the beginning of the year ended March 31. 2015.

4. The amount of per share for March 31. 2019 is ¥29, which is the total of the interim dividends of ¥4 and the year-end dividends of ¥25. In addition, the amount of per share of interim dividends ¥4 is before the reverse split of stocks, and the amount of per share of year-end dividends ¥25 is after the reverse split of stocks.

The Group is carrying the Medium - Term Management Plan 2020, which started in the current fiscal year, and aiming to expand corporate value by strengthening ESG activities, which are the basis of the Group’s sustainable growth.

As a result, consolidated net sales in the fiscal year ended March 31, 2019, increased by 1.3% under the previous fiscal year to ¥245,033 million, operating income decreased by 9.2% to ¥10,336 million, and net income attributable to owners of the parent increased by 8.5% to ¥7,654 million.

Financial HighlightsMeidensha Corporation and Consolidated Subsidiaries Years ended March 31

5,743

6,868 6,962 7,057

50,000

0

100,000

150,000

200,000

60,000

120,000

180,000

240,000

300,000

0

250,000

0

2015 2016 2017 20182015 2016 2017 20192018

220,141

241,833

247,647

Net sales( Millions of yen )

Total Assets( Millions of yen )

Net income attributable to owners of the parent( Millions of yen )

230,299237,404

255,519 255,025

2019

264,457

2,000

4,000

6,000

8,0007,654245,033

265,586

2015 2016 2017 2018 2019

03

Millions of yenThousands of

U.S. dollars (Note1)

Assets 2019 2018 2019

Current assets:

Cash and time deposits (Note 18) ¥ 12,688 ¥ 9,506 $ 114,306

Receivables:

Trade notes 5,099 5,081 45,937

Electronically recorded monetary claims 6,508 6,888 58,631

Trade accounts 81,118 81,151 730,793

Loans receivable and advances 1,491 1,741 13,432

Due from unconsolidated subsidiaries and affiliates 1,293 1,129 11,649

Allowance for doubtful accounts (123) (196) (1,108)

Inventories (Note 5) 42,649 41,726 384,225

Other current assets 3,008 2,429 27,099

Total current assets 153,731 149,455 1,384,964

Property, plant and equipment:

Land (Note 17) 12,602 12,591 113,532

Buildings and structures (Notes 6 and 17) 87,891 86,493 791,811

Machinery and equipment (Notes 6 and 17) 72,825 71,501 656,081

Construction in progress 1,188 1,628 10,703

Accumulated depreciation (111,175) (107,213) (1,001,577)

Net property, plant and equipment 63,331 65,000 570,550

Investments and other assets:

Investment securities (Notes 4 and 8) 18,824 20,509 169,586

Investments in unconsolidated subsidiaries and affiliates (Note 4) 1,325 1,210 11,937

Long-term loans receivable 31 33 279

Deferred tax assets (Note 16) 15,130 14,088 136,306

Software 5,433 5,569 48,946

Goodwill 4,645 5,739 41,847

Other assets 3,174 2,893 28,595

Allowance for doubtful accounts (38) (39) (343)

Total investments and other assets 48,524 50,002 437,153

Total assets ¥ 265,586 ¥ 264,457 $ 2,392,667

See accompanying notes to consolidated financial statements.

CONSOLIDATED BALANCE SHEETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (as of March 31, 2019 and 2018)

04

Million of yenThousands of


Liabilities and Net assets 2019 2018 2019

Current liabilities:

Short-term borrowings (Note 7) ¥ 6,838 ¥ 6,060 $ 61,604

Commercial paper (Note 7) — 6,000 —

Current portion of long-term debt (Note 7) 3,090 2,136 27,838

Payables:

Trade notes 6,041 6,704 54,423

Electronically recorded monetary obligations 5,046 2,660 45,459

Trade accounts 27,212 29,719 245,153

Due to unconsolidated subsidiaries and affiliates 433 417 3,901

Advances received from customers 14,473 13,962 130,387

Accrued income taxes 1,839 3,240 16,568

Accrued bonuses for employees 7,124 7,232 64,180

Provision for product warranties 1,422 1,157 12,811

Provision for loss on orders 1,107 970 9,973

Other current liabilities 30,154 30,238 271,658

Total current liabilities 104,779 110,495 943,955

Long-term liabilities:

Corporate bonds (Note 7) 5,000 5,000 45,045

Long-term debt (Note 7) 24,594 20,908 221,568

Net defined benefit liability (Note 9) 43,145 43,061 388,694

Provision for environmental measures 426 654 3,838

Deferred tax liabilities (Note 16) 3 8 27

Other Long-term liabilities 3,141 3,102 28,297

Total Long-term liabilities 76,309 72,733 687,469

Contingent liabilities (Note 12)

Net assets (Note 10):

Common stock

Authorized − 115,200,000 shares

Issued − 45,527,540 shares 17,070 17,070 153,784

Capital surplus 11,924 12,435 107,423

Retained earnings 49,665 44,103 447,432

Less:Treasury stock, at cost (187) (182) (1,685)

Unrealized gains (losses) on securities, net of taxes 6,974 8,258 62,829

Unrealized gains (losses) on hedging derivatives, net of taxes 6 6 54

Foreign currency translation adjustment 1,086 1,723 9,784

Remeasurements of defined benefit plans, net of taxes (2,818) (3,180) (25,387)

Non-controlling interests 778 996 7,009

Total net assets 84,498 81,229 761,243

Total liabilities and net assets ¥ 265,586 ¥ 264,457 $ 2,392,667


CONSOLIDATED BALANCE SHEETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (as of March 31, 2019 and 2018)

05

CONSOLIDATED STATEMENTS OF INCOMEMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2019, 2018 and 2017)



2019 2018 2017 2019Net sales (Note 15) ¥ 245,033 ¥ 241,833 ¥ 220,141 $ 2,207,505 Cost of sales (Notes 13 and 14) 185,027 181,430 164,685 1,666,910 Selling, general and administrative expenses (Notes 13 and 14) 49,670 49,022 46,607 447,478

Operating income (Note 15) 10,336 11,381 8,849 93,117 Other income (expenses):

Interest and dividend income 612 556 561 5,514 Interest expense (625) (478) (465) (5,631)Equity in net income of unconsolidated subsidiaries and affiliates 152 — — 1,369 Equity in net loss of unconsolidated subsidiaries and affiliates — (902) (588) —Gain on sales of fixed assets 239 17 — 2,153 Loss on disposal of fixed assets (21) (33) (154) (189)Impairment loss (6) — (89) (54)Gain on sales of investment securities (Note 4) 201 481 360 1,811 Loss on valuation of stocks of unconsolidated subsidiaries and affiliates — — (46) —Loss on liquidation of unconsolidated subsidiaries and affiliates — — (142) —Reversal of allowance for doubtful accounts — 1 — —Gain on revision of retirement benefit plan (Note 9) — — 38 —Litigation expenses (485) (401) — (4,369)Compensation for damage (282) (200) — (2,541)Others 152 (150) (92) 1,370

Income before income taxes and non-controlling interests 10,273 10,272 8,232 92,550 Income taxes :

Current 3,504 4,351 2,294 31,568 Deferred (679) (1,143) 257 (6,117)

Total 2,825 3,208 2,551 25,451 Net income 7,448 7,064 5,681 67,099

Net income (loss) attributable to non-controlling interests (206) 7 (62) (1,856)Net income attributable to owners of the parent (Note 20) ¥ 7,654 ¥ 7,057 ¥ 5,743 $ 68,955

Yen U.S. dollars (Note1)

2019 2018 2017 2019Amounts per share of common stock (Note 20):

Net income ¥ 168.68 ¥ 155.52 ¥ 126.56 $ 1.52 Cash dividends applicable to the year 29.00 9.00 8.00 0.26


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2019, 2018 and 2017)



2019 2018 2017 2019Net income ¥ ¥7,448 ¥ 7,064 ¥ 5,681 $ 67,099 Other comprehensive income

Unrealized gains (losses) on securities, net of taxes (1,285) 826 1,528 (11,576)Unrealized gains (losses) on hedging derivatives, net of taxes 1 23 (21) 9

Foreign currency translation adjustment (627) 360 (1,087) (5,649)

Remeasurements of defined benefit plans 362 1,276 647 3,261 Share of other comprehensive income of unconsolidated

subsidiaries and affiliates accounted for using equity method — 60 678 —Total other comprehensive income (Note 11) (1,549) 2,545 1,745 (13,955)

Comprehensive income 5,899 9,609 7,426 53,144 Comprehensive income attributable to:

Owners of the parent 6,094 9,578 7,523 54,901 Non-controlling interests (195) 31 (97) (1,757)


06

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2019, 2018 and 2017)

Millions of yen

Number of shares issued

Common stock

Capital surplus

Retained earnings

Treasury stock, at

cost

Unrealized gains

(losses) on securities,

net of taxes

Unrealized gains (losses) on hedging derivatives, net of taxes

Foreign currency

translation adjustment

Remeasure-ments of defined

benefit plans, net of taxes

Non-controlling interests Total

Net assets at April 1, 2016 227,637,704 ¥17,070 ¥13,197 ¥34,933 ¥(174) ¥5,903 ¥4 ¥1,701 (¥5,102) ¥1,240 68,772Net income (loss)

attributable to owners of the parent 5,743 5,743

Cash dividends paid (1,815) (1,815)Purchase of treasury

stock (3) (3)Disposal of treasury stock 0 0 0 Change in ownership

interest of parent due to transactions with non-controlling interests —

Net changes during the year 1,529 (21) (375) 647 (164) 1,616

Balance at March 31, 2017 227,637,704 ¥17,070 ¥13,197 ¥38,861 ¥(177) ¥7,432 (¥17) ¥1,326 ¥(4,455) ¥1,076 ¥74,313 Net assets at April 1, 2017 227,637,704 ¥17,070 ¥13,197 ¥38,861 ¥(177) ¥7,432 ¥(17) ¥1,326 (¥4,455) ¥1,076 74,313Net income (loss)



stock (5) (5)Disposal of treasury stock —Change in ownership

interest of parent due to transactions with non-controlling interests (762) (762)

Net changes during the year 826 23 397 1,275 (80) 2,441

Balance at March 31, 2018 227,637,704 ¥17,070 ¥12,435 ¥44,103 ¥(182) ¥8,258 ¥6 ¥1,723 ¥(3,180) ¥996 ¥81,229 Net assets at April 1, 2018 227,637,704 ¥17,070 ¥12,435 ¥44,103 ¥(182) ¥8,258 ¥6 ¥1,723 (¥3,180) ¥996 81,229Net income (loss)



stock (6) (6)Disposal of treasury stock 0 1 1Change of merger (50) (50)Change in ownership

interest of parent due to transactions with non-controlling interests (511) (511)

Net changes during the year (1,284) 0 (637) 362 (218) (1,777)

Balance at March 31, 2019 45,527,540 ¥17,070 ¥11,924 ¥49,665 ¥(187) ¥6,974 ¥6 ¥1,086 ¥(2,818) ¥778 ¥84,498

Thousands of U.S. dollars (Note 1)

Number of shares issued

Common stock

Capital surplus

Retained earnings

Treasury stock, at

cost

Unrealized gains

(losses) on securities,

net of taxes

Unrealized gains (losses) on hedging derivatives, net of taxes

Foreign currency

translation adjustment

Remeasure-ments of defined

benefit plans, net of taxes

Non-controlling interests Total

Net assets at April 1, 2018 227,637,704 $153,784 $112,027 $397,324 $(1,640) $74,396 $54 $15,523 $(28,648) $8,973 $731,793 Net income (loss)



stock (54) (54)Disposal of treasury stock 0 9 9Change of merger (451) (451)Change in ownership

interest of parent due to transactions with non-controlling interests (4,604) (4,604)

Net changes during the year (11,567) 0 (5,739) 3,261 (1,964) (16,009)

Balance at March 31, 2019 45,527,540 $153,784 $107,423 $447,432 $(1,685) $62,829 $54 $9,784 $(25,387) $7,009 $761,243

See accompanying notes to consolidated financial statements. A reverse split of stocks was conducted on October 1.2018 at a ratio of 1-for-5 common stocks.

07

CONSOLIDATED STATEMENTS OF CASH FLOWSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES(Years ended March 31, 2019, 2018 and 2017)


U.S.dollars (Note1)

2019 2018 2017 2019

Operating activities:

Income before income taxes and non-controlling interests ¥ 10,273 ¥ 10,272 ¥ 8,232 $ 92,550

Adjustments to reconcile income before income taxes and non-controlling interests to net cash provided by operating activities:

Depreciation and amortization 8,623 8,673 8,586 77,685

Amortization of goodwill 581 225 78 5,234

Increase(decrease) in provisions 218 1,369 (565) 1,964

Increase(decrease) in net defined benefit liability 600 1,176 650 5,405

Interest and dividend income (612) (556) (561) (5,514)

Interest expense 625 478 465 5,631

Equity in net loss(income) of unconsolidated subsidiaries and affiliates (152) 902 588 (1,369)

Decrease(increase) in trade receivables 821 (12,209) 7,755 7,396

Decrease(increase) in inventories (965) (309) (1,657) (8,694)

Increase(decrease) in trade payables (1,204) 7,701 (7,485) (10,847)

Others 447 2,601 (537) 4,027

Sub-total 19,255 20,323 15,549 173,468

Interest and dividend received 648 608 609 5,838

Interest expense paid (625) (482) (482) (5,631)

Income taxes paid (4,913) (2,474) (3,835) (44,261)

Net cash provided by operating activities 14,365 17,975 11,841 129,414

Investing activities:

Purchase of property, plant and equipment, and intangible assets (7,831) (7,083) (7,270) (70,550)

Proceeds from sales of investment securities — 648 422 —

Purchase of stocks of unconsolidated subsidiaries and affiliates — (587) (2,688) —

Investments in subsidiaries resulting in change in scope of consolidation — — — —

Payments of loan receivables (3) (4) (2,380) (27)

Others (240) (556) (115) (2,162)

Net cash used in investing activities (8,074) (7,582) (12,031) (72,739)

Financing activities:

Net increase (decrease) in short-term borrowings 985 (1,916) 451 8,874

Increase (decrease) in commercial paper (6,000) (9,000) 4,000 (54,054)

Proceeds from long-term debt 7,249 — 10,000 65,306

Repayment of long-term debt (2,586) (3,438) (16,544) (23,297)

Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation (531) (273) — (4,784)

Proceeds from issuance of corporate bonds — 5,000 — —

Cash dividends paid (2,043) (1,814) (1,814) (18,405)

Cash dividends paid to non-controlling interests (8) (18) (67) (72)

Others (167) 229 207 (1,505)

Net cash used in financing activities (3,101) (11,230) (3,767) (27,937)

Changes in exchange rates on cash and cash equivalents 5 25 (472) 46

Net increase (decrease) in cash and cash equivalents 3,195 (812) (4,429) 28,784

Cash and cash equivalents at beginning of year 9,237 10,009 14,438 83,216

Increase in cash and cash equivalents due to addition of consolidated subsidiaries — 40 — —

Increase in cash and cash equivalents resulting from merger 1 — — 9

Cash and cash equivalents at end of the year (Note 18) ¥ 12,433 ¥ 9,237 ¥ 10,009 $ 112,009


08

Notes to Consolidated Financial StatementsMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES

1. Basis of Presenting Consolidated Financial StatementsThe accompanying consolidated financial statements of MEIDENSHA CORPORATION (“the Company”) and its consolidated

subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.

The Practical Issues Task Force No. 18 “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (“PITF No. 18”), issued by the Accounting Standards Board of Japan (“ASBJ”) on September 14, 2018, has been applied to the Company and its consolidated subsidiaries (“the Group”). PITF No. 18 requires that accounting policies and procedures applied by a parent company and its subsidiaries to similar transactions and events under similar circumstances should, in principle, be unified for the preparation of the consolidated financial statements. The accounts of consolidated overseas subsidiaries are prepared in accordance with either International Financial Reporting Standards or U.S. generally accepted accounting principles, with adjustments for the following specified four items as applicable.

1 Goodwill not subject to amortization2 Actuarial gains and losses of defined-benefit retirement plans recognized outside profit or loss3 Capitalized expenditures for research and development activities4 Fair value measurement of investment properties, and revaluation of property, plant and equipment and intangible assetsThe accompanying consolidated financial statements have been reformatted and translated into English (with some expanded

descriptions) from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Japanese Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese language consolidated financial statements is not presented in the accompanying consolidated financial statements.

The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using the prevailing exchange rate on March 31, 2019, which was ¥111 to U.S. $1. The convenience translations should not be construed as representations of what the Japanese yen amounts have been, could have been, or could be in the future when converted into U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policiesa) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its 37, 37 and 38 consolidated subsidiaries in 2019, 2018 and 2017, respectively.

Principles of Consolidation for the year ended March 31, 2019 and 2018 were as follows:

(2019)Not applicable.

(2018)SADO MEIDEN SERVICE CORPORATION was newly established in fiscal year 2018 and added to the scope of consolidation.Furthermore, Prime Meiden Ltd. was added to the scope of consolidation, due to its increasing significance. MEIDEN EUROPE LTD. and MEIDENSHA (SHANGHAI) CORPORATE MANAGEMENT CO., LTD. were liquidated and excluded

from the scope of consolidation in fiscal year 2018.The consolidated subsidiary MEIDEN AMERICA, INC. merged another consolidated subsidiary MEIDEN TECHNICAL CENTER

NORTH AMERICA LLC, and it was excluded from the scope of consolidation.

All significant inter-company accounts and transactions are eliminated in consolidation. The number of unconsolidated subsidiaries, whose total assets, sales, net income (loss), and retained earnings are not significant in the aggregate in relation to the comparable figures in the consolidated financial statements, are 5, 6, and 7 in 2019, 2018 and 2017, respectively.

In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to non-controlling shareholders, are evaluated using the fair value when the Group acquired controls over the respective subsidiaries.

09

The closing date of following companies are December 31. MEIDENSHA (SHANGHAI) CORPORATE MANAGEMENT CO.,LTD., MEIDEN ZHENGZHOU ELECTRIC CO., LTD., MEIDEN HANGZHOU DRIVE SYSTEMS CO., LTD., DONGGUAN MEIDEN PACIFIC ELECTRICAL ENGINNERING COMPANY LIMITED, SHANGHAI MEIDENSHA CHANGCHENG SWITCHGEAR CO., LTD.

For the consolidation purposes, provisional settlement of accounts as of the year end of March is used.

b) Equity MethodInvestments in affiliated companies (all 20% to 50% owned) are accounted for by the equity method for the years ended March

31, 2019, 2018 and 2017.The equity method was applied to one unconsolidated subsidiary during the fiscal year 2017, one affiliate during the years

ended March 31, 2019, 2018.Investments in 5, 6 and 6 unconsolidated subsidiaries and 3, 3 and 3 other affiliated companies, that would not have material

effect on the consolidated financial statements, were stated at cost in 2019, 2018 and 2017.

c) SecuritiesSecurities are classified based on the intent of holding as (a) securities held for trading purposes (hereafter, “trading securities”),

(b) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt securities”), (c) equity securities issued by unconsolidated subsidiaries and affiliated companies, and (d) all other securities that are not classified in any of the above categories (hereafter, “available-for-sale securities”).

The Group does not hold trading securities and held-to-maturity debt securities. Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity method are stated at the moving-average cost. Available-for-sale securities with no available fair market values are stated at the moving-average cost.

If the market value of equity securities issued by unconsolidated subsidiaries and affiliated companies and available-for-sale securities declines significantly, such securities are stated at fair market value and the difference between fair market value and the carrying amount is recognized as loss in the period of the decline unless the declines are considered temporary. If the fair market value of equity securities issued by unconsolidated subsidiaries and affiliated companies not accounted for by the equity method and available-for-sale is not readily available, such securities should be written down to net asset value with a corresponding charge in the consolidated statements of income in the event net asset value declines significantly unless the decline is considered as recoverable.

Available-for-sale securities with available fair market values are stated at fair market value. Unrealized gains and unrealized losses on these securities are reported, net of applicable income taxes, as a separate component of net assets. Realized gains and losses on sale of such securities are computed using the moving-average cost.

d) Derivatives and Hedge AccountingDerivative financial instruments are stated at fair value, and the Group recognizes changes in the fair value as gains or losses

unless derivative financial instruments are used for hedging purposes.If derivative financial instruments are used as hedging instruments and meet certain hedging criteria, the Group defers

recognition of gains or losses resulting from changes in fair value of derivative financial instruments until the corresponding losses or gains on the hedged items are recognized.

However, in cases where forward foreign exchange contracts are used as hedging instruments and meet certain hedging criteria, forward foreign exchange contracts and hedged items are accounted for in the following manner:1. If a forward foreign exchange contract is executed to hedge an existing foreign currency receivable or payable,

(a) the difference, if any, between the Japanese yen amount of the hedged foreign currency receivable or payable translated using the spot rate at the inception date of the contract and the book value of the receivable or payable is recognized in the statements of income in the period which includes the inception date, and

(b) The discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.

2. If a forward foreign exchange contract is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be recorded using the contracted forward rate when the future transaction occurs, and no gains or losses on the forward foreign exchange contract are separately recognized. (“Allocation treatment”)Also, if interest rate swap contracts are used as hedging instruments and meet certain hedging criteria, the net amount to be

paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract is executed. (“Special treatment”)

10

e) InventoriesInventories of the Group are stated at cost determined principally by the weighted-average method as to materials and supplies,

and the specific identification method as to finished products and work-in-process. The carrying amounts stated on the balance sheet are calculated after a devaluation reflecting reduced profitability.

f) Property, Plant and Equipment and DepreciationThe Group computes depreciation of the assets principally by the declining-balance method at rates based on the useful lives

and residual values determined in accordance with the Corporation Tax Law of Japan. However, the Group computes depreciation by the straight line method for buildings (excluding facilities attached to buildings), which were acquired on or after April 1, 1998, facilities attached to buildings, and structures and machinery of the Company’s Real Estate Division (Osaki, Shinagawa Ward, Tokyo), and facilities attached to buildings and structures which were acquired on or after April 1, 2016.

The estimated useful lives primarily range from 2 to 60 years for buildings and structures and from 2 to 13 years for machinery and equipment.

g) Intangible AssetsAmortization of the software for internal use is computed by the straight-line method over the estimated useful lives (three to five

years). And, other intangible assets (except for software for internal use) are computed by the straight-line method.Amortization of the customer relation is computed by the straight-line method over the mainly 12 years of effective period.

h) Goodwill Goodwill is amortized using the straight-line method over mainly 10 years of effective period.

i) LeaseProperty, plant and equipment capitalized under finance lease arrangements are depreciated over the lease term of the

respective assets up to no residual values. However, as permitted, finance leases commencing prior to April 1, 2008, which do not transfer ownership of the leased property to the lessee, are accounted for as operating leases with disclosure of certain “as if capitalized” information.

j) Allowance for Doubtful AccountsThe Group provides the allowance for doubtful accounts in an amount sufficient to cover possible losses on collection by

estimating individually uncollectible amounts and applying a percentage based on collection experience to the remaining accounts.

k) Accrued Bonuses for EmployeesThe Group provides accruals for the employee bonuses, based on the actual payment in the past.

l) Provision for Product WarrantiesThe Group makes provision for product warranty by individually estimating the expected expenses.

m) Provision for Loss on OrdersThe Group makes provision for losses on orders by estimating the expected losses incurred after the balance sheet date.

n) Provision for Environmental MeasuresThe Group makes provision for the expected future amount required to provide for expenditures related to environmental

measures such as the processing of hazardous substances as required by laws and regulations.

o) Accounting for Retirement Benefits(1) Net defined benefit liability

To provide severance and retirement benefits to employees, net defined benefit liability is recorded in the amount calculated by subtracting the value of pension plan assets from the amount of retirement benefit obligations estimated.(2) The method for attributing expected pension benefits to periods of employee service

Benefit formula is used to attribute expected pension benefits to the period up to the end of the fiscal year.

11

(3) Actuarial differences and prior service costPrior service cost is amortized using the straight-line method over a certain number of years (10 years), which is within the

average remaining service periods of employees at the time when the service cost incurred. Actuarial differences are amortized evenly commencing with the following period of calculation using the straight-line method over the average remaining service periods of employees (from 12 to 15 years).(4) Simplified accounting method used by small-size companies

For calculation of net defined benefit liability and retirement benefit expenses, certain consolidated subsidiaries use the simplified accounting methods under which retirement benefit obligations is recorded as the amount which would be paid for voluntary retirement as of the balance sheet date.

p) Revenue Recognition of Construction ContractsThe Group applies the percentage-of-completion method when the outcome of individual contracts can be reliably estimated.

The percentage/stage of completion at the end of the reporting period is measured by the proportion of the cost incurred to the estimated total cost.

q) Income TaxesThe provision for income taxes is computed based on the pretax income included in the consolidated statements of income.

The Group recognizes tax effects of temporary differences between the carrying amounts of assets and liabilities for tax and financial reporting. The asset and liability approach is used to recognize expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The Company and some consolidated domestic subsidiaries adopted consolidated tax return system.

r) Amounts per Share of Common StockThe computation of net income per share is based on the weighted average number of shares of common stock outstanding

during the year.For the years ended March 31, 2019, 2018 and 2017, diluted net income per share was not shown since the Company had

no securities with dilutive effect. Cash dividends per share presented in the consolidated statements of income represent actual amounts applicable to the respective years.

s) Statements of Cash FlowsIn preparing the consolidated statements of cash flows, cash on hand, readily-available deposits, and short-term highly liquid

investments with maturities that do not exceed three months at the time of purchase and with insignificant risks of change in value are considered to be cash and cash equivalents.

t) Translation of Foreign Currency Accounts and Financial StatementsCash, receivables and payables denominated in foreign currencies are translated into Japanese yen at the year-end exchange

rates. All revenues and expenses in foreign currencies are translated at the exchange rates prevailing when such transactions are recognized. The resulting exchange loss or gain is charged or credited to income.

Financial statements of consolidated overseas subsidiaries are translated into Japanese yen at the year-end exchange rates.Foreign currency translation adjustments resulting from translations of foreign currency financial statements are presented

separately in the foreign currency translation adjustment and non-controlling interests in the consolidated balance sheets.

u) ReclassificationsCertain prior years’ amounts were reclassified to conform to the current year presentation.These reclassifications had no effect on previously reported results of operations or retained earnings.

v) Change in Accounting PoliciesNot applicable.

w) Accounting Standards issued but not adoptedAccounting Standards issued but not adopted as of March 31, 2019.

12

-“Accounting Standard for Revenue Recognition” (ASBJ Statement No.29, March 30, 2018)-“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No.30, March 30, 2018)

(1) OverviewThe above standard and guidance provide comprehensive principles for revenue recognition.Under the standard and guidance, revenue is recognized by applying the following 5 steps.Step1: Identify contracts with customers.Step2: Identify the performance obligations in the contract.Step3: Determine the transaction price.Step4: Allocate the transaction price to the performance obligation in the contract.Step5: Recognize revenue when the entity satisfies a performance obligation.

(2) Effective dateEffective from the beginning of the fiscal year ending March 31, 2022.

(3) Effects of application of the StandardsThe Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of these new

standards on the consolidated financial statements.

x) Change in presentation Changes in presentation for the year ended March 31, 2019 were as follows:

(Partial amendments to Accounting Standard for Tax Effect Accounting)

“Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018 (hereinafter, “Statement No.28”)) became applicable for the consolidated financial statements from the current fiscal year end. As a result, the Company and its domestic subsidiaries adopted Statement No.28 and changed the presentation and related notes of deferred tax assets and deferred tax liabilities, such that deferred tax assets and deferred tax liabilities are classified as part of ‘investments and other assets’ and ‘non-current liabilities’, respectively.

As a result, in the consolidated balance sheet of the previous fiscal year, “deferred tax assets” of ¥ 4,348 million classified in “current assets” were presented in “investments and other assets” of ¥ 14,088 million.

The notes related to tax effect accounting additionally included those described in notes 8 (excluding total amount of valuation reserves) and 9 of “Accounting Standard for Tax Effect Accounting”, which are required in paragraphs 3 to 5 of Statement No.28. However, those additional information corresponding to the previous fiscal year is not disclosed, following the transitional treatments prescribed in paragraph 7 of Statement No.28.

3. Financial InstrumentsInformation on financial instruments for the year ended March 31, 2019 required pursuant to the accounting standards is as

follows:

1. Items relating to condition of financial instruments(1) Policies for financial instruments

It is Meiden Group policy to limit fund management to short-term deposits, and use bank loans and the issue of short-term bonds for financing. Derivatives are used only to hedge the market fluctuation risks described below and are not used for speculative transactions.

(2) Types of financial instruments and risks Operating claims such as trade notes, trade accounts receivable and electronically recorded monetary claims are exposed to

the credit risk of customers. Operating claims denominated in foreign currencies that arise from our business operations overseas are also exposed to currency rate fluctuation risk. However, in principle, this exposure is hedged through forward exchange contracts, except for cases in which the claims are less than the balance of operating debts denominated in the same foreign currency.

13

Securities and investment securities are mainly shares in corporations with which the Group has business or capital alliances. Those are exposed to market price fluctuation risk.

The majority of operating debts such as trade notes, trade accounts payable and electronically recorded monetary obligations has payment dates within one year. In addition, there are some foreign currency-denominated notes and accounts payable related to raw materials purchases that are exposed to currency rate fluctuation risk. However, in principle, this exposure is hedged through forward exchange contracts, except for cases in which the debts are less than the balance of operating claims denominated in the same foreign currency.

Short-term borrowings and commercial paper are mainly used for financing operations transactions, corporate bonds payable and long-term debt are used for financing capital investment and operating capital. Borrowings with a floating rate are exposed to interest rate fluctuation risk. However derivatives transactions are used as instruments to hedge the fluctuation risk for interest paid and to ensure that a fixed interest rate is paid.

Derivatives transactions consist of forward exchange contracts to hedge currency fluctuation risk associated with foreign currency-denominated operating claims and debts, interest rate swaps to hedge interest rate payment fluctuation risk associated with borrowings and commodity swaps to hedge price fluctuation risk associated with raw materials purchases.

Refer to the note 2 d) (Derivatives and Hedge Accounting) for information relating to hedge accounting concerning hedge instruments, hedged items and hedge policies.

(3) Risk management structure for financial instruments

(i) Credit risk (risk relating to counterparty not executing contracts, etc.) managementOperating claim balances are managed based on credit management policies for each counterparty and creditworthiness of

major counterparties is regularly assessed.When using derivatives transactions, transactions are only conducted with financial institutions with a high credit rating to

reduce the credit risk.

(ii) Market risk (currency and interest rate fluctuation risk) managementForward exchange contracts are used to hedge future currency rate fluctuation risk associated with foreign currency-

denominated operating claims and debts. In addition, interest rate swap transactions are used to control interest rate payment risk associated with borrowings, and commodity swap transactions are used to control price fluctuation risk associated with raw materials purchases.

The fair value of securities and investment securities and financial position of issuers are assessed regularly.The purposes, types of transactions, and approvers for derivative transactions are stipulated in derivatives transactions

management policies and approval regulations. In addition, the Group has even more specific operation rules for actual transactions.

(iii) Management of liquidity risk (risk that payment are not made on payment date) associated with financingAlthough operating debts and borrowings are exposed to liquidity risk, this risk is managed through methods such as preparing

and renewing cash flow planning as required.

(4) Supplementary explanation concerning fair value of financial instrumentsThe fair values of financial instruments include amounts based on market values and amounts that are reasonably estimated

when no market value is available. As the measurements of these amounts incorporate elements subject to fluctuation, the resulting amounts could change if different preconditions are used. Please note that for the contract amounts related to derivatives transactions included in the note “Derivatives and hedge accounting”, the amounts themselves do not indicate the market risk associated with derivatives transactions.

2. Items related to the calculation of fair values of financial instruments and securities and derivatives transactionsAssets

(1) Cash and time deposits, (2) Trade notes and trade accounts receivable (3) Electronically recorded monetary claimsThese assets are settled in short-term and fair value is nearly equivalent to book value, therefore the book value is used.

(4) Securities and investment securitiesThe fair value of stocks is price at capital markets and fair value of debt securities is price at capital markets or price presented

by correspondent financial institutions and similar institutions. For the details, please refer to the Note 4(Securities).

14

(5) Long-term loans receivableThe fair value of long-term loans is calculated by discounting with the interest rate assumed for a new loan of the same type.

Liabilities

(1) Trade notes and trade accounts payable, (2) Electronically recorded monetary obligations, (3) Short-term borrowings, (4) Commercial paper, (5) Accounts payable - other, (6) Accrued income taxes

These liabilities are settled in short-term and fair value is nearly equivalent to book value, therefore the book value is used.

(7) Corporate BondsThe fair value of corporate bonds is calculated on the basis of market price.

(8) Long-term debtThe fair value of long-term debt is calculated by discounting with interest rate assumed for a new loan of the same type. For

the fair value of long-term debt with floating rate interest subject to “special treatment” of interest rate swaps, the total of principal and interest, which is treated together with the interest rate swap is discounted with the interest reasonably expected to be applied for a similar type of debt.

Derivative transactions

As the “special treatment” of interest rate swaps is treated together with the hedged long-term borrowings, the fair value is stated with the fair value of the relevant long-term borrowings. As the “allocation treatment” of forward exchange contracts is treated together with the hedged foreign currency-denominated account receivable, the fair value is stated with the fair value of the relevant foreign currency-denominated account receivable. Please refer to Note “Derivatives and hedge accounting”.

15

3. Fair value of financial instrumentsBook values and fair values of the financial instruments on the consolidated balance sheet at March 31, 2019 and 2018 were

as follows:

Millions of yen

2019 Book value Fair value Difference

Cash and time deposits ¥ 12,688 ¥ 12,688 ¥ —

Trade notes and trade accounts receivable (Note) 87,452 87,452 —

Electronically recorded monetary claims 6,508 6,508 —

Securities and Investment securities 18,324 18,324 —


Total assets ¥ 125,008 ¥ 125,009 ¥ 1

Trade notes and trade accounts payable (Note) ¥ 33,686 ¥ 33,686 ¥ —

Electronically recorded monetary obligations 5,046 5,046 —

Short-term borrowings 6,838 6,838 —

Commercial paper — — —

Accounts payable - other 13,490 13,490 —

Accrued income taxes 1,839 1,839 —

Corporate bonds 5,000 5,018 18

Long-term debt 27,684 27,676 (8)

Total liabilities ¥ 93,583 ¥ 93,593 ¥ 10

Derivatives transactions ¥ 0 ¥ 0 ¥ —

Millions of yen


Cash and time deposits ¥ 9,506 ¥ 9,506 ¥ —





Total assets ¥ 123,716 ¥ 123,717 ¥ 1

Trade notes and trade accounts payable (Note) ¥ 36,841 ¥ 36,841 ¥ —



Commercial paper 6,000 6,000 —




Long-term debt 23,044 22,999 (45)

Total liabilities ¥ 97,142 ¥ 97,111 ¥ (31)

Derivatives transactions ¥ 14 ¥ 14 ¥ —

16

Thousands of U.S. dollars


Cash and time deposits $ 114,306 $ 114,306 $ —





Total assets $ 1,126,198 $ 1,126,207 $ 9

Trade notes and trade accounts payable (Note) $ 303,477 $ 303,477 $ —



Commercial paper — — —




Long-term debt 249,406 249,333 (73)

Total liabilities $ 843,091 $ 843,180 $ 89

Derivatives transactions $ 0 $ $0 $ —

(Note) For receivables from and payables to unconsolidated subsidiaries and affiliates are included in those items.

4. Derivatives and hedge accounting(1) Derivative transactions not subject to hedge accounting(i) Currency related

2019 Millions of yen

Types of derivative transactions

Amount of contracts

Amount of contracts over one year

Fair valueUnrealized gain

(loss)

Transaction except for market transaction

JPY-denominated forward exchange contracts (buy)

¥ 9 ¥ 4 ¥ (0) ¥ (0)


SGD-denominated forward exchange contracts (buy)

159 55 (0) (0)



Amount of contracts



(loss)


JPY-denominated forward exchange contracts (sell)

¥ 41 ¥ — ¥ 0 ¥ 0



324 — 18 18



177 — (5) (5)

2019 Thousands of U.S. dollars


Amount of contracts



(loss)



$ 81 $ 36 $ (0) $ (0)



1,432 495 (0) (0)

(Notes) 1. Fair value calculation Fair values are determined based on prices presented by financial institutions.

17

(2) Derivative transactions subject to hedge accounting(i) Currency related


Hedge accounting methodTypes of derivative

transactionsMajor hedged items

Amount of contracts

Amount of contracts

over one yearFair value

Allocation treatment of forward exchange contracts

SGD-denominated forward exchange contracts (sell)

Accounts receivable ¥ 139 ¥ — ¥ (*2)


US dollar-denominated forward exchange contracts (buy)

Accounts payable 5 — (0)


EUR-denominated forward exchange contracts (buy)



GBP-denominated forward exchange contracts (buy)

Accounts payable 138 — 1


Chinese yuan-denominated forward exchange contracts (buy)



Chinese yuan -denominated forward exchange contracts (buy)

Accounts payable 146 — (*2)




Amount of contracts

Amount of contracts




Accounts payable ¥ 5 ¥ — ¥ 0








Thai baht-denominated forward exchange contracts (buy)





Amount of contracts

Amount of contracts



SGD-denominated forward exchange contracts (sell)

Accounts receivable $ 1,252 $ — $ (*2)





EUR-denominated forward exchange contracts (buy)



GBP-denominated forward exchange contracts (buy)

Accounts payable 1,243 — 9





Chinese yuan -denominated forward exchange contracts (buy)

Accounts payable 1,315 — (*2)

(Notes) 1. Fair value calculation Fair values are determined based on prices presented by financial institutions and other entities. *2. The fair value is treated together with the fair value of the relevant account receivable as the “allocation treatment” of forward

exchange contracts is treated together with the hedged account receivable.

18

(ii) Interest rate related




Amount of contracts

Amount of contracts


Special treatment for interest rate swaps

Interest rate swap transactions

Long-term debt ¥ 700 ¥ 700 ¥ (*2)




Amount of contracts

Amount of contracts




Long-term debt ¥ 700 ¥ 700 ¥ (*2)




Amount of contracts

Amount of contracts




Long-term debt $ 6,306 $ 6,306 $ (*2)

(Notes) 1. Fair value calculation Fair values are determined based on prices presented by financial institutions.*2. The fair value is treated together with the fair value of the relevant long-term debts as the “special treatment” of interest rate

swaps is treated together with the hedged long-term borrowings.

19

4. SecuritiesA. The following tables summarize acquisition costs and book values of securities with fair values as of March 31, 2019 and 2018.

Millions of yen

2019 Acquisition cost Book value Difference

Securities with book value (fair value) exceeding acquisition cost:Equity securities

¥ 5,632 ¥ 16,470 ¥ 10,838

Sub-total 5,632 16,470 10,838

Securities with book value (fair value) not exceeding acquisition cost: Equity securities

2,458 1,837 (621)

Others 17 17 —

Sub-total 2,475 1,854 (621)

Total ¥ 8,107 ¥ 18,324 ¥ 10,217

Millions of yen


Securities with book value (fair value) exceeding acquisition cost: Equity securities

¥ 7,696 ¥ 19,678 ¥ 11,982

Sub-total 7,696 19,678 11,982


393 268 (125)

Others 17 17 —

Sub-total 410 285 (125)

Total ¥ 8,106 ¥ 19,963 ¥ 11,857



Securities with book value (fair value) exceeding acquisition cost: Equity securities

$ 50,739 $ 148,378 $ 97,639

Sub-total 50,739 148,378 97,639


22,144 16,550 (5,594)

Others 153 153 —

Sub-total 22,297 16,703 (5,594)

Total $ 73,036 $ 165,081 $ 92,045

B. The following tables summarize book values of securities with no fair value as of March 31, 2019 and 2018.

(a) Available-for-sale securities;

Book value

Millions of yenThousands ofU.S. dollars

2019 2018 2019

Non-listed equity securities ¥ 517 ¥ 564 $ 4,658

(b) Equity securities issued by subsidiaries and affiliated companies;

Book value


2019 2018 2019

Investments in unconsolidated subsidiaries ¥ 24 ¥ 24 $ 216

Investments in affiliated companies 1,301 1,186 11,721

Total ¥ 1,325 ¥ 1,210 $ 11,937

20

C. The following table summarizes total sales amounts of available-for-sale securities sold, gains and losses, in the years ended March 31, 2019 and 2018.


2019 2018 2019

Sales amount ¥ 255 ¥ 648 $ 2,297

Gains 201 481 1,811

D. The amounts of impairment of securities in the years ended March 31, 2019 and 2018. There were no applicable items under this category for the year ended March 31, 2019 and 2018.

5. InventoriesInventories as of March 31, 2019 and 2018 were as follows:


2019 2018 2019

Finished products ¥ 4,479 ¥ 4,389 $ 40,351

Work-in-process 32,694 32,048 294,541

Materials and supplies 5,476 5,289 49,333

Total ¥ 42,649 ¥ 41,726 $ 384,225

6. Subsidies Received from the Japanese Government and local Government, etc The Group received a portion of acquisition costs of certain tangible fixed assets from the Japanese Governments and local

Governments. The aggregated amounts of the subsidies deducted from the acquisition costs of the tangible fixed assets as of March 31, 2019 and 2018, were ¥3,134 million ($28,234 thousand) and ¥3,094 million, respectively.

The deducted amounts from acquisition costs of acquired fixed assets based on certain tax regulations in the current term are ¥0 million ($0 thousand) for Building and ¥40 million ($360 thousand) for Machinery and Equipment.

7. Short-Term Borrowings, Commercial Paper, Corporate Bonds and Long-Term Debt

1. Short-term Borrowings(1) Weighted average interest rates on short-term borrowings were 2.1% and 4.6% as of March 31, 2019 and 2018, respectively. Short-term borrowings as of March 31, 2019 and 2018 were as follows:


2019 2018 2019

Bank loans ¥ 6,838 ¥ 6,060 $ 61,604

(2) Commitment Line AgreementThe Company renewed an agreement with a syndicate of 14 Japanese banks to set up a commitment line for the Company.The unexecuted balances of lending commitments for the Company as of March 31, 2019 and 2018 were as follows:


2019 2018 2019

Total lending commitments ¥ 25,000 ¥ 25,000 $ 225,225

Less amounts currently executed — — —

Unexecuted balance ¥ 25,000 ¥ 25,000 $ 225,225

21

2. Commercial PaperInterest rate on commercial paper was 0.0% as of March 31, 2018.Commercial papers as of March 31, 2019 and 2018 were as follows:


2019 2018 2019

Commercial paper ¥ — ¥ 6,000 $ —

3. Corporate BondsInterest rate on corporate bonds was 0.38% as of March 31, 2019.


2019 2018 2019

Corporate Bonds ¥ 5,000 ¥ 5,000 $ 45,045

The annual maturities of corporate bonds as of March 31, 2019 is as follows:

Year ending March 31 Millions of yenThousands of

U.S. dollars

2020 ¥ — $ —

2021 — —

2022 — —

2023 5,000 45,045

4. Long-Term DebtWeighted average interest rates on Long-term debts were 0.5% as of March 31, 2019 and 2018.Long-term debts as of March 31, 2019 and 2018 were as follows:


2019 2018 2019

Loans from banks and insurance companies ¥ 27,684 ¥ 23,044 $ 249,406

Less: Current portion 3,090 2,136 27,838

Total ¥ 24,594 ¥ 20,908 $ 221,568

The annual maturities of long-term debts as of March 31, 2019 were as follows:

Year ending March 31 Millions of yenThousands ofU.S. dollars

2020 ¥ 3,090 $ 27,838

2021 4,599 41,432

2022 9,020 81,261

2023 450 4,054

2024 9,040 81,441

2025 and thereafter 1,485 13,380

22

8. Pledged AssetsInvestment securities of ¥2 million ($18 thousand) as of March 31, 2019 and 2018 were pledged as collateral for borrowing of

an affiliate from financial institutions.

9. Employees’ Severance and Retirement Benefits1. Overview of Employees’ Severance and Retirement Benefit Plan

The Group provides funded/unfunded defined benefit corporate pension plans, and defined contribution pension plans. Under the unfunded defined benefit corporate pension plan (i.e. a lump-sum payment plan), all eligible employees are entitled

to a lump-sum payment based on the level of wages and salaries at the time of retirement or termination, length of service, and other factors.

Since some consolidated subsidiaries which adopt a multi-employer welfare pension fund plan are not able to estimate their value of the plan assets reasonably, they account for it in the same way as the defined contribution plan.

Certain small consolidated subsidiaries in defined benefit corporate pension plans and unfunded lump-sum payment plans adopt the simplified accounting method to calculate net defined benefit liability and retirement benefit expenses.

2. Defined benefit corporate pension plan(1) Reconciliation of retirement benefit obligations (excluding pension plans using the simplified accounting method)


U.S. dollars

2019 2018 2019

Balance of severance and retirement benefit liabilities as of April 1 ¥ 49,567 ¥ 50,781 $ 446,550

Service cost 1,954 2,015 17,604

Interest cost 416 427 3,748

Actuarial gain 85 (925) 765

Retirement benefit payment (3,433) (2,731) (30,929)

Transfer due to changing from simplified method to principle method 281 — 2,532

Increase due to changing from simplified method to principle method 205 — 1,847

Balance of severance and retirement benefit liabilities as of March 31 ¥ 49,075 ¥ 49,567 $ 442,117

(2) Reconciliation of plan assets (excluding pension plans using the simplified accounting method)


U.S. dollars

2019 2018 2019

Balance as of April 1 ¥ 8,333 ¥ ¥8,739 $ 75,072

Expected return on plan assets 250 262 2,252

Actuarial gain / (loss) (150) 98 (1,351)

Contribution from employer 71 75 640

Retirement benefit payment (859) (835) (7,739)

Transfer due to changing from simplified methods to principle methods 176 — 1,585

Others — (6) —

Balance as of March 31 ¥ ¥7,821 ¥ ¥8,333 $ 70,459

(3) Reconciliation of net defined benefit liability for the pension plans using the simplified accounting method


U.S. dollars

2019 2018 2019

Balance as of April 1 ¥ 1,827 ¥ 1,673 $ 16,459

Retirement benefit cost 384 405 3,459

Retirement benefit payment (123) (162) (1,108)

Contribution to the plans (92) (89) (829)

Transfer due to changing from simplified methods to principle methods (105) — (946)

Others 1 — 10

Balance as of March 31 ¥ 1,892 ¥ 1,827 $ 17,045

23

(4) Reconciliation from retirement benefit obligations and plan assets to net defined benefit liability/asset in the consolidated balance sheets


U.S. dollars

2019 2018 2019

Retirement benefit obligations in funded plans ¥ 10,319 ¥ 11,153 $ 92,964

Plan assets (8,749) (9,406) (78,820)

Sub total ¥ 1,570 ¥ 1,747 $ 14,144

Retirement benefit obligations in unfunded plans 41,575 41,314 374,550

Net defined benefit liability in the consolidated balance sheets ¥ 43,145 ¥ 43,061 $ 388,694

Defined benefit liability 43,145 43,061 388,694

Net defined benefit liability in the consolidated balance sheets ¥ 43,145 ¥ 43,061 $ 388,694

(5) Retirement benefit costs


U.S. dollars

2019 2018 2019

Service cost ¥ 1,954 ¥ 2,015 $ $17,604

Interest cost 416 427 3,738

Expected return on plan assets (250) (262) (2,252)

Amortization of actuarial gains and losses 758 825 6,828

Amortization of prior service cost (4) (4) (36)

Increase due to changing from simplified methods to principle methods 205 — 1,847

Retirement benefit cost calculated using the simplified methods 384 405 3,459

Retirement benefit expenses ¥ 3,463 ¥ 3,406 $ 31,198

(6) Remeasurements of defined benefit plansComponents of remeasurements of defined benefit plans (before deducting tax effects)


U.S. dollars

2019 2018 2019

Prior service cost ¥ (4) ¥ (4) $ (36)

Actuarial gains and losses 523 1,849 4,712

Total ¥ 519 ¥ 1,845 $ 4,676

(7) Cumulative remeasurements of defined benefit plansComponents of remeasurements of defined benefit plans (before deducting tax effects)


U.S. dollars

2019 2018 2019

Unrecognized prior service cost ¥ (54) ¥ (58) $ (486)

Unrecognized actuarial gains and losses 4,135 4,658 37,252

Total ¥ 4,081 ¥ 4,600 $ 36,766

(8) Plan assets(i) Main components of plan assets

2019 2018

Corporate Bonds 59% 53%

Equity securities 26% 34%

Life insurance general account 15% 13%

Cash and time deposits 0% 0%

Total 100% 100%

24

(ii) Long-term expected rate of return on plan assetsCurrent and target asset allocations, current and expected returns on various categories of plan assets are considered in

determining the long-term expected rate of return.

(9) Actuarial assumptionsPrincipal actuarial assumptions used as of March 31, 2019 and 2018 (in weighted average)

2019 2018

Discount rate 0.8% 0.8%

Long-term expected rate of return on plan assets 3.0% 3.0%

3. Defined contribution pension planThe contribution of the Company and its certain consolidated subsidiaries to the defined contribution pension plans totaled

¥804 million ($7,243 thousand) as of March 31, 2019, and ¥791 million as of March 31, 2018, respectively.

10. Net AssetsUnder Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock.

However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the prices of the new shares as additional paid-in capital, which is included in capital surplus.

Under Japanese Corporation Law (“the Law”), in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.

Under the Law, generally legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit or could be capitalized by a resolution of the shareholders’ meeting.

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, however generally, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.

The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated financial statements of the Company in accordance with Japanese laws and regulations.

1. Stock InformationChanges in number of shares issued and outstanding during the years ended March 31, 2019 and 2018 are as follows:

Treasury stock outstanding Thousands of shares

2019 2018

Balance at beginning 767 756

Increase due to purchase of odd-lot stocks 9 11

Decrease due to reverse split of stocks and sales of odd-lot stocks (620) (—)

Balance at end 156 767

The reverse split of stocks was conducted on October 1.2018 at a ratio of 1-for-5 common stocks.

2. Dividend Information

Dividends paid during the year ended March 31, 2019 Amount of dividends Dividends per share

Resolution Record date Effective date Millions of yenThousands of U.S. dollars

Yen

Shareholders’ meetingon June 27, 2018

March 31, 2018 June 28, 2018 ¥1,134 $10,216 ¥5

The dividends per share includes 1 yen for 120th foundation anniversary.

Board of Directors’ meeting on October

26, 2018September 30, 2018 November 28, 2018 ¥907 $8,171 ¥4

The reverse split of stocks was conducted on October 1, 2018, at a ratio of 1-for-5 common stocks.The record date is September 30, 2018, therefore the amount of dividends per share is before conducting the reverse split of stocks.

25

Dividends whose record date is attributable to the year ended March 31, 2019 but to be effective after March 31, 2019

Amount of dividends Dividends per share


Yen

Shareholders’ meeting on June 25, 2019

March 31, 2019 June 26, 2019 ¥1,134 $10,216 ¥25

Dividends paid during the year ended March 31, 2018 Amount of dividends Dividends per share


Yen


March 31, 2017 June 29, 2017 ¥908 $8,566 ¥4

Board of Directors’ meeting on October

31, 2017September 30, 2017 November 30, 2017 ¥907 $8,557 ¥4

Dividends whose record date is attributable to the year ended March 31, 2018 but to be effective after March 31, 2018

Amount of dividends Dividends per share


Yen


March 31, 2018 June 28, 2018 ¥1,134 $10,698 ¥5

The dividends per share includes 1 yen for 120th foundation anniversary.

26

11. Reclassification Adjustments and Tax Effects for Other Comprehensive IncomeAmounts reclassified to net income (loss) in the current period that were recognized in other comprehensive income in the

current or previous periods and tax effects for each component of other comprehensive income as of March 31, 2019 and 2018, were as follows:


U.S. dollars

2019 2018 2019

Unrealized gains (losses) on securities

Increase (decrease) during the year ¥ (1,640) ¥ 1,667 $ (14,775)

Reclassification adjustments (201) (481) (1,811)

Sub-total, before tax (1,841) 1,186 (16,586)

Tax (expense) or benefit 556 (360) 5,010

Sub-total, net of tax (1,285) 826 (11,576)

Unrealized gains (losses) on hedging derivatives

Increase (decrease) during the year 1 5 9

Reclassification adjustments 0 27 0

Sub-total, before tax 1 32 9

Tax (expense) or benefit 0 (9) 0

Sub-total, net of tax 1 23 9

Foreign currency translation adjustment

Increase (decrease) during the year (627) 305 (5,649)

Reclassification adjustments — 55 —

Sub-total, before tax (627) 360 (5,649)

Remeasurements of defined benefit plans

Increase (decrease) during the year (235) 1,024 (2,117)

Reclassification adjustments 754 821 6,793

Sub-total, before tax 519 1,845 4,676

Tax (expense) or benefit (157) (569) (1,415)

Sub-total, net of tax 362 1,276 3,261

Share of other comprehensive income of affiliates accounted for using equity method

Increase (decrease) during the year — 60 —

Total other comprehensive income ¥ (1,549) ¥ 2,545 $ (13,955)

12. Contingent LiabilitiesContingent liabilities as of March 31, 2019 and 2018 were as follows:


2019 2018 2019

MEIDEN INDIA PVT. LTD. ¥ 84 ¥ 20 $ 757

MEIDEN KOREA CO., LTD. 14 15 126

Employees 6 11 54

Total ¥ 104 ¥ 46 $ 937

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13. Lease InformationPrior to April 1, 2008, finance leases, which do not transfer ownership of properties to lessees, were not capitalized and were

accounted for in the same manner as operating leases. Certain related information is summarized as follows:

1. Assumed amounts (inclusive of interest) of acquisition cost, accumulated depreciation and net book value as of March 31, 2019 and 2018 were summarized as follows:


2019 2018 2019

Assumed acquisition cost

Machinery and equipment ¥ 570 ¥ 570 $ 5,135

Accumulated depreciation (513) (475) (4,621)

Net book value ¥ 57 ¥ 95 $ 514

2. The amounts of future minimum lease payments calculated by the interest-inclusive method as of March 31, 2019 and 2018 totaled ¥57 million ($514 thousand) and ¥95 million, including ¥38 million ($342 thousand) and ¥38 million that were due within one year, respectively.

3. Lease payments, which are equal to assumed depreciation charges for the years ended March 31, 2019, 2018 and 2017 were ¥38 million ($342 thousand), ¥38 million and ¥38 million, respectively.

4. Assumed depreciation charges are computed using the straight-line method over lease terms assuming no residual value.

14. Research and Development ExpensesResearch and development expenses are charged to income as incurred. The amounts charged to income for the years ended

March 31, 2019, 2018 and 2017 were ¥9,458 million ($85,207 thousand), ¥9,403 million and ¥9,462 million, respectively.

15. Segment Information1. General information relating to reportable segments

Each reportable segment of the Group consists of business units within the Group, for which separate financial information is available.

Reportable segments are reviewed periodically at the Board of Directors’ Meeting in order to determine distribution of management resources and evaluate business results.

The Group has business units based on products and services, and each unit plans its comprehensive strategy and operates business activities.

The Group’s reportable segments are identified by products and services, including “Social Infrastructure Systems,” “Industrial Systems,” “Maintenance and Servicing,” and “Real Estate.”

Description of business of each reportable segment is as follows:

Reportable segments Description of business

Social Infrastructure Systems This segment includes businesses that provide products and services related to social infrastructure such as power generation and transmission systems.

Industrial Systems This segment includes businesses that provide products and services such as industrial components, dynamometer systems, and automatic guided vehicles to businesses in the general manufacturing industry.

Maintenance and Servicing This segment includes the maintenance business.

Real Estate This segment includes businesses related to the rental of real estates.

2. Basis of measurement relating to reported segment profit or loss, segment assets, segment liabilities and other material items

Accounting policies for each reportable segment are the same as “Summary of Significant Account Policies.”The operating income for each reportable segment is reconciled with the operating income of consolidated statements of

income.Inter-segment sales and transfers are based on market prices.

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3. Information relating to reported segment profit or loss, segment assets, segment liabilities and other material itemsSegment information for the year ended March 31, 2019, was as follows:

Millions of yen

Year ended March 31, 2019

Social Infrastructure

SystemsIndustrial Systems

Maintenance and

Servicing Real Estate Sub total Others Total Adjustments Consolidated

Net sales:

External customers ¥134,770 ¥61,376 ¥35,701 ¥3,219 ¥235,066 ¥9,967 ¥245,033 ¥— ¥245,033

Inter-segment 2,763 3,724 1,273 263 8,023 8,635 16,658 (16,658) —

Total ¥137,533 ¥65,100 ¥36,974 ¥3,482 ¥243,089 ¥18,602 ¥261,691 ¥(16,658) ¥245,033

Operating income ¥(107) ¥5,623 ¥4,343 ¥1,419 ¥11,278 ¥798 ¥12,076 ¥(1,740) ¥10,336

Identifiable assets ¥124,354 ¥43,784 ¥27,312 ¥15,586 ¥211,036 ¥8,290 ¥219,326 ¥46,260 ¥265,586

Other items

Depreciation and amortization(excluding goodwill)

3,347 1,473 283 937 6,040 166 6,206 2,417 8,623

Amortization amount of goodwill

581 — — — 581 — 581 — 581

Capital expenditures 2,787 1,745 193 44 4,769 190 4,959 2,937 7,896





Maintenance and


Net sales:

External customers $1,214,144 $552,937 $321,631 $29,000 $2,117,712 $89,793 $2,207,505 $— $2,207,505

Inter-segment 24,892 33,550 11,468 2,369 72,279 77,793 150,072 (150,072) —

Total $1,239,036 $586,487 $333,099 $31,369 $2,189,991 $167,586 $2,357,577 $ (150,072) $2,207,505

Operating income $(964) $50,658 $39,126 $12,784 $101,604 $7,189 $108,793 $ (15,676) $93,117

Identifiable assets $1,120,307 $394,450 $246,054 $140,414 $1,901,225 $74,685 $1,975,910 $416,757 $2,392,667

Other items


30,153 13,270 2,550 8,441 54,414 1,496 55,910 21,775 77,685


5,234 — — — 5,234 — 5,234 — 5,234

Capital expenditures 25,108 15,721 1,739 396 42,964 1,712 44,676 26,459 71,135

(Notes)1. “Others” segment comprises business operations that are not included in the reportable segments, including other product sales, employee welfare and benefit

services, and the provision of chemical and other products. 2. Segment operating income is reconciled with operating income reported on the consolidated financial statements. 3. “Adjustments” for segment operating income of ¥ (1,740) million ($(15,676) thousand) include eliminations of inter-segment transactions of ¥757 million ($6,820

thousand), adjustments for Inventories of ¥ (5) million ($(45) thousand), and corporate operating expenses of ¥ (2,492) million ($(22,451) thousand) that are not allocated to the reportable segments. The corporate operating expenses mainly include R&D expenses incurred at the fundamental research laboratory and other facilities that are not affiliated with the reportable segments.

4. “Adjustments” for segment assets of ¥46,260 million ($416,757 thousand) includes eliminations of inter-segment receivables and other assets of ¥ (36,903) million ($(332,459) thousand), and corporate assets of ¥83,163 million ($749,216 thousand) that are not allocated to the reportable segments. Corporate assets mainly include cash and time deposits, investment securities, and the assets related to the fundamental research laboratory and other facilities that are not affiliated with the reportable segments.

5. “Adjustments” for capital expenditures of ¥2,937 million ($26,459 thousand) include mainly capital investments for the information system of the Company.

29

Segment information for the year ended March 31, 2018 and 2017 were as follows:

Millions of yen




Maintenance and


Net sales:


Inter-segment 2,913 4,217 1,094 263 8,487 8,484 16,971 (16,971) —

Total ¥147,049 ¥56,001 ¥33,963 ¥3,463 ¥240,476 ¥18,328 ¥258,804 ¥(16,971) ¥241,833

Operating income ¥4,080 ¥4,386 ¥3,587 ¥1,337 ¥13,390 ¥497 ¥13,887 ¥(2,506) ¥11,381


Other items


3,330 1,458 268 936 5,992 164 6,156 2,517 8,673


225 — — — 225 — 225 — 225



services, and the provision of chemical and other products. 2. Segment operating income is reconciled with operating income reported on the consolidated financial statements. 3. “Adjustments” for segment operating income of ¥ (2,506) million include eliminations of inter-segment transactions of ¥672 million, adjustments for Inventories of ¥

(4) million, and corporate operating expenses of ¥ (3,174) million that are not allocated to the reportable segments. The corporate operating expenses mainly include R&D expenses incurred at the fundamental research laboratory and other facilities that are not affiliated with the reportable segments .

4. “Adjustments” for segment assets of ¥44,315 million includes eliminations of inter-segment receivables and other assets of ¥ (32,178) million, and corporate assets of ¥76,493 million that are not allocated to the reportable segments. Corporate assets mainly include cash and time deposits, investment securities, and the assets related to the fundamental research laboratory and other facilities that are not affiliated with the reportable segments .

5. “Adjustments” for capital expenditures of ¥2,672 million include mainly capital investments for the information system of the Company.

Millions of yen




Maintenance and


Net sales:


Inter-segment 3,178 4,223 1,035 263 8,699 8,894 17,593 (17,593) —

Total ¥126,530 ¥55,552 ¥33,045 ¥3,452 ¥218,579 ¥19,155 ¥237,734 ¥(17,593) ¥220,141

Operating income ¥3,297 ¥2,466 ¥3,782 ¥1,340 ¥10,885 ¥465 ¥11,350 ¥(2,501) ¥8,849


Other items


3,247 1,432 243 943 5,865 179 6,044 2,542 8,586


78 — — — 78 — 78 — 78



services, and the provision of chemical and other products. 2. Segment operating income is reconciled with operating income reported on the consolidated financial statements. 3. “Adjustments” for segment operating income of ¥ (2,501) million include eliminations of inter-segment sales transactions of ¥748 million, adjustments for Inventories of

¥ 1 million, and corporate operating expenses of ¥ (3,250) million that are not allocated to the reportable segments. The corporate operating expenses mainly include R&D expenses incurred at the fundamental research laboratory and other facilities that are not affiliated with the reportable segments.

4. “Adjustments” for segment assets of ¥49,652 million includes eliminations of inter-segment receivables and other assets of ¥ (22,467) million, and corporate assets of ¥72,119 million that are not allocated to the reportable segments. Corporate assets mainly include cash and time deposits, investment securities, and the assets related to the fundamental research laboratory and other facilities that are not affiliated with the reportable segments.

5. “Adjustments” for capital expenditures of ¥3,281 million include mainly capital investments for the information system of the Company.

30

Related information1. Related information relating to geographic areas

Information about geographic areas for the year ended March 31, 2019, 2018 and 2017 was as follows:

Millions of yen

Year ended March 31, 2019 Japan Asia Other Areas Total

Net sales ¥173,308 ¥44,245 ¥27,480 ¥245,033

Tangible fixed assets 55,518 5,835 1,978 63,331

Millions of yen


Net sales ¥167,679 ¥55,719 ¥18,435 ¥241,833


Millions of yen


Net sales ¥161,411 ¥42,166 ¥16,564 ¥220,141

Thousands of U.S dollars


Net sales $1,561,333 $398,604 $247,568 $2,207,505


2. Information relating to impairment loss of the assets by reportable segmentsThe amount of impairment loss of the fix assets for the year ended March 31, 2019 was ¥6 million ($54 thousand).The amount belonged to Maintenance and Servicing segment.Not applicable for the fiscal year ended March 31, 2018 and 2017.

3. Information relating to amortization and ending balance of goodwill by reportable segmentsThe amounts of amortization of goodwill for the years ended March 31, 2019, 2018 and 2017, were ¥581 million ($5,234

thousand), ¥225 million, and ¥78 million respectively.The amounts of ending balance of goodwill as of March 31, 2019 and 2018 were ¥4,645 million ($41,847 thousand) and

¥5,739 million, respectively. The amounts belonged to Social Infrastructure Systems segment.

4. Information relating to gain on negative goodwill by reportable segments:There were no applicable items under this category for the years ended March 31, 2019, 2018 and 2017.

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16. Income TaxesThe Company is subject to a number of taxes based on income, which in aggregate, resulted in normal statutory tax rates

of approximately 30.31% for the year ended March 31, 2019 and 30.54% for the year ended March 31, 2018,2017, respectively based on Japan’s corporate tax, inhabitant tax and business tax.

1. The significant differences between the statutory tax rate and the Group’s effective tax rate for financial statement purposes for the years ended March 31, 2019, 2018 and 2017 are as follows:

2019 2018 2017

Statutory tax rate 30.31% 30.54% 30.54%

Permanent difference (social expenses, etc.) 0.45 0.51 0.62

Inhabitant tax on per capita basis 1.37 1.35 1.73

Net changes in valuation reserve (0.41) 0.05 1.43

Equity in income (losses) of affiliated companies (0.45) 2.68 2.18

Tax credits (7.42) (6.00) (5.42)

Statutory tax rates variance of overseas subsidiaries 0.38 0.28 (2.98)

Amortization of goodwill 1.71 0.67 0.29

Other-net 1.56 1.15 2.60

Effective tax rate 27.50% 31.23% 30.99%

2. Significant components of deferred tax assets and liabilities of the Group as of March 31, 2019 and 2018(1) Deferred tax assets and deferred tax liabilities based on the major sources of temporary differences


2019 2018 2019

Deferred tax assets:

Carryforward tax loss ¥ 3,224 ¥ 3,378 $ 29,045

Net defined benefit liability 13,016 13,058 117,261

Accrued bonuses 2,083 2,081 18,766

Allowance for doubtful accounts 24 45 216

Loss from inventory revaluation and provision for loss on order received 517 480 4,658

Loss from securities and other 1,197 1,203 10,784

Provision for product warranties 353 253 3,180

Provision for environmental measures 129 198 1,162

Land assessed value due to merger 268 268 2,414

Elimination of unrealized profit 259 271 2,333

Others 1,589 1,663 14,316

Gross deferred tax assets 22,659 22,898 204,135

Less: Valuation reserve for carryforward tax loss(A) (1,862) — (16,775)

Less: Valuation reserve for deductible temporary differences(B) (1,483) — (13,360)

Less: Valuation reserve (3,345) (4,282) (30,135)

Total deferred tax assets 19,314 18,616 174,000

Deferred tax liabilities:

Differences between book and tax basis of property, plant and equipment (61) (61) (550)

Reserve for accelerated depreciation (7) (31) (63)

Unrealized gains on securities (3,048) (3,605) (27,459)

Retirement salary debt adjustment (778) (807) (7,009)

Deferred gain from division of corporation — (6) —

Others (293) (26) (2,640)

Total deferred tax liabilities (4,187) (4,536) (37,721)

Net deferred tax assets ¥ 15,127 ¥ 14,080 $ 136,279

(Note) Valuation reserve decreased by ¥937 million ($8,441 thousand). Mainly because of expiry of carryforward tax loss and decrease of

amounts of overseas subsidiaries caused by appreciation of Japanese yen.

32

(2) Carryforward tax loss and deferred tax assets by expiration periods


Millions of yen

2020 2021 2022 2023 20242025 and beyond

Total

Carryforward tax loss(a) ¥ 26 ¥ 78 ¥ 85 ¥ 24 ¥ 112 ¥ 2,899 ¥ 3,224

Valuation reserve (26) (78) (85) (24) (0) (1,649) (1,862)

Net deferred tax assets — — — — 112 1,250 (b)1,362



2020 2021 2022 2023 20242025 and beyond

Total

Carryforward tax loss(a) $ 234 $ 703 $ 766 $ 216 $ 1,009 $ 26,117 $ 29,045

Valuation reserve (234) (703) (766) (216) (0) (14,856) (16,775)

Net deferred tax assets — — — — 1,009 11,261 (b)12,270

(Notes)(a) Carryforward tax loss shown in the above table is after multiplying the statutory tax rate.(b) Deferred tax asset of ¥1,362 million ($12,270 thousand) was recognized for carryforward tax loss of ¥3,224 million ($29,045 thousand), which was amount multiplied

by the statutory tax rate. No valuation reserve is recognized for the carryforward loss since the amount was determined to be recoverable based on expected future taxable income.

17. Investment and Rental PropertyThe Company owns some rental office buildings and rental commercial facilities for the purpose of earning rent income in Tokyo

and other regions. Information relating to fair value of investment and rental property was disclosed as follows:

Millions of yen

2019 beginning-of-year balance

Increase (decrease) during 2019

2019 end-of-year balance 2019 fair value

Rental real estate ¥15,550 ¥(839) ¥14,711 ¥54,648

(Notes)1. Figures stated above were the amounts after accumulated depreciation was deducted from the cost of acquisition.2. The decrease in investment and rental property during the year ended March 31, 2019, was mainly attributable to depreciation ¥839 million ($7,558 thousand).3. The fair value at March 31, 2019 represented the appraisal value from an independent real estate appraiser.

Millions of yen




Rental real estate ¥16,370 ¥(820) ¥15,550 ¥52,759

(Notes)1. Figures stated above were the amounts after accumulated depreciation was deducted from the cost of acquisition.2. The decrease in investment and rental property during the year ended March 31, 2018, is mainly attributable to depreciation ¥ 820 million.3. The fair value at March 31, 2018 represented the appraisal value from an independent real estate appraiser.





Rental real estate $140,090 $(7,558) $132,532 $492,324

The profits and losses associated with rental real estate and real estate that contains portions that were used as rental real estate for the fiscal years ended March 31, 2019, 2018 and 2017 were as follows.

Millions of yen

Year ended March 31, 2019 Operating income Operating cost Operating profit

Rental real estate ¥3,482 ¥2,063 ¥1,419

Millions of yen



33

Millions of yen





Rental real estate $31,369 $18,585 $12,784

18. Cash and Cash Equivalents1. Reconciliations of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents

shown in the consolidated statements of cash flows as of March 31, 2019 and 2018 were as follows:


2019 2018 2019

Cash and time deposits ¥ 12,688 ¥ 9,506 $ 114,306

Time deposits with maturities exceeding three months (216) (219) (1,946)

Restricted deposits (39) (50) (351)

Cash and cash equivalents ¥ 12,433 ¥ 9,237 $ 112,009

2. Significant non-cash transactions(1) For the fiscal year ended March 31, 2017, due to the conversion of convertible corporate bonds issued by an unconsolidated

subsidiary, the corporate bonds issued by affiliate were decreased by ¥1,725 million, and investments in unconsolidated subsidiaries and affiliates were increased by ¥1,646 million.

(2) Using debt-equity swap (DES), the loans receivable were decreased by ¥2,378 million, and investments in unconsolidated subsidiaries and affiliates were increased by ¥2,511 million.

Not applicable for the fiscal year ended March 31, 2019 and 2018.

19. Related Party TransactionsInformation on related party transactions as of and for the fiscal year ended March 31, 2017 was as follows:

Type Name Location

Capital or investments(Millions of

yen)

Business Voting interest

Relationship with related party Transactions

Transaction amount

(Millions of yen)

Account

Balance at year end(Millions of

yen)

Subsi-diary Prime Meiden Ltd. India ¥2,024

Manufacturing of power transformers and EPC contracting of transmission and distribution (“T&D”) projects

Direct60.0%

- Guarantee for liabilities

- Guarantee for liabilities ¥4,764

— —

- Conversion of convertible bonds

- Conversion of convertible bonds ¥1,646

- Lending of funds - Lending of funds (*) ¥2,378

- Underwriting of the capital increase

- Underwriting of the capital increase (*) ¥2,511

- Interlocking directors — —

(Note)(*) Underwriting of the capital increase was by investment in kind of loan receivable in the form of DES.

For the years ended March 31, 2019 and 2018, there were no applicable items under this category.

34

20. Net Income per ShareThe bases for per share amount calculation for the years ended March 31, 2019, 2018 and 2017 were as follows:


2019 2018 2017 2019

Basic earnings per share:

Net income ¥ 7,654 ¥ 7,057 ¥ 5,743 $ 68,955

Earnings not attributable to common shareholders — — — —

Net income allocated to common stocks 7,654 7,057 5,743 68,955

Diluted net income per share is not presented, since the Company has not issued any dilutive securities.

Thousands of shares

2019 2018 2017

Weighted-average number of common stocks 45,373 226,876 226,886

A reverse split of stocks was conducted on October 1, 2018, at a ratio of 1-for-5 common stocks.The net income per share was calculated by assuming the reverse split of stocks was conducted at the beginning of 2017.

21. Business CombinationBusiness combination information as of March 31, 2017 were as follows;Not applicable for the fiscal year ended March 31, 2019 and 2018.

(2017)Business combination through acquisition

1. Overview of transactions(1) Name of acquired company and description of business Name of acquired company: Prime Meiden Ltd. (“PML”) Description of business: Manufacturing of power transformers and EPC contracting of transmission and distribution (“T&D”)

projects

(2) Main reason for the business combinationThe Company invested in March 2014 in Prime Electric Ltd., an India power transformer company, which changed the name to PML in May 2014. Since then, the Company has been providing assistance to PML by sending engineers to PML in enhancing its technical capabilities and expanding opportunities to win others in India and abroad.In India and other emerging countries, investment in power infrastructure is expected to grow to meet the ever increasing need of electricity, and power transformer business is also anticipated to grow strongly in the medium to long-term. In its T&D business, the Company has been promoting the overseas expansion of its products and projects in Southeast Asia through its production bases in Singapore for transformers and switchgear, but for further expansion into emerging countries, the Company finds it necessary to increase its production capacity and improve ability to meet price and delivery requirements.To promote further overseas expansion, the MEIDEN group will integrate PML, the Company’s subsidiary, into the Group as a strategic production base for both finished and semi-finished large capacity power transformers, as well as a procurement base for transformer materials and components. With this new strategic base, the Group will take further steps forward in its overseas expansion not only in India’s power generation, T&D and railway markets, but also power equipment markets in Southeast Asia and other emerging countries in the west side from India.The Company applies equity method to PML as an unconsolidated subsidiary.

(3) Date of the business combinationJune 29, 2016

(4) Legal form of the business combinationThe share acquisition in exchange for cash

(5) Name of company after the business combinationPrime Meiden Ltd. (no change)

35

(6) Percentage of the acquired voting rightsPercentage of voting shares held immediately before merger: 23%Percentage of voting shares additionally acquired: 37%Percentage of total voting shares held after acquisition: 60%

(7) Main reason for determining the acquirerThe Company acquired 60% of the voting rights through the share acquisition in exchange for cash.

2. The term of business of the acquired corporation reflected on the consolidated financial statementsJanuary 1 to December 31, 2016

3. Cost of acquisition and cost breakdownAcquisition cost of PML shares (37%) acquired on date of the business combination: ¥2,630 million (Cash and time deposits)Fair value of investment securities of PML owned by the Company before the business combination: ¥1,503 million

4. Main acquisition-related expenseAdvisory fees: ¥279 million.

5. The difference between the acquisition-date fair value of the acquirer’s equity interest and the total of acquisition costs in stages

Not applicable.

6. Amount for goodwill recognized, cause of goodwill, amortization method and period(1) Amount for goodwill recognized

¥4,766 millionThe share acquisition by the conversion of convertible bonds issued by PML was regarded as one transaction and the goodwill was recorded at the time of acquisition.

(2) Cause of goodwillGoodwill was recognized based on excess earning power expected from the future business development.

(3) Amortization method and periodStraight-line method over 10 years

7. Amounts and breakdown of assets and liabilities received on the date of the business combination

Millions of yen

Current assets ¥ 1,736

Fixed assets 2,558

Total asset ¥ 4,294

Current liabilities 3,711

Fixed liabilities 1,216

Total liabilities ¥ 4,927

8. Approximate amounts and calculation method of the impacts on consolidated statements of the fiscal year, assuming that the business combination had been completed on the first date of the fiscal year

Disclosure is omitted as it is immaterial.

22. Subsequent EventsNot applicable for the year ended March 31, 2018 and 2017.Subsequent event as of March 31, 2019 was as follows;

(2019)1. Capital increase at subsidiary

The Company resolved to increase capital of Meiden Hangzhou Drive Technology Co., Ltd., a wholly owned subsidiary in China, at a board of directors meeting held on May 31, 2019.Details of the increase are as follows.

36

(1) Purpose of the capital increaseFor investment and working capital.

(2) Outline of subsidiary(1) Name of the Company

Meiden Hangzhou Drive Technology Co., Ltd.

(2) AddressHangzhou, Zhejiang, China

(3) Chairman and general managerMasahiko Satoh

(4) Business operationsProduction and sale of motors and inverters for electric vehicles and plug-in hybrid electric vehicles.

(5) Capital¥150 million (before the capital increase)¥4,250 million (after the capital increase)

(6) Date of establishmentMay 16, 2019

(7) Ratio of ownership100% by the Company (before the capital increase)100% by the Company (after the capital increase)

(3) Outline of the capital increase(1) Amount

¥4,100 million.

(2) Payment dateUndecided.

2. Issue of the unsecured public bondsThe Company resolved to issue unsecured public bonds in the Japanese domestic bond market at a board of directors meeting

held on May 31, 2019.Details are as follows.

(1) Date of issuanceFrom May 31, 2019 to March 31, 2020

(2) Amount of issuance¥7 billion or under

(3) The issue-price of bonds¥100 per the face value ¥100

(4) Interest rate of bonds0.5% or under annually

(5) The term of redemption5 years

(6) The type of bondsMaturity bonds

(7) Use of proceedFor capital fund

37

3. Business combination through acquisitionThe Company resolved to purchase additional shares and acquire a controlling interest of EAML ENGINEERING CO.,LTD.

(“EML”) , currently an affiliated company, at a board of directors meeting held on June 25, 2019.

(1) Outline of business combination(1) Name of acquired company and description of business

(a) Name of acquired companyEAML ENGINEERING CO.,LTD.

(b) Description of businessDesigning, manufacturing, sales and repairing of water power generators and peripheral equipment.

(2) Main reason for business combinationTo strengthen small and medium water power generation related business, the Company will implement the smooth joint projects and strengthen the synergy effect of the projects.

(3) Date of business combinationJune 28, 2019 (As plan)

(4) Legal form of business combinationThe share acquisition in exchange for cash

(5) Name of company after business combinationNo change

(6) Percentage of the acquired voting rightsPercentage of voting shares held immediately before business combination: 33%Percentage of voting shares additionally acquired: 11% (As plan)Percentage of total voting shares held after acquisition: 44%

(7) Main grounds in determining the acquirerThe Company come to own 44% of the total voting shares and control majority of the board of directors meeting as a result of the additional share purchase.

(2) Acquisition cost of the acquired company and breakdown thereofAcquisition cost of the shares additionally acquired (cash): ¥89 million (As plan)

23. LitigationThe application for an arbitration request was filed at the SIAC Court of Arbitration on January 31, 2018, which claimed

compensation for a breach of contract by the Company in relation to the share acquisition and shareholder agreement (hereinafter “Agreement”) concluded among the Company and India-based Prime Meiden Limited (referred to as “PML” below) and its shareholders, PCI Limited (former parent company of PML; referred to as “PCI” below) and six other PML shareholders on June 1, 2016.

The demand for 13,083 million Indian rupees (approx. ¥20.9 billion ($188,288 thousand); converted using the exchange rate as of March 31, 2019) was made claiming that the Company reduced the corporate value of PML and caused damages to shareholders as a result.

The Company maintains that the content of the request is inappropriate and groundless because it is inconsistent with the Agreement. The Company will sincerely engage for early dismissal of the arbitration request by explaining the facts and legal grounds in line with the Agreement. At this stage, the Company doesn’t expect that the arbitration will have an impact on the consolidated financial statements.

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Independent Auditor’s Report

meidensha report 2019 · 2021. 2. 27. · investment securities (notes 4 and 8) 18,824 20,509...

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