KAYABA INDUSTRY CO., LTD. · PDF fileFit, and Nissan’s March and Cube, all of which use...
Transcript of KAYABA INDUSTRY CO., LTD. · PDF fileFit, and Nissan’s March and Cube, all of which use...
C1C1
A n n u a l R e p o r t 2 0 0 3
KAYABA INDUSTRY CO., LTD.
37
Contents
To Our Stakeholders...................................................1An Interview with the President ..................................2Review of Operations .................................................8
Hydraulic Products..............................................8Systems Products .............................................10Research & Development..................................12
Board of Directors and Corporate Auditors..............14Financial Section ......................................................15Major Subsidiaries and Affiliates ..............................36Corporate Data .........................................................37
CONSOLIDATED FINANCIAL HIGHLIGHTSKayaba Industry Co., Ltd. and Consolidated Subsidiaries Years Ended March 31
Thousands ofMillions of yen U.S. dollars Change
(Millions Change2003 2002 2003 of yen) %
For the year:Net sales ......................................................................................... ¥207,643 ¥184,919 $1,730,358 ¥22,724 12.3Operating expenses ........................................................................ 198,706 182,085 1,655,883 16,621 9.1Net income (loss)............................................................................. 2,663 (735) 22,192 3,398 362.3
At year-end:Total shareholders’ equity................................................................ 59,521 57,956 496,008 1,565 2.7Total assets..................................................................................... 194,455 185,868 1,620,458 8,587 4.6
Per share data (in yen and dollars):Net income (loss)............................................................................. ¥11.47 ¥(3.30) $0.10Cash dividends applicable to the year ............................................. 5.00 — 0.04
Notes: 1. Unless otherwise indicated, all dollar amounts herein refer to U.S. currency. Yen amounts have been translated into U.S. dollars, for convenience only, at ¥120=US$1,the approximate exchange rate prevailing on March 31, 2003.
2. Per share amounts are based on the average number of shares outstanding each year.
Forward-Looking StatementsThis annual report contains forward-looking statements,including Kayaba’s plans and strategies, as well as state-ments that report historical results. Forward-lookingstatements involve such known and unknown risks anduncertainties as economic conditions; currency exchangerates; laws, regulations, and government policies; andpolitical instability in principal markets.
1
1
TO OUR STAKEHOLDERS
During fiscal 2002, ended March 31, 2003, even as the Japanese economy displayed some indications of bottoming out
with the initial recovery in exports, challenging conditions persisted overall as deflationary trends continued and both
private-sector capital investment and consumer spending remained lackluster. On the global level, while there was
growth in many economies in the Asia-Pacific region, strained international relations and the worldwide decline in stock
prices have made the future of the global economy particularly difficult to forecast.
Against this backdrop, Kayaba Industry Co., Ltd.’s consolidated net sales increased ¥22,724 million, or 12.3%, to
¥207,643 million (US$1,730 million) on the strength of increases in sales of automobile shock absorbers, notably in the
assembly-use and export segments, and growth in hydraulic devices and exports to China mainly through construction
machinery manufacturers, which compensated for the slip in revenues from systems products.
Turning to profit performance, the entire Kayaba Group has strongly implemented a range of initiatives to improve
profitability, including the reconfiguration of the production framework, securing of orders from customers through aug-
mented sales promotion efforts, and the reduction of fixed costs and overall expenses. Thanks to these initiatives, the
Company succeeded in substantially improving its income for the term. Income before income taxes and minority inter-
ests amounted to ¥5,466 million (US$46 million), compared with a loss in the previous fiscal year of ¥79 million. Net
income for the term also improved from a loss of ¥735 million in the previous year, to income of ¥2,663 million (US$22
million).
Kayaba’s current initiatives: Profitability expansion
1. Assembly of a global supply framework
2. Building a business foundation capable of flexibly adapting to changes in business conditions
3. Greater strengthening of developmental abilities
While growth in both sales and profits was achieved in fiscal 2002, the first year of our current Three-Year Plan, further
enhancement of profitability and strengthening of our corporate foundation remain our top priorities, which we will carry
out under the slogan “Change and Speed.” Specifically, we will accelerate our efforts to further augment our global sup-
ply bases, boost training and education programs for overseas operations, improve quality and cost, and establish prod-
uct creation and production processes and develop new products and new technologies with which we will prevail over
the global competition.
We look forward to the continued understanding and support of our shareholders, investors, and all stakeholders.
September 2003
Tadahiko Ozawa, President
2
2
AN INTERVIEW WITH THE PRESIDENT
QKayaba achieved firm growth in revenue
and income in fiscal 2002, ended March 31,
2003. Although the majority of income
growth in today’s industry is achieved through
restructuring and cost reduction, Kayaba simultane-
ously attained increases in both revenue and income
growth. Please describe the factors contributing
to this accomplishment.
AIncreased production of compact cars during
fiscal 2002, including the Toyota ist, the Honda
Fit, and Nissan’s March and Cube, all of which
use Kayaba shock absorbers, provided strong momen-
tum, resulting in satisfactory increases in revenue and
income.
Although there was a slight reduction in the domestic
workforce as we reduced production lines and integrated
or closed plants in accordance with market demand,
there was no specific plan regarding workforce reduction.
Rather, the improved profitability seen in the period under
review is one of the results of our ongoing efforts to
reduce costs in each product line at each plant through
structural reform of all manufacturing-related efforts, in
addition to such measures as component standardization
and the reevaluation of our businesses and products. I
would say that Kayaba’s business efforts and strategies
to enhance its corporate framework are paying dividends.
Adopting the slogan Change and Speed, Kayaba
will reinforce its business foundation and improve
its framework to achieve both globalization and
secure profit even as business conditions continue
to undergo sweeping changes.
Tadahiko Ozawa,
President
Building a business framework capable of swiftresponse to change
3
3
QFiscal 2003, ending March 31, 2004, is the
second year of Kayaba’s current Three-Year
Plan. What kind of year do you see it being in
terms of the results of Kayaba’s reforms?
AWe are steadily attaining a level from which we
can accommodate the cost reduction demands
of our customers, and I am certain that our reform pro-
jects in hydraulic devices, hydraulic shock absorbers,
steering, and other segments will bear fruit.
However, challenging conditions, including the rise in
steel and other raw materials prices, are expected to
continue, and Kayaba will continue to engage in mea-
sures to generate profit while keeping product prices low.
Reconfiguration of domestic operations
1999
1998
1997
1996
1995
2003
2002
2001
2000
8.71
6.73
8.62
2.59
-3.0
0
-12.
00
1.15
-1.3
1
4.53
Return on Equity (ROE)%
1999
1998
1997
1996
1995
2003
2002
2001
2000
4,78
4
4,16
5 5,61
5
1,73
8
-1,9
61
636
-735
2,66
3
-7,1
68
Net Income (Loss)(Million ¥)
QChallenging conditions in both production
and sales are expected to persist in the
Japanese market. What measures are
Kayaba taking to reconfigure its domestic operations
and increase competitiveness?
ATo reinforce our business framework so as to
be able to secure profit in the Japanese market,
we will concentrate our efforts on improving
quality and costs. We will pursue automation and work-
force streamlining as a means to reforming cost struc-
tures and continue to revise manufacturing processes
and indirect departments. We will also continue to assess
market conditions and consider further reconfiguration
of our manufacturing plants when appropriate. Our first
priority in this regard is to reap the full benefits of the clo-
sure of the Urawa Plant and the integration of its opera-
tions into our other plants.
We consider the domestic business to be the nerve
center of the Kayaba Group’s operations, and we will
ultimately apply the streamlining measures that have
produced results in Japan to our overseas operations.
4
4
AN INTERVIEW WITH THE PRESIDENT
Production BaseSales OfficeRepresentative Office
QKayaba appears to be concentrating specifi-
cally on its overseas operations in fiscal 2003.
Please describe the background to this.
AKayaba’s primary customers, automobile and
motorcycle manufacturers, conduct their busi-
nesses on a global level, taking such steps as
establishing manufacturing plants in the regions that have
the largest demand.
Given this setting, relying on exports from Japan alone
incurs extra shipping, longer lead times, and other extra-
neous costs. Also, limiting overseas operations to joint
ventures or technological support alone introduces such
problems as quality issues and delivery timing and runs
the risk of restricted mobility and inability to fully satisfy
customer demands, thus limiting Kayaba-led services.
We therefore decided, based on the assessment of local
market scales, that Kayaba should expand overseas
on its own.
The latest Kayaba production methods and cutting-
edge technologies will be adopted by its overseas plants
so as to assure the same standard of quality as its pro-
duction operations in Japan.
Overseas business operations
Global Network
5
5
QWhat is your assessment of business
in North America?
AKayaba has been independently conducting
automobile shock absorber production in North
America since October 2001. Having learned
from past joint venture experience, we narrowed our
focus to supplying Japanese automakers and gave top
priority to corporate revitalization, including increasing
production efficiency, reducing product defects, and
educating the workforce. However, we have had sup-
ply requests from numerous companies, including the
Big Three, and in the months and years ahead we will
proactively develop sales and raise profitability.
Also, although the North American market for the
maintenance of shock absorbers stands at 30 million
units, Kayaba commands a mere 5% market share. By
unifying specifications and integrating overlapping items,
we will raise productivity with the aim of increasing our
market share.
QWhat is the progress of business
in Europe?
AUntil now, Kayaba’s automobile shock
absorbers have been supplied to the various
EU markets through its joint venture in Spain.
While we will continue to provide technological guidance
to production operations in Spain, after consideration of
responsiveness to Japanese automakers’ expansion into
Europe and economic viability, we have made the deci-
sion to construct a new plant in the Czech Republic.
We will also expand promotion and marketing to local
automakers in addition to Japanese manufacturers. For
example, although its power steering pump production
subsidiary in Spain supplies pumps for use in numerous
Volkswagen models, Kayaba’s status as one of the
world’s leading shock absorber manufacturers still goes
generally unnoticed. If the Company can focus on the
high quality of our products through concentrated pro-
motion and marketing, I believe there is a very good
chance that we will be able to supply our shock
absorbers to the major European automakers within
the next five years.
QWhat developments are being made in
Asia?
AJapanese automakers are expanding local pro-
duction operations in China, a market that
offers the merits of scale. Kayaba has decided
to formulate a local supply framework and established
KYB Industrial Machinery (Zhenjiang) Ltd. to produce and
market shock absorbers.
Using this new subsidiary as a base, Kayaba’s auto-
mobile shock absorber business in China will target
6
6
AN INTERVIEW WITH THE PRESIDENT
Maintenance and improvement of product quality
QThe topic of improved product quality is
often brought up. What level of quality is
Kayaba aiming to achieve?
APut simply: a level of quality that leaves our
customers, finished product manufacturers,
and end users, problem free. In other words,
we want the products that we deliver, by definition, to
cause zero hindrance to our customers’ operating lines.
The goal of each and every worker is to concentrate
on actually producing only products that provide total
customer satisfaction, rather than emphasizing defect
rate statistics.
Quality control can be very challenging, especially
since Kayaba makes products that are evaluated by cri-
teria that are not always quantifiable: ride quality, safety,
feeling, and so on. Nevertheless, we have commenced
programs to back up product warranty, with data taken
by quality managers at every process stage, starting at
the outset with the design review stage.
growing demand, including Sino-Japanese joint ventures.
We will also study the possibilities for promoting our
motorcycle shock absorbers and industrial hydraulic
devices in the growing Chinese market.
In other Asian regions, in addition to our operations
in Thailand, Malaysia, Indonesia, and Taiwan, we also
established a hydraulic shock absorber manufacturing
and sales company to supply the motorcycle industry
in Vietnam. By expanding orders from customers in
Vietnam, we aim to augment our supply framework in
the ASEAN region.
12,6
22
7,40
4
8,17
2
11,6
74
20,1
70
Overseas Sales by Geographic Area(North America)(Million ¥)
2003
2002
2001
2000
1999
13,0
08
16,5
08
16,0
22 17,7
15
18,8
08
Overseas Sales by Geographic Area(Europe)(Million ¥)
2003
2002
2001
2000
1999
5,58
0 6,54
0
6,75
5
5,83
0
7,87
2
Overseas Sales by Geographic Area(Southeast Asia)(Million ¥)
2003
2002
2001
2000
1999
7
7
Efforts for sustainable growth
We also consider clean working environments at our
plants to be one of the factors contributing to improved
product quality.
QWhat progress has Kayaba made in
technological R&D?
ASupplying highly reliable products with superb
cost performance amid growing globalization
requires not only improved performance for
each product but also development and product system-
ization and modularization.
Kayaba has been proactively engaged in R&D activi-
ties aimed at quickly creating new products and new
technologies with high-added-value and competitive-
ness, and many of these efforts are now bearing fruit.
For example, we have developed brakes for the bullet
train using aircraft systems technologies and we are
commencing overseas marketing of semi-active supension
originally developed for use in the bullet train. We also
achieved the world’s first mass production of Diamond-
Like Carbon (DLC) skin for use in motorcycle front forks,
which features excellent durability and seize resistance.
We are also jointly developing electromagnetic
dampers together with the University of Tokyo and work-
ing to enable low-cost overseas production of products
with the same properties as those made in Japan.
In the months and years ahead, we will continue to
invest proactively in R&D, which we see as a major
contributor to future profit.
QPlease describe Kayaba’s environmental
protection efforts.
AConsideration for the global environment is one
of Kayaba’s top priority action items. We are
constantly undertaking the challenge of devel-
oping environment-friendly products and technologies
while at the same time proactively working to reduce
environmental impact.
In environmental products, Kayaba has developed a
scrap plastic compactor that reduces the volume of
scrap plastic from PET bottles and other sources. The
compactor is now being supplied to waste treatment
centers and other local municipal facilities. We also jointly
developed a secondary pulverization vehicle for pruned
tree branches together with Hino Motors, Ltd. The pulver-
ized chips can be reused in compost or soil remediation
materials.
We hope to fully launch our new business related to
waste disposal and the environment in fiscal 2004.
QPlease explain the state of Kayaba’s
corporate governance.
AKayaba, of course, constantly pursues opti-
mum corporate governance. For example, our
flash bulletin system provides quick response
to on-site information and has been effective in achieving
zero time loss decision making. We will continue to
expand the use of this system as we go forward.
The majority of products handled by Kayaba are
custom-made or otherwise unique or require specific
technical knowledge. For this reason, it is often difficult
to see the effectiveness of recruiting external human
resources, and the Company currently uses only two
external auditors. However, in the interest of achieving
more forward-thinking corporate governance, we will
proactively explore other possibilities, including the adop-
tion of an executive officer system.
Shock Absorbers• For automobiles, motorcycles, railway
vehicles, and industrial-use products• Seismic isolation systems and vibration
control dampers
Hydraulic Equipment• For industrial use: Pumps, valves, motors,
and cylinders• For automobiles: Pumps and electric power
steering and four-wheel steering machinery• For aircraft: Equipment for landing systems,
flight control systems, pneumatic/hydraulicsystems, and space flight-related equipment
• Others: Jacks, brake pads, and clutch disksfor automobiles
Major Products
170,
874
173,
110
177,
700
169,
637 19
4,94
820
03
2002
2001
2000
1999
In October 2002, Kayaba established KayabaVietnam Co., Ltd., to serve Vietnam’s growingmotorcycle market.
Review of Operations
8
8
PerformanceDuring fiscal 2002, sales in the Hydraulic Products segment amounted to ¥194.9 billion (US$1,624.6 million), up ¥25.3 billion, or 14.9%,
from the previous fiscal year. Operating income for the segment surged ¥5.6 billion, or 61.9%, to ¥14.8 billion (US$123.0 million).
The primary reasons for these results were as follows.
Automobile shock absorbers—Beyond a rise in automobile production volume in Japan stemming from an export-led recovery,
shipments to the repairs market from Kayaba’s sales subsidiaries in Europe and North America also increased. The addition of
Kayaba’s new U.S. subsidiary, which commenced production in October 2002, to the scope of consolidation also contributed to a
substantial increase in revenue.
Hydraulic devices—Despite persistent weakness in domestic demand, Kayaba increased sales in industrial-use hydraulic devices
by effectively leveraging increases in exports to China in the segment’s core market of construction machinery manufacturers as
well as growth in the Company’s own exports to Asian markets. Sales of automotive hydraulic devices rose on the strength of
expanded production by the major domestic manufacturers as well as the inclusion of Kayaba’s power steering pump production
subsidiary in Thailand within the scope of consolidation.
HydraulicProducts
Sales of Hydraulic Products(Million ¥)
9
9
Kayaba will improve both quality and costs, and work to raise efficiency andcompetitiveness.
10
Systems Products• Special-purpose vehicles: Concrete mixer
trucks, granule carriers, exhaust absorbingcars, and special-function vehicles
• Systems devices: Motion simulators, controlsystems, electrical hydraulic servos, electroniccontrollers, hydraulic systems, auditorium andstage control systems, and hydraulic tunnelborers
16,2
55
15,7
99
15,1
50 16,5
92
13,9
7520
03
2002
2001
2000
1999
Kayaba has developed a waste plastic compactorfor use in local government environmental protectionprograms. The compactor reduces bulky scrap byone-tenth to one-fifteen its initial volume.
(Komono-cho Recycling Center in Mie)
Review of Operations
10
PerformanceAlthough sales in the Systems Products segment during fiscal 2002 slipped ¥2.6 billion, or 15.8%, to ¥14.0 billion (US$116.5 million),
operating income amounted to ¥0.5 billion (US$4.5 million), a ¥0.8 billion improvement over a ¥0.3 billion loss in the previous fiscal
year.
The factors contributing to these results are as follows.
Systems devices—Sales eased off as a result of declines in deliveries of motion control devices to amusement parks and stage
control systems to large-scale facilities stemming from the protracted downturn in the Japanese economy.
Special-purpose vehicles—The Company increased sales in this sector by effectively leveraging new vehicle demand in the core
market for concrete mixer trucks in the second half resulting from Tokyo area emissions restrictions.
SystemsProducts
Major Products
Sales of Systems Products(Million ¥)
11
11
Kayaba will accelerate efforts to reduce breakeven points through thestreamlining of its workforce and other initiatives.
12
4,10
8
3,76
0
3,56
5
3,51
7 3,84
520
03
2002
2001
2000
1999 Joint research was undertaken with the University
of Tokyo into the possibility of developing electro-magnetic dampers with electric motors as next-generation dampers.
Review of Operations
12
Major Product Developments in Fiscal 2002
This section outlines the ways in which the Company implemented a number of R&D initiatives during the recently ended
fiscal year.
Automobile shock absorbers—Development of the Dynamic Ride Control System, a new suspension system that links the
shock absorbers through the center unit, thereby greatly enhancing both handling and driving enjoyment.
Motorcycle shock absorbers—Introduction and establishment of mass production of the world’s first inner tube for motorcycle
front forks to use a DLC (Diamond-Like Carbon) skin, which is highly effective in reducing friction.
Railway shock absorbers—Development of a semi-active suspension for the bullet train featuring a switching system with contin-
uously variable damping force, an upgrade from the traditional fixed tiered phase damping force systems.
Anti-seismic vibration control dampers for buildings—Development of electronically controlled dampers, enabling low-cost
reduction of overall building vibration.
Steering devices—Development of the world’s first high-pressure high-capacity vein pump for passenger cars, delivering
enhanced handling and energy conservation.
Vehicle break pad products—Development of the new Rad’s Series, featuring substantially enhanced high-speed stability made
possible through improved durability and usable temperature range.
Stage control systems—Development of the Whispering Winch system, featuring extremely low operating noise and a broad
range of speeds.
Research& Development
R&D Expenditures(Million ¥)
13
Kayaba will strengthen its R&D framework and concentrate on performance enhancementand cost reduction, and search out new approaches to its products and technologies.t
13
14
14
Kenji Hanado Tadahiko Ozawa
Nobuyuki Funatsu Yoshitake Yonekubo
Kenzo Noguchi
Katsuma Ohara
Yohichi Furugohri Satoru Yamamoto
Kiyoshi Hosomi Masato Kosaka
Tomohiro Takeda Masahito Kori
Ken Mizumukai
Tatsuji Hayashi
Koji Masuda
Kiyoshi Inoue Masao Usui
Board of Directors and Corporate Auditors
Board of Directors
CHAIRMAN AND REPRESENTATIVE DIRECTOR
Kenji Hanado
PRESIDENT AND REPRESENTATIVE DIRECTOR
Tadahiko Ozawa
EXECUTIVE MANAGING DIRECTORS
Nobuyuki FunatsuLegal, Audit, and PurchasingGeneral Manager, Gifu Plants Management Div.
Yoshitake YonekuboTechnology and Information SystemsGeneral Manager, New Business DevelopmentOperations
Katsuma OharaInternational Operations General Manager, Suspension ProductsInternational Operations
MANAGING DIRECTORS
Yohichi FurugohriProduction and Environment General Manager, Aircraft Components Div.
Tomohiro TakedaGeneral Manager, Automotive Parts Div.
Masahito KoriCorporate Planning, General Affairs, and PersonnelAdministrationGeneral Manager, Corporate Planning Dept.
Kenzo NoguchiFinance and AccountingGeneral Manager, Finance and Accounting Dept.General Manager, Motorcycle Parts Div.
Satoru YamamotoGeneral Manager, Hydraulic Equipment Div.
DIRECTOR AND CORPORATE EXECUTIVE ADVISOR
Kiyoshi Hosomi
DIRECTORS
Masato KosakaQuality ControlGeneral Manager, Quality Control Dept.
Ken MizumukaiGeneral Manager, Gifu North Plant
Koji MasudaGeneral Manager, Gifu South Plant
Tatsuji HayashiGeneral Manager, General Affairs and Personnel Administration Dept.
Kiyoshi InoueGeneral Manager, Basic Technology R&D Center
Masao UsuiGeneral Manager, Sagami Plant
Corporate Auditors
STANDING CORPORATE AUDITORS
Katsuji AmanoHidetsune IsekiKatsuhisa Egawa
CORPORATE AUDITOR
Kenji Asai
(As of June 25, 2003)
15
15
Consolidated Five-Year SummaryKayaba Industry Co., Ltd. and Consolidated Subsidiaries Years ended March 31
Financial Section
Thousands ofMillions of yen U.S. dollars
2003 2002 2001 2000 1999 2003
For the year:Net sales .................................................................. ¥207,643 ¥184,919 ¥192,052 ¥187,522 ¥185,405 $1,730,358Operating expenses ................................................. 198,706 182,085 184,952 182,090 183,922 1,655,883Net income (loss)...................................................... 2,663 (735) 636 (7,168) (1,961) 22,192Capital expenditures................................................. 8,398 8,389 6,979 6,210 11,096 69,983
At year-end:Working capital ........................................................ ¥ 24,550 ¥ 25,267 ¥ 17,770 ¥ 33,063 ¥ 28,945 $ 204,583Total shareholders’ equity......................................... 59,521 57,956 54,309 56,029 63,463 496,008Total assets.............................................................. 194,455 185,868 183,214 185,010 169,334 1,620,458
Yen U.S. dollars
Per share:Net income (loss)...................................................... ¥ 11.47 ¥ (3.30) ¥ 2.85 ¥ (32.09) ¥ (8.53) $ 0.10Cash dividends applicable to the year ...................... 5.00 — 6.00 3.00 3.00 0.04Net worth ................................................................. 266.62 259.92 243.56 251.27 280.94 2.22
Number of employees............................................... 6,105 6,159 6,031 6,161 5,810
Notes: 1. Unless otherwise indicated, all dollar amounts herein refer to U.S. currency. Yen amounts have been translated into U.S. dollars, for convenience only, at ¥120=US$1,the approximate exchange rate prevailing on March 31, 2003. Billion is used in the American sense of one thousand million.
Notes: 2. Per share amounts are based on the average number of shares outstanding each year.
Contents
Financial Review.............................................................................................16
Consolidated Balance Sheets ........................................................................18
Consolidated Statements of Operations and Retained Earnings...................20
Consolidated Statements of Cash Flows .......................................................21
Notes to Consolidated Financial Statements.................................................22
Report of Independent Public Accountants ...................................................35
6
16
Financial Review
RESULTS OF OPERATIONSNet salesKayaba’s consolidated net sales for fiscal 2002, ended March31, 2003, increased 12.3%, or ¥22,724 million, to ¥207,643 mil-lion (US$1,730 million). Sales were boosted by increases in rev-enue from the Hydraulic Products segment, particularly inautomobile shock absorbers and industrial-use and automobilehydraulic devices, and from the new subsidiary in the UnitedStates, which commenced shock absorber production inOctober 2001. These factors compensated for the decline in rev-enue from the Systems Products segment.
Cost of salesCost of sales increased 9.6%, or ¥14,895 million, to ¥170,003million (US$1,417 million). The cost of sales ratio was down 2.0percentage points, to 81.9%, and net sales increased 12.3%.Gross profit rose 26.3%, or ¥7,829 million, to ¥37,640 million(US$314 million), and the gross profit margin was 18.1%, upfrom 16.1% in the previous fiscal year.
Operating incomeOperating income totaled ¥8,937 million (US$74 million), up215.3%, or ¥6,103 million, from the previous fiscal year. Selling,general and administrative (SG&A) expenses increased 6.4%,or ¥1,726 million, to ¥28,703 million (US$239 million), com-mensurate with the increase in net sales, and the ratio of SG&Aexpenses to net sales was 13.8%, down 0.8 percentage point,compared with 14.6% in the previous fiscal year.
Income (loss) before income taxes and minority interestsThe Company’s expenses included a loss on devaluation ofinvestment securities of ¥1,591 million due to market pricedeclines on its stockholdings and ¥1,017 million in severanceand retirement benefit expenses. However, as stated above, as
a result of Kayaba’s Groupwide measures to improve profitability,including the securing of orders from customers through effectivesales promotion, decreasing assets, and reducing costs, incomebefore income taxes and minority interests jumped to ¥5,466 mil-lion (US$46 million), compared with a loss of ¥79 million in theprevious fiscal year.
Net Income (loss)After deducting income taxes and minority interests from incomebefore income taxes, net income amounted to ¥2,663 million(US$22 million), an increase of ¥3,398 million from the previous fis-cal year’s loss. Net income per share was ¥11.47 (US$0.10) andcash dividends applicable to the fiscal year were ¥5.00 (US$0.04).
FINANCIAL CONDITIONSAssetsTotal assets amounted to ¥194,455 million (US$1,620 million),up 4.6%, or ¥8,587 million, from the previous fiscal year-end.
Total current assets were ¥106,616 million (US$888 million),up ¥12,950 million, due mainly to a ¥3,681 million increase intrade notes and accounts receivable, and a ¥10,657 millionincrease in short-term loans receivable. The increase in tradenotes and accounts receivable was a result of the increase insales and the rise in short-term loans receivable was caused bya change in accounting practices for the parent company’sadministration of short-term excess cash to presentation asa loan receivable item.
Total investments and other non-current assets declined¥4,405 million, to ¥22,043 million (US$184 million), due mainlyto a decrease in deferred tax assets.
A total of ¥8,398 million (US$70 million) was invested in prop-erty, plant and equipment, a slight increase of ¥9 million fromthe previous fiscal year, and ¥8,031 million (US$67 million) wasdepreciated in property, plant and equipment, slightly down
185.
4
187.
5
192.
1
184.
9
207.
6
Net Sales(Billion ¥)
2003
2002
2001
2000
1999
0.6
2.7
-2.0
-7.2
-0.7
Net Income (Loss)(Billion ¥)
2003
2002
2001
2000
1999
1.5
5.4
7.1
2.8
8.9
Operating Income(Billion ¥)
2003
2002
2001
2000
1999
11.1
6.2
7.0
8.4
8.4
Capital Expenditures(Billion ¥)
2003
2002
2001
2000
1999
17
17
¥2 million from the previous fiscal year. The book value ofmachinery and equipment increased ¥1,844 million, to ¥144,808million (US$1,207 million). Net property, plant and equipmentamounted to ¥65,796 million (US$548 million).
LiabilitiesTotal liabilities and minority interests in consolidated subsidiariesrose ¥7,021 million, to ¥134,934 million (US$1,124 million). Thisprincipally reflected a ¥6,220 million increase in trade notes andaccounts payable. This rise was due to increased purchasingresulting from the expansion in production. Short- and long-terminterest-bearing debt decreased ¥570 million, to ¥51,053 million(US$425 million). The debt-to-equity ratio (interest-bearing debtdivided by the sum of interest-bearing debt and shareholders’equity) decreased from 47.1% to 46.2%, and the current ratiodecreased from 1.37 to 1.30.
Shareholders’ EquityTotal shareholders’ equity increased ¥1,565 million, to ¥59,521million (US$496 million), mainly due to a ¥2,048 million increasein retained earnings. However, due to the aforementioned ¥8,587million increase in total assets, the shareholders’ equity ratiodecreased 0.6 percentage point, to 30.6%.
Cash FlowsNet cash provided by operating activities amounted to ¥19,279million (US$161 million), an increase of ¥12,865 million from theprevious fiscal term. This was primarily attributable to incomebefore income taxes and minority interests of ¥5,466 million(US$46 million) and depreciation and amortization of ¥8,157 mil-lion (US$68 million). The net changes in accounts receivable,inventories, and trade notes and accounts payable resulting fromthe increase in sales generated a cash balance of ¥1,457 million.
Net cash used in investing activities increased ¥551 million, to¥10,107 million (US$84 million). Net cash outflow due to payments
for acquisition of property, plant and equipment totaled ¥7,785million (US$65 million) and payments for acquisition of investmentsecurities of ¥1,424 million (US$12 million) and payments for addi-tional acquisition of consolidated subsidiaries stock of ¥1,131million (US$9 million). Hence, free cash flow improved by a sub-stantial margin of ¥12,314 million, from a cash outflow of ¥3,142million in the previous fiscal year, to a cash inflow of ¥9,172 mil-lion (US$76 million).
Net cash used in financing activities amounted to ¥1,261 mil-lion (US$11 million), compared with ¥1,680 million in net cashprovided by financing activities in the previous fiscal year. Netcash outflow was mainly due to the repayments of long-termdebt that amounted to ¥3,087 million (US$26 million) and cashdividends paid out of ¥446 million (US$4 million), while net cashinflow was primarily due to ¥1,798 million (US$15 million) fromshort-term loans.
As a result, cash and cash equivalents at end of year amount-ed to ¥20,252 million (US$169 million), compared with ¥12,281million at the previous fiscal year-end.
Consequently, management is confident that it has maintaineda sufficiently high level of liquidity.
SEGMENT INFORMATIONRevenue from sales of automobile shock absorbers increasedsubstantially due to an export-led recovery in domestic automo-bile production volumes, increased shipments by Kayaba’sEuropean and North American subsidiaries to the repair market,and strong sales by Kayaba’s U.S. subsidiary. Sales of theHydraulic Products segment were boosted by increased produc-tion on the part of principal domestic manufacturers as well asthe addition of Kayaba’s Thailand power steering pump produc-tion subsidiary to the scope of consolidation. Despite stagnationin domestic demand, sales of industrial-use hydraulic productsalso increased as a result of exports to China by the segment’sprimary customer base of construction machinery manufacturersas well as growth in the Company’s own direct exports to Asia.However, sales of hydraulic products for aircraft edged down asa result of a decline in production at The Boeing Company.
Sales of concrete mixer trucks and other special-purpose vehi-cles rose on the strength of demand for replacement vehiclesfollowing the implementation of new emissions restrictions in theTokyo area in the second half of the term. However, in-systemdevices revenues declined as a result of decreases in demandof stage control systems to large-scale facilities and motionsimulators to amusement parks.
Overseas sales increased 32.2%, or ¥12,831 million, to¥52,721 million (US$439 million), and accounted for 25.4% of netsales. Due to a rise in revenues from Kayaba’s U.S. subsidiary,which commenced shock absorber production in October 2001,sales in North America jumped 72.8%, or ¥8,496 million, to¥20,170 million (US$168 million). As a result of the addition ofKayaba’s subsidiaries in Southeast Asia to the scope of consoli-dation, sales in Southeast Asia rose 35.0%, or ¥2,042 million, to¥7,872 million (US$66 million).
Total Shareholders’ Equity Ratio(%)
30.6
37.5
30.3
29.6 31
.2
2003
2002
2001
2000
1999
Return on Equity (ROE)(%)
4.5
-3.0
-12.
0
1.2
-1.3
2003
2002
2001
2000
1999
8
18
Consolidated Balance Sheets
Kayaba Industry Co., Ltd. and Consolidated Subsidiaries March 31, 2003 and 2002
Thousands ofMillions of yen U.S. dollars (Note 1)
ASSETS 2003 2002 2003
Current assets:Cash and time deposits (Note 9)..................................................................................... ¥ 10,121 ¥ 12,641 $ 84,342Marketable securities (Note 11)....................................................................................... — 63 —Trade receivables:
Notes and accounts ................................................................................................... 58,607 54,926 488,392Unconsolidated subsidiaries and affiliated companies ................................................. 747 1,432 6,225Allowance for doubtful receivables.............................................................................. (338) (156) (2,817)
Inventories (Note 3)......................................................................................................... 23,134 22,953 192,784Deferred tax assets (Note 6) ........................................................................................... 3,241 1,297 27,008Short-term loans receivable ............................................................................................ 10,704 47 89,200Prepaid expenses and other current assets .................................................................... 400 463 3,333
Total current assets ................................................................................................ 106,616 93,666 888,467
Investments and other non-current assets:Investments in and loans to unconsolidated subsidiariesand affiliated companies ............................................................................................... 3,753 3,685 31,275
Allowance for doubtful receivables.................................................................................. (164) (164) (1,367)Investment securities (Note 11) ....................................................................................... 8,994 9,712 74,950Lease deposits, loans and other long-term receivables................................................... 1,988 2,470 16,567Deferred tax assets (Note 6) ........................................................................................... 7,130 10,454 59,417Other assets ................................................................................................................... 342 291 2,850
Total investments and other non-current assets...................................................... 22,043 26,448 183,692
Property, plant and equipment (Note 4):Land............................................................................................................................... 21,378 21,282 178,150Buildings......................................................................................................................... 38,576 38,103 321,467Machinery and equipment .............................................................................................. 144,808 142,964 1,206,732Construction in progress................................................................................................. 1,458 1,142 12,150
Total ....................................................................................................................... 206,220 203,491 1,718,499Less accumulated depreciation ...................................................................................... 140,424 137,737 1,170,200
Net property, plant and equipment ......................................................................... 65,796 65,754 548,299
Total assets ............................................................................................................ ¥194,455 ¥185,868 $1,620,458
See accompanying notes.
19
19
Thousands ofMillions of yen U.S. dollars (Note 1)
LIABILITIES AND SHAREHOLDERS’ EQUITY 2003 2002 2003
Current liabilities:Bank loans (Note 4) ........................................................................................................ ¥ 17,556 ¥ 15,648 $ 146,300Current maturities of long-term debt (Note 4) .................................................................. 7,531 2,984 62,758Trade payables:
Notes and accounts ................................................................................................... 42,341 36,121 352,842Unconsolidated subsidiaries and affiliated companies ................................................. 393 414 3,275
Payables—other ............................................................................................................. 6,030 6,465 50,250Accrued expenses.......................................................................................................... 6,080 5,045 50,667Income taxes payable..................................................................................................... 1,444 358 12,033Other current liabilities .................................................................................................... 691 1,364 5,758
Total current liabilities.............................................................................................. 82,066 68,399 683,883
Long-term debt less current maturities (Note 4) ........................................................... 25,967 32,992 216,392Retirement benefits (Note 5)............................................................................................ 19,543 18,127 162,858Deferred tax liabilities on land revaluation.................................................................... 4,823 4,983 40,192Other long-term liabilities ............................................................................................... 557 519 4,642
Minority interests in consolidated subsidiaries ............................................................ 1,978 2,892 16,483
Contingent liabilities (Note 8)
Shareholders’ equity (Note 7):Common stock;
Authorized—491,955,000 sharesIssued—222,984,315 shares...................................................................................... 19,114 19,114 159,283
Capital surplus................................................................................................................ 20,248 20,248 168,733Land revaluation excess ................................................................................................. 5,231 5,070 43,592Retained earnings........................................................................................................... 16,506 14,458 137,550Net unrealized holding gains on securities....................................................................... 982 1,129 8,183Foreign currency translation adjustments........................................................................ (2,531) (2,061) (21,091)Less: Treasury stock....................................................................................................... (29) (2) (242)
Total shareholders’ equity ....................................................................................... 59,521 57,956 496,008
Total liabilities and shareholders’ equity .................................................................. ¥194,455 ¥185,868 $1,620,458
20
20
Kayaba Industry Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2003 and 2002
Thousands ofMillions of yen U.S. dollars (Note 1)
2003 2002 2003
Net sales (Note 15)............................................................................................................ ¥207,643 ¥184,919 $1,730,358Cost of sales (Notes 13 and 15) ....................................................................................... 170,003 155,108 1,416,691
Gross profit............................................................................................................. 37,640 29,811 313,667Selling, general and administrative expenses (Notes 13 and 15) ................................. 28,703 26,977 239,192
Operating income (Note 15) .................................................................................... 8,937 2,834 74,475Other income (expenses):
Interest and dividend income .......................................................................................... 154 181 1,283Interest expense ............................................................................................................. (932) (1,078) (7,767)Gain on sale of investments in stock of affiliated companies ........................................... 69 — 575Severance and retirement benefit expenses (Note 5) ...................................................... (1,017) (1,017) (8,475)Reorganization and restructuring costs of U.S. operations.............................................. — (148) —Reorganization and restructuring costs of Hydraulic Equipment Division ......................... (647) — (5,392)Royalty income ............................................................................................................... 666 657 5,550Loss on disposal of property, plant and equipment......................................................... (612) (584) (5,100)Equity in earnings of unconsolidated subsidiaries and affiliated companies ..................... 650 483 5,417Loss on devaluation of investment securities................................................................... (1,591) (2,420) (13,258)Other, net (Note 14) ........................................................................................................ (211) 1,013 (1,758)
Net other expenses ................................................................................................ (3,471) (2,913) (28,925)
Income (loss) before income taxes and minority interests........................................ 5,466 (79) 45,550Income taxes (Note 6):
Current ....................................................................................................................... 1,049 415 8,741Deferred ..................................................................................................................... 1,520 9 12,667
Income (loss) before minority interests in consolidated subsidiaries................................. 2,987 (503) 24,142Minority interests ............................................................................................................ (234) (232) (1,950)
Net income (loss) .................................................................................................... 2,663 (735) 22,192Retained earnings:
Balance at beginning of year........................................................................................... 14,458 15,892 120,483Deductions:
Cash dividends paid ................................................................................................... (446) (669) (3,717)Bonuses to directors and corporate auditors .............................................................. (37) (29) (308)Bonuses to employees ............................................................................................... — (1) —Decrease in retained earnings from decrease in number of consolidated subsidiaries... (126) — (1,050)Decrease in retained earnings from increase in number of consolidated subsidiaries .... (6) — (50)
Balance at end of year .................................................................................................... ¥ 16,506 ¥ 14,458 $ 137,550
Yen U.S. dollars (Note 1)
Amounts per share of common stock:Net income (loss) ............................................................................................................ ¥11.47 ¥(3.30) $0.10Cash dividends applicable to the year............................................................................. 5.00 — 0.04
See accompanying notes.
Consolidated Statements of Operations and Retained Earnings
Kayaba Industry Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2003 and 2002
2
21
Thousands ofMillions of yen U.S. dollars (Note 1)
2003 2002 2003
Cash flows from operating activities:Income (loss) before income taxes and minority interests ................................................... ¥ 5,466 ¥ (79) $ 45,550
Depreciation and amortization ........................................................................................ 8,157 8,188 67,975Loss on disposal of property, plant and equipment ........................................................ 612 584 5,100Loss on devaluation of investment securities .................................................................. 1,591 2,420 13,258Amortization of consolidation goodwill ............................................................................ 74 61 617Changes in allowance for doubtful receivables ............................................................... 193 147 1,608Changes in retirement benefits ....................................................................................... 1,517 (2,366) 12,642Interest and dividend income.......................................................................................... (154) (181) (1,283)Interest........................................................................................................................... 932 1,078 7,767Equity in expense of unconsolidated subsidiaries and affiliated companies ..................... (650) (483) (5,417)Gain on sale of property, plant and equipment ............................................................... (4) (21) (33)Reorganization and restructuring costs of U.S. operations ............................................. — 148 —Reorganization and restructuring costs of Hydraulic Equipment Division......................... 648 — 5,400Changes in trade notes and accounts receivable............................................................ (4,447) 5,756 (37,059)Changes in inventories ................................................................................................... (569) 1,629 (4,742)Changes in trade notes and accounts payable ............................................................... 6,473 (6,249) 53,942Other, net....................................................................................................................... 711 (1,704) 5,925
Subtotal ................................................................................................................. 20,550 8,928 171,250Interest and dividends received ...................................................................................... 306 251 2,550Interest paid ................................................................................................................... (925) (1,112) (7,708)Income taxes paid.......................................................................................................... (447) (1,795) (3,725)Income taxes refunded................................................................................................... 187 142 1,558Payments for reorganization and restructuring costs of Hydraulic Equipment Division .... (392) — (3,267)
Net cash provided by operating activities ............................................................... 19,279 6,414 160,658Cash flows from investing activities:
Transfer to time deposits.................................................................................................... (1,266) (592) (10,550)Transfer from time deposits................................................................................................ 1,131 775 9,425Payments for acquisition of property, plant and equipment................................................. (7,785) (8,383) (64,875)Proceeds from sale of property, plant and equipment ........................................................ 20 55 167Payments for acquisition of investment securities ............................................................... (1,424) (1,128) (11,867)Proceeds from sale of investment securities ....................................................................... — 96 —Payments for additional acquisition of consolidated subsidiaries stock ............................... (1,131) — (9,425)Payments for loans............................................................................................................. (47) (3,058) (392)Proceeds from collection of loans....................................................................................... 247 3,080 2,058Other, net .......................................................................................................................... 148 (401) 1,234
Net cash used in investing activities........................................................................ (10,107) (9,556) (84,225)Cash flows from financing activities:
Proceeds from bank loans.................................................................................................. 30,867 28,812 257,225Repayments of bank loans ................................................................................................. (29,068) (28,441) (242,233)Proceeds from long-term debt .......................................................................................... 603 13,200 5,025Repayments of long-term debt........................................................................................... (3,087) (3,161) (25,725)Repayments of bonds ....................................................................................................... — (8,000) —Payments for acquisition of treasury stock.......................................................................... (26) (2) (217)Cash dividends paid........................................................................................................... (446) (669) (3,717)Cash dividends paid for minority interests........................................................................... (104) (59) (866)
Net cash used in (provided by) financing activities .................................................. (1,261) 1,680 (10,508)Effect of exchange rate changes on cash and cash equivalents ................................... 36 152 300
Net increase (decrease) in cash and cash equivalents ................................................... 7,947 (1,310) 66,225Cash and cash equivalents at beginning of year ............................................................. 12,281 13,591 102,342Increase in cash and cash equivalents due to change of consolidated scope ............ 24 — 200
Cash and cash equivalents at end of year (Note 9)........................................................... ¥20,252 ¥12,281 $168,767
See accompanying notes.
Consolidated Statements of Cash Flows
22
22
Kayaba Industry Co., Ltd. and Consolidated Subsidiaries Years ended March 31, 2003 and 2002
The Company and its consolidated domestic subsidiaries main-
tain their official accounting records in Japanese yen, and in
accordance with the provisions set forth in the Japanese
Commercial Code and accounting principles and practices gen-
erally accepted in Japan (“Japanese GAAP”). The accounts of
overseas subsidiaries are based on their accounting records
maintained in conformity with generally accepted accounting
principles and practices prevailing in the respective countries of
domicile. Certain accounting principles and practices generally
accepted in Japan are different from International Accounting
Standards and standards in other countries in certain respects as
to application and disclosure requirements. Accordingly, the
accompanying consolidated financial statements are intended for
use by those who are informed about Japanese accounting prin-
ciples and practices.
The accompanying financial statements have been restructured
and translated into English (with some expanded descriptions
and the inclusion of the statements of shareholders’ equity) from
the consolidated financial statements of the Company prepared
in accordance with Japanese GAAP and filed with the appropri-
ate Local Finance Bureau of the Ministry of Finance as required
by the Securities and Exchange Law. Some supplementary informa-
tion included in the statutory Japanese-language consolidated
financial statements, but not required for fair presentation, is not
presented in the accompanying financial statements.
The translation of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers, using the pre-
vailing exchange rate at March 31, 2003, which was ¥120 to
US$1. The convenience translations should not be construed as
representations that the Japanese yen amounts have been,
could have been, or could in the future be converted into U.S.
dollars at this or any other rate of exchange.
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
Consolidation
The consolidated financial statements of the Company include
the accounts of the Company and its significant subsidiaries
(16 in 2003 and 17 in 2002) which are controlled through sub-
stantial ownership of majority voting rights or the existence of
certain conditions.
Financial statements of certain consolidated subsidiaries which
have the fiscal year ending December 31 were consolidated with
adjustments made for material transactions which took place in
the three-month period between the balance sheet date of such
subsidiaries and that of the Company.
Equity method
Investments in seven affiliated companies in 2003 and eight in 2002
(20% to 50% owned and certain others less than 20% owned) are
accounted for by the equity method and, accordingly, are stated
at cost adjusted for equity in undistributed earnings and losses
from the date of acquisition.
Investments in the other affiliated companies and unconsolidated
subsidiaries are stated at cost or less.
Foreign currency translation
Receivables and payables denominated in foreign currencies are
translated into Japanese yen at the year-end rates.
Balance sheets of consolidated overseas subsidiaries are trans-
lated into Japanese yen at the year-end rates except for share-
holders’ equity accounts, which are translated at the historical
rates. Income statements of consolidated overseas subsidiaries
are translated at average rates.
Foreign currency translation adjustments are presented in
shareholders’ equity and minority interests.
Cash and cash equivalents
In preparing the consolidated statements of cash flows, cash on
hand, readily-available deposits and short-term highly liquid invest-
ments with maturities of not exceeding three months at the time
of purchase are considered to be cash and cash equivalents.
Inventories
Inventories are stated at cost by the weighted-average method.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Notes to Consolidated Financial Statements
23
23
Securities
Under the accounting standard for financial instruments, the
Company and its consolidated subsidiaries (the “Companies”)
examine the intent of holding each security and classify those
securities as (a) securities held for trading purposes, (b) debt
securities intended to be held to maturity, (c) equity securities
issued by subsidiaries and affiliated companies and (d) for all
other securities that are not classified in any of the above cate-
gories (hereafter, “available-for-sale securities”).
Equity securities issued by subsidiaries and affiliated compa-
nies which are not consolidated or accounted for using the equity
method are stated at moving-average cost. 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 com-
ponent of shareholders’ equity. Realized gains and losses on sales
of such securities are computed using the moving-average cost.
Securities with no available fair market value are stated at
moving-average cost.
For the year ended March 31, 2002, as permitted as a tempo-
rary measure under the new accounting standards for financial
instruments effective April 1, 2000, securities acquired under
resale agreements continued to be accounted for in the same
manner as in the periods before April 1, 2000. At March 31,
2002, marketable securities and cash and time deposits included
such securities amounting to ¥63 million ($525 thousand) and
¥4,000 million ($33,333 thousand), respectively. However, with
effect from the year ended March 31, 2003, the Companies clas-
sify those securities into short-term loans receivable on the bal-
ance sheet. The balance of such securities was ¥10,704 million
($89,200 thousand) as of March 31, 2003.
Derivative transactions and hedge accounting
The accounting standard for financial instruments requires com-
panies to state derivative financial instruments at fair value and to
recognize 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 hedges and meet
certain hedging criteria, the Companies defer recognition of gains
or losses resulting from changes in the fair value of derivative
financial instruments until the related gains or losses on the
hedged items are recognized.
However, 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 and no gains or losses on the forward foreign exchange con-
tract are recognized.
Also, if interest rate swap contracts are used as hedges 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 was executed.
Property, plant and equipment
Property, plant and equipment are carried at cost except for cer-
tain land used for business operations. Depreciation is computed
by the declining-balance method at rates based on the estimated
useful lives, except for buildings acquired after March 31, 1998,
which are depreciated using the straight-line method. Overseas
consolidated subsidiaries use the straight-line method over the
estimated useful lives.
Land revaluation
Pursuant to the Law Concerning Revaluation of Land enacted on
March 31, 1998, land owned by the Company for business oper-
ations was revalued at fair value as of March 31, 2002. Due to
the revaluation, the book value of the land increased by ¥10,054
million, to ¥20,377 million as of March 31, 2002, and the related
unrealized gain is reported as a separate component of share-
holders’ equity net of applicable income taxes as of March 31,
2002.
According to the revised law, the Company is not permitted to
revalue the land at any time even in the case that the fair value of
the land declines. Such unrecorded revaluation loss amounted to
¥2,769 million ($23,075 thousand) at March 31, 2003.
Research and development
Expenses relating to research and development activities are
charged to income as incurred.
Certain lease transactions
Financial leases, except for those leases for which the ownership
of the leased assets is considered to be transferred to lessees,
are accounted for as operating leases.
24
24
Retirement benefits
(1) Employees’ severance and retirement benefits
The Company and its certain domestic consolidated subsidiaries
provide two types of post-employment benefit plans, unfunded
lump-sum payment plans and funded noncontributory pension
plans, under which all eligible employees are entitled to benefits
based on the level of wage and salary at the time of retirement or
termination, length of service and certain other factors. Some
subsidiaries have adopted a pension plan of their own.
At March 31, 2000, the Company and certain domestic con-
solidated subsidiaries accrued liabilities for lump-sum severance
and retirement payments at 100% of the amount required had
all eligible employees voluntarily terminated their employment at
the balance sheet date. The Companies recognized pension ex-
pense based on the accrual method.
The Companies provided an allowance for employees’ sever-
ance and retirement benefits at March 31, 2003 and 2002 based
on the amounts of projected benefit obligation and the fair value
of the plan assets at those dates.
The excess of the projected benefit obligation over the total of
the fair value of pension assets as of April 1, 2000 and the bal-
ances of retirement benefits and accrued prior service costs
recorded as of April 1, 2000 (the “net transition obligation”)
amounted to ¥16,442 million, of which ¥11,358 million was rec-
ognized as an expense as a result of the contribution of invest-
ment securities worth ¥11,358 million to the employee retirement
benefit trust in June 2000. The remaining net transition obligation,
amounting to ¥5,084 million, will be recognized in expenses in
equal amounts over five years commencing with the year ended
March 31, 2001. Actuarial gains and losses are recognized in
expenses in equal amounts over the average of the estimated
remaining service lives (14 to 15 years) commencing with the
succeeding period.
(2) Severance and retirement allowance for directors
Directors and corporate auditors of the Company and certain sub-
sidiaries receive lump-sum payments upon termination of their ser-
vices under unfunded termination plans. The full amount of such
retirement benefits for directors and corporate auditors is accrued
in accordance with the internal rules. The payments to directors
and corporate auditors are subject to shareholders’ approval.
Income taxes
Income taxes comprise corporation, enterprise and inhabitant taxes.
The Companies recognize tax effects of temporary differences
between the financial statement basis and the tax basis of assets
and liabilities.
Amounts per share
In computing net income (loss) per share of common stock, the
average number of shares issued during each fiscal year has
been used. For diluted net income per share, both net income
(loss) and shares outstanding were adjusted to assume the con-
version of convertible bonds. Cash dividends per share represent
actual amounts applicable to the respective years.
Effective April 1, 2002, the Company adopted the new account-
ing standard for earnings per share and related guidance (Ac-
counting Standards Board Statement No. 2, “Accounting Standard
for Earnings Per Share” and Financial Standards Implementation
Guidance No. 4, “Implementation Guidance for Accounting Stan-
dard for Earnings Per Share,” issued by the Accounting Standards
Board of Japan on September 25, 2002).
The effect on earnings per share of the adoption of the new
accounting standard was not material.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the 2003 presentation. These changes had no impact on previ-
ously reported results of operations or shareholders’ equity.
Treasury stock and reversal of statutory reserves
Effective April 1, 2002, the Company adopted the new account-
ing standard for treasury stock and reversal of statutory reserves
(Accounting Standards Board Statement No. 1, “Accounting
Standard for Treasury Stock and Reversal of Statutory Reserves,”
issued by the Accounting Standards Board of Japan on February
21, 2002). The effect on net income of adopting the new stan-
dard was not significant.
25
25
Inventories at March 31, 2003 and 2002 consisted of the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Finished products .......................................................................................................................... ¥ 9,489 ¥10,210 $ 79,075Work in process............................................................................................................................. 10,778 10,567 89,817Raw materials and supplies ........................................................................................................... 2,867 2,176 23,892
...................................................................................................................................................... ¥23,134 ¥22,953 $192,784
3. INVENTORIES
Bank loans at March 31, 2003 and 2002 were represented by
short-term notes, generally 90 days, bearing annual interest rates
ranging from 0.49% to 4.60% and from 0.49% to 4.73%,
respectively.
4. BANK LOANS AND LONG-TERM DEBT
Long-term debt at March 31, 2003 and 2002 consisted of the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
2.5% unsecured bonds, due in 2005 ............................................................................................. ¥ 7,000 ¥ 7,000 $ 58,333Loans from banks and others, due through 2009 withinterest rates ranging from 0.95% to 2.9%:Secured..................................................................................................................................... 2,833 3,054 23,608Unsecured................................................................................................................................. 23,665 25,922 197,209
Total .................................................................................................................................. 33,498 35,976 279,150Less current maturities................................................................................................................... 7,531 2,984 62,758
...................................................................................................................................................... ¥25,967 ¥32,992 $216,392
As is customary in Japan, security may have to be given if
requested by a lending bank, and such bank has the right to off-
set cash deposited with it against any debt or all obligations that
become due and, in the case of default or certain other specified
events, against all debts payable to the bank. The Company has
never received such a request.
At March 31, 2003, the following assets were pledged as col-
lateral for notes and long-term bank loans:
Thousands ofMillions of yen U.S. dollars
Property, plant and equipment less accumulated depreciation ..................................................................... ¥18,496 $154,133
The aggregate annual maturities of long-term debt are as follows:
Thousands ofYear ending March 31, Millions of yen U.S. dollars
2004 ............................................................................................................................................................ ¥ 7,531 $ 62,7582005 ............................................................................................................................................................ 10,268 85,5672006 ............................................................................................................................................................ 3,826 31,8832007 ............................................................................................................................................................ 8,295 69,1252008 ............................................................................................................................................................ 1,595 13,292Thereafter..................................................................................................................................................... 1,983 16,525
.................................................................................................................................................................... ¥33,498 $279,150
26
26
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Projected benefit obligation .......................................................................................................... ¥100,196 ¥88,136 $834,967Unrecognized actuarial differences............................................................................................... (35,832) (16,861) (298,600)Less fair value of plan assets........................................................................................................ (43,927) (51,352) (366,058)Less unrecognized net transition obligation .................................................................................. (2,028) (3,050) (16,900)Prepaid pension expense............................................................................................................. 479 721 3,991
Liability for employees’ severance and retirement benefits........................................................ 18,888 17,594 157,400Severance and retirement allowance for directors .................................................................... 655 533 5,458
Total retirement benefits........................................................................................................... ¥ 19,543 ¥18,127 $162,858
Included in the consolidated statements of operations and retained earnings for the years ended March 31, 2003 and 2002 are
employees’ severance and retirement benefit expenses comprising the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Service costs–benefits earned during the year ................................................................................. ¥2,612 ¥2,564 $21,767Interest cost on projected benefit obligation..................................................................................... 2,623 2,907 21,858Expected return on plan assets........................................................................................................ (1,321) (2,108) (11,008)Amortization of net transition obligation............................................................................................ 1,017 1,017 8,475Amortization of actuarial differences................................................................................................. 1,162 570 9,683Special payment of extra retirement benefits.................................................................................... 42 65 350
Severance and retirement benefit expenses................................................................................. ¥6,135 ¥5,015 $51,125
The estimated amount of all employees’ retirement benefits to
be paid at the future retirement date is allocated equally to each
service year using the estimated number of total service years.
The discount rate and the rate of expected return on plan assets
used by the Companies were 2.5% and 3.0% for 2003, and
3.0% and 3.5% to 5.0% for 2002, respectively. Actuarial differ-
ences are recognized as an expense in equal amounts over 14 to
15 years.
As explained in Note 2, Summary of Significant Accounting Poli-
cies, the liabilities and expenses for employees’ severance and
retirement benefits are determined based on the amounts obtained
by actuarial calculations.
The liabilities for employees’ severance and retirement benefits
included in the liabilities section of the consolidated balance
sheets as of March 31, 2003 and 2002 consist of the following:
5. RETIREMENT BENEFITS
6. INCOME TAXES
The aggregate statutory income tax rate will be reduced for the
years commencing on April 1, 2004 or later due to the revised
local tax law. At March 31, 2003, the Company and consolidat-
ed domestic subsidiaries applied the reduced aggregate statu-
tory income tax rate of 39.8% for calculating deferred tax assets
and liabilities that are expected to be recovered or settled in the
years commencing on April 1, 2004 or later. As a result, de-
ferred tax assets decreased by ¥279 million ($2,325 thousand),
deferred income taxes increased by ¥258 million ($2,150 thou-
sand) and net unrealized holding gains on securities increased
by ¥22 million ($183 thousand) compared with what would be
reported using the currently applicable tax rate of 41.1%.Deferred tax liabilities on land revaluation decreased by ¥160
million ($1,333 thousand) and land revaluation excess increasedby the same amount compared with the previous fiscal year.
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The following table summarizes the significant differences bet-
ween the statutory tax rate and the Company’s effective tax rate
for financial statement purposes for the year ended March 31,
2003. Reconciliation of the statutory tax rate and the Company’s
effective tax rate for the year ended March 31, 2002 was not
required due to a small difference.
2003
Statutory tax rate........................................................................................................................................................................... 41.1%Decrease of deferred tax assets due to the change of the aggregate statutoryincome tax rates...................................................................................................................................................................... 4.7
Non-deductible expenses (entertainment expenses, etc.) .......................................................................................................... 4.6Valuation allowance................................................................................................................................................................... 2.4Equity in earnings of the affiliated company ............................................................................................................................... (4.9)Other......................................................................................................................................................................................... (0.9)
Effective tax rate............................................................................................................................................................................ 47.0%
Significant components of the Company’s deferred tax assets and liabilities as of March 31, 2003 and 2002 were as follows:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Deferred tax assets:Provision for employees’ severance and retirement benefits....................................................... ¥10,515 ¥10,524 $ 87,626Reorganization and restructuring costs of U.S. operations ......................................................... — 4,341 —Loss carried forward .................................................................................................................. 5,233 3,962 43,608Fixed assets write-down ............................................................................................................ 1,851 2,047 15,425Accrued bonuses....................................................................................................................... 1,213 808 10,108Provision for retirement benefits for directors ............................................................................. 262 220 2,183Unrealized holding losses on securities ...................................................................................... 65 85 542Other ......................................................................................................................................... 1,174 798 9,783
Total deferred tax assets............................................................................................................ 20,313 22,785 169,275Less: Valuation allowance .......................................................................................................... (5,376) (5,358) (44,800)
...................................................................................................................................................... 14,937 17,427 124,475
Deferred tax liabilities:Securities contributed to employees’ retirement benefit trust ..................................................... (3,487) (4,272) (29,058)Unrealized holding gains on securities........................................................................................ (722) (884) (6,017)Prepaid pension expenses ......................................................................................................... (190) (296) (1,583)Other ......................................................................................................................................... (167) (225) (1,392)
Total deferred tax liabilities ......................................................................................................... (4,566) (5,677) (38,050)
Net deferred tax assets...................................................................................................... ¥10,371 ¥11,750 $ 86,425
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Reconciliations of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents shown in the con-
solidated statements of cash flows as of March 31, 2003 and 2002 are as follows:
Thousands of Millions of yen U.S. dollars
2003 2002 2003
Cash and time deposits ................................................................................................................. ¥10,121 ¥12,641 $ 84,342Less: Time deposits with maturities exceeding three months ......................................................... (556) (423) (4,633)Add: Commercial paper with maturity less than three months........................................................ 10,687 63 89,058
Cash and cash equivalents ............................................................................................................ ¥20,252 ¥12,281 $168,767
9. CASH AND CASH EQUIVALENTS
At March 31, 2003, the Company and its consolidated sub-
sidiaries were contingently liable for trade notes receivable dis-
counted amounting to ¥281 million (US$2,342 thousand) and
trade notes receivable endorsed amounting to ¥698 million
(US$5,817 thousand).
At the same date, the Company was also contingently liable
under guarantees of indebtedness of unconsolidated subsidiaries and
affiliated companies amounting to ¥790 million (US$6,583 thou-
sand) and of employees’ loans for their own houses amounting to
¥12 million (US$100 thousand).
8. CONTINGENT LIABILITIES
Under the Commercial Code of Japan (the “Code”), at least 50%
of the issue price of new shares is required to be credited to
common stock. The portion which is to be credited to common
stock is determined by resolution of the Board of Directors.
Proceeds in excess of the amounts credited to common stock
are credited to capital surplus.
The Code provides that an amount at least equal to 10% of
the aggregate amount of cash dividends and certain other cash
payments which are made as an appropriation of retained earn-
ings applicable to each fiscal period shall be appropriated and
set aside as a legal reserve until the total of the legal reserve and
additional paid-in capital equals 25% of stated capital. Prior to
the revision of the Code effective October 1, 2001, such appro-
priations as a legal reserve were required until the amount of legal
reserve equaled 25% of common stock. If the total of the legal
reserve and additional paid-in capital exceeds 25% of stated
capital, the excess can be transferred to retained earnings by
resolution of the shareholders.
The Code permits the Company to transfer a portion of addi-
tional paid-in capital and legal reserve to stated capital by resolution
of the Board of Directors. The Code also permits the Company to
transfer portions of unappropriated retained earnings, available
for dividends, to stated capital by resolution of the shareholders.
Under the Code, the Company may issue new common shares to
existing shareholders without consideration as a stock split pursuant
to resolution of the Board of Directors. Legal reserve is included
in retained earnings in the accompanying financial statements.
Dividends are approved by the shareholders at a meeting held
subsequent to the fiscal year to which the dividends are applica-
ble. Semiannual interim dividends may also be paid upon resolu-
tion of the Board of Directors, subject to certain limitations
imposed by the Code.
The maximum amount that the Company can distribute as
dividends is calculated based on the unconsolidated financial
statements of the Company and in accordance with the Code.
7. SHAREHOLDERS’ EQUITY
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Finance leases which do not transfer ownership to lessees are not capitalized and are accounted for in the same manner as operating
leases.
A summary of assumed amounts of acquisition cost, accumulated depreciation and net book value of machinery and equipment at
March 31, 2003 and 2002 is as follows:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Acquisition cost of machinery and equipment .................................................................................... ¥4,490 ¥3,873 $37,417Accumulated depreciation of machinery and equipment .................................................................... 1,737 2,016 14,475
Net book value of machinery and equipment ..................................................................................... ¥2,753 ¥1,857 $22,942
Future minimum lease payments at March 31, 2003 and 2002 were as follows:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Due within one year ........................................................................................................................... ¥ 760 ¥ 666 $ 6,333Due after one year ............................................................................................................................. 1,993 1,191 16,609
.......................................................................................................................................................... ¥2,753 ¥1,857 $22,942
Lease payments and assumed depreciation charge for the years ended March 31, 2003 and 2002 were as follows:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Lease payments.................................................................................................................................... ¥829 ¥954 $6,908Assumed depreciation charge............................................................................................................... 829 954 6,908
10. LEASE INFORMATION
Assumed depreciation charges are computed using the
straight-line method over lease terms assuming no residual value.
Since the portion of the future minimum lease payments is
minor compared to the balance of property, plant and equipment
at March 31, 2003 and 2002, interest expense has been in-
cluded in acquisition costs and depreciation expense.
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The Company and certain consolidated subsidiaries have entered
into forward exchange contracts with banks as hedges against
receivables denominated in foreign currencies and interest rate
swap agreements for certain assets with fixed interest rates and
certain liabilities with variable interest rates to hedge its exposure
to fluctuations of interest rates.
These derivative financial transactions are utilized solely for
hedging purposes under the internal control rules and the
supervision of the Board of Directors. The Companies do not
anticipate any credit loss from non-performance by the counter-
parties to forward exchange contracts and interest rate swap
agreements.
The following summarizes hedging derivative financial instru-
ments used by the Companies and items hedged:
Hedging instruments:
Forward foreign exchange contracts, interest rate swap
contracts
Hedged items:
Foreign currency transactions, bank loans
Evaluation of hedge effectiveness during the years ended
March 31, 2003 and 2002 is omitted as hedge accounting has
been applied to derivative transactions.
12. DERIVATIVE FINANCIAL INSTRUMENTS
A. The following tables summarize acquisition costs, book values and fair value of securities with available fair values as of March 31,
2003 and 2002.
Available-for-sale securities: Securities with book values exceeding acquisition costs
Millions of yen Thousands of U.S. dollars
2003 2002 2003
Acquisition Acquisition Acquisitioncost Book value Difference cost Book value Difference cost Book value Difference
Equity securities...................... ¥2,404 ¥4,218 ¥1,814 ¥3,002 ¥5,139 ¥2,137 $20,033 $35,150 $15,117
Available-for-sale securities: Other securities
Millions of yen Thousands of U.S. dollars
2003 2002 2003
Acquisition Acquisition Acquisitioncost Book value Difference cost Book value Difference cost Book value Difference
Equity securities...................... ¥2,656 ¥2,493 ¥(163) ¥3,495 ¥3,289 ¥(206) $22,133 $20,775 $(1,358)
B. The following tables summarize book values of securities with no available fair values as of March 31, 2003 and 2002.
Available-for-sale securities:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Commercial paper ............................................................................................................................. ¥ — ¥ 63 $ —Non-listed equity securities ................................................................................................................ 2,283 1,282 19,025Others ............................................................................................................................................... — 2 —
Total .............................................................................................................................................. ¥2,283 ¥1,347 $19,025
11. SECURITIES
C. Total sales of available-for-sale securities sold in the year ended
March 31, 2003 was not material.
Total sales of available-for-sale securities sold in the year ended
March 31, 2002 amounted to ¥95 million and the related losses
amounted to ¥53 million, respectively.
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13. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to the cost of sales
and selling, general and administrative expenses for the years
ended March 31, 2003 and 2002 were ¥3,845 million (US$32,042
thousand) and ¥3,517 million, respectively.
Business segment
The Company and its consolidated subsidiaries operate primarily in the production and sale of hydraulic products and systems products.
Business segment information for the years ended March 31, 2003 and 2002 is as follows:
Year ended March 31, 2003: Millions of yen
EliminationHydraulic products Systems products Total or unallocation Consolidated
Sales:Outside customers .......................................................... ¥194,525 ¥13,118 ¥207,643 ¥ — ¥207,643Intersegment ................................................................... 423 857 1,280 (1,280) —
Total sales............................................................... 194,948 13,975 208,923 (1,280) 207,673Operating expenses ............................................................ 180,194 13,431 193,625 5,081 198,706
Operating income................................................................ ¥ 14,754 ¥ 544 ¥ 15,298 ¥ (6,361) ¥ 8,937
Identifiable assets................................................................ ¥144,437 ¥12,521 ¥156,958 ¥37,497 ¥194,455
Depreciation and amortization ............................................. 7,359 499 7,858 173 8,031
Capital expenditures............................................................ 7,625 499 8,124 274 8,398
Year ended March 31, 2002: Millions of yen
EliminationHydraulic products Systems products Total or unallocation Consolidated
Sales:Outside customers .......................................................... ¥169,192 ¥15,727 ¥184,919 ¥ — ¥184,919Intersegment ................................................................... 445 865 1,310 (1,310) —
Total sales............................................................... 169,637 16,592 186,229 (1,310) 184,919Operating expenses ............................................................ 160,524 16,886 177,410 4,675 182,085
Operating income (loss)....................................................... ¥ 9,113 ¥ (294) ¥ 8,819 ¥ (5,985) ¥ 2,834
Identifiable assets................................................................ ¥136,323 ¥14,400 ¥150,723 ¥35,145 ¥185,868
Depreciation and amortization ............................................. 7,251 604 7,855 179 8,034
Capital expenditures............................................................ 8,007 315 8,322 67 8,389
15. SEGMENT INFORMATION
Other, net, included in other income (expenses) for the years ended March 31, 2003 and 2002 comprises the following:
Thousands ofMillions of yen U.S. dollars
2003 2002 2003
Compensation received ........................................................................................................................ ¥ 177 ¥ 79 $ 1,475Loss on disposal of inventories ............................................................................................................. (318) (219) (2,650)Foreign exchange gain, net ................................................................................................................... (411) 879 (3,425)Grants received..................................................................................................................................... 56 52 467Others................................................................................................................................................... 285 222 2,375
............................................................................................................................................................. ¥(211) ¥1,013 $(1,758)
14. OTHER INCOME (EXPENSES)—OTHER, NET
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32
Year ended March 31, 2003: Thousands of U.S. dollars
EliminationHydraulic products Systems products Total or unallocation Consolidated
Sales:Outside customers .......................................................... $1,621,042 $109,316 $1,730,358 $ — $1,730,358Intersegment ................................................................... 3,525 7,142 10,667 (10,667) —
Total sales ............................................................... 1,624,567 116,458 1,741,025 (10,667) 1,730,358Operating expenses ............................................................ 1,501,617 111,925 1,613,542 42,341 1,655,883
Operating income................................................................ $ 122,950 $ 4,533 $ 127,483 $ (53,008) $ 74,475
Identifiable assets ................................................................ $1,203,642 $104,341 $1,307,983 $312,475 $1,620,458
Depreciation and amortization ............................................. 61,325 4,158 65,483 1,442 66,925
Capital expenditures............................................................ 63,542 4,158 67,700 2,283 66,925
Geographic segment
Geographic segment information for the years ended March 31, 2003 and 2002 is as follows:
Year ended March 31, 2003: Millions of yen
EliminationJapan Other areas Total or unallocation Consolidated
Sales:Outside customers ............................................................. ¥170,807 ¥36,836 ¥207,643 ¥ — ¥207,643Intersegment ...................................................................... 12,261 116 12,377 (12,377) —
Total sales .................................................................. 183,068 36,952 220,020 (12,377) 207,643Operating expenses................................................................ 168,136 36,653 204,789 (6,083) 198,706
Operating income ................................................................... ¥ 14,932 ¥ 299 ¥ 15,231 ¥ (6,294) ¥ 8,937
Identifiable assets ................................................................... ¥146,230 ¥25,941 ¥172,171 ¥22,284 ¥194,455
Year ended March 31, 2002: Millions of yen
EliminationJapan Other areas Total or unallocation Consolidated
Sales:Outside customers ............................................................. ¥161,207 ¥23,712 ¥184,919 ¥ — ¥184,919Intersegment ...................................................................... 8,599 113 8,712 (8,712) —
Total sales .................................................................. 169,806 23,825 193,631 (8,712) 184,919Operating expenses................................................................ 161,765 23,481 185,246 (3,161) 182,085
Operating income ................................................................... ¥ 8,041 ¥ 344 ¥ 8,385 ¥ (5,551) ¥ 2,834
Identifiable assets ................................................................... ¥140,597 ¥21,461 ¥162,058 ¥23,810 ¥185,868
33
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Year ended March 31, 2003: Thousands of U.S. dollars
Elimination Japan Other areas Total or unallocation Consolidated
Sales:Outside customers........................................................... $1,423,391 $306,967 $1,730,358 $ — $1,730,358Intersegment.................................................................... 102,175 967 103,142 (103,142) —
Total sales ............................................................... 1,525,566 307,934 1,833,500 (103,142) 1,730,358Operating expenses............................................................. 1,401,133 305,442 1,706,575 50,692 1,655,883
Operating income ................................................................ $ 124,433 $ 2,492 $ 126,925 $ (52,450) $ 74,475
Identifiable assets ................................................................ $1,218,583 $216,175 $1,434,758 $185,700 $1,620,458
Overseas sales
Overseas sales by geographic area for the years ended March 31, 2003 and 2002 were as follows:
Year ended March 31, 2003: Millions of yen
North Southeast OtherAmerica Europe Asia areas Total
III. Overseas sales ................................................................................... ¥20,170 ¥18,808 ¥7,872 ¥5,871 ¥ 52,721III. Consolidated sales ............................................................................. — — — — 207,643III. Ratio of overseas sales (%) ................................................................. 9.7% 9.1% 3.8% 2.8% 25.4%
Year ended March 31, 2002: Millions of yen
North Southeast OtherAmerica Europe Asia areas Total
III. Overseas sales ................................................................................... ¥11,674 ¥17,715 ¥5,830 ¥4,671 ¥ 39,890III. Consolidated sales ............................................................................. — — — — 184,919III. Ratio of overseas sales (%) ................................................................. 6.3% 9.6% 3.2% 2.5% 21.6%
Year ended March 31, 2002: Thousands of U.S. dollars
North Southeast OtherAmerica Europe Asia areas Total
III. Overseas sales................................................................................. $168,083 $156,733 $65,600 $48,925 $ 439,341III. Consolidated sales ........................................................................... — — — — 1,730,358III. Ratio of overseas sales (%)............................................................... 9.7% 9.1% 3.8% 2.8% 25.4%
Overseas sales included those of the Company and its consolidated subsidiaries.
34
34
16. SUBSEQUENT EVENTS
A. On June 25, 2003, the shareholders of the Company authorized the following appropriations of retained earnings at March 31, 2003:
Thousands ofMillions of yen U.S. dollars
Cash dividends, ¥3 ($0.03) per share ........................................................................................................... ¥669 $5,575
Bonuses to directors and corporate auditors................................................................................................ 68 567
B. In connection with the enforcement of the Defined Benefit
Enterprise Pension Law, the Company and some of its consolidat-
ed subsidiaries received approval from the Minister of Health,
Labor and Welfare for winding-up the non-contributory defined
benefit pension plan and exemption from payment of future
benefits on April 24, 2003. In accordance with the winding-up, the
future obligations will disappear, and the Companies will record ¥7
billion as a part of special gains in the next fiscal year’s financial
statements.
35
35
To the Shareholders and the Board of Directors of KAYABA INDUSTRY CO., LTD.:
We have audited the accompanying consolidated balance sheets of KAYABA INDUSTRY CO., LTD. and subsidiaries as of March
31, 2003 and 2002, and the related consolidated statements of operations and retained earnings, and cash flows for the years then
ended, expressed in Japanese yen. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstate-
ment. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evalu-
ating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of KAYABA INDUSTRY CO., LTD. and subsidiaries as of March 31, 2003 and 2002, and the consolidated results
of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in
Japan as described in Note 1 to the consolidated financial statements.
Without qualifying our opinion, we draw attention to Note 16 to the consolidated financial statements as a subsequent event,
KAYABA INDUSTRY CO., LTD. and some of its consolidated subsidiaries received approval from the Minister of Health, Labor and
Welfare for winding-up the non-contributory defined benefit pension plan and exemption from payment of future benefits on April
24, 2003. In accordance with the winding-up, the future obligations will disappear, and the Companies will record ¥7 billion as a
part of special gains in the next fiscal year’s financial statements.
The consolidated financial statements as of and for the year ended March 31, 2003 have been translated into United States dollars
solely for the convenience of the reader. We have recomputed the translation and, in our opinion, the consolidated financial state-
ments expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 1 to the consoli-
dated financial statements.
Tokyo, Japan
June 25, 2003
Report of Independent Public Accountants
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36
Japan
Nippon Power Steering Co., Ltd.2548 Dota, Kani City, Gifu 509-0298, JapanTel: 81-574-28-2811Fax: 81-574-28-2840
Kayaba Engineering and Service Co., Ltd.Tanaka Building, 1-25, Shiba 2-chome, Minato-ku, Tokyo 105-0014, JapanTel: 81-3-5476-1777Fax: 81-3-3451-7803
Nihon Koki Co., Ltd.Fuji Bldg., 11-1, Shiba Daimon 2-chome, Minato-ku, Tokyo 105-0012, JapanTel: 81-3-3431-9331Fax: 81-3-3431-1634
Kayaba-Rae Stage Co., Ltd.Fuji Bldg., 11-1, Shiba Daimon 2-chome, Minato-ku, Tokyo 105-0012, JapanTel: 81-3-3578-1791Fax: 81-3-3578-1789
Japan Analysts Co., Ltd.Matsunaga Bldg., 1-17, Hamamatsu-cho 2-chome, Minato-ku, Tokyo 105-0013, JapanTel: 81-3-3436-5660Fax: 81-3-3436-1077
Yanagisawa Seiki MFG Co., Ltd.7001 Oaza-Sakaki, Sakaki-machi, Hanishina-gun,Nagano 389-0601, JapanTel: 81-268-82-2850Fax: 81-268-82-2857
MacGREGOR-Kayaba Co., Ltd.Suzue Baydium, 15-1, Kaigan 1-chome, Minato-ku, Tokyo 105-0022, JapanTel: 81-3-5403-1951Fax: 81-3-5403-1953
Americas
KYB Manufacturing North America, Inc.2625 North Morton, Franklin, IN 46131, U.S.A.Tel: 1-317-736-7774Fax: 1-317-736-4618
KYB America LLC140 North Mitchell Court, Addison, IL 60101, U.S.A.Tel: 1-630-620-5555Fax: 1-630-620-8133
Europe
Kayaba Europe GmbHKimpler Str. 336, 47807 Krefeld, GermanyTel: 49-2151-931430Fax: 49-2151-9314320
Kayaba Spain S.A.Poligono Industrial de Ipertegui No. 2, Orcoyen Navarra, SpainTel: 34-948-321004Fax: 34-948-321005
AP Amortiguadores, S.A.Ctra. Irurzun S/No, 31171 Ororbia Navarra, SpainTel: 34-948-421700Fax: 34-948-322338
Paioli Meccanica S.p.A.30/D, Via Ronchi Inferiore, 40061 Minerbio (BO), ItalyTel: 39-51-6606010Fax: 39-51-6606105
Asia
Yung Hwa Machinery Industrial Co., Ltd.No. 493, Kuang Hsing Rd., Pa-Teh City, Tao Yuan Hsien, TaiwanTel: 886-3-3683123Fax: 886-3-3683369
Thai Kayaba Industries Co., Ltd.700/460 Moo 7, T. Don Hua, Roh A. Muang, Chonburi 20000, ThailandTel: 66-3-821-5025Fax: 66-3-821-5029
Siam Kayaba Co., Ltd.380 Moo 2, Sukhumvit Rd., T. Bangpoo Mai, Ampur Muang, Samut Prakan 10280, ThailandTel: 66-2-323-9035Fax: 66-2-323-9037
Kayaba (Malaysia) Sdn. Bhd.Kayaba Hydraulics (Malaysia) Sdn. Bhd.Lot 8, Jalan Waja 16, Telok Panglima Garang, 42500 Kuala Langat, Selangor DE, MalaysiaTel: 60-3-31226222Fax: 60-3-31226677
P.T. Kayaba IndonesiaJL. Rawaterate 1/4, Pulogadung Industrial Estate, Jakarta Timur 13930, IndonesiaTel: 62-21-4615020Fax: 62-21-4606140
Husco-Kayaba Hydraulics (Shanghai), Ltd.No. 235, Jiangtian Rd., East Songjiang Industry Zone, Shanghai 201600, People’s Republic of ChinaTel: 86-21-5774-6468Fax: 86-21-3774-0186
Kayaba Vietnam Co., Ltd.Plot D46 Thang Long Industrial Park,Dong Anh District, Hanoi, VietnamTel: 84-4-8812773Fax: 84-4-8812774
Major Subsidiaries and Affiliates
37
37
37
Corporate Data
Head OfficeWorld Trade Center Bldg., 4-1, Hamamatsu-cho 2-chome, Minato-ku, Tokyo 105-6111, JapanTel: 81-3-3435-3511Fax: 81-3-3436-6759URL: http://www.kyb.co.jp/
Date of EstablishmentNovember 25, 1948
Paid-in Capital¥19,114 million
Common Stock Issued222,984,315 shares
Number of Shareholders19,176
Number of Employees6,105 (Consolidated basis)
Securities TradedTokyo Stock Exchange (First Section)
Transfer Agent and RegistrarMizuho Trust & Banking Co., Ltd.2-1, Yaesu, 1-chome,Chuo-ku, Tokyo 100-0005, Japan
(As of March 31, 2003)
PlantsSagami, Kumagaya, Gifu North, Gifu South, Mie
R&D CentersBasic Technology R&D Center, Production Technology R&D Center
Sales BranchesSapporo, Sendai, Hamamatsu, Nagoya, Osaka,Hiroshima, Fukuoka
Overseas Offices
Europe BranchKimpler Str. 336, 47807 Krefeld, GermanyTel: 49-2151-9314350
Fax : 49-2151-9314330
California Representative Office5790 Katella Ave., Cypress, CA 90630, U.S.A.Tel: 1-562-799-3862Fax: 1-562-799-3863
Seattle Representative Office700 5th Ave., Suite 5900, Seattle, WA 98104, U.S.A.Tel: 1-206-386-5625Fax: 1-206-621-9448
Kayaba Middle East EstablishmentRoom 309 A, 3rd Fl., Sheikha Mariam Bint Almaktoum Bldg., Nasser Square, Deira, Dubai, U.A.E.Tel: 971-4-2230244Fax: 971-4-2234363
0
100
200
300
400(Yen)
1998 1999 2000 2001 2002
¥354 ¥287 ¥248 ¥235 ¥293
123 151 165 151
(As of March 31, 2003)
159
FY
High
Low
Common Stock Price Range (Tokyo Stock Exchange)
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