EBARA CORPORATION Annual Report 2013 · EBARA CORPORATION Annual Report 2013 For the Year Ended...

EBARA CORPORATIONAnnual Report 2013For the Year Ended March 31, 2013

Founded in 1912, EBARA Corporation has grown to become one of the world’s princi-

pal manufacturers of industrial machinery, based especially on its fluid machinery and

systems business, with particularly strong positions in pumps and compressors as

well as other related products. With its origins in the fluid machinery and systems

business, the Company expanded into the environmental engineering business cen-

tered around incinerators and gasification technology as well as into the precision

machinery business, which produces semiconductor manufacturing equipment and

other equipment.

The EBARA Group is constantly thinking of what will be required in the future and is

seeking to accurately grasp the current and future needs of its customers, while it

continues to pursue the development of superior technologies and products in all its

businesses. In the years to come, as in the past, the EBARA Group will continue to

achieve further development and contribute to society by excelling in the develop-

ment of technologies as well as the manufacturing and marketing of products and

by providing high-quality support and services.

Cautionary Statement with Regard to Forward-Looking StatementsCertain of the statements made in this annual report are forward- looking statements, which involve certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which are valid only as of the date thereof. EBARA undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date thereof or to reflect the occurrence of unanticipated events.

On the Cover: Upward Flow Cryogenic Liquid

Expanders

Cryogenic liquid expanders have become an

important component in the liquefaction process

train. Used in lieu of a Joule-Thomson valve, this

product typically increases LNG production by

3%-5%. This machine is an upward flow configura-

tion (bottom inlet, top outlet), and several advantag-

es can be gained by changing the direction of the

flow.

Our Next Stage in Growth:

EBARA CORPORATION ANNUAL REPORT 2013 1

Financial Highlights

Net Sales(Millions of yen)

600,000

0

200,000

300,000

400,000

100,000

500,000

’13’12’11’10’09

Shareholders’ Equity and Accumulated Other Comprehensive Income, ROIC(Millions of yen, %)

200,000

0

50,000

100,000

150,000

’13’12’11’10’09

12

-6

-3

0

3

6

9

Shareholders’ Equity and Accumulated Other Comprehensive Income ROIC (right scale)

Net Income (Loss)(Millions of yen)

30,000

-15,000

0

15,000

’13’12’11’10’09

Free Cash Flow(Millions of yen)

40,000

0

10,000

20,000

30,000

’13’12’11’10’09

Net Income (Loss) per Share(Yen)

80

-40

-20

0

20

40

60

’13’12’11’10’09

Total Net Assets per Share(Yen)

500

400

0

200

300

100

’13’12’11’10’09

EBARA CORPORATION and Consolidated Subsidiaries Thousands of Millions of yen U.S. dollars*

Fiscal years ended March 31 2013 2012 2013

Net sales ¥426,302 ¥412,077 $4,532,716Operating income 25,084 23,267 266,709Net income 15,303 2,890 162,711Depreciation and amortization 12,356 12,765 131,377Capital expenditures 12,302 12,316 130,802Shareholders’ equity and accumulated other comprehensive income 186,883 151,063 1,987,060Total net assets 191,786 154,656 2,039,192Total assets 504,576 488,964 5,364,976

Interest-bearing debt ¥138,914 ¥143,617 $1,477,023Shareholders’ equity and accumulated other comprehensive income to total assets (%) 37.0 30.9 Dividend payout ratio (%) 13.9 73.0 Free cash flow 883 3,751 9,389

Per share data: Net income (yen and U.S. dollars) ¥ 35.93 ¥ 6.85 $ 0.382 Cash dividends (yen and U.S. dollars) 5.00 5.00 0.053 Total net assets (yen and U.S. dollars) 402.41 357.79 4.279ROIC (%)** 4.9 1.0 ROE (%)*** 9.1 1.9 Debt/equity ratio 0.74 0.95

* The U.S. dollar amounts are included solely for convenience and have been translated as a matter of arithmetical computation only at the rate of ¥94.05=US$1, the rate of exchange prevailing on March 31, 2013.** ROIC: Net income/(Interest-bearing debt (Average between beginning and end of period) + Shareholders’ equity and accumulated other comprehensive income (Average between beginning and end of period))

*** ROE: Net income/Shareholders’ equity and accumulated other comprehensive income (Average between beginning and end of period)

2 EBARA CORPORATION ANNUAL REPORT 2013

Message from the Management

“EBARA will continue to make extensive contribu-

tions to society as a manufacturer of industrial equip-

ment by providing superior technologies and the best

possible service.”I would like to express my profoundest thanks for your understanding and

support of EBARA’s business activities. In April 2013, I assumed the

office of President and Representative Director. I am committed to drawing

fully on my experience over the years with EBARA and doing my very best

to ensure its further development. I, therefore, request your advice and

cooperation in the years ahead as we embark on EBARA’s second century

of contributing to sustainable development.

During the fiscal year ended March 31, 2013, among overseas econo-

mies, the United States showed gradual recovery, but Europe experienced

continued stagnation. The economies of Asia reported a slight improve-

ment in the pace of recovery, but relatively low growth is forecast in the

region for the time being. In Japan, the outlook is for the economy to show

moderate improvement.

Amid these economic conditions, the EBARA Group (the “Group”)

entered the second fiscal year of its three-year, Medium- Term

Management Plan “E-Plan2013,” and worked to establish a more-solid

and stabler business structure.

As a result of these activities, consolidated net sales for the fiscal year

amounted to ¥426.3 billion, operating income amounted to ¥25.0 billion,

ordinary income was ¥25.6 billion, and net income amounted to ¥15.3 bil-

lion.

The Group will continue to strengthen its management base through the

implementation of “E-Plan2013” as well as, with the aim of establishing a

more-solid and stabler business structure, will strengthen its global com-

petitiveness and work to maximize the value of its core businesses.

We would highly appreciate your continuing support and understanding.

Toichi MaedaPresident and Representative Director

t

m

p

o

fu

to

c

o

m

c

m

re

m

e

M

a

a

o

li

im

m

p


An Interview with the President

New Policies as President

Q1 You became president of EBARA on April 1, 2013. Could you please outline your plans for managing EBARA in the future?

The previous president of EBARA, Mr. Natsunosuke Yago, was successful in bringing

a major increase in profitability. He accomplished this by adopting a policy of selection

and concentration in the use of resources, especially by withdrawing from unprofitable

businesses and finding solutions to pending issues related to one of our overseas

projects.

Under the Medium-Term Management Plan “E-Plan 2013” (covering April 2011 to

March 2014), which Mr. Yago began to implement in the fifth year after becoming pres-

ident of EBARA, we moved steadily forward despite such setbacks as the appreciation

of the yen and the natural disaster and addressed important issues forthrightly. These

included adopting a policy of “regional production for regional supply,” strengthening

EBARA’s profitable service and support business, and innovating in manufacturing pro-

cesses. Most recently, in March 2013, EBARA raised the financial resources needed for

its growth strategy by securing a total of ¥35 billion through a ¥15 billion public offering

of new shares and a ¥20 billion issue of convertible bonds.

I have become president in the midst of the implementation of E-Plan2013. I intend

to move forward with business activities based on the concepts of E-Plan2013, which

embodies Mr. Yago’s management policies.

Professional Profile

Date of Birth: December 24, 1955

April 1981 Entered the Company

April 2007 Executive OfficerDeputy Division Executive, Custom Pump Division, Fluid Machinery & Systems Company

May 2008 Executive General Manager, Haneda District

April 2009 Executive General Manager, Futtsu District

April 2010 Managing Executive Officer

April 2011 Head of Business Unit, Custom Pump Business Unit, Fluid Machinery & Systems Company

June 2011 Member, Board of Directors

April 2012 President, Fluid Machinery & Systems Company

April 2013 President and Representative Director (to present)


On the other hand, it will be necessary for EBARA to change the concepts of its

business activities. Though our business is “manufacturing”, at the same time, I am

clearly aware that our business is also “providing service” over the entire life cycles of

our products, and that we must implement reforms in our business systems. Delivering

products to our customers is the first event in their product life cycles. We need a

renewed awareness that our business activities should extend until these products ful-

fill their missions. An urgent task for us is to make reforms and become a company

that not only manufactures but also provides service. I also think that, as a manufactur-

er, we must continue to raise the level of our technology, which is our core compe-

tence, and I would like to lead EBARA to grow to be a top-tier industrial machinery

manufacturer.

Toichi Maeda

President and Representative Director

Toichi M

Preside


Questions Investors Ask Frequently

We have selected a few of the questions that investors ask us frequently and

provided our responses.

The Current Business Environment

Q2 What are your views of the business environment?

Let me answer your question by business segment. First, our Fluid Machinery &

Systems (FMS) Company is responsible for a major business domain accounting for

about 70% of EBARA’s total sales. Moreover, the FMS Company responds to the

needs of several different industries. For example, the oil and gas sector accounts for

about one-third of its sales and the building equipment for the construction industry for

another one-third. The remainder is accounted for by the domestic public sector and

other sectors. Of these various industries served by the FMS Company, the oil and gas

industry is drawing attention because of the expansion in investment in nonconven-

tional energy projects, such as the development of shale gas resources in the United

States. At the same time, investment plans for conventional energy sources are coming

under review, and we are at a turning point where, from a global perspective, the ener-

gy resources that are being supplied and the composition of energy demanded are

changing. Responding to these changes, the key to future growth will be how quickly

we can provide the necessary equipment for these various sectors.

In addition, worldwide demand for energy continues rising on an upward trend,

particularly in emerging countries, and energy-related investments are expected to

continue to expand. In Asia in particular, the implementation of investment plans is

in progress, including projects related to LNG, refineries, petrochemicals, including

About the Pumps BusinessWhat kinds of pumps does EBARA manufacture?

Where are these used?

Since the time EBARA began operations in 1912 as a pumps

manufacturer, it has provided the world with a wide range of

pumps. Most of these have been so-called centrifugal pumps


ethylene, and other areas. As a consequence, we still foresee that these markets will

continue to grow.

In the field of building equipment for construction projects, construction starts in

Japan have shown only slight recovery, and the market is not expected to show major

growth. For this reason, the main issue is how to improve profitability.

Turning next to our Environmental Engineering (EE) segment, most projects

of EBARA’s EE Company in Japan are commissioned by the public sector, and, during

the fiscal year ended March 31, 2013, sales from this source accounted for about 20%

of EBARA’s total sales.

Views of demand from the public sector in Japan are becoming somewhat more

optimistic as concrete progress is being made in implementing Japan’s plans for

“Building National Resilience” that have been introduced following the change of gov-

ernment administration. Specific activities expected to receive priority in budgetary

allocations include measures to deal with major disasters as well as repairing and

replacing Japan’s aging social infrastructure.

EBARA’s third business segment, the Precision Machinery (PM) Company, makes

most of its sales to the semiconductor industry. Some sales are also made to the LED,

FPD (flat panel display), and PV (photovoltaic) industries, but market conditions

in these industries are lackluster. During the fiscal year ending March 31, 2014, capital

investment by the semiconductor industry is not expected to show a major movement

toward improvement in comparison with the previous year, but demand is viewed as

likely to begin to recover in the latter half of the fiscal year.

that make use of centrifugal force to convey liquids and

gases.

Our pumps are used in a wide variety of applications. For

example, our compact pumps are used in such applications

as the supplying and discharging of water in buildings and

condominiums as well as in firefighting situations. Our

high-pressure customized pumps find application in electric

power, petrochemical, and other industrial plants, while large-

scale customized pumps are used in pumping stations to

provide water for irrigation purposes.


Medium- to Long-Term Management Strategy

Q3 We understand that you will be making strategic investments to strengthen the profitability of the pumps business. Could you describe the measures you will be taking to increase profits and your views of the future of the pumps business?

As I previously mentioned, in March 2013, we raised a total of ¥35 billion in funds to

finance our growth strategies and strengthen our financial position through a ¥15 bil-

lion public offering and a ¥20 billion issue of convertible bonds. These funds will be

used for strategic investments that include the rapid expansion of our sales network

and service shops to capture demand for service and support in the pumps business.

The issues we are addressing in our pumps business are “excessive dependence on

domestic sales” and “a low ratio of sales generated from service and support activi-

ties.” At present, the driving force for growth in the FMS Company is the compressors

and turbines business, and we have achieved growth and stabilized profitability

through “globalization” and “capturing demand for service and support business.” The

background for these measures in the compressors and turbines business is that, as

part of our business strategy, we have built a service and support network that proper-

ly covers important regions. Among service and support bases, looking at repair shops

alone, we have about 20 bases around the world.

On the other hand, in the pumps business, overseas sales account for about 30% of

the total, while the ratio of revenues from service and support is only about 20%. Also,

we have only several global bases for providing service and support. Therefore, service

coverage for pumps is not up to the level of coverage for the compressors and tur-

bines business.

As these comments suggest, to improve profitability in the pumps business, we

must strengthen our service and support capability overseas and bring it up to the

same level as the compressors and turbines business. To realize this, over the coming

one to two years, we will set up service and support bases in regions where we have

already delivered a significant number of pumps. For example, in Asia and the Middle

East, where the cumulative number of custom pumps we have delivered is high, we

Questions Investors Ask Frequently

We have selected a few of the questions that investors ask us frequently and

provided our responses.

About the Compressors BusinessCould you describe the development of the

compressors and turbines business?

To make a full-scale entry into the market for equipment of the

oil & gas industry, EBARA concluded a technical alliance with

Elliott Company, a compressors manufacturer based in the


will put service and support capabilities in place. When we establish service and sup-

port bases, we will consider a number of options appropriate for various regions, rang-

ing from setting up new facilities to making use of existing production facilities for this

purpose, and acquiring local manufacturers and service companies.

Returns to Shareholders

Q4 What will be your policy for providing a return to shareholders?

We position providing a return to our shareholders as one of our most-important man-

agement priorities. Our basic policy is to provide returns on a continuous and stable

basis, taking our performance into account. For the fiscal year ended March 31, 2013,

we paid a dividend of ¥2.5 per share for the interim period and ¥5 per share for the full

fiscal year.

United States, and began manufacturing compressors and tur-

bines. Thereafter, as this business grew, EBARA made step-by-

step investments in Elliott, and that company became a wholly

owned subsidiary of EBARA in 2000. Subsequently, the compres-

sors business of EBARA was split off to become Elliott Ebara

Turbomachinery Corporation, and, currently, we are operating

two compressor manufacturing facilities, one in Japan and the

other in the United States. Operations of these two companies

were integrated in 2011 under a holding company structure.

Our Group has a major presence in the market for equip-

ment used in oil and gas applications, especially downstream

in refineries and further downstream in petrochemical plants.

Difference between Pumps Business and Compressors & Turbines Business

Compressors & Turbines Business

Strengths: Achieved high growth and stable profitability through further expanding overseas business and

capturing additional aftermarket demand

Leading Brands

% of Revenues

Overseas Business

Overseas

High share of overseas

business

Domestic

% of Revenues

Products

Service &Support

Aftermarket

High percentage

of aftermarket revenues

Leading Brands

Pumps Business

Objectives: Attain higher growth and stabilize profitability by substantially expanding overseas business and

capturing more aftermarket demand

Overseas Business

% of Revenues

Domestic

Overseas

% of Revenues

Products

Service &Support

Aftermarket

Increase share of overseas

business

Increase share of aftermarket

demand


At a Glance

� Components � Vacuum pumps � Gas abatement systems

� CMP Systems � Chemical mechanical polishing (CMP)

systems

� Others � Plating systems

Sales by Region Sales by Industry

� Environmental Plants � Municipal waste incineration facilities � Industrial waste incineration facilities � Energy-related plants


Environmental Engineering 12%

Precision Machinery 16%

Semiconductor

Japan

Overseas

Overseas

Public WorksJapan

Other

Other


� Pumps � Pumps (Custom pumps, Standard

pumps)


� Compressors and Turbines � Compressors � Turbines


� Chillers � Chillers � Cooling Towers


� Others � Fans

Fluid Machinery & Systems 72%

Composition of Net SalesFiscal year ended March 31, 2013

Net Sales: ¥426.3 Billion

Japan

Japan

Japan

Overseas

Overseas

Overseas

Other

Oil and Gas

Oil and Gas

Building Equipment

Electric Power

Other

Other

Building Equipment

PublicWorks


Review and Outlook

Net Sales

141312111009

310Billions of Yen

Year ended/ending March 31Forecast for 2014: Net sales of ¥310 billion

� Actual � Forecast

Operating Income/Operating Income Ratio

141312111009

6.4%

20Billions of Yen

Year ended/ending March 31Forecast for 2014: Operating income

ratio of 6.4%


Fluid Machinery & Sy

Overview

In the FMS Company, in the pumps busi-

ness, inquiries regarding electric power

generation plant projects in the electric

power market, mainly in the emerging

countries, fertilizer plant projects in the

chemical market, and oil refinery plant

projects in the oil and gas market were

active, and conditions overseas remained

strong. In Japan also, portions of the

private-sector market for building equip-

ment recovered. In addition, although

conditions in the public sector have not

recovered to the level prevailing prior to

the 2011 earthquake disaster, orders

for large-scale projects held firm.

In the compressors and turbines busi-

ness, backed by increases in energy

demand and expansion in shale gas pro-

duction, projects in the oil and gas mar-

ket increased and remained firm in North

America, the Middle East, and Asia,

including China, India, and certain other

markets.

In the chillers business, conditions

were severe in the domestic market, but

conditions in the Chinese market were

favorable.

Sales in the FMS Company for the

fiscal year amounted to ¥305,586 mil-

lion (an increase of 6.8% year on year).

The segment income amounted to

¥15,942 million (an increase of 2.3% year

on year).

In the domestic pumps business, to

manage the Group’s corporate resources

more efficiently and increase profitability,

three consolidated subsidiaries—namely,

Ebara Techno-serve Co., Ltd., Ebara

Yoshikura Hydro-Tech Co., Ltd., and

Ebara Environmental Technologies

Hokkaido Co., Ltd.—were merged with

the Company on April 1, 2012.

Market Trends

and Basic Strategies

In the FMS Company, although condi-

tions in China and some areas of Europe

are uncertain, demand is expected to

show moderate recovery as a result of

the expansion in worldwide demand for

energy and other factors.

In the pumps business, the outlook is

for continued active construction of large-

scale thermal power generation plants

and LNG combined cycle thermal power

plants, principally in China, the Middle

East, Southeast Asia, and India. In addi-

tion, demand in the markets for general

machinery and building equipment is

expected to continue to expand, espe-

cially in the emerging countries. In the

LNG plants business, a number of proj-

ects have begun, and demand for cryo-

genic pumps and related equipment for

use in liquefaction plants, LNG storage

bases, and transport vessels is expected.

Also, demand is expected for pumps

used in fertilizer plants, along with growth

in the production of shale gas. In the

compressors and turbines business,

expansion in demand is anticipated for

Review and Outlook

0

Foreca

Atsuo OhiCompany President


stems Company

compressors for use in LNG plants; eth-

ylene plants, especially in North America,

where shale gas is being used as a raw

material; and for use in propane dehydro-

genation (PDH) plants. In the chillers

business, in addition to growth in

demand for heat pumps in China,

expansion in demand in the markets

of Southeast Asia is also anticipated.

Amid these conditions, overseas, the

Group is pursuing the development of

products suited to the needs of individual

regions, and the Group is moving forward

with expanding the scope of its business

activities by strengthening its global pro-

duction and sales systems as well as its

service and support capabilities.

Moreover, in Japan, the Group will con-

tinue to give highest priority to business

related to recovery from the 2011 earth-

quake, as well as expand and upgrade

its sales and service systems to meet

customer needs.

Issues to Be Addressed

In the pumps business, the FMS

Company is upgrading and expanding its

sales and service network to fill demand

for products and after-sales service. In

parallel with this, activities are under way

to strengthen cooperation among FMS

Company production facilities located

around the globe.

In the sales and service network area,

the FMS Company is working to raise

profitability and broaden sales activities

for new products by responding to

demand for after-sales service. To this

end, the FMS Company is strengthening

its service systems with close ties to local

areas, principally in such priority regions

as China, Southeast Asia, the Middle

East, North America, and South America.

Moreover, in Japan, the FMS Company is

collaborating with its overseas production

centers to expand offerings of products

meeting customer needs and, thereby,

respond to replacement demand. Also,

by realigning and optimizing sales and

service systems, the FMS Company is

planning to gain market share and

increase profitability.

Through strengthening collaboration

among production centers, the FMS

Company is expanding its product supply

capabilities by providing products from

Group production centers to areas

around the world based on systematic,

strategic marketing activities led by the

Head Office. Also, by developing prod-

ucts meeting the needs of various

regions and applying productivity innova-

tion to Group production facilities, the

FMS Company is striving to increase the

competitiveness of Group products as

a whole.

In the compressors and turbines

business, the FMS Company is taking

measures to strengthen collaboration

between the Elliott Group products busi-

ness and its global service organization,

and thereby make thoroughgoing efforts

EBARA’s largest size (4,200mm) tubular pump installed in a pumping station of the Hokuriku Regional Agricultural Administration, in Japan


to capture all possible demand for prod-

ucts and services.

Among product businesses, the FMS

Company is focusing on the North

American market, where the number of

projects using shale gas is increasing,

and the Chinese market, where invest-

ments in coal chemical plants are rising,

as well as on the Indian market, where

petrochemical and oil refining projects are

active. In undertaking these projects, the

FMS Company is concentrating not only

on pricing but also especially on making

value-added proposals for after-sales

service, delivery timing, and other

aspects.

In the global service business, the FMS

Company is increasing its service facilities

such as those in China, the Middle East,

and India. Other initiatives include expan-

sion into the engineered solution field

aimed at not only our products but also

those of other companies.

Also, to structure global supply chains,

the FMS Company is developing relation-

ships with new suppliers and working to

strengthen the management of quality

and delivery for its supplier group.

Moreover, the FMS Company is

upgrading its R&D functions and working

to enhance its competitiveness in terms

of technology and price.

In the chillers business, the FMS

Company is working to coordinate the

operation of its production facilities locat-

ed in Japan and China as well as improve

business growth and profitability in priori-

ty regions, such as Japan, China, and

Southeast Asia.

High- efficiency turbo chiller (RTBF-type)


Installation of world’s largest class Elliott 110M propylene compressor

Also, the FMS Company is implement-

ing measures to strengthen the competi-

tiveness of its products by shortening

lead times, lowering procurement costs,

and reducing costs of design. Other

measures being implemented include

strengthening after-sales service business

by raising the quality of maintenance

technology and conducting marketing

activities in close contact with customers

and end users.

In this business, the FMS Company will

increase capacity for the production of

large-scale absorption chillers in China to

respond to the expansion of the absorp-

tion heat pumps market in that country.

Moreover, the FMS Company is focusing

on expansion of sales of centrifugal

chillers in China and Southeast Asia.

For the cooling towers business,

the FMS Company will strengthen sales

activities for large-scale cooling towers

for industrial use in Japan. In addition,

in those regions where expansion in

demand is expected, sales systems will

be enhanced in China, and sales organi-

zations will be established in Southeast

Asia.


Net Sales

141312111009

48Billions of Yen




141312111009

10.4%

5Billions of Yen


ratio of 10.4%


Environmental Engin

Overview

In the EE Company, in domestic public

works projects, the Group secured

roughly the same level of orders for oper-

ation and maintenance (“O&M”) business

for waste incineration facilities, while

in the engineering, procurement, and

construction (“EPC”) and other fields,

demand for the replacement of facilities

is increasing.

In such a situation, the Group received

orders for the construction and operation

of temporary waste incineration facilities

to deal with the disaster waste left behind

by the Great East Japan Earthquake, the

construction of a general waste incinera-

tion facility for a local authority, and

design, build, and operate (“DBO”) proj-

ects, including those covering services

ranging from the construction of facilities

to operation and business management

services.

Sales in the EE Company for the fiscal

year amounted to ¥52,496 million (an

increase of 4.7% year on year). The seg-

ment income amounted to ¥5,177 million

(an increase of 1,506.4% year on year).

Market Trends


In the market for general waste process-

ing facilities in Japan, as in the previous

year, the number of new plant construc-

tion projects, especially those involving

all stages, from construction through

operational management and operation,

is increasing. In addition, demand for

service and support is expected to rise;

specifically, this will include expansion in

the scope of O&M projects, construction

for the replacement and renovation of

existing facilities, and work related to the

improvement of core facilities. Also,

accompanying the introduction of a

system for purchasing electric power

generated from renewable energy at fixed

rates, the market for biomass power

generating plants is expanding.

Amid this business environment, the

EE Company worked to develop busi-

ness with new customers, obtained addi-

tional orders for O&M services for plants

delivered previously by EBARA, and

worked to secure stable income flows

based on the provision of service and

support. Moreover, the EE Company

is endeavoring to strengthen its tech-

nological capabilities and its abilities for

providing comprehensive proposals for

reducing costs over the full life cycle

of facilities.


Amid this business environment, the EE

Company focused on its most-significant

issues of securing orders for EPC projects

and profitability in its O&M projects. To

address these issues, the EE Company

is implementing the following policies.

Tetsuji FujimotoCompany President


eering Company

1. In the O&M business, the EE Company is

working to expand O&M orders and sales,

including maintenance and management

as well as overhaul work for existing waste

incineration facilities in Japan. Efforts are

also being directed toward lowering

expenses, reducing fixed costs, and other

activities to substantially raise profitability.

2. In recent years, municipal governments,

which are the principal customers for

environmental engineering projects, have

increasingly requested comprehensive ser-

vices for the operation and management of

existing incineration facilities. Accordingly,

the EE Company is working to expand

orders for these comprehensive services. In

parallel, efforts are being made to increase

the profitability of these projects by drawing

on the know-how accumulated thus far

and make these activities one of the EE

Company’s mainstay sources of earnings.

3. To secure increased profitability in the O&M

business, the EE Company continues

to present proposals, based on plans for

lengthening the useful lifetimes of facilities

to increase the efficiency of their use, for

plant renewal work, and for improvement in

core plant functions to substantially reduce

CO2 emissions by applying the latest EPC

technology to the O&M business.

4. In the EPC business, to enhance profit-

ability, the EE Company is substantially

strengthening its project management func-

tions for municipal waste incineration facility

projects that are currently under construc-

tion. In addition, the EE Company is striving

to prevent the incidence of additional costs

arising from issues related to contract

fulfillment. In addition, the EE Company

is endeavoring to identify potential plant

rebuilding projects by sharing its plans for

lengthening useful lifetimes of facilities in

its O&M business with other divisions of

EBARA. When certain facilities are expect-

ed to be rebuilt, the EE Company presents

timely proposals based on the latest EPC

technology at customer request.

5. In the market for newly constructed mun-

icipal waste incineration facility projects,

municipal government agencies increasingly

tend to request such projects on a DBO

basis. To win orders for these projects, the

EE Company is, therefore, offering custom-

ers proposals that best meet their needs

based on the know-how accumulated thus

far in the EPC and O&M businesses. To

facilitate these activities, the EE Company is

coordinating its O&M and EPC businesses

more closely, including the sharing of infor-

mation on facilities management available in

the O&M business with the EPC-related

divisions. This makes it possible to differen-

tiate the EE Company’s proposals from

those of competitors by promoting plans

for greenhouse gas emissions reductions

through increasing the amount of electric

power generated and the promotion of

energy conservation and by major reduc-

tions in the life-cycle cost of plants.

Through the implementation of these

policies, the EE Company will strengthen

its competitiveness based on its footprint

as well as product and service capabili-

ties and work to improve its ability to

provide solutions to customers.

The EBARA Group received an order for the DBO project of this waste incinerating plant to be built in Funabashi City, Japan. (architect’s drawing of the complet-ed facility)


Net Sales

141312111009

62Billions of Yen




141312111009

6.4%

4Billions of Yen


ratio of 6.4%


Precision Machinery

Overview

In the PM Company, in the semiconduc-

tor market, although the market for

smartphones and tablet-type portable

terminals drove the market as a whole,

growth in the personal computers and

servers markets weakened as in the

previous year, and conditions remained

lackluster overall through the fiscal year.

Thus, with the exception of some leading

foundries, capital investments by most

semiconductor manufacturers continued

to be postponed, and major differences

were seen among semiconductor manu-

facturers in their stances toward making

capital investments.

Further, demand from relevant markets

other than semiconductors, such as the

flat panel display, photovoltaic cell, and

LED markets, continued to remain

sluggish.

Sales in the PM Company for the

fiscal year amounted to ¥66,504 million

(a decrease of 2.7% year on year). The

segment income amounted to ¥3,306 mil-

lion (a decrease of 49.9% year on year).

Market Trends


In the semiconductor business, the PM

Company will work to ensure that its

market share in the “foundry” sector,

which is expected to make capital

investments during the fiscal year ending

March 31, 2014, is solid. In the photovol-

taic cell, LED, and its other markets, the

PM Company will endeavor to expand its

market share by identifying accurately the

timing of the resumption of capital invest-

ments. Also, to secure stable earnings,

the PM Company will work to shorten

lead times, further optimize its manufac-

turing processes with the aim of lowering

costs, and take measures to further

strengthen its service and support

business.

In the components business, the PM

Company will also make its best efforts to

maintain and strengthen its base as

a major supplier to companies in the

semiconductor industry, which is its core

customer industry. The PM Company is

making preparations to accurately identify

the timing of the resumption of capital

investment in the photovoltaic cell, LED,

and other industries as well as expand

into the markets for vacuum process

equipment among other industries.

In the chemical mechanical polishing

(CMP) business, the PM Company is

pursuing development together with its

customer companies to meet even

more-active launching and extension of

applications of new processes, including

those for miniaturization and larger wafer

diameter as well as 3D integrations and

the introduction of new materials.

The PM Company has taken full mea-

sures to deal with risks, including the

maintaining of its plants in Kumamoto

and Fujisawa. Going forward, the PM

Company is also aiming to expand its

Manabu TsujimuraCompany President


Company

market share and increase profitability by

establishing a global supply chain, short-

ening lead times, and innovating in pro-

duction activities to reduce costs and

attain other related objectives.

New product development is proceed-

ing smoothly, including the development

of processing equipment for 3D integra-

tions and equipment for improving pro-

cess yields. The goal is to have these

businesses take their place along with

components and the CMP business as

major supports of the PM Company’s

performance.

The PM Company is seeking to lower

costs by reducing lead times through its

production innovation activities and by

taking further steps to manufacture and

procure overseas. Through these activi-

ties and the strengthening of its customer

service and support systems, the PM

Company is aiming to create a stable

earnings structure. In addition, with the

aim of further increasing market share,

the PM Company will continue its devel-

opment activities to respond to customer

needs, including further miniaturization,

new devices, 3D integration, and larger

wafer diameter.


In the PM Company, the semiconductor

market is believed likely to remain stag-

nant for the time being. However, viewed

in the medium-to-long term, demand will

grow going forward, and our assumption

is that capital investment to respond to

this future demand will emerge gradually

in the latter half of the current fiscal year.

In addition, we anticipate that the mar-

kets for flat panel displays, solar batter-

ies, LEDs, and other products will begin

to recover step by step from 2014

onward.

Amid these conditions, the Group will

work to stabilize its earnings structure

through lowering its manufacturing costs

by shortening lead times through reforms

in production and procuring more from

overseas sources. In parallel with this, the

Group will also adopt measures to build

stronger service and support systems

that have close ties with customers. Also,

the Group will endeavor to expand its

business activities by continuing its devel-

opment activities to respond to customer

needs, such as further miniaturization,

the launching of new devices, 3D integra-

tion, and larger wafer diameter.

Plug and run compact air-cooled dry pumps

CMP systemsCMP


Governance Structure and Management Systems

Support forManagementand Execution

Reporting Selection/Dismissal

Supplementary Assistance

Reporting

Auditing

Auditing/Reporting

Auditing

Exchange of Opinions

Advice,Directions forImprovement

Exchange of Informationand Opinions

Selection/Dismissal

Exchange of Informationand Opinions

Department of Audit& Supervisory Board

Members’ Staff

Independent Auditor

Outline of EBARA’s Corporate Governance Framework

General Meeting of Shareholders

Subsidiaries and

ReportingInternal Audits

Compensation Committee

Nominations Committee

Management Meeting

Management Planning Committee

CSR Committee

Risk Management Panel

President and Representative Director

Reporting

Reporting

Reporting

Selection/Dismissal

Board of DirectorsPresided over by Chairman

Guidance/Transmission of Information

Company/Corporate

Guidance

Selection/Dismissal/Surveillance

Corporate Audit Department

Audit & Supervisory Board

Disclosure Committee

EBARA’s corporate philosophy is “Extensive contribution to society by providing superior technologies and services related

to water, air, and the environment.” Under this corporate philosophy, EBARA is set to enhance its corporate value and return-

ing profit to shareholders as its highest-priority management issues. To address these issues, it is indispensable to increase

the transparency and objectivity of management activities. Accordingly, EBARA is working to strengthen its corporate gover-

nance.

Additionally, EBARA has established in-house rules that include the “EBARA Group Code of Conduct” to provide basic

guidelines for the conduct of corporate activities.

Corporate Governance

Based on Japan’s Companies Act, EBARA has established a

governance structure comprising the Board of Directors, the Audit

& Supervisory Board, and the Independent Auditor.

Board of Directors

Under the rules for the activities of the Board of Directors established

by the Company, members of the Board of Directors are required to

execute their duties in compliance with laws and regulations and the

Company’s Articles of Incorporation. Also under these rules, the

Board of Directors holds regular monthly meetings and special ses-

sions when necessary. The Chairman of the Board of Directors is

appointed from among Board members who do not have the status

of Representative Director with the objective of separating manage-

ment oversight functions from final decision-making authority. In

addition, the Board of Directors is composed of 12 members, and

4 of these are independent Outside Directors who have no special

interest in EBARA. At present, all Board members are Japanese

men, but from the standpoint of diversity, the Company is consider-

ing the appointment of women and persons of foreign nationality to

its Board in several years.

Audit & Supervisory Board

The Audit & Supervisory Board comprises five members, three of

whom are Outside Audit & Supervisory Board Members who have no

special interest in EBARA. Based on auditing plans and auditing prin-

ciples drawn up by the Audit & Supervisory Board, it audits the con-

duct of management duties by the Directors. At the same time, it

exchanges information and opinions with the Representative Director

and with the Independent Auditor to ensure the effectiveness of

auditing activities.

Independent Auditor

The Company’s Independent Auditor, Ernst & Young ShinNihon LLC,

audits the Company’s accounts and other matters as required under

the Companies Act and Japan’s Financial Instruments and Exchange

Act.

Discretionary Governance Structure

In addition to the previously mentioned organizational units required

by law, the Company has established the following units on its own

initiative.


1. Executive Officer System

The Company has separated the decision-making and management

oversight functions of the Board of Directors on the one hand and

functions of the Executive Officers, who are in charge of the conduct

of operations of business divisions, on the other. Moreover, those

executives of the principal EBARA Group companies, who have been

certified to meet the personnel conditions for being Executive

Officers of the parent company, are appointed to the status of

EBARA Group Executive Officers. In addition to performing their

duties in their respective Group companies, they also perform roles

in the management of the Group from an overall optimal perspective.

At present, there are 39 Executive Officers, including the Group

Executive Officers, and all of these are Japanese men, but from the

standpoint of diversity, the Company is considering the appointment

of women and persons of foreign nationality to Executive Officer

positions in several years.

2. Management Meeting

In addition to the discussion of management policy and corporate

strategy in the meetings of the Board of Directors, the Management

Meeting is convened monthly to provide management members with

the chance to broadly discuss various issues related to policy and

strategy.

3. Nominations Committee and Compensation Committee

To ensure the transparency and objectivity in the selection of

Directors and Executive Officers as well as in the determination of

their compensation, the Company has established the Nominations

Committee and the Compensation Committee. Both of these com-

mittees have a majority of Outside Directors as members, and their

decisions are made on a majority basis.

4. Corporate Social Responsibility (CSR) Committee

The CSR Committee is composed of all members of the Board

of Directors, including Outside Directors and all standing Audit &

Supervisory Board Members (as observers). The committee hears

periodic reports from the Corporate Audit Department and the

Internal Control Department and provides a forum for the exchange

of information and opinions among the Outside Directors, Audit

& Supervisory Board Members, the Corporate Audit Department,

and others.

Executive Compensation

Regarding the compensation of Directors and Audit & Supervisory

Board Members, basic upper limits on the total compensation of

Directors and the total compensation of Audit & Supervisory Board

Members are approved by the General Meeting of Shareholders.

Policies regarding compensation of Directors are discussed in the

Compensation Committee and put to a vote in the Board of Directors

meeting. For the compensation of Audit & Supervisory Board

Members, discussions are held and final recommendations are

approved in the Audit & Supervisory Board. Note that all Directors,

other than Outside Directors, are encouraged to abide by and moni-

tor compliance with the Company’s corporate philosophy. Also, to

provide a strong motivation to attain medium- to long-term manage-

ment goals, the Company has established a compensation system

that is closely linked to Company performance. For Audit &

Supervisory Board Members, in setting compensation, consideration

is given to the workload assigned to full-time versus part-time Audit

& Supervisory Board Members, and the amount of compensation

for individual Auditors is determined in discussions among Audit

& Supervisory Board Members.

Total Amounts of Compensation for Directors and Audit

& Supervisory Board Members (Year ended March 31, 2013)

Millions of yen

Executive position

(Number of persons)

Total

compensation

Basic

compensationBonus

Stock

options

Directors (17) 392 237 94 60

Outside Directors (6) 48 48 None None

Audit & Supervisory

Board Members (5) 81 81 None None

Outside Audit &

Supervisory Board

Members (3)

32 32 None None


Directors of the Board, Audit & Supervisory Board Members, and Executive Officers

(As of June 27, 2013)

Directors of the Board

Natsunosuke YagoDirector of the BoardChairman

Toichi Maeda*President and Representative Director

Tetsuji Fujimoto*Director of the Board

Manabu Tsujimura*Director of the Board

Atsuo Ohi*Director of the Board

Akira Ogata*Director of the Board

Masaru Shibuya*Director of the Board

Nobuharu Noji*Director of the Board

Akio MikuniOutside Director

Sakon UdaOutside Director

Masao NamikiOutside Director

Shiro KuniyaOutside Director

Directors of the Board marked with * hold the post of Executive Officer concurrently.

Masao Namiki Akio Mikuni Natsunosuke Yago Toichi Maeda Sakon Uda Shiro Kuniya

Masaru Shibuya Manabu Tsujimura Tetsuji Fujimoto Atsuo Ohi Akira Ogata Nobuharu Noji


Audit & Supervisory Board Members

Toshihiro YamashitaAkira Hashimoto

Yoshihiro Machida*Fumio Takahashi*Tadashi Urabe*

Individuals marked with * are Outside Audit & Supervisory Board Members.

Executive Officers

Senior Managing Executive Officers

Tetsuji FujimotoResponsible for Group Management, Finance & Accounting, Internal Control, President, Environmental Engineering Company

Manabu TsujimuraPresident, Precision Machinery Company, Responsible for Technologies, R&D, Intellectual Property

Managing Executive Officers

Atsuo OhiPresident, Fluid Machinery & Systems Company, Head of Business Unit, Global Pump Business Unit

Akira OgataHead of Business Unit, Operations of Technology and Production, Fluid Machinery & Systems Company, Responsible for Production Process Innovation, Information & Communication System, Division Executive, Production Process Innovation Division

Masaru ShibuyaResponsible for Human Resources, Legal, Public Relations & General Affairs, Division Executive, Human Resources, Legal & Public Relations Division

Nobuharu NojiDivision Executive, Standard Pump Business Division, Operations of Technology and Production, Fluid Machinery & Systems Company, Executive General Manager, Fujisawa Plant

Akira ItohDivision Executive, Enterprise Risk Control Division

Shotaro KuryuHead of Business Unit, Domestic Sales, Marketing & Service Business Unit, Fluid Machinery & Systems Company

Akio TeragakiDivision Executive, Custom Pumps Division, Operations of Technology and Production, Fluid Machinery & Systems Company, Executive General Manager, Futtsu Plant, Executive General Manager, Futtsu District

Executive Officers

Koji OtaDivision Executive, Administration Division, Precision Machinery Company

Kiyoshi HironoExecutive General Manager, Osaka Branch, Domestic Sales, Marketing & Service Business Unit, Fluid Machinery & Systems Company

Takao InoueDivision Executive, Marketing & Sales Division, Global Pump Business Unit, Fluid Machinery & Systems Company

Seiji KatsuokaDivision Executive, CMP Division, Precision Machinery Company

Norio KimuraDivision Executive, Components Division, Precision Machinery Company

Susumu ShigaGeneral Manager, Ebara Boshan Pumps Co., Ltd.,Fluid Machinery & Systems Company

Masao AsamiDivision Executive, Sales and Marketing Division, Precision Machinery Company

Minoru TakanoDivision Executive, General Affairs Division, Executive General Manager, Haneda Office

Kazuhiro OgawaraHead of Unit, Planning & Administration Unit, Fluid Machinery & Systems Company

Kengo ChokiDivision Executive, Finance & Accounting Division

Akihiro KidaDeputy Head of Business Unit, Domestic Sales, Marketing & Service Business Unit, Fluid Machinery & Systems Company

Yoshiaki OkiyamaDivision Executive, China & East Asia Division, Global Pump Business Unit, Division Executive, Business Planning & Administration Division, Executive General Manager, China & East Asia Regional Office, Fluid Machinery & Systems Company

Mitsuhiko ShirakashiDivision Executive, Production & Assurance Division, Precision Machinery Company, Executive General Manager, Fujisawa District

Hisao MatsumotoDeputy Division Executive, Standard Pump Business Division, Operations of Technology and Production, Fluid Machinery & Systems Company

Takafumi MaeharaDivision Executive, Middle East Division, Executive General Manager, Middle East Regional Office, Fluid Machinery & Systems Company

Kazuo ToriumiDeputy Head of Business Unit, Domestic Sales, Marketing & Service Business Unit, Division Executive, Infrastructure Project Engineering Division, Domestic Sales, Fluid Machinery & Systems Company

Hidenori IwanagaDivision Executive, Southeast Asia Division, Global Pump Business Unit, Executive General Manager, Southeast Asia Regional Office, Fluid Machinery & Systems Company

Hideki YamadaDivision Executive, Procurement Division, Operations of Technology and Production, Fluid Machinery & Systems Company


Internal Controls

EBARA’s Board of Directors has approved its Basic Policy on Internal

Control. Based on this policy, EBARA has been operating internal

control systems to ensure that directors and employees conduct

their assignments in compliance with laws and rules, to manage

risks, to conduct proper operations in Group companies, and to

prepare reliable financial reports.

The EBARA Group Code of Conduct has been established,

and training programs are being implemented to raise awareness of

compliance. In addition, the status of implementation of compliance

is monitored, and surveillance is conducted for the design and oper-

ation of internal controls. Also, the CSR Committee has been

appointed as the organizational unit to issue directives for making

improvements when necessary. Moreover, both internal and external

advisory units have been established as a “whistle blower system,”

with consulting services regarding violations of laws and ethics.

The EBARA Group’s risk management systems oversee risk-relat-

ed activities, and a Risk Management Panel has been formed as the

organizational unit in charge of deliberating and giving guidance and

support for making improvements in risk management. The EBARA

Group has divided its risk management activities broadly into two

types. The first type comprises risks that might impair the continuing

development of the operations of EBARA Corporation and its Group

companies. The other type is business continuity strategy for risks

that might emerge during times of crisis. Through these two types of

risk management activities, the major risks have been identified, and

countermeasures to deal with them have been prepared. As a part of

business continuity strategy in crisis situations, EBARA has devel-

oped business continuity management systems for dealing with such

risks during times of major disasters or epidemics.

Regarding internal audit systems, the Corporate Audit Department,

which reports directly to the president of EBARA, has been formed. It

has the responsibility for identifying major issues and themes related

to the status of Group company compliance and risk management

systems. This department then implements internal audits from a

perspective that is independent of the business execution depart-

ments where these issues and themes may arise.

To ensure the reliability of financial reporting, the Committee for

Proper Accounting has been formed consisting of representatives of

the internal control departments as well as the accounting depart-

ments of Group companies. This committee works to promote the

efficacy of the Group’s internal controls under Japan’s Financial

Instruments and Exchange Act, and strives to ensure the reliability

of financial reporting, through the implementation of assessments

of internal controls by assessment teams, which are formed by

the Corporate Audit Department.

Compliance System

The Company is fully aware that unethical behavior due to the lack of

compliance may damage its management foundations. Accordingly,

its approach to securing thorough compliance includes five

approaches. These are the preparation of the Board of Directors’

Compliance Action Plan, the formation of a CSR Committee, the

establishment of a Group Compliance Network, the creation of a

Compliance Liaison System, and the offering of consultation

functions, or a “whistle-blower” system.

The Board of Directors’ Compliance Action Plan for taking specific

action to promote compliance is prepared each year by the Board of

Directors. The content of this plan is announced to employees to

clarify what Directors should be doing to secure compliance. The

results of the activities of Directors are assessed at the end of the

year, and used as a basis for a “plan-do-check-action” (PDCA) cycle

aimed at improving the effectiveness of these activities year by year.

The CSR Committee is chaired by the President of EBARA

Corporation and comprises all Directors and Full-Time Corporate

Auditors. In addition, the outside legal counsel responsible for the

outside compliance-related consultation function participates to offer

advice. In the CSR Committee meetings, deliberations are conduct-

ed concerning how the Company should perform its social responsi-

bilities on a day-to-day basis.

In addition, this committee invites the presidents and representa-

tives of Group companies to confirm the status of compliance in each

of these companies, and, by conducting periodic checks on the sta-

tus of compliance throughout the Group, verifies the proper conduct

of business activities and promotes improvements in Group activities.

The Group Compliance Network is composed of the officers in

charge of corporate ethics in each of the Group companies, and, to

ensure that the various measures decided by the CSR Committee

are properly implemented in the Group, this network serves as

a forum for introducing the related training activities and initiatives

being taken by Group companies.

The Compliance Liaison System provides for the stationing of

liaison personnel at the workplace level. Its objectives include pro-

moting the development of a compliance culture in the workplace as

well as discovering and correcting compliance risks that may exist.

Training courses for liaison personnel are conducted twice a year

to sharpen their awareness of the objectives of liaison activities

and enhance their skills.

As part of compliance-related consultation functions, the Company

offers access to advisory services provided by outside legal counsel as

well as the Harassment Consultation Service, offered by the Human

Rights and Compliance Department. Together, these consultation

functions deal with between 20 and 30 compliance-related cases each

year. In addition, the Human Rights and Compliance Department con-

ducts a questionnaire survey each year to gain input for assessing and

implementing improvements in the Company’s compliance system.

24 EBARA CORPORATION ANNUAL REPORT 2013 24 EBARA CORPORATION ANNUAL REPORT 2013

Corporate Social Responsibility (CSR)

The EBARA Group conducts business with a strong sense of ethics and works to build relationships of trust

with its stakeholders. EBARA’s CSR activities have been highly appreciated from outside of the Company,

and its stock continues to be selected for inclusion in the Dow Jones Sustainability Asia Pacific Index and

FTSE4Good Index Series, which are the world’s leading social responsibility investment (SRI) indexes.

Moreover, EBARA is a signatory to the United Nations Global Compact and practices its 10 principles in the

four categories of human rights, labor, environment, and anti-corruption. The activities of the EBARA Group

are covered in the EBARA Group CSR Report, which is published annually.

EBARA Group CSR Policy

The EBARA Group has established its EBARA Group CSR Policy

to indicate its basic stance toward the conduct of business

around the world. The Group’s CSR policy charges the EBARA

Group with the responsibilities of maintaining a high standard

of ethics and fulfilling its responsibilities to its stakeholders as it

works to build strong relationships of trust with them. It is the

Group’s policy to share EBARA’s founding spirit in its business

activities around the world and to conduct its operations taking

pride in its mission, which is to make “Extensive contributions

to society by providing superior technologies and services.”

EBARA Framework for Corporate Ethics

EBARA CORPORATION ANNUAL REPORT 2013 25EBARA CORPORATION ANNUAL REPORT 2013 25

Respect for Human Rights and Diversity

Based on global human rights standards (including the Universal

Declaration of Human Rights and International Human Covenants

on Human Rights), EBARA works to protect and respects the

human rights of its stakeholders, including customers, business

partners, community citizens, and employees.

EBARA’s initiatives to respect diversity include creating oppor-

tunities for persons with physical and other challenges to work

and achieve independence and to be participating members of

society. In November 2012, EBARA established a subsidiary,

EBARA Earnest Co., Ltd., with the objective of raising the ratio

of persons with physical and other challenges who work in

the EBARA Group. In April 2013, five intellectually challenged

persons entered the newly formed subsidiary.

Also, the CSR study program, which EBARA has conducted

for its employees since fiscal 2009, takes up the themes of

human rights and diversity each year and aims to deepen under-

standing of these issues.

Labor Practices

To develop its businesses around the world, the EBARA Group

is taking initiatives in expanding the recruitment of non-Japanese

personnel, conducting programs to enable employees hired in

Japan to gain international experience, and developing human

resources from a global perspective.

Also, to maintain the physical and mental health of its employ-

ees, the Group is working to strengthen measures for the mainte-

nance of mental health. A consulting function for mental health

issues has been put in place, and it is possible for employees to

undergo diagnoses by a neuropsychiatric specialist. In addition,

employee mental health training sessions are also conducted

on a continuing basis.

Environmental Preservation

EBARA has an environmental management system based on

ISO 14001. In Japan and overseas, a total of 19 organizations

belonging to the EBARA Group had qualified for ISO 14001

certification as of April 1, 2012.


In addition, concerning regulations requiring disclosure related

to conflict minerals, which were enacted in August 2012 under

Article 1502 of the Dodd-Frank Act, the EBARA Group regards

conflict minerals disclosure as a major issue, and, going forward,

will request the cooperation of its business partners and move

forward with specific initiatives.

Fair and Impartial Transactions

With the objective of conducting fair and impartial transactions, in

September 2012, the EBARA Group issued its Basic Policy on

Anti-Corruption. Bribery, unfair trade practices, and relationships

with Anti-Social Forces have been defined to be within the scope

of corruption, and the EBARA Group is working to prevent such

corrupt practices.

Moreover, as a part of its procurement activities, the EBARA

Group is aiming for co-existence and mutual prosperity with its

business partners by building long-term relationships with them,

while also working to increase its corporate value, to achieve sus-

tainable growth through its CSR activities, and to create value for

society. To accomplish these objectives, the EBARA Group has

issued its CSR Procurement Guidelines and is moving ahead with

CSR activities together with its business partners.

Contributing to Society

As a good corporate citizen, the EBARA Group is making steady

efforts to contribute to society mainly in five areas (see diagram

below). Among these activities, in the area of promotion of tech-

nology, the EBARA Hatakeyama Memorial Fund (EHMF) has held

seminars to transfer EBARA’s technology for engineers and stu-

dents, mainly in the countries of Southeast Asia, for more than 20

years. Lecturers at these seminars have been drawn from among

EBARA Group employees, and, in 2011 and 2012, a staff mem-

ber of Ebara Vietnam Pump Company Limited, one of the EBARA

Group companies, also acted as lecturer. The content of the

seminars focused on not only on basic technologies for fluid

machinery and pumps but also on subjects that met the needs of

the local communities.

EHMF seminar in progress

Five areas of the social

con tribution activities

Technology and arts promotion

�Interaction with the community

�

Environmental conservation

�

Social welfare

�

Sports promotion

�

CSR Information

More-detailed information on the EBARA Group’s CSR activities,

is published on the website. English-language website: http://

www.ebara.co.jp/en/csr/

The EBARA Group CSR Report 2013 contains indexes of

EBARA’s core CSR activities that are undertaken in response to

ISO 26000 (Guidance on social responsibility). In addition, this

report provides information and related tables that are based on

the reporting framework set forth under the GRI Sustainability

Reporting Guidelines, version 3.1. The report may be accessed

at http://www.ebara.co.jp/en/csr/report/


Principal Subsidiaries and Affiliated Companies (As of June 30, 2013) � Consolidated subsidiary � Production Sales � Service and support

Fluid Machinery & Systems (FMS) Company

<Pumps>Asia–Pacific

� Ebara Material Co., Ltd. (Japan)Manufacture of cast products for custom pumps �

� Ebara-Byron Jackson, Ltd. (Japan)Custom pumps (for nuclear power plants) �

� Ebara Great Pumps Co., Ltd. (China)Custom pumps, small turbines � �

� Ebara Machinery (China) Co., Ltd. (China)Standard pumps � �

� Ebara Boshan Pumps Co., Ltd. (China)Custom pumps � �

� Ebara Densan (Kunshan) Mfg. Co., Ltd. (China)Standard pumps � �

� Ebara Engineering Singapore Pte. Ltd. (Singapore)Standard pumps, custom pumps, chillers, vacuum pumps, equipment for the semiconductor industry �

� Ebara-Densan Taiwan Manufacturing Co., Ltd. (Taiwan)Standard pumps � �

Pacific Machinery and Engineering Co., Ltd. (Japan)Special-purpose pumps, including slurry pumps, facilities for transportation of liquid, and powder processing equipment � �

Kirloskar Ebara Pumps Limited (India)Standard pumps, custom pumps, small turbines � �

P.T. Ebara Indonesia (Indonesia)Standard pumps � �

Ebara Pumps Malaysia Sdn. Bhd. (Malaysia)Standard pumps �

Ebara (Thailand) Limited (Thailand)Standard pumps, custom pumps, engineering �

Ebara Vietnam Pump Company Limited (Vietnam)Custom pumps, engineering � �

Ebara Pumps Australia Pty. Ltd. (Australia)Standard pumps �

Ebara Fluid Machinery Korea Co., Ltd. (Republic of Korea)Custom pumps, standard pumps �

Americas

� Ebara International Corporation (U.S.A.)Custom pumps, standard pumps � �

� Ebara Indústrias Mecánicas e Comércio Ltda. (Brazil)Standard pumps � �

EMEA

� Ebara Pumps Europe S.p.A. (Italy)Standard pumps � �

� Sumoto S.r.l. (Italy)Deep well motors, standard pumps � �

Ebara España Bombas S.A. (Spain)Standard pumps � �

Ebara Pompy Polska sp. z o.o. (Poland)Standard pumps �

<Compressors & Turbines>Asia–Pacific

� Elliott Group Holdings, Inc. (Japan)Holding company

� Elliott Ebara Turbomachinery Corporation (Japan)Compressors, turbines � �

� Ebara-Elliot Service (Taiwan) Co., Ltd. (Taiwan)Compressors, turbines �

� Elliott Ebara Singapore Pte. Ltd. (Singapore)Compressors, turbines �

� Elliott Ebara Turbomachinery India Pvt. Ltd. (India)Compressors, turbines �

� Elliott Turbomachinery Services (Tianjin) Co., Ltd. (China)Compressors, turbines �

� Elliott Korea Co., Ltd. (Republic of Korea)Compressors, turbines �

Asia-Paca-PacificEurope & Middle East, Africa (EMEA)EMMEAiddle East, Afric

EBARA Global Network


Americas

� Elliott Company (U.S.A.)Compressors, turbines � �

� Elliott MVP Services, LLC. (U.S.A.)Compressors, turbines �

� Elliott Turbomachinery S.A. de C.V. (Mexico)Compressors, turbines �

� Elliott Turbomachinery Canada, Inc. (Canada)Compressors, turbines �

� Elliott Turbocharger Guatemala, S.A. (Guatemala)Compressors, turbines �

� Elliott Ebara Servicos para Equipamentos Rotativos Ltda. (Brazil)Compressors, turbines �

EMEA

� Elliott Turbomachinery S.A. (Switzerland)Compressors, turbines �

� Elliott Turbomachinery Limited (U.K.)Compressors, turbines �

� Elliott Ebara Middle East Maintenance WLL (Bahrain)Compressors, turbines �

� ELLIOTT GAS Services Saudi Arabia Limited (Saudi Arabia)Compressors, turbines �

<Chillers>Asia–Pacific

� Ebara Refrigeration Equipment & Systems Co., Ltd. (Japan)Chillers, cooling towers, heat-exchange systems � �

� Yantai Ebara Air Conditioning Equipment Co., Ltd. (China)Chillers, cooling towers, heat-exchange systems � �

Ebara Thermal Systems (Thailand) Co., Ltd. (Thailand)Chillers, cooling towers � �

<Others>Asia–Pacific

� EBARA DENSAN LTD. (Japan)Electrical and electronic equipment � �

� EBARA HAMADA BLOWER CO., LTD. (Japan)Industrial fans � �

Environmental Engineering (EE) Company

Asia–Pacific

� Ebara Environmental Plant Co., Ltd. (Japan)EPC and O&M for the waste treatment business �

� Ebara Qingdao Co., Ltd. (China)Boilers for waste incineration plants, packaged boilers �

Swing Corporation (Japan)EPC and O&M for the water treatment business �

Precision Machinery (PM) Company

Asia–Pacific

� Ebara Field Tech. Corporation (Japan)Vacuum pumps, products for the semiconduc-tor industry �

� Ebara Precision Machinery Taiwan Incorporated (Taiwan)Vacuum pumps, products for the semiconduc-tor industry �

� Ebara Precision Machinery Korea Incorporated (Republic of Korea)Vacuum pumps, products for the semiconduc-tor industry �

� Shanghai Ebara Precision Machinery Co., Ltd. (China)Vacuum pumps, products for the semiconduc-tor industry �

Americas

� Ebara Technologies Incorporated (U.S.A.)Vacuum pumps, products for the semiconduc-tor industry �

EMEA

� Ebara Precision Machinery Europe GmbH(Germany)Vacuum pumps, products for the semiconduc-tor industry �

AmericasasFMS PumpsFMS Compressors & TurbinesFMS ChillersEEPM



EBARA CORPORATION and Consolidated Subsidiaries Fiscal years ended March 31

2013 2012 2011

Net sales ¥426,302 ¥412,077 ¥401,676

Cost of sales 322,192 318,937 301,658

Gross profit 104,110 93,140 100,018

Operating income (loss) 25,084 23,267 31,542

Net income (loss) 15,303 2,890 28,192

Capital expenditures 12,302 12,316 8,189

R&D expenses 5,026 3,827 4,067

Shareholders’ equity and

accumulated other comprehensive

income** 186,883 151,063 151,951

Total net assets 191,786 154,656 154,938

Total assets 504,576 488,964 507,898

Net income (loss) per share

(yen and U.S. dollars) ¥ 35.93 ¥ 6.85 ¥ 66.78

ROIC (%)*** 4.9 1.0 9.1

ROE (%)**** 9.1 1.9 20.0

* The U.S. dollar amounts are included solely for convenience and have been translated as a matter of arithmeti-cal computation only at the rate of ¥94.05=US$1, the rate of exchange prevailing on March 31, 2013.

** The EBARA Group has applied “Accounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ Statement No. 5, issued on December 9, 2005) and “Guidance on Accounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ Guidance No. 8, issued on December 9, 2005) from the fiscal year ended March 31, 2007. The amount corresponding to shareholders’ equity, according to the previous method of presentation, is ¥186,873 million for the fiscal year 2013, ¥151,054 million for the fiscal year 2012, ¥151,960 million for the fiscal year 2011, ¥129,806 million for the fiscal year 2010, ¥121,411 million for the fiscal year 2009, ¥151,237 million for the fiscal year 2008, and ¥151,242 million for the fiscal year 2007.

*** ROIC: Net income/(Interest-bearing debt (Average between beginning and end of period) + Shareholders’ equity and accumulated other comprehensive income (Average between beginning and end of period))

**** ROE: Net income/Shareholders’ equity and accumulated other comprehensive income (Average between beginning and end of period)

Eleven-Year Summary

Financial Section

Contents

Eleven-Year Summary 30

Financial Review 32

Consolidated Balance Sheets 38

Consolidated Statements

of Income40

Consolidated Statements of

Comprehensive Income41


Changes in Net Assets42


Cash Flows45

Notes to the Consolidated

Financial Statements46

Independent Auditor’s Report 72



Thousands ofMillions of yen U.S. dollars*

2010 2009 2008 2007 2006 2005 2004 2003 2013

¥485,889 ¥501,149 ¥567,191 ¥538,098 ¥514,957 ¥478,397 ¥507,767 ¥517,981 $4,532,716

389,437 415,827 469,865 434,934 418,414 384,168 405,760 420,079 3,425,752

96,452 85,322 97,326 103,164 96,543 94,229 102,007 97,902 1,106,964

18,953 638 6,017 13,249 10,902 7,581 10,446 (1,424) 266,709

5,442 (13,113) 7,609 5,446 3,350 (19,649) 2,586 (28,538) 162,711

19,484 23,560 22,381 17,917 14,838 12,706 13,690 19,600 130,802

4,977 8,829 10,812 11,357 10,883 9,994 10,965 14,116 53,440

129,806 121,411 151,243 151,255 153,695 102,952 112,578 106,782 1,987,060

132,665 124,264 155,263 154,970 — — — — 2,039,192

522,540 562,456 607,007 625,033 592,631 558,265 576,412 613,759 5,364,976

¥ 12.89 ¥ (31.04) ¥ 18.01 ¥ 12.89 ¥ 9.11 ¥ (64.43) ¥ 8.34 ¥ (95.49) $ 0.382

1.8 (4.1) 2.2 1.5 1.0 (6.2) 0.8 (8.5)

4.3 (9.6) 5.0 3.6 2.6 (18.2) 2.3 (23.1)


Financial Review

Overview

During the fiscal year ended March 31, 2013, while the economy was showing gradual recovery in the United States, in Europe, the economy continued to stagnate due to such factors as the continuing uncertainty regarding the financial system. In Asia, although the pace of economic expansion has recovered to some degree, relatively low rates of growth are forecast for the time being. In Japan, the outlook is for the economy to show moderate improvement as investment by the public sector remains firm and signs of a bottoming out of investment in the private sector continue to emerge. Amid these economic conditions, the EBARA Group (the “Group”) entered the second fiscal year of the three-year medium-term management plan “E-Plan2013,” working to establish a firmer and stabler business structure under the plan, which has four basic policies: (1) promot-ing “regional production for regional supply” in priority areas and establishing an optimally locat-ed production and supply system from a global perspective; (2) working to enter new markets by expanding core business domains; (3) aiming to optimize “monozukuri” (manufacturing) process-es through scientific approaches; and (4) expanding the functions of the corporate headquarters in keeping with the globalization of business domains. As a consequence, consolidated net sales for the fiscal year amounted to ¥426,302 million (an increase of 3.5% year on year), and operating income amounted to ¥25,084 million (an increase of 7.8% year on year). Overall net sales rose, despite a decline in sales in the Precision Machinery (“PM”) Company. Operating income rose overall, in spite of a decline in the PM Company, because of higher income in the Fluid Machinery & Systems (“FMS”) Company and Environmental Engineering (“EE”) Company. Other income (expense), net, amounted to expenses of ¥1,196 million, and improved ¥11,206 million from the previous fiscal year, mainly as a result of the reporting of an extraordinary loss of ¥10,295 million in connection with the withdrawal from a business accompanying the concluding of an agreement to make a final transfer of a plant to the client in the InfraServ project in Germany in the previous fiscal year. Consequently, income before income taxes and minority interests amounted to ¥23,888 mil-lion. Net income amounted to ¥15,303 million (an increase of 429.6% year on year).

Financial Position

AssetsCompared with the previous fiscal year-end, as a result of an increase in current assets of ¥17,049 million and a decrease in fixed assets of ¥1,437 million, total assets increased ¥15,612 million, to ¥504,576 million. The principal reasons for these movements in assets were as follows. The increase in current assets was due to an increase in cash on hand and in banks and securities of ¥26,494 million, despite a decrease of ¥3,537 million in notes and accounts r eceivable–trade and a decrease of ¥2,763 million in inventories. The increase in property, plant and equipment was due to the implementation of capital expenditures of ¥12,302 million and depreciation charges of ¥11,222 million. The decrease in investments and other assets was due primarily to a decrease in deferred tax assets.

LiabilitiesCompared with the previous fiscal year-end, current liabilities decreased ¥4,611 million, and long-term liabilities decreased ¥16,907 million; thus, total liabilities decreased ¥21,518 million, to ¥312,790 million. The principal causes of these decreases were as follows. Current liabilities decreased ¥4,611 million primarily as a result of a decrease in notes and accounts payable–trade of ¥9,752 million, despite an increase of ¥9,412 million in the current portion of long-term debt.

Years ended March 31

Sales Cost of sales SG&A expenses Operating margin (%) (right scale)

Operating Margin(Millions of yen, %)

0

600,000

400,000

500,000

300,000

200,000

100,000

0

9.0

7.5

4.5

6.0

3.0

1.5

2009

2010

2011

2012

2013


Long-term liabilities decreased ¥16,907 million as a result of a decrease of ¥11,303 million in long-term debt and a decrease of ¥5,449 million in accrued severance and pension costs.

Net AssetsNet assets at the end of the fiscal year amounted to ¥191,786 million, ¥37,130 million higher than at the end of the previous fiscal year. Although the Company paid cash dividends of ¥3,169 million, this increase in net assets was due to the reporting of consolidated net income of ¥15,303 million, the issuance of 42 million new shares in March 2013, which added ¥14,524 million to shareholders’ equity, and other factors.

Cash Flows

Net cash flow provided by operating activities increased from the previous fiscal year and amounted to a net inflow of ¥34,014 million due mainly to an increase of ¥13,023 million in income before income taxes and minority interests. Net cash used in investing activities amounted to a net outflow of ¥33,131 million for the fiscal year ended March 31, 2013, compared to a net outflow of ¥8,838 million for the previous fiscal year. This primarily reflected the purchase of fixed assets of ¥11,816 million and the purchase of securities and investment securities of ¥26,278 million. Net cash used for financing activities amounted to a net inflow of ¥3,264 million for the fiscal year ended March 31, 2013, compared to a net outflow of ¥19,998 million for the previous fiscal year. This primarily reflected proceeds from the issuance of common stock of ¥14,524 million and proceeds from the issuance of bonds of ¥20,000 million, despite a net decrease in short-term loans payable and long-term loans payable of ¥26,695 million. As a consequence, consolidated cash and cash equivalents at the end of the period were ¥93,791 million, ¥6,495 million higher than at the end of the previous fiscal year.

Capital Expenditures

Regarding investments, during the fiscal year, the Group implemented capital investments amounting to ¥12,302 million. These were primarily for expansion of production capacity and the introduction of equipment to enhance productivity. This figure for investment includes expenditures for the acquisition of intangible fixed assets and long-term prepaid expenses. Principal capital investments by business segment were as follows. Please note that these investment figures include inter-segment transactions.

Fluid Machinery & Systems CompanyInvestments were made primarily for expanding capacity and increasing productivity, and the amount of capital investment during the fiscal year was ¥6,876 million.

Environmental Engineering CompanyThis segment invested in equipment intended for the development of environment-related products. Investments by this segment totaled ¥394 million.

Precision Machinery CompanyInvestments were made principally for equipment needed for development of new products. Investments by this segment totaled ¥2,486 million.

Liquidity and Capital Resources

(1) Capital ResourcesAt the end of the fiscal year under review, on a consolidated basis, the Group had total interest-bearing debt of ¥138,914 million, comprising ¥86,670 million in short-term interest-bearing liabil-ities and ¥52,244 million in long-term interest-bearing liabilities. Although this balance decreased ¥4,703 million from the total balance at the end of the previous fiscal year of ¥143,617 million,

Net Cash Provided by Operating Activities(Millions of yen)

Interest-Bearing Debt/ Equity Ratio(Millions of yen, %)


Shareholders’ equity and accumulated other comprehensive income Liabilities, except interest-bearing debt Interest-bearing debt Equity ratio (%) (right scale)



Fluid Machinery & Systems Environmental Engineering Precision Machinery

Capital Expenditures(Millions of yen)

0

600,000

450,000

300,000

150,000

0

40

30

10

20

2009

2010

2011

2012

2013

0

40,000

20,000

30,000

10,000

2009

2010

2011

2012

2013

0

25,000

15,000

20,000

10,000

5,000

2009

2010

2011

2012

2013


the Group’s dependence on interest-bearing debt remains at a high level, and management believes that reducing this dependence is an important issue. We believe that increasing profitability and the efficiency of capital are basic to strengthening the Group’s financial base. During the fiscal year under review, the Group’s free cash flow, defined as net cash from oper-ating activities plus net cash from investing activities, amounted to a net inflow of ¥883 million, and the amount of net outflow increased ¥2,868 million from the previous fiscal year. While net cash flow provided by operating activities amounted to ¥34,014 million, a ¥21,425 million increase from ¥12,589 million of net cash provided by operating activities in the previous fiscal year, the increase in net outflow reflected a ¥24,293 million increase in net cash used in investing activities, to ¥33,131 million, compared with ¥8,838 million of net cash used in investing activities in the previous fiscal year.

(2) Management of LiquidityRegarding asset liquidity, the Group maintains a level of cash and cash equivalents appropriate for the scale of its business activities. To manage liquidity risk, the Company has concluded commitment line contracts with its principal banks that provide an adequate amount of financial liquidity for its operations. In addition, to increase the efficiency of cash within the Group, the Company has instituted a system whereby idle cash is concentrated in the parent company and then allocated to Group companies with cash requirements. The consolidated balance of cash and cash equivalents at the end of the fiscal year was ¥93,791 million. In addition, the available balance of commitment lines was ¥45,000 million, and available overdrafts amounted to ¥5,000 million. While the total funding limit from overdrafts and commitment lines was ¥50,000 million, the Company had no borrowings from these sources at the end of the fiscal year.

R&D Expenses

R&D expenditures of the Group can be divided into three major categories:1. Basic research aimed at discovering and establishing seed technologies for the medium-to-long term,2. Development research focused on the application of technologies and the creation of new products, and3. R&D to provide the development research of existing businesses and improvement of existing products. The Company implemented R&D activities that are directly linked to its businesses and the commercialization of products by integrating these activities directly into the respective compa-nies and subsidiaries. Regarding point 1. above, the corporate headquarters takes the leadership in this area, and, by working closely with the operating companies, research is focused on technological “seeds” and the search for new markets. With regard to points 2. and 3. above, the individual business divisions and Group companies take the leadership in implementing these two categories of R&D. R&D expenses amounted to ¥5,026 million during the fiscal year under review.

Activities by business segment are as follows:Fluid Machinery & Systems CompanyThe FMS Company worked to strengthen its lineup of products for global markets and develop products suited to the individual regions where they are sold in the fields of water, energy, and the natural environment, where sustained growth is expected in the medium-to-long term. In addition, the FMS Company advanced the development of equipment for seawater desalination, process pumps for oil and gas markets, energy-saving high-efficiency standard pumps and motors, submersible pumps for use globally in sewage treatment applications, and other types

R&D Expenses(Millions of yen)


0

10,000

6,000

4,000

2,000

8,000

2009

2010

2011

2012

2013


of equipment. It also completed the development of a series of turbo chillers equipped with a new, high-performance compressor and will introduce these to the market one by one as well as develop further applications. Amid an increasingly competitive environment, initiatives were also taken to enhance cost-competitiveness and reliability through the application of basic technolo-gies, including advanced numerical simulation technology and materials engineering technology, as well as strengthen R&D for service and support businesses. The FMS Company made expenditures on R&D amounting to ¥3,282 million during the fiscal year under review.

Environmental Engineering CompanyIn the environmental engineering field, since the focus of operations is shifting from the construc-tion of new plants to after-sales service, in today’s market, more so than in the past, the EE Company is being required to provide services related to the renewal of existing facilities and strengthen its capabilities for offering proposals for operation and maintenance (O&M) services as well as improve its cost-competitiveness. In view of these circumstances, the EE Company is working to strengthen its capabilities for the renewal of facilities, develop new technologies and products that will make possible reductions in the life-cycle cost of facilities, and promote repair, maintenance, and operating technologies that will improve the performance of existing products. The EE Company made expenditures on R&D amounting to ¥147 million during the fiscal year under review.

Precision Machinery CompanyIn the precision machinery field, in the semiconductor device manufacture equipment field, the PM Company worked to refine and improve its existing products and develop new equipment with the aims of responding to the requirements for larger-diameter wafers as well as greater miniaturization and three-dimensional integration. Among component products, the PM Company is striving to develop products that can contribute to energy conservation as well as reduce the burden on the natural environment with the aims of responding to the “green fab” (eco-friendly) semiconductor manufacturing concept, which calls for greater conservation of energy and materials. Also, by pursuing collaborative R&D with customers and universities, and participating in consortia for the development of cutting-edge technologies, the PM Company is continuing its research into next-generation semiconductor process technologies. The PM Company made expenditures on R&D amounting to ¥1,597 million during the fiscal year under review.

Business Risks

The Group confronts a number of business risks that may have an influence on the judgment of investors. These are described as follows. In addition to being aware of the possibility of the emergence of these risks, the Group implements measures to prevent their occurrence and deal with them when they emerge. This section includes forward-looking statements that are based on judgments made at the time of the preparation of this report on the Group’s performance.

1. Market RiskThe markets where the Group conducts its business activities are highly competitive, and down-ward pressures on the prices of most of the products and services it offers may have a negative impact on the Group’s performance. In addition, the percentage of the business of the EE Company accounted for by the public sector is high, and its performance is influenced by trends in expenditures on public works projects. Moreover, the businesses of the PM Company are strongly affected by market fluctuations accompanying the silicon cycle.


2. Large-Scale Projects and Overseas Business ActivitiesThe Group engineers, manufactures, installs, and constructs machinery and plants in big proj-ects both in Japan and foreign countries. Certain of these projects involve technical issues with a high degree of difficulty. There is a possibility that additional costs may be incurred due to failure to function properly, prolongation of the time required to achieve the specified capabilities, and other factors. Also, big projects in foreign countries involve risks related to business environ-ments that differ from those of Japan. Group companies overseas and their employees may face difficulties related to compliance. The Group takes a full range of measures to manage this risk, but, in cases where appropriate steps cannot be taken, this may have an adverse effect on the Group’s performance as well as on the trust placed in the Group by society.

3. Business Realignments, etc.The Group takes continuing initiatives to strengthen its management base and may withdraw from certain unprofitable businesses and liquidate or take other appropriate action with regard to affiliates. Such realignments may have an effect on the Group’s performance.

4. Exchange RiskTransactions denominated in foreign currencies that are conducted as part of business activities overseas are converted to yen in the course of preparing the consolidated financial statements. As a result of changes in foreign exchange conversion rates at the time of conversion, there is a possibility that this may have an effect on the Group’s performance.

5. Risks Related to the Interest Rate and FundingThe Group has both fixed-rate and floating-rate interest-bearing debt, and there is a possibility that fluctuations in interest rates may have an effect on the Group’s performance. Moreover, when the Group violates the covenants contained in its borrowing agreements, it may be required to increase the interest rates it pays and/or lose the advantages of repayment sched-ules. When the Group’s debt ratings are lowered and during times of market turmoil, there is a possibility that the Group’s borrowing costs and its ability to raise funds may be affected.

6. Risks Related to the Impact of Natural Disasters and Impairment of the Social InfrastructureIf a Group place of business is struck by a major typhoon, earthquake, or other natural disaster that adversely affects its ability to conduct business activities, this may have an adverse impact on the Group’s performance. In addition, in the event of a major accident affecting the labor force or an accident involving equipment that leads to a stoppage, or impairment, of business activities, this may have an adverse impact on the Group’s performance.

7. Deferred Tax AssetsThe Group’s deferred tax assets are calculated by making a judgment regarding the future recoverability of income taxes paid, identifying those deferred tax assets whose recoverability is uncertain (amount regarding which there is concern about future recoverability), and the amount of deferred tax assets judged to be recoverable is presented in the financial statements in a valu-ation reserve. Since the amount of taxes paid deemed to be recoverable fluctuates depending on corporate performance and other factors, if certain factors influence the estimate of taxable income, the Company revises the amount regarding which there is concern about future recov-erability, and revises the value of its deferred tax assets. Such revisions may cause fluctuations in net income for the fiscal year.

8. Material ProcurementThe Group procures parts and materials for its manufacturing and construction activities and is influenced by fluctuations in market conditions for these materials. Increases in prices of materi-als result in higher material costs for the Group and may have an adverse effect on the Group’s performance.


9. Legal RestrictionsThe Group conducts operations in Japan and foreign countries, and is subject to the legal regulations of the countries where its operations take place related to approvals, product liability, trade, taxation, competition, corruption, intellectual property, environment, labor, and other mat-ters. Therefore, if the Group should violate such legal regulations, this may have an impact on the Group’s performance as well as on the trust placed in the Group by society. In some instanc-es, the passage of laws and changes in existing legislation may result in an alteration of assump-tions for operating and business plans. Such changes in assumptions may have an impact on the Group’s performance.

10. Risk of Litigation and Other ConflictsIn conducting its business operations, the Group may be the object of lawsuits or bring lawsuits against other parties with regard to such matters as product liability, intellectual property, envi-ronmental protection, labor issues, and other matters. In addition, there may be cases where lawsuits may be brought against the Group by product suppliers on the grounds that the Group’s products violate intellectual property regulations. Depending on the outcome of such lawsuits, litigation of this kind may have an impact on the Group’s performance as well as on the trust placed in the Group by society.

11. Risk of Increased Costs of Land SalesAs provided for in the sales contract for the land where the Company’s former headquarters and its Haneda Plant were located, the area was handed over to Yamato Transport Co., Ltd. Subsequently, during the course of the construction of a logistics terminal by this company, slate fragments containing asbestos were discovered. Yamato Transport Co., Ltd., has brought a law-suit against the Company for the payment of damages in the amount of approximately ¥7.4 bil-lion (including indemnities due to late payment) in connection with the Company’s failure to perform on its obligations as stated in the transfer contract and owing to responsibility for the provision of defective collateral. After investigating this matter, the Company has drawn the con-clusion that the said slate fragments do not constitute defects under the contract. The Company has obtained a written legal opinion from a law office substantiating this view and will use this to assert the correctness of its position in this matter. Nevertheless, depending on the subsequent course of events, this matter may have an adverse effect on the Group’s performance.

12. Risk of Collection of Export ReceivablesThe Group exports its products to the Middle East, etc. There is concern that export receivables outstanding from customers in this region may not be collectible because of international coop-eration measures, changes in regional political conditions, and other factors. In the event that it is impossible to make collections, this may have an adverse impact on the Group’s performance.

13. Projected Benefit ObligationThe changes in the cost burden of the Group’s retirement benefit plans (due to changes and other variations in the market value of pension assets, return on pension assets under manage-ment, and other factors) may have an effect on the Group’s performance and financial position. In addition, in accordance with the revised Accounting Standard for Retirement Benefits, which will be applied in financial statements beginning in the fiscal year ending March 31, 2014, the amounts of unrecognized actuarial differences and unrecognized costs related to past services of employees will be presented among net assets on the balance sheets after deductions for tax effects. The amount of net assets is forecast to decline in the first year these accounting stan-dards are applied, and, therefore, these accounting changes may have an effect on the Group’s financial position. Please note that the amounts of unrecognized actuarial differences and unrecognized costs related to past services of employees are presented in “Note 19.”


Consolidated Balance Sheets

EBARA CORPORATION and Consolidated Subsidiaries Thousands ofAs of March 31, 2013 and 2012 U.S. dollars Millions of yen (Note 5)

ASSETS 2013 2012 2013

Current assets: Cash on hand and in banks and securities ¥114,306 ¥ 87,812 $1,215,375 Notes and accounts receivable–trade 157,459 160,996 1,674,205 Allowance for doubtful accounts (1,702) (1,107) (18,097) Inventories (Note 6) 66,948 69,711 711,834 Deferred tax assets (Note 21) 11,002 11,514 116,980 Others 15,285 17,323 162,521

Total current assets 363,298 346,249 3,862,818

Property, plant and equipment (Note 15): Land 21,231 21,669 225,742 Buildings 97,867 93,208 1,040,585 Machinery and equipment 138,875 129,879 1,476,608 Lease assets 2,841 3,185 30,207 Construction in progress 4,609 4,642 49,006

265,423 252,583 2,822,148 Accumulated depreciation (174,701) (163,479) (1,857,533)

Property, plant and equipment, net (Note 7) 90,722 89,104 964,615

Investments and other assets: Investment securities (Notes 7 and 17) 16,576 15,881 176,247 Investments in and advances to subsidiaries and affiliates 7,845 7,415 83,413 Long-term loans receivable 564 554 5,997 Deferred tax assets (Note 21) 14,723 19,115 156,544 Other investments 6,989 15,956 74,311 Other assets 7,084 5,766 75,321 Allowance for doubtful accounts (3,225) (11,076) (34,290)

Total investments and other assets 50,556 53,611 537,543

Total assets ¥504,576 ¥488,964 $5,364,976

The accompanying notes are an integral part of these statements.


Thousands of U.S. dollars Millions of yen (Note 5)

LIABILITIES AND NET ASSETS 2013 2012 2013

Current liabilities: Short-term loans payable (Notes 7 and 9) ¥ 52,024 ¥ 54,798 $ 553,153 Current portion of long-term debt (Notes 7 and 9) 33,991 24,579 361,414 Notes and accounts payable–trade 95,887 105,639 1,019,532 Accrued income taxes 2,178 3,324 23,158 Deferred tax liabilities 31 19 330 Lease obligations 655 649 6,964 Reserve for losses on construction completion guarantees 3,169 5,359 33,695 Reserve for product warranties 2,769 1,713 29,442 Reserve for construction losses 5,585 8,758 59,383 Reserve for expenses related to the sales of land 1,847 1,850 19,638 Accrued expenses and other current liabilities 47,594 43,653 506,050

Total current liabilities 245,730 250,341 2,612,759

Long-term liabilities: Long-term debt (Notes 7 and 9) 51,338 62,641 545,859 Lease obligations 906 950 9,633 Accrued severance and pension costs (Note 19) 9,801 15,250 104,211 Deferred tax liabilities 322 260 3,424 Asset retirement obligations 1,825 1,800 19,405 Other long-term liabilities 2,868 3,066 30,493

Total long-term liabilities 67,060 83,967 713,025

Net assets (Note 13): Shareholders’ equity: Common stock: Authorized: 1,000,000,000 shares Issued: 465,118,658 shares in 2013 and 422,899,658 shares in 2012 68,613 61,314 729,537 Capital surplus 72,542 65,243 771,313 Retained earnings 53,886 41,752 572,951 Treasury stock 703,461 shares in 2013 and 689,200 shares in 2012 (284) (278) (3,020)

Total shareholders’ equity 194,757 168,031 2,070,781

Accumulated other comprehensive income (loss): Net unrealized gains on investment securities 1,662 1,116 17,671 Deferred gains on hedges 12 6 128 Translation adjustments (9,548) (18,090) (101,520)

Total accumulated other comprehensive income (loss) (7,874) (16,968) (83,721)

Subscription rights to shares 547 439 5,815

Minority interests 4,356 3,154 46,317

Total net assets 191,786 154,656 2,039,192

Total liabilities and net assets ¥504,576 ¥488,964 $5,364,976


Consolidated Statements of Income

EBARA CORPORATION and Consolidated Subsidiaries Thousands ofFor the fiscal years ended March 31, 2013 and 2012 U.S. dollars Millions of yen (Note 5)

2013 2012 2013

Net sales ¥426,302 ¥412,077 $4,532,716Cost of sales 322,192 318,937 3,425,752

Gross profit 104,110 93,140 1,106,964Selling, general and administrative expenses 79,026 69,873 840,255

Operating income 25,084 23,267 266,709

Other income (expenses): Interest and dividend income 754 812 8,017 Interest expenses (2,351) (2,515) (24,997) Gain on sales of securities 5 42 53 Write-down of securities and other investments (408) (161) (4,338) Loss on sales and disposal of fixed assets, net (503) (126) (5,348) Gain on sales of investments in subsidiaries and affiliates — 462 — Impairment loss (Note 11) (278) (128) (2,956) Loss on liquidation of subsidiaries and affiliates (45) (168) (478) Loss on business withdrawal (Note 10) — (10,295) — Special retirement expenses (298) — (3,169) Other, net 1,928 (325) 20,499

(1,196) (12,402) (12,717)

Income before income taxes and minority interests 23,888 10,865 253,992

Income taxes (Note 21): Current taxes 5,766 3,336 61,308 Deferred tax expenses (benefits) 1,364 3,596 14,503

7,130 6,932 75,811

Income before minority interests 16,758 3,933 178,181Minority interests in income 1,455 1,043 15,470

Net income ¥ 15,303 ¥ 2,890 $ 162,711

Yen U.S. dollars

Per share of common stock: Net income ¥35.93 ¥6.85 $0.382 Fully diluted net income 33.69 6.72 0.358 Cash dividends (Note 13 ) 5.00 5.00 0.053



Consolidated Statements of Comprehensive Income


2013 2012 2013

Income before minority interests ¥16,758 ¥3,933 $178,181

Other comprehensive income (loss) Net unrealized gains (losses) on investment securities 528 51 5,614 Unrealized gains (losses) on hedges 5 16 53 Translation adjustments 8,850 (2,014) 94,099 Share of other comprehensive income (loss) of associates accounted for using equity method 59 (7) 627

Total other comprehensive income (loss) (Note 12) 9,442 (1,954) 100,393

Comprehensive income 26,200 1,979 278,574

Comprehensive income attributable to shareholders of EBARA CORPORATION 24,397 962 259,404Comprehensive income attributable to minority interests 1,803 1,017 19,170



Consolidated Statements of Changes in Net Assets

EBARA CORPORATION and Consolidated Subsidiaries Millions of yen

For the fiscal year ended March 31, 2013 Shareholders’ equity

Number of Common Capital Retained Treasury Total shareholders’ shares issued stock surplus earnings stock equity

Balance at April 1, 2012 422,899,658 ¥61,314 ¥65,243 ¥41,752 ¥(278) ¥168,031

Changes during the fiscal year Net income 15,303 15,303 Cash dividends (3,169) (3,169) Issuance of new shares 42,000,000 7,262 7,262 14,524 Issuance of new shares (exercise of subscription rights to shares) 219,000 37 37 74 Change of increase in scope of consolidation Net unrealized gains on investment securities Change in translation adjustments Purchase of treasury stock (6) (6) Loss on disposal of treasury stock 0 0 0 Changes in profit/loss deferral hedge accounting Changes in subscription rights to shares Changes in minority interests Total changes during the fiscal year 7,299 7,299 12,134 (6) 26,726

Balance at March 31, 2013 465,118,658 ¥68,613 ¥72,542 ¥53,886 ¥(284) ¥194,757

Millions of yen

Accumulated other comprehensive income (loss)

Net unrealized Total accumulated gains on Deferred other Subscription investment gains Translation comprehensive rights to Minority Total net securities on hedges adjustments income (loss) shares interests assets

Balance at April 1, 2012 ¥1,116 ¥ 6 ¥(18,090) ¥(16,968) ¥439 ¥3,154 ¥154,656

Changes during the fiscal year Net income 15,303 Cash dividends (3,169) Issuance of new shares 14,524 Issuance of new shares (exercise of subscription rights to shares) (74) 0 Change of increase in scope of consolidation Net unrealized gains on investment securities 546 546 546 Change in translation adjustments 8,542 8,542 8,542 Purchase of treasury stock (6) Loss on disposal of treasury stock 0 Changes in profit/loss deferral hedge accounting 6 6 6 Changes in subscription rights to shares 182 182 Changes in minority interests 1,202 1,202Total changes during the fiscal year 546 6 8,542 9,094 108 1,202 37,130

Balance at March 31, 2013 ¥1,662 ¥12 ¥ (9,548) ¥ (7,874) ¥547 ¥4,356 ¥191,786


EBARA CORPORATION and Consolidated Subsidiaries Thousands of U.S. dollars (Note 5)


Common Capital Retained Total shareholders’ stock surplus earnings Treasury stock equity

Balance at April 1, 2012 $651,931 $693,703 $443,935 $(2,960) $1,786,609

Changes during the fiscal year Net income 162,711 162,711 Cash dividends (33,695) (33,695) Issuance of new shares 77,214 77,214 154,428 Issuance of new shares (exercise of subscription rights to shares) 392 392 784 Change of increase in scope of consolidation Net unrealized gains on investment securities Change in translation adjustments Purchase of treasury stock (64) (64) Loss on disposal of treasury stock 4 4 8 Changes in profit/loss deferral hedge accounting Changes in subscription rights to shares Changes in minority interests Total changes during the fiscal year 77,606 77,610 129,016 (60) 284,172

Balance at March 31, 2013 $729,537 $771,313 $572,951 $(3,020) $2,070,781

Thousands of U.S. dollars (Note 5)



Balance at April 1, 2012 $11,866 $ 64 $(192,344) $(180,414) $4,664 $33,535 $1,644,394

Changes during the fiscal year Net income 162,711 Cash dividends (33,695) Issuance of new shares 154,428 Issuance of new shares (exercise of subscription rights to shares) (784) 0 Change of increase in scope of consolidation Net unrealized gains on investment securities 5,805 5,805 5,805 Change in translation adjustments 90,824 90,824 90,824 Purchase of treasury stock (64) Loss on disposal of treasury stock 8 Changes in profit/loss deferral hedge accounting 64 64 64 Changes in subscription rights to shares 1,935 1,935 Changes in minority interests 12,782 12,782Total changes during the fiscal year 5,805 64 90,824 96,693 1,151 12,782 394,798

Balance at March 31, 2013 $17,671 $128 $(101,520) $ (83,721) $5,815 $46,317 $2,039,192


EBARA CORPORATION and Consolidated Subsidiaries Millions of yen


Number of Common Capital Retained Treasury Total shareholders’ shares issued stock surplus earnings stock equity

Balance at April 1, 2011 459,245,678 ¥61,284 ¥65,213 ¥40,760 ¥(266) ¥166,991

Changes during the fiscal year Net income 2,890 2,890 Cash dividends (2,110) (2,110) Issuance of new shares (exercise of subscription rights to shares) 174,000 30 30 60 Change of increase in scope of consolidation 212 212 Net unrealized gains on investment securities Change in translation adjustments Purchase of treasury stock (13) (13) Retirement of treasury stock (36,520,020) Loss on disposal of treasury stock 0 1 1 Changes in profit/loss deferral hedge accounting Changes in subscription rights to shares Changes in minority interests Total changes during the fiscal year 30 30 992 (12) 1,040

Balance at March 31, 2012 422,899,658 ¥61,314 ¥65,243 ¥41,752 ¥(278) ¥168,031

Millions of yen



Balance at April 1, 2011 ¥1,053 ¥(10) ¥(16,083) ¥(15,040) ¥362 ¥2,625 ¥154,938

Changes during the fiscal year Net income 2,890 Cash dividends (2,110) Issuance of new shares (exercise of subscription rights to shares) (58) 2 Change of increase in scope of consolidation 212 Net unrealized gains on investment securities 63 63 63 Change in translation adjustments (2,007) (2,007) (2,007) Purchase of treasury stock (13) Retirement of treasury stock Loss on disposal of treasury stock 1 Changes in profit/loss deferral hedge accounting 16 16 16 Changes in subscription rights to shares 135 135 Changes in minority interests 529 529Total changes during the fiscal year 63 16 (2,007) (1,928) 77 529 (282)

Balance at March 31, 2012 ¥1,116 ¥ 6 ¥(18,090) ¥(16,968) ¥439 ¥3,154 ¥154,656



Consolidated Statements of Cash Flows


2013 2012 2013

Cash Flows from Operating Activities: Income before income taxes and minority interests ¥23,888 ¥ 10,865 $253,992 Depreciation and amortization 12,356 12,765 131,377 Impairment loss 278 128 2,956 Gain on sales of securities and investment securities (5) (504) (53) Decrease in provision (15,527) (3,712) (165,093) Loss (gain) on sales of fixed assets 123 (18) 1,308 Interest and dividend income (754) (812) (8,017) Interest expenses 2,351 2,515 24,997 Decrease (increase) in notes and accounts receivable–trade 8,676 (2,839) 92,249 Decrease (increase) in inventories 5,959 (3,387) 63,360 Increase (decrease) in notes and accounts payable–trade (11,485) 8,613 (122,116) Increase (decrease) in other assets/liabilities 13,881 (2,647) 147,581 Other loss (gain) 1,737 (190) 18,480 Sub-total 41,478 20,777 441,021 Interest and dividends received 816 823 8,676 Interest expenses paid (2,400) (2,550) (25,518) Income taxes paid (5,880) (6,461) (62,520) Net cash provided by operating activities 34,014 12,589 361,659Cash Flows from Investing Activities: Purchases of fixed assets (11,816) (10,133) (125,635) Sales of fixed assets 60 244 638 Purchases of securities and investment securities (26,278) (3,392) (279,405) Sales and redemption of securities and investment securities 5,690 3,826 60,500 Payment into time deposits (918) (516) (9,761) Withdrawal of time deposits 1,023 — 10,877 Disbursement of loans receivable (2,797) (3,077) (29,740) Collection of loans receivable 2,761 2,618 29,357 Purchase of investments in capital of subsidiaries (992) — (10,548) Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation — 870 — Sales or purchases of other investments, net 136 722 1,446 Net cash used in investing activities (33,131) (8,838) (352,271)Cash Flows from Financing Activities: Net increase (decrease) in short-term loans payable (4,689) 1,337 (49,856) Proceeds from long-term loans payable 2,629 16,267 27,953 Repayment of long-term loans payable (24,635) (14,466) (261,935) Proceeds from issuance of bonds 20,000 — 212,653 Redemption of bonds — (20,000) — Proceeds from issuance of common stock 14,524 — 154,428 Purchase of treasury stock (6) (13) (64) Cash dividends paid (3,169) (2,110) (33,695) Proceeds from stock issuance to minority shareholders 97 241 1,031 Cash dividends paid to minority shareholders (708) (692) (7,528) Others (779) (562) (8,282) Net cash provided by (used in) financing activities 3,264 (19,998) 34,705Translation Adjustments 2,348 (771) 24,965Increase (decrease) in Cash and Cash Equivalents 6,495 (17,018) 69,058Cash and Cash Equivalents: At beginning of fiscal year: Balance brought forward 87,296 104,003 928,187 Increase in cash and cash equivalents resulting from change of scope of consolidation — 311 — At end of fiscal year (Note 14) ¥93,791 ¥ 87,296 $997,245The accompanying notes are an integral part of these statements.


Notes to the Consolidated Financial StatementsEBARA CORPORATION and Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements

EBARA CORPORATION (the “Company”) and its subsidiaries (hereinafter, collectively referred to as the “Group”) maintain their records and prepare their statutory fi nancial statements in accor-dance with generally accepted accounting principles in Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile. The accompanying consolidated fi nan-cial statements were also prepared in accordance with generally accepted accounting principles in Japan.

2. Summary of Significant Accounting Policies

Basis of consolidation The consolidated fi nancial statements include the accounts of the Company and those of certain

of its subsidiaries. All signifi cant intercompany transactions and accounts are eliminated in con-solidation.

As of March 31, 2013, the numbers of consolidated subsidiaries, non-consolidated subsidiar-ies that applied the equity method, and affi liated companies that applied the equity method were 49, 1 and 2 (53, 1 and 2 in 2012), respectively.

The fi nancial statements of 21 foreign subsidiaries are consolidated by using their fi nancial statements as of the fi scal year end, and necessary adjustments are made to their fi nancial state-ments to refl ect any signifi cant transactions from January 1 to March 31.

Previously, the date for closing the accounts of Elliott Company and its 11 subsidiaries, Ebara-Elliott Service (Taiwan) Co., Ltd., Elliott Ebara Singapore Pte. Ltd. and Elliott Ebara Turbomachinery India Pvt. Ltd. was December 31. As a result of the change in the account closing date of these companies to March 31, the fi nancial statements consolidated with the Company’s accounts for the fi scal year ended March 31, 2013 cover the 15-month period from January 1, 2012, through March 31, 2013.

The differences, at the time of acquisition or consolidation newly made, between the cost and underlying net equity of investments in consolidated subsidiaries are included in other assets and are amortized on a straight-line basis over a reasonable estimated period of time within a 20-year period in respect of each particular difference.

Foreign currency translation Foreign currency denominated trade receivables and payables are translated into yen at the

balance sheet date. Investments are translated into yen at the exchange rates current when the trans actions occur.

Assets and liabilities of foreign consolidated subsidiaries are translated into yen at appropriate year-end rates. Revenue, expenses and net income of these companies are also translated into yen at the appropriate year-end rates. Contributed capital to those companies by the parent company is translated at the rates at which the transactions were made. Receivables and pay-ables with the parent company are translated at the same rates used by the parent company, and the resultant translation adjustments are stated in the net assets section.

Investment securities and other fi nancial instruments Investment securities and other fi nancial instruments are valued using the following methods: (a) Securities having market value are stated at market value, and the unrealized gains or loss-

es, net of tax, is credited or debited to net assets as shown in the balance sheets. Cost of securities sold is determined by the gross average.

(b) Securities not having market value are recorded at the gross average cost. (c) Bonds held to maturity are stated at cost less accumulated amortization. (d) Other fi nancial assets (or instruments), including golf memberships, are valued at market

value, if available.

Inventories Finished goods and raw materials are stated at the gross average cost method (computed by

lowering the value on the balance sheets from book value to account for any decline in earnings- generation capacity of such assets), except for in the Precision Machinery Group, which employs the moving average method (computed by lowering the value on the balance sheets from book value to account for any decline in earnings-generation capacity of such assets), and work in process is valued at the specifi c identifi cation cost method (computed by lowering the value on the balance sheets from book value to account for any decline in earnings-generation capacity of such assets).


Property, plant and equipment and related depreciation (except lease assets) The declining balance method, applied according to the criteria specifi ed in the corporate

income tax laws, is used as the primary method for computing depreciation. However, deprecia-tion of buildings (excluding fi xtures installed in such buildings) that were acquired on or after April 1, 1998 is computed using the straight-line method. Consolidated foreign subsidiaries employ the straight-line method. Note that the method for depreciating minor assets valued from ¥100,000 to less than ¥200,000 is the lump-sum method specifi ed in the corporate income tax laws, and these assets are depreciated in equal amounts over a three-year period.

Intangible assets and investments and other assets (except lease assets) Intangible assets are amortized on a straight-line basis, according to the criteria specifi ed in the

Corporation Tax Law, and are used as the primary method for computing depreciation. Software used in the Company is amortized on a straight-line basis for the estimated useful

life of 5 years.

Lease assets Lease assets under fi nance lease transactions that do not transfer ownership of the asset to

the lessee are depreciated by the straight-line method over the lease term as the useful life and a residual value of zero.

For fi nancial leases that do not transfer ownership to the lessee commencing on or prior to March 31, 2008, the Group adopts accounting standards normally applicable to ordinary operat-ing lease transactions.

Allowance for doubtful accounts Allowance for doubtful accounts is provided based on past experience for normal receivables

and on an estimate of the collectability of receivables from companies in fi nancial diffi culty.

Severance and pension plans The cost of the severance and pension plans, based on actuarial computations of current and

future employee benefi ts, including the unfunded severance indemnities plan, is charged to income. Retirement benefi ts to directors and corporate auditors are also accrued at the amounts of the

future liability in relation to the length of service at the balance sheet date and included in accrued severance and pension costs.

The Company, its domestic consolidated subsidiaries, and some foreign consolidated subsid-iaries have termination allowance plans and retirement pension plans as severance and defi ned benefi t pension plans.

Reserve for losses on construction completion guarantees To provide for possible expenses arising from guarantees against defects, the Company makes

reasonable estimates of the ratio of such expenses and uses this ratio to derive provisions for such losses.

Reserve for product warranties To provide for expenses related to defect guarantees related to buying and selling contracts, the

amount of such warranties is estimated by multiplying a reasonable percentage of defects by the value of product sales.

Reserve for construction losses To prepare for possible losses on construction projects contracted to the Company, the

Company makes estimates of such losses for those uncompleted projects deemed to have a strong possibility of incurring losses and for which such construction losses can be reasonably estimated.

Inventories related to construction contracts on which losses are expected and the reserve for construction losses are both presented on the balance sheets without offsetting. The value of inventories related to construction contracts on which losses are expected that are contained within the reserve for construction losses was ¥4,693 million ($49,899 thousand) (Including work in process of ¥4,693 million) and ¥3,289 million (Including work in process of ¥3,289 million) for the fi scal years ended March 31, 2013 and 2012, respectively.

The provision to the reserve for construction losses contained in cost of sales was ¥2,740 mil-lion ($29,133 thousand) and ¥8,152 million for the fi scal years ended March 31, 2013 and 2012, respectively.


Reserve for expenses related to the sales of land Accompanying the sales of the land formerly occupied by the Group’s headquarters and Haneda

Plant, this reserve has been created to provide for expenses related to restoring the land to its original condition.

Revenue recognition Standard for cost of completed work and construction revenue The percentage-of-completion method has been applied for the completion of a portion of

the construction work that is deemed to be certain by the end of each fi scal year. (The percent-age of completion is estimated based on the percentage of cost incurred compared with the estimated total cost). For other construction work, the completed-contract method has been applied.

Hedging accounting methods Hedging transactions Gains or losses and evaluation differences related to hedging transactions accounted for at

fair market value are deferred as assets or liabilities until recognized. Evaluation gains and losses on foreign exchange contracts are allocated to settlement periods throughout the peri-od of the contract. Interest-rate swaps are treated as a special method under the Accounting Standard for Financial Instruments.

Hedging instruments and hedged items Hedging instruments Foreign exchange forward contracts, foreign currency option contracts, and interest-rate swap

agreements were used. Hedged items Currency exchange rate risk on existing assets and liabilities in foreign currencies and interest-

rate risk. Hedging policy The Company and its consolidated subsidiaries use derivatives only for the purpose of hedg-

ing related to exports, imports, funding, and others in accordance with internal fund manage-ment policy.

Assessing the effectiveness of hedging Interest risk The effectiveness of hedging is assessed by comparing the accumulated cash fl ows between

hedging instruments and hedging items. However, with regard to the interest-rate swaps that agree with hedge criteria, the assessments are omitted.

Currency exchange rate risk As long as one hedging instrument and one hedging object correspond, the hedge is consid-

ered effective.

Income taxes Deferred tax assets and liabilities are determined based on the differences between fi nancial

reporting and the tax bases of the assets and liabilities and are measured by applying currently enacted tax rates and laws.

Stock and bond issue costs Stock and bond issue costs are charged to income as incurred.

Research and development costs Costs relating to research and development activities are charged to income as incurred.

Research and development costs charged to income were ¥5,026 million ($53,440 thousand) and ¥3,827 million for the fi scal years ended March 31, 2013 and 2012, respectively.

Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits, time deposits with maturi-

ties of three months or less, and highly liquid investments.


Net income (loss) and dividends per share Primary net income (loss) per share of common stock is based on the average number of shares

of common stock outstanding during each period. Common stock equivalents on warrants and convertible bonds are not taken into consider-

ation for the above computation. Fully diluted net income per share of common stock is com-puted assuming outstanding convertible bonds at that date are all converted to common shares after adjustment of after-tax debt servicing costs, unless antidilutive effect results.

Consumption tax Consumption taxes are accounted for using the net-of-tax method.

Non-deductible consumption taxes are expensed for the fi scal year ended March 31, 2013.

Consolidated taxation system A consolidated taxation system is applied.

Standard issued but not yet effective On May 17, 2012, the ASBJ issued “Accounting Standard for Retirement Benefi ts” (Accounting

Standards Board of Japan [ASBJ] Statement No. 26) and “Guidance on Accounting Standard for Retirement Benefi ts” (ASBJ Guidance No. 25), which replaced the Accounting Standard for Retirement Benefi ts that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000 and the other related practical guidance, being followed by partial amendments from time to time through 2009. The major changes are as follows:

(1) Treatment in the balance sheet Actuarial gains and losses and prior service costs that have yet to be recognized in profi t or loss

shall be recognized within the net assets (accumulated other comprehensive income), after adjusting for tax effects, and the defi cit or surplus shall be recognized as a liability (liability for retirement benefi ts) or asset (asset for retirement benefi ts).

(2) Treatment in the statements of income and the statements of comprehensive income Actuarial gains and losses and prior service costs that arose in the current period and have yet

to be recognized in profi t or loss shall be included in other comprehensive income, and actuarial gains and losses and prior service costs that were recognized in other comprehensive income in prior periods and then recognized in profi t or loss in the current period shall be treated as reclassifi cation adjustments.

This standard and related guidance are effective as of the end of the fi scal years beginning on or after April 1, 2013. The Company is currently evaluating the effect these modifi cations will have on its consolidated results of operations and fi nancial position.

3. Change in Accounting Policies

Application of Accounting Standard for Earnings Per Share From the fi scal year ended March 31, 2012, the Group has applied the “Accounting Standard

for Earnings Per Share” (ASBJ Statement No. 2, issued on June 30, 2010), the “Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4, issued on June 30, 2010), and the “Practical Solution on Accounting for Earnings Per Share” (ASBJ PITF No. 9, issued on June 30, 2010). To calculate diluted net income per share of the quarter, the Group has changed the method to include potential services offered by the employees in the fair valuation of stock options of payment when exercising the right regarding stock options whose rights are secured after a certain period of employment.

Changes in Depreciation Method In accordance with an amendment of the Corporation Tax Law effective April 1, 2012, the

Company and its domestic consolidated subsidiaries have changed their depreciation method for tangible fi xed assets acquired on or after April 1, 2012 to refl ect the methods prescribed in the amended Corporation Tax Law. This change had an immaterial impact on the profi t and loss.


4. Additional Information Adoption of Accounting Standard for Accounting Changes and Error Corrections For accounting changes and corrections of prior period errors made on and after the beginning

of the fi scal year ended March 31, 2012, the Group adopted the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No. 24, issued on December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No. 24, issued on December 4, 2009).

5. U.S. Dollar Amounts The U.S. dollar amounts are included solely for convenience and have been translated as a mat-ter of arithmetical computation only at the rate of ¥94.05=US$1, the rate of exchange prevailing on March 31, 2013. The approximate rate of exchange prevailing at May 31, 2013 was ¥101.18=US$1. This translation should not be construed as a representation that yen amounts actually represent or could be converted into U.S. dollars.

6. Inventories Inventories comprise the following:

Thousands of Millions of yen U.S. dollars

As of March 31 2013 2012 2013

Finished goods ¥ 9,949 ¥10,622 $105,784Raw materials 19,118 18,977 203,275Work in process 37,881 40,112 402,775

Total ¥66,948 ¥69,711 $711,834

7. Pledged Assets and Related Liabilities

Pledged assets are as follows:


As of March 31 2013 2012 2013

Buildings ¥2,783 ¥1,120 $29,591Machinery and equipment 1,551 1,807 16,491Land 83 189 883Investment securities 1,774 1,290 18,862

Total ¥6,191 ¥4,406 $65,827

Foundation mortgages of pledged assets are as follows:


As of March 31 2013 2012 2013

Buildings ¥— ¥ 17 $—Machinery and equipment — — —Land — 114 —Investment securities — — —

Total ¥— ¥131 $—

Collateral for loans is as follows:


As of March 31 2013 2012 2013

Short-term loans payable ¥1,087 ¥6,877 $11,558Long-term loans payable 2,173 1,331 23,105


Foundation mortgages of collateral for loans are as follows:


As of March 31 2013 2012 2013

Short-term loans payable ¥— ¥700 $—Long-term loans payable — — —

Pledged assets for purposes other than loans payable are as follows:


As of March 31 2013 2012 2013

Investment securities ¥20 ¥20 $213

8. Commitments and Contingent Liabilities

The Company and its consolidated subsidiaries had the following commitments and contingent liabilities:


As of March 31 2013 2012 2013

Loans guaranteed: Unconsolidated subsidiaries and affiliates ¥626 ¥736 $6,656 Others 275 359 2,924

9. Short-Term Loans Payable and Long-Term Debt

As of March 31, 2013 and 2012, short-term loans payable amounted to ¥52,024 million ($553,153 thousand) and ¥54,798 million, respectively, and generally represent short-term loans payable (having a life of less than 365 days), of which ¥639 million ($6,794 thousand) and ¥1,446 million are secured, respectively.

As of March 31, 2013 and 2012, ¥3,260 million ($34,662 thousand) and ¥8,208 million of short-term loans payable and long-term loans payable were collateralized by assets amounting to ¥6,191 million ($65,827 thousand) and ¥4,406 million, respectively.

The weighted-average interest rates for short-term loans and current portion of long-term loans as of March 31, 2013 and 2012 were 0.978% and 1.188%, respectively.

Long-term debt (excluding lease obligations) comprised:


As of March 31 2013 2012 2013

Loans payable from banks, insurance companies, and other, due 2013 to 2022 with interest rate of 0.014% to 12.0% at March 31, 2013 and with interest rate of 0.7% to 12.0% at March 31, 2012 Secured ¥ 2,621 ¥ 6,762 $ 27,868 Unsecured 42,708 60,458 454,0991.30% unsecured bonds with stock acquisition rights due 2013 issued in the overseas market 20,000 20,000 212,653Unsecured bonds with stock acquisition rights due 2018 issued in the overseas market 20,000 — 212,653

85,329 87,220 907,273Less current portion due within one year (33,991) (24,579) (361,414)

Total ¥51,338 ¥62,641 $545,859


The maturities of long-term debt (excluding lease obligations) are summarized as follows:

Thousands ofAs of March 31 Millions of yen U.S. dollars

2014 ¥33,991 $361,4142015 8,215 87,3472016 4,030 42,8502017 17,955 190,9092018 20,504 218,0122019 and thereafter 634 6,741

10. Loss on Business Withdrawal

The loss on business withdrawal is the estimate of loss to be incurred in connection with the withdrawal from the InfraServ project in Germany. The breakdown of this loss is as follows:


For the fiscal years ended March 31 2013 2012 2013

Provision of allowance for doubtful accounts accompanying the aging of accounts receivable (accompanying the payment of certain accounts receivable on a long-term basis) ¥— ¥ 7,000 $—Portion of cost incurred related to additional construction for improvements — 3,295 —

Total ¥— ¥10,295 $—

11. Impairment Loss on Long-Lived Assets

Fiscal year ended March 31, 2013 The Group reported an impairment loss of long-lived assets amounting to ¥278 million ($2,956

thousand) in the fi scal year ended March 31, 2013. This impairment loss was recognized in the following asset groups: Contracts of technical alliances and idle assets.

Outline of asset grouping: The Group groups its assets according to its business segments, but idle assets are grouped individually.

Recognition of impairment loss: Since the price at which buildings and land are planned to be sold is below the book value of such assets, the Company has written down the book value to the recoverable value. Also, since the value in use of equipment for the manufacturing of chillers machinery was below the book value of such machinery, the book value has been reduced to the recoverable value. Since idle buildings, machinery and equipment, and land are no longer expected to contribute to earnings in future periods, the book value has been reduced to the memorandum value or recoverable value.

Computation of recoverable value: The recovery value of assets has been calculated as the value in use or the net sales value. The net sales value is estimated by reasonable methods, tak-ing offi cially announced land prices and other information as a base. The discount rate used for measuring the value in use as the recoverable value based on future cash fl ows was 6.0%.

Fiscal year ended March 31, 2012 The Group reported an impairment loss of long-lived assets amounting to ¥128 million in the

fi scal year ended March 31, 2012. This impairment loss was recognized in the following asset groups: Contracts of technical alliances and idle assets.

Recognition of impairment loss: Regarding machinery and equipment, patents and others that are no longer expected to contribute to future income, the value of such assets has been dero-gated to the memorandum value. Regarding land and buildings, since the market value has decreased signifi cantly compared with the book value, the book value has been reduced to the recoverable value. Computation of recoverable value: The Group employs the net sales value as the recoverable amounts of idle assets. The net sales value is estimated by reasonable methods, taking offi cially announced land prices and other information as a base.


12. Other Comprehensive Income

The following table presents reclassifi cation adjustments and tax effects allocated to each com-ponent of other comprehensive income for the fi scal years ended March 31, 2013 and 2012:



Unrealized holding gain on securities: Amount arising during the fiscal year ¥ 771 ¥ 86 $ 8,198 Reclassification adjustments for gains (losses) realized in net income 44 (72) 468

The amount of unrealized holding gains on securities before tax effect 815 14 8,666 Tax effect (287) 37 (3,052)

Unrealized holding gains on securities 528 51 5,614Deferred gains on hedges: Amount arising during the fiscal year 8 11 85 Reclassification adjustments for gains (losses) realized in net income — 16 —

The amount of unrealized holding gains (losses) on securities before tax effect 8 27 85 Tax effect (3) (11) (32)

Deferred gains on hedges 5 16 53Translation adjustment: Amount arising during the fiscal year 8,596 (2,015) 91,398 Reclassification adjustments for gains (losses) realized in net income 254 — 2,701

Translation adjustment 8,850 (2,015) 94,099Share of other comprehensive income (loss) of associates accounted for using equity method: Amount arising during the fiscal year 59 (6) 627

Total other comprehensive income (loss) ¥9,442 ¥(1,954) $100,393

13. Net Assets The Companies Act of Japan (Act No. 86 of 2005, as amended) provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the total of the capital reserve and the legal reserve equals 25% of the common stock account.

Such distribution can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for distributions.

Dividends 1. Dividends paid For the fi scal year ended March 31, 2013

Millions Thousands of U.S. of yen U.S. dollars Yen dollars

Type of Dividends Resolution shares Total dividends per share Cut-off date Effective date

Regular General Common ¥2,111 $22,446 ¥5.00 $0.053 March 31, June 29, Meeting of stock 2012 2012Shareholders on June 28, 2012




Board Meeting on Common ¥1,056 $11,228 ¥2.50 $0.0265 September 30, December 4, November 5, 2012 stock 2012 2012

For the fi scal year ended March 31, 2012

Millions of yen Yen


Regular General Common ¥2,110 ¥5.00 March 31, June 27, Meeting of stock 2011 2011Shareholders on June 24, 2011

2. Dividends with the cut-off date in the fi scal year ended March 31, 2013 and the effective date in the fi scal year ending March 31, 2014


Type of Source of Dividends Resolution shares Total dividends dividends per share Cut-off date Effective date

Regular Common ¥1,161 $12,344 Retained ¥2.50 $0.0265 March 31, June 28, General stock earnings 2013 2013Meeting of Shareholders on June 27, 2013

Dividends with the cut-off date in the fi scal year ended March 31, 2012 and the effective date in the fi scal year ended March 31, 2013

Millions of yen Yen

Type of Source of Dividends Resolution shares Total dividends dividends per share Cut-off date Effective date

Regular Common ¥2,111 Retained ¥5.00 March 31, June 29, General stock earnings 2012 2012Meeting of Shareholders on June 28, 2012

14. Supplementary Cash Flow Information

Cash and cash equivalents in the consolidated statements of cash fl ows for the fi scal years ended March 31, 2013 and 2012 are reconciled to cash on hand and in banks in the consolidat-ed balance sheets as follows:



Cash on hand and in banks ¥90,753 ¥84,956 $964,944Securities 23,553 2,856 250,431Securities with maturities of more than three months (20,005) (1) (212,706)Time deposits with maturities of more than three months (510) (515) (5,424)

Cash and cash equivalents ¥93,791 ¥87,296 $997,245


15. Leases For fi nance lease transactions that do not transfer ownership to the lessee commencing on or prior to March 31, 2008, the Group adopts accounting treatment normally applicable to ordinary operating lease transactions.

The following pro forma amounts concern the fi nance leases, which would have been refl ect-ed in the fi nancial statements if fi nance lease accounting had been applied to the fi nance lease transactions currently accounted for as operating leases: (As lessee)


As of March 31 2013 2012 2013

Acquisition costs: Machinery and equipment ¥2,501 ¥3,144 $26,592 Accumulated depreciation: Machinery and equipment 1,584 1,824 16,842 Net book value: Machinery and equipment 917 1,320 9,750

Future lease payments: Due within one year 236 492 2,509 Due after one year 73 397 776

Total ¥ 309 ¥ 889 $ 3,285

Amounts equivalent to lease payments, depreciation expenses, and interest expense: Lease payments ¥ 425 ¥ 512 $ 4,519 Depreciation expense 336 486 3,573 Interest expense 11 18 117

The depreciation expense is computed by the straight-line method over the lease terms. Interest is computed as the difference between the total lease payments and the value of

leased assets and is allocated to each period using the interest method. Information concerning operating leases is as follows:

(As lessee)


As of March 31 2013 2012 2013

Future lease payments for operating lease transactions: Due within one year ¥ 582 ¥ 502 $ 6,188 Due after one year 2,375 2,103 25,253

Total ¥2,957 ¥2,605 $31,441

16. Financial Instruments 1. Status of fi nancial instruments

(1) Policies regarding fi nancial instruments The Company raises the necessary long-term funds for its capital investment and other require-

ments principally from bank borrowings, the issuance of bonds, and other means. Short-term working capital is raised through bank borrowings and other sources, as necessary. Available short-term funds are invested in highly secure fi nancial assets. In addition, derivatives are used to avoid risk based on actual demand, and the Company’s policy is not to use derivatives for speculative purposes.


(2) Types and risk for fi nancial instruments Notes and accounts receivable–trade, which are operating assets, are exposed to customer

credit risk. In addition, since the Company conducts its business activities globally, its operating assets denominated in foreign currencies are exposed to foreign currency risk. To manage for-eign currency risk, the Company hedges its net foreign currency assets and liabilities position through the use of foreign currency borrowings and deposits. The Company’s con solidated sub-sidiaries use foreign currency forward contracts to hedge foreign currency exposure. Securities and investment securities are principally certifi cates of deposit, money market funds (MMFs), and stocks in fi nancial institutions and other companies that are held for business relationship purposes and are, therefore, exposed to market price fl uctuations.

Notes and accounts payable–trade, which are operating liabilities, are made payment, for the most part, within one year. In addition, a portion of these, which arise in connection with imports of motors and other items, are denominated in foreign currencies and are exposed to foreign currency risk; however, in general, the balance of these liabilities is within the amounts of accounts receivable–trade denominated in foreign currencies. Among these, a portion of bor-rowings have fl oating interest rates and are subject to interest-rate risk. These are hedged through the use of derivatives (interest-rate swaps). The Company also makes use of other derivatives: namely, foreign currency forward contracts that are employed to hedge the foreign currency risk of operating assets and liabilities denominated in foreign currencies as well as inter-est-rate swaps that are arranged to hedge the risk of interest paid on borrowings. Please note that further information on hedge accounting, including hedging instruments, hedging items, hedging policy, and assessing the effectiveness of hedging, may be found in a previous section entitled “Hedging accounting methods” contained in the section “2. Summary of Signifi cant Accounting Policies”.

(3) Risk management systems for fi nancial instruments a. Management of credit risk (risk related to nonperformance of contractual obligations by

trans action counterparties) Regarding operating assets, the Company’s fi nance and business departments, based on

the Company regulations related to invoices and the credit management, monitor the condition of principal business customers, and supervise the payment dates and balances by customer with the aims of identifying possible deterioration in the fi nancial condition of customers and other issues related to the recovery of exposure at an early date and taking steps to minimize credit risk. The Company’s consolidated subsidiaries have also adopted the same method of management.

For securities held to maturity, under the Company’s regulations, investments are made only in securities with high credit ratings, and the credit risk of these investments is minimal.

The maximum value of credit risk, as of the date of the closing of accounts, is shown by the value on the balance sheets of fi nancial assets subject to credit risk.

b. Management of market risk (risk of fl uctuations in foreign currency rates, interest rates, and other indicators)

To manage foreign currency risk, assets and liabilities denominated in foreign currencies are classifi ed by currency, and risk is hedged through the use of foreign currency borrowings and deposits. Also, for foreign currency assets and liabilities, the Company makes use of foreign currency forward contracts to hedge its exposure. Please note that, depending on conditions in foreign currency markets, for confi rmed and scheduled foreign currency assets and obligations that are certain to take place, the Company makes arrangements for foreign currency forward contracts. To hedge against interest-rate fl uctuations, the Company makes use of interest-rate swaps.

For securities and investment securities, the Company confi rms the market prices and the fi nancial condition of the issuers (transactions counterparties). In addition, for securities other than those held to maturity, the Company reviews its holdings on a continuing basis, taking account of the relationship with the issuer (counterparty).

For derivatives, the Company and its consolidated subsidiaries manage such exposure based on Company regulations for accounting for fi nancial instruments.


c. Management of liquidity risk related to fund-raising (risk of being unable to meet payment obligations on the scheduled date)

The Company’s Finance Department prepares and revises cash fl ow plans based on reports of the Company departments, and manages liquidity risk by maintaining a volume of liquidity appropriate for business conditions. Also, as an alternative to liquid assets, the Company manages its liquidity by arranging for commitment lines in a specifi ed amount.

(4) Supplementary information on the fair value of fi nancial instruments The fair value of fi nancial instruments, in addition to values based on market prices, also includes

the value of instruments that do not have market prices that have been calculated based on rea-sonable methods. Since factors that may fl uctuate are taken into account in these calculations, the respective values may change when different assumptions are adopted.

In addition, the contract value of derivatives, as contained in “Information of the fair value of fi nancial instruments”, does not indicate the value of the market risk of these derivative transac-tions.

2. Information on the fair value of fi nancial instruments The amounts shown on the consolidated balance sheets as of March 31, 2013 and 2012 (the

Company’s closing date of the consolidated accounts), the corresponding fair values, and differ-ences between book and fair value are as follows.

Please note that the values of the fi nancial instruments for which ascertaining the fair value is recognized to be extremely diffi cult have not been included (Refer to Note 2.).

Millions of yen

On consolidatedAs of March 31, 2013 balance sheets Fair value Difference

Cash on hand and in banks ¥ 90,753 ¥ 90,753 ¥ —Notes and accounts receivable–trade 157,459 Allowance for doubtful accounts*1 (1,702)

155,757 155,594 (163)Securities and investment securities 35,282 35,282 —

Total ¥281,792 ¥281,629 ¥ (163)

Notes and accounts payable–trade ¥ 95,887 ¥ 95,887 ¥ —Short-term loans payable 66,014 66,014 —Current portion of bonds with subscription rights to shares 20,000 20,000 —Bonds with subscription rights to shares 20,000 18,731 (1,269)Long-term loans payable 31,338 31,225 (113)

Total ¥233,239 ¥231,857 ¥(1,382)

Derivative transactions*2 ¥ 19 ¥ 19 ¥ —

Millions of yen


Cash on hand and in banks ¥ 84,956 ¥ 84,956 ¥ —Notes and accounts receivable–trade 160,996 Allowance for doubtful accounts*1 (1,107)

159,889 159,750 (139)Securities and investment securities 13,876 13,876 —

Total ¥258,721 ¥258,582 ¥(139)

Notes and accounts payable–trade ¥105,639 ¥105,639 ¥ —Short-term loans payable 79,377 79,377 —Bonds with subscription rights to shares 20,000 19,830 (170)Long-term loans payable 42,641 41,916 (725)

Total ¥247,657 ¥246,762 ¥(895)

Derivative transactions*2 ¥ 10 ¥ 10 ¥ —


Thousands of U.S. dollars


Cash on hand and in banks $ 964,940 $ 964,940 $ —Notes and accounts receivable–trade 1,674,205 Allowance for doubtful accounts*1 (18,097)

1,656,108 1,654,375 (1,733)Securities and investment securities 375,141 375,141 —

Total $2,996,189 $2,994,456 $ (1,733)

Notes and accounts payable–trade $1,019,532 $1,019,532 $ —Short-term loans payable 701,916 701,916 —Current portion of bonds with subscription rights to shares 212,653 212,653 —Bonds with subscription rights to shares 212,653 199,160 (13,493)Long-term loans payable 333,206 332,005 (1,201)

Total $2,479,960 $2,465,266 $(14,694)

Derivative transactions*2 $ 202 $ 202 $ —

*1 The full amount of the allowance for doubtful accounts is excluded. Please note that the allowance for doubtful accounts includes promissory notes receivable–trade, accounts receivable–trade, and other receivable–trade that are considered to be doubtful.

*2 The net amount of the assets and liabilities is shown.

Note 1: Methods of calculating the fair value of fi nancial instruments and matters related to securities and derivatives

(1) Assets a. Cash on hand and in banks These items are settled within short periods and are shown at their respective book value, which

is almost equivalent to their settlement values. b. Notes and accounts receivable–trade The fair value of these fi nancial instruments is calculated, by specifi ed period and type of securi-

ty, as the present value by discounting the cash fl ow to maturity using a discount rate that takes account of credit risk.

c. Securities and investment securitiesThese fair values for stocks are based on quoted market prices. Also, certifi cates of deposit are settled within short periods and are shown at their respective book value, which is almost equiv-alent to their settlement values. For the note related to securities to be held to maturity, please refer to the “Marketable and Investment Securities” section of these notes.

(2) Liabilities a. Notes and accounts payable–trade, Short-term loans payable, and Current portion of bonds

with subscription rights to shares Since these items are settled within short periods of time and the book value is close to fair

value, they are presented at book value. b. Bonds with subscription rights to shares and Long-term loans payable These fair values are calculated using the discount rate that would apply if the full amount of the

principal were newly borrowed. Long-term borrowings at fl oating rates are subject to special treatment as interest-rate swaps, with the total amount of principal being treated together with the related interest-rate swap, and the value is calculated as the present value, of the same kind of borrowing, using a discount rate determined by reasonable estimation methods.

(3) Derivative transactions Please refer to “Note 18. Derivative Financial Instruments.”


Note 2: Financial instruments for which ascertaining the fair value is recognized to be extremely diffi cult

On consolidated balance sheets


As of March 31 2013 2012 2013

Stocks of associated companies ¥ 6,620 ¥ 6,356 $ 70,388Unlisted stocks 4,847 4,863 51,536

Total ¥11,467 ¥11,219 $121,924

Note: Market values are not available for these stocks, and, since ascertaining their fair value is recognized to be extremely diffi cult, the values of these stocks have not been included in “Securities and investment securities.”

Note 3: Monetary claims and securities with maturity dates that are scheduled to be amortized after the closing date of the consolidated accounts

Millions of yen

Over 1 year and Over 5 years and As of March 31, 2013 Within 1 year within 5 years within 10 years Over 10 years

Cash on hand and in banks ¥ 90,753 ¥ — ¥ — ¥—Notes and accounts receivable–trade 152,050 5,216 193 —Investment securities and other securities: Bonds to be held to maturity: Other 1 356 0 — Other securities with maturity: Other 23,549 — — —

Total ¥266,353 ¥5,572 ¥193 ¥—

Millions of yen


Cash on hand and in banks ¥ 84,956 ¥ — ¥— ¥—Notes and accounts receivable–trade 157,872 3,104 20 —Investment securities and other securities: Bonds to be held to maturity: Other 1 354 1 — Other securities with maturity: Other 2,855 — — —

Total ¥245,684 ¥3,458 ¥21 ¥—



Cash on hand and in banks $ 964,940 $ — $ — $—Notes and accounts receivable–trade 1,616,693 55,460 2,052 —Investment securities and other securities: Bonds to be held to maturity: Other 11 3,785 0 — Other securities with maturity: Other 250,388 — — —

Total $2,832,032 $59,245 $2,052 $—


Note 4: Interest-bearing debt that is scheduled to be repaid after the closing date of the consolidated accounts

Millions of yen

Over 1 year Over 2 years Over 3 years Over 4 years Within and within and within and within and within Over As of March 31, 2013 1 year 2 years 3 years 4 years 5 years 5 years

Short-term loans payable ¥52,024 ¥ — ¥ — ¥ — ¥ — ¥ —Current portion of bonds with subscription rights to shares 20,000 — — — — —Bonds with subscription rights to shares — — — — 20,000 —Long-term loans payable 13,991 8,215 4,030 17,955 504 634Lease obligations 655 449 287 131 35 4

Total ¥86,670 ¥8,664 ¥4,317 ¥18,086 ¥20,539 ¥638

Millions of yen


Short-term loans payable ¥54,798 ¥ — ¥ — ¥ — ¥ — ¥—Bonds with subscription rights to shares — 20,000 — — — —Long-term loans payable 24,579 13,692 8,098 3,311 17,470 70Lease obligations 649 486 302 101 45 16

Total ¥80,026 ¥34,178 ¥8,400 ¥3,412 ¥17,515 ¥86



Short-term loans payable $553,153 $ — $ — $ — $ — $ —Current portion of bonds with subscription rights to shares 212,653 — — — — —Bonds with subscription rights to shares — — — — 212,653 —Long-term loans payable 148,761 87,347 42,850 190,909 5,359 6,741Lease obligations 6,964 4,774 3,052 1,393 372 42

Total $921,531 $92,121 $45,902 $192,302 $218,384 $6,783

17. Marketable and Investment Securities

Marketable and investment securities comprise securities which have fair value. The book value, gross unrealized gains and losses, and fair value for such securities at March 31, 2013 and 2012 are as follows:Other securities:

Millions of yen

Historical Unrealized Unrealized BookAs of March 31, 2013 value gains losses value

Book value over historical cost: Equity securities ¥ 7,639 ¥2,806 ¥ — ¥10,445Historical cost over book value: Equity securities 1,551 — 263 1,288 Others 23,549 — — 23,549


Millions of yen


Book value over historical cost: Equity securities ¥4,139 ¥2,907 ¥ — ¥7,046Historical cost over book value: Equity securities 5,134 — 1,161 3,973 Others 2,855 — — 2,855



Book value over historical cost: Equity securities $ 81,223 $29,835 $ — $111,058Historical cost over book value: Equity securities 16,491 — 2,796 13,695 Others 250,388 — — 250,388

Proceeds from sales of marketable and investment securities and realized gains and losses for the fi scal years ended March 31, 2013 and 2012 are as follows:Other securities:

Millions of yen

For the fiscal year ended March 31, 2013 Proceeds of sales Realized gains Realized losses

Equity securities ¥57 ¥7 ¥1

Millions of yen


Equity securities ¥3,826 ¥83 ¥41



Equity securities $606 $74 $11

Impairment loss on securities:



Valuation loss on investment securities ¥398 ¥139 $4,232Loss on valuation of membership 11 22 117

Total ¥409 ¥161 $4,349


18. Derivative Financial Instruments

Fiscal year ended March 31, 2013 1. Derivatives not subject to hedge accounting No items reported 2. Derivatives subject to hedge accounting (1) Currency related

Millions of yen

Contractual Hedging Contractual value over FairClassification Transaction instruments value 1 year value

Deferred Forward exchange Accounts hedge contract receivable–tradeaccounting To sell: and accounts CAD payable–trade ¥ 25 ¥— ¥ 0 EUR 804 — 18 To buy: EUR 142 — (1) GBP 1 — (0) JPY 99 — 2

Total ¥1,071 ¥— ¥19



Deferred Forward exchange Accounts hedge contract receivable–trade accounting To sell: and accounts CAD payable–trade $ 266 $— $ 0 EUR 8,549 — 191 To buy: EUR 1,510 — (11) GBP 11 — (0) JPY 1,052 — 21

Total $11,388 $— $201

Note: Fair value is computed based on quotes from fi nancial institutions, among other sources.

(2) Interest-rate related

Millions of yen


Special Interest-rate swap Long-term ¥27,038 ¥19,013 (See notetreatment of contract loans payable below)interest-rate Receipts floating, swaps payments fixed



Special Interest-rate swap Long-term $287,485 $202,158 (See notetreatment of contract loans payable below)interest-rate Receipts floating,swaps payments fixed

Note: Items subject to special treatment of interest-rate swaps are handled together with long-term loans payable that are subject to hedging. The fair value is presented in the section entitled, “2. Information on the fair value of fi nancial instruments” contained in the section “16. Financial Instruments.”


Fiscal year ended March 31, 2012 1. Derivatives not subject to hedge accounting No items reported 2. Derivatives subject to hedge accounting (1) Currency related

Millions of yen


Deferred Forward exchange Accounts hedge contract receivable–tradeaccounting To sell: and accounts CAD payable–trade ¥ 40 ¥— ¥ 2 EUR 259 — 10 JPY 233 — (1) To buy: EUR 86 — (1) JPY 56 — 0

Total ¥674 ¥— ¥10

Note: Fair value is computed based on quotes from fi nancial institutions, among other sources.

(2) Interest-rate related

Millions of yen


Special Interest-rate swap Long-term ¥42,563 ¥27,038 (See notetreatment of contract loans payable below)interest-rate Receipts floating, swaps payments fixed

Note: Items subject to special treatment of interest-rate swaps are handled together with long-term loans payable that are subject to hedging. The fair value is presented in the section entitled, “2. Information on the fair value of fi nancial instruments” contained in the section “16. Financial Instruments.”

19. Severance and Pension Plans

The Company, its domestic consolidated subsidiaries, and some foreign consolidated subsidiar-ies have severance and defi ned benefi t pension plans as follows:


As of March 31 2013 2012 2013

Benefit obligation: Benefit obligation ¥68,403 ¥54,567 $727,305 Fair value of plan assets (45,325) (35,692) (481,925) Unrecognized actuarial loss (12,930) (3,215) (137,480) Unrecognized prior service cost (519) (612) (5,518)

Net amount recognized ¥ 9,629 ¥15,048 $102,382

Accrued severance and pension costs as of March 31, 2013 and 2012 include the reserve for directors’ retirement benefi ts of ¥172 million ($1,829 thousand) and ¥202 million, respectively.




Benefit cost: Service cost ¥3,034 ¥2,840 $32,259 Interest cost 2,182 1,736 23,200 Expected return on plan assets (998) (1,020) (10,611) Recognized actuarial loss 681 773 7,241 Recognized prior service cost 50 72 532 Special retirement benefits 266 23 2,828 Others 760 727 8,081

Net periodic benefit cost ¥5,975 ¥5,151 $63,530

For the fiscal years ended March 31 2013 2012

Assumptions to determine above obligation and cost: Discount rate 2.0% 2.0% Discount rate (Subsidiaries outside Japan) 4.0% 4.4% Expected return rate on plan assets 2.7% 2.7% Expected return rate on plan assets (Subsidiaries outside of Japan) 8.0% 8.0% Amortization period of actuarial loss 10 years 10 years Amortization period of prior service cost 10 years 10 years

20. Stock Options 1. Items and amounts of related expenses presented in the consolidated accounts for the fi scal years 2013 and 2012 are as follows:



Cost of sales ¥ 26 ¥ 31 $ 276Selling, general and administrative expenses 158 103 1,680

2. Description and Movement of Stock Options (1) Description of stock options granted by the end of the fi scal year ended March 31, 2013

1st subscription rights to shares

Scope and number of people eligible 1. Directors excluding outside directors in the to be granted stock options Company: 9 persons 2. Executive officers in the Company: 23 personsNumber of stock options awarded by type of stock Common stock: 1,223,000 shares (Note 1)Granted date November 5, 2009Vesting conditions (Note 3)Vesting period No relevant service period has been established.Exercise period From July 1, 2011 to November 5, 2024

Notes: 1. Options are presented after conversion to the number of shares.2. Those granted share options may exercise those options only while serving as directors or executive offi cers of the Company

and during a period of fi ve years after retiring from those positions. 3. When the Company’s consolidated return on equity (ROE; the “attained performance”) is less than 8.0% (the “target perfor-

mance”) as of the fi nal fi scal year-end within a two-year period (the “fi nal fi scal year”), those granted share options may only exercise share option rights for a number of shares calculated by multiplying the number of share option rights by the vesting ratio (a fi gure with a lower limit of 0.5 calculated by dividing the attained performance by the target performance).

4. When those granted share options are those newly appointed as directors or executive offi cers after July 1, 2009, or when those granted share options retire from their positions as directors or executive offi cers before the fi nal day of the fi nal fi scal year, the number of share option rights they may exercise is calculated by multiplying the adjusted fi gure described in Note 2 above by a tenure period ratio (a fi gure representing the ratio of days of tenure to the number of days in the period from April 1, 2009, through March 31, 2011).

5. When the calculations described in notes 3 and 4 above result in numbers of exercisable share option rights including a fraction of a right (a fi gure less than one), this fractional right is to be discarded.

6. When those who were granted share options are recognized to have executed their offi cial duties in an illegal or improper man-ner during their tenure, it is possible for the Company to restrict the number of share option rights that the people in question may exercise based on a decision by the Board of Directors. In such cases, the people granted share options in question may not exercise a number of share options in excess of the restricted number.

7. When those granted share options die, the heirs of those people may exercise the share options until a date three months after the day following the date of death or until a date six months after the last day of the fi nal fi scal year, whichever is later.

8. In addition to the provisions described in each of the previous notes, the exercise of share options is to be undertaken in accor-dance with the conditions stipulated in “share option grant contracts” agreed between the Company and those granted share options.


2nd subscription rights to shares

Scope and number of people eligible Executive officers in the Company: 4 persons to be granted stock options Number of stock options awarded by type of stock Common stock: 36,000 shares (Note 1)Granted date September 28, 2010Vesting conditions (Note 3)Vesting period No relevant service period has been established.Exercise period From July 1, 2011 to November 5, 2024


and during a period of fi ve years after retiring from those positions. 3. When the Company’s consolidated return on equity (ROE; the “attained performance”) is less than 8.0% (the “target perfor-

mance”) as of the fi nal fi scal year-end within a one-year period (the “fi nal fi scal year”), those granted share options may only exercise share option rights for a number of shares calculated by multiplying the number of share option rights by the vesting ratio (a fi gure with a lower limit of 0.5 calculated by dividing the attained performance by the target performance).






3rd subscription rights to shares

Scope and number of people eligible 1. Directors excluding outside directors in the to be granted stock options Company: 8 persons 2. Executive officers in the Company: 23 personsNumber of stock options awarded by type of stock Common stock: 1,615,000 shares (Note 1)Granted date September 27, 2011Vesting conditions (Note 3)Vesting period No relevant service period has been established.Exercise period From July 1, 2014 to June 30, 2026


and during a period of fi ve years after retiring from those positions. 3. When the Company’s consolidated return on invested capital (ROIC; the “attained performance”) is less than 8.0% (the “target

performance”) as of the fi nal fi scal year-end within a three-year period (the “fi nal fi scal year”), those granted share options may only exercise share option rights for a number of shares calculated by multiplying the number of share option rights by the vest-ing ratio (a fi gure with a lower limit of 0.5 calculated by dividing the attained performance by the target performance).







4th subscription rights to shares

Scope and number of people eligible 1. Directors excluding outside directors in the to be granted stock options Company: 4 persons 2. Executive officers in the Company: 4 persons 3. Directors and executive officers in subsidiaries: 10 personsNumber of stock options granted by type of stock Common stock: 534,000 shares (Note 1)Granted date October 1, 2012Vesting conditions (Note 3)Vesting period No relevant service period has been established.Exercise period From July 1, 2014 to June 30, 2026

Notes: 1. Options are presented after conversion to the number of shares.2. Those granted share options may exercise those options only while serving as directors or executive offi cers of the Company or

subsidiaries and during a period of fi ve years after retiring from those positions. 3. When the Company’s consolidated return on invested capital (ROIC; the “attained performance”) is less than 8.0% (the “target

performance”) as of the fi nal fi scal year-end within a two-year period (the “fi nal fi scal year”), those granted share options may only exercise share option rights for a number of shares calculated by multiplying the number of share option rights by the vest-ing ratio (a fi gure with a lower limit of 0.5 calculated by dividing the attained performance by the target performance).






(2) Movement of stock options and status of related changes With respect to stock options existing during the consolidated fi scal year ended March 31,

2013, the relevant numbers of stock options and numbers of shares issuable on the conversion of stock options are as follows:

a. Number of Stock Options

1st subscription 2nd subscription 3rd subscription 4th subscription rights to shares rights to shares rights to shares rights to shares

Share subscription rights which are not yet vested Outstanding as of March 31, 2012 — — 1,615,000 — Granted — — — 534,000 Forfeited — — — — Vested — — — — Undetermined balance — — 1,615,000 534,000Share subscription rights which have already been vested Outstanding as of March 31, 2012 1,010,000 36,000 — — Vested — — — — Exercised 219,000 — — — Forfeited — — — —Unexercised balance 791,000 36,000 — —

b. Price Information

1st subscription 2nd subscription 3rd subscription 4th subscription rights to shares rights to shares rights to shares rights to shares

Exercise price (yen) ¥ 1 ¥ 1 ¥ 1 ¥ 1Weighted average exercise price (yen) 300 — — —Weighted average fair value per stock at the granted date (yen) 341 343 245 288


3. Method of Estimating the Fair Value of Stock Options Regarding 4th subscription rights to shares issued during the consolidated fi scal year ended

March 31, 2013, the method of estimating the fair value of the share options is as follows.

a. Evaluation Method Used: Black-Scholes Method

b. Main Basic Parameters and Evaluation Methods

4th subscription rights to shares

Expected volatility (Note 1) 39.17%Expected holding period (Note 2) 8.0 yearsExpected dividend (Note 3) ¥5.0 per shareRisk-free rate (Note 4) 0.513%

Notes: 1. Expected volatility is calculated based on actual stock prices during the preceding eight years (from September 29, 2004, through September 28, 2012).

2. Because suffi cient data has not yet been accumulated and a rational estimate is diffi cult, estimates were performed based on an assumption that share options are exercised at the midpoint of the period in which the options may be exercised.

3. The expected dividend is a simple average value calculated based on actual dividends during the most recent eight fi scal years. 4. The risk-free rate corresponds to the interest rate (compounded) on Japanese government bonds with remaining periods

to maturity of approximately eight years as of September 28, 2012.

4. Method of Estimating the Number of Vested Stock Option Rights Basically, because rationally estimating the number of rights invalidated in the future is diffi cult,

the method used is to refl ect only the number of rights that are actually forfeited.

21. Income Taxes Signifi cant components of the deferred tax assets and liabilities are as follows:


As of March 31 2013 2012 2013

Deferred tax assets: Excess provision of accrued bonuses to employees ¥ 2,554 ¥ 2,087 $ 27,156 Loss recognized on a percentage-of-completion basis 730 642 7,762 Accrued enterprise tax 117 117 1,244 Accrued severance and pension costs 5,118 5,545 54,418 Unrealized gain on fixed assets 1,269 887 13,493 Tax loss carried forward 22,415 21,268 238,331 Write-down of other investments 1,604 2,232 17,055 Loss from liquidation of investments in subsidiaries and affiliates — 46 — Research and development expenses 100 334 1,063 Loss on write-down of inventories 3,645 3,794 38,756 Reserve for losses on construction completion guarantees 3,742 5,027 39,787 Allowance for doubtful accounts 1,470 4,033 15,630 Others based on overseas tax codes outside Japan 4,097 4,241 43,562 Others 2,138 5,604 22,732

48,999 55,857 520,989

Valuation allowance (19,240) (20,798) (204,572)

Total deferred tax assets 29,759 35,059 316,417Deferred tax liabilities: Reserve for advanced depreciation of fixed assets (1,350) (1,415) (14,354) Net unrealized gains on investment securities (904) (617) (9,612) Others (2,133) (2,677) (22,679)

Total deferred tax liabilities (4,387) (4,709) (46,645)

Net deferred tax assets ¥25,372 ¥30,350 $269,772


A summary of the major differences between the Japanese statutory tax rate and the Group’s effective tax rate is as follows:

As of March 31 2013 2012

Statutory tax rate, giving tax effect on enterprise tax payable 38.0% 40.7%Entertainment expenses and other expenses not deductible 1.2 3.4Per capital equalization inhabitants’ taxes 2.2 2.8Dividends received not taxable (17.5) (62.7)Dividends received effected by the exclusion from consolidation 16.1 69.7Valuation allowance (8.2) 25.7Tax rate differences with overseas consolidated subsidiaries (9.0) (21.5)Reduction in deferred tax assets at the end of the period due to changes in tax rate — 21.8Others 7.1 (16.2)

Effective tax rate as shown in statements of income 29.8 63.8

22. Segment Information For the fi scal years ended March 31, 2013 and 20121. Overview of reportable segments

The reportable segments are constituent units of the Group for which separate fi nancial informa-tion is available. The Board of Directors periodically examines these segments for the purpose of deciding the allocation of management resources and evaluating operating performance. The Group operates in three business segments as follows:

Segments Principal Products Contents

Fluid Machinery & Systems

Pumps, compressors, turbines, refrigera-tion equipment, fans, and others

Manufacture, sale, operation and main-tenance (O&M) services, and others

Environmental Engineering

Municipal waste incineration plants, industrial waste incineration plants, water treatment plants, and others

Engineering, construction, O&M services, and others

Precision Machinery

Dry vacuum pumps, CMP systems, plat-ing systems, gas abatement systems, and others

Manufacture, sale, and maintenance

2. Calculation method used for sales, profi ts and losses, assets and liabilities, and other items for each reportable segment

The accounting method used for reportable business segments is the same as the method stated in “Notes to the Consolidated Financial Statements.” Profi ts from reportable segments are fi gures based on operating income. Intersegment sales are recorded at the same prices used in transactions with customers.


3. Information about sales, profi ts and losses, assets and liabilities, and other items for each reportable segment for the fi scal years ended March 31, 2013 and 2012, is as follows:

Millions of yen

Reportable segments

Fluid Machinery Environmental Precision Others Adjustments ConsolidatedFor the fiscal year ended March 31, 2013 & Systems Engineering Machinery Total (Note 1) Total (Note 2) (Note 3)

Sales to customers ¥305,586 ¥52,496 ¥66,504 ¥424,586 ¥ 1,716 ¥426,302 ¥ — ¥426,302Intersegment sales and transfers 319 5 — 324 3,721 4,045 (4,045) —

Total ¥305,905 ¥52,501 ¥66,504 ¥424,910 ¥ 5,437 ¥430,347 ¥ (4,045) ¥426,302

Segment income ¥ 15,942 ¥ 5,177 ¥ 3,306 ¥ 24,425 ¥ 552 ¥ 24,977 ¥ 107 ¥ 25,084

Segment assets ¥267,037 ¥46,393 ¥60,327 ¥373,757 ¥20,594 ¥394,351 ¥110,225 ¥504,576

Others: Depreciation expense ¥ 8,221 ¥ 340 ¥ 2,950 ¥ 11,511 ¥ 921 ¥ 12,431 ¥ (76) ¥ 12,356 Amortization of goodwill 382 — — 382 — 382 — 382 Investments for companies applying equity method 1,283 4,418 — 5,701 — 5,701 — 5,701 Increase in tangible and intangible assets 6,876 394 2,486 9,756 2,574 12,330 (28) 12,302


Reportable segments

For the fiscal year ended Fluid Machinery Environmental Precision Others Adjustments ConsolidatedMarch 31, 2013 & Systems Engineering Machinery Total (Note 1) Total (Note 2) (Note 3)

Sales to customers $3,249,187 $558,171 $707,113 $4,514,471 $ 18,245 $4,532,716 $ — $4,532,716Intersegment sales and transfers 3,392 53 — 3,445 39,564 43,009 (43,009) —

Total $3,252,579 $558,224 $707,113 $4,517,916 $ 57,809 $4,575,725 $ (43,009) $4,532,716

Segment income $ 169,506 $ 55,045 $ 35,151 $ 259,702 $ 5,869 $ 265,571 $ 1,138 $ 266,709

Segment assets $2,839,309 $493,280 $641,435 $3,974,024 $218,969 $4,192,993 $1,171,983 $5,364,976

Others: Depreciation expense $ 87,411 $ 3,615 $ 31,366 $ 122,392 $ 9,793 $ 132,185 $ (808) $ 131,377 Amortization of goodwill 4,062 — — 4,062 — 4,062 — 4,062 Investments for companies applying equity method 13,642 46,975 — 60,617 — 60,617 — 60,617 Increase in tangible and intangible assets 73,110 4,189 26,433 103,732 27,368 131,100 (298) 130,802

Notes: 1. The “Others” item in the table above is the business segment for operations that are not included among reportable segments. It contains business support services and other activities.

2. The “Adjustments” item is as follows: (1) Segment income shows eliminations among intersegment sales and transfers. (2) Segment assets consisted of ¥113,022 million for corporate assets and ¥(2,797) million for eliminations among intersegment sales and transfers. The corporate assets

primarily consisted of cash and cash equivalents, some investment securities, and deferred tax assets of the Group. 3. The adjustment in the increase in “Others” items under depreciation, fi xed assets, and intangible assets is due to the elimination of intersegment transactions. 4. Segment income has been reconciled within operating income in the consolidated statements of income.


Millions of yen

Reportable segments

Fluid Machinery Environmental Precision Others Adjustments ConsolidatedFor the fiscal year ended March 31, 2012 & Systems Engineering Machinery Total (Note 1) Total (Note 2) (Note 3)

Sales to customers ¥286,090 ¥50,129 ¥68,373 ¥404,592 ¥ 7,485 ¥412,077 ¥ — ¥412,077Intersegment sales and transfers 954 0 7 961 3,593 4,554 (4,554) —

Total ¥287,044 ¥50,129 ¥68,380 ¥405,553 ¥11,078 ¥416,631 ¥ (4,554) ¥412,077

Segment income ¥ 15,579 ¥ 322 ¥ 6,594 ¥ 22,495 ¥ 617 ¥ 23,112 ¥ 155 ¥ 23,267

Segment assets ¥268,430 ¥47,974 ¥67,591 ¥383,995 ¥18,061 ¥402,056 ¥86,908 ¥488,964

Others: Depreciation expense ¥ 8,569 ¥ 355 ¥ 3,264 ¥ 12,188 ¥ 697 ¥ 12,885 ¥ (120) ¥ 12,765 Amortization of goodwill 235 — — 235 — 235 — 235 Investments for companies applying equity method 1,187 3,966 — 5,153 — 5,153 — 5,153 Increase in tangible and intangible assets 7,273 440 2,932 10,645 1,685 12,330 (14) 12,316

Notes: 1. The “Others” item in the table above is the business segment for operations that are not included among reportable segments. It contains business support services and other activities.

2. The “Adjustments” item is as follows: (1) Segment income shows eliminations among intersegment sales and transfers. (2) Segment assets consisted of ¥90,091 million for corporate assets and ¥(3,183) million for eliminations among intersegment sales and transfers. The corporate assets

primarily consisted of cash and cash equivalents, some investment securities, and deferred tax assets of the Group. 3. The adjustment in the increase in “Others” items under depreciation, fi xed assets, and intangible assets is due to the elimination of intersegment transactions. 4. Segment income has been reconciled within operating income in the consolidated statements of income.

Reference information 1. Geographical segment information for the fi scal years ended March 31, 2013 and 2012 is

as follows: a. Net sales



Japan ¥210,566 ¥230,863 $2,238,873Asia 117,126 99,408 1,245,359North America 45,631 36,085 485,178Others 52,979 45,721 563,306

Total ¥426,302 ¥412,077 $4,532,716

Note: Net sales information above is based on the location of the customer.

b. Property, plant and equipment


As of March 31 2013 2012 2013

Japan ¥66,299 ¥68,734 $704,934Asia 9,320 8,183 99,096North America 13,638 10,303 145,008Others 1,465 1,884 15,577

Total ¥90,722 ¥89,104 $964,615


Information about impairment loss on fi xed assets by reportable segments for the fi s-cal years ended March 31, 2013 and 2012 is as follows:

Millions of yen

Reportable segments

For the fiscal year ended Fluid Machinery Environmental Precision March 31, 2013 & Systems Engineering Machinery Total Others Adjustments Consolidated

Impairment loss ¥263 ¥0 ¥0 ¥263 ¥15 ¥— ¥278

Millions of yen

Reportable segments


Impairment loss ¥— ¥— ¥— ¥— ¥128 ¥— ¥128


Reportable segments


Impairment loss $2,796 $0 $0 $2,796 $160 $— $2,956

Information about amortization of goodwill and year-end balances by reportable seg-ments for the fi scal years ended March 31, 2013 and 2012 is as follows:

Millions of yen

Reportable segments


Amortization of goodwill ¥ 382 ¥— ¥— ¥ 382 ¥— ¥— ¥ 382Balances as of March 31 1,785 — — 1,785 — — 1,785

Millions of yen

Reportable segments


Amortization of goodwill ¥235 ¥— ¥— ¥235 ¥— ¥— ¥235Balances as of March 31 859 — — 859 — — 859


Reportable segments


Amortization of goodwill $ 4,062 $— $— $ 4,062 $— $— $ 4,062Balances as of March 31 18,979 — — 18,979 — — 18,979


Independent Auditor’s Report

The Board of Directors

EBARA CORPORATION

We have audited the accompanying consolidated fi nancial statements of EBARA CORPORATION and its consolidated subsid-

iaries, which comprise the consolidated balance sheet as at March 31, 2013, and the consolidated statements of income, com-

prehensive income, changes in net assets, and cash fl ows for the year then ended and a summary of signifi cant accounting

policies and other explanatory information, all expressed in Japanese yen.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated fi nancial statements in accordance

with accounting principles generally accepted in Japan, and for designing and operating such internal control as management

determines is necessary to enable the preparation and fair presentation of the consolidated fi nancial statements that are free

from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our

audit 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 consolidated fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of

material misstatement of the consolidated fi nancial statements, whether due to fraud or error. The purpose of an audit of the

consolidated fi nancial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making

these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the

consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also

includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the consolidated fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated fi nancial statements referred to above present fairly, in all material respects, the consolidated

fi nancial position of EBARA CORPORATION and its consolidated subsidiaries as at March 31, 2013, and their consolidated fi nan-

cial performance and cash fl ows for the year then ended in conformity with accounting principles generally accepted in Japan.

Convenience Translation

We have reviewed the translation of these consolidated fi nancial statements into U.S. dollars, presented for the convenience of

readers, and, in our opinion, the accompanying consolidated fi nancial statements have been properly translated on the basis

described in Note 5.

Ernst & Young ShinNihon LLC

June 27, 2013

Tokyo, Japan

72 EBARA CORPORATION ANNUAL REPORT 2013 72 EBARA CORPORATION ANNUAL REPORT 2013

EBARA Group History

1912 (Nov.)

Inokuty Type Machinery Office founded. Issey Hatakeyama was appointed general manager, under the supervision of Ariya Inokuty, a professor of Tokyo Imperial University.

1920 (May)

EBARA CORPORATION establishedA plant was constructed at Minami-Shinagawa, Shinagawa-cho, Ebara-gun, Tokyo, marking the estab-lishment of the Company, which assumed the responsi-bilities of the Inokuty Type Machinery Office and began the manufacturing of centrifugal pumps.

1938 (Apr.)

New plant built in Haneda, Kamata-ku, TokyoThe Head Office and manufacturing operations shifted from Shinagawa to the new facility in Haneda.

1941 (Dec.)

New plant built in KawasakiThe new plant began manufacturing machine tools in accordance with the Machine Tool Manufacturing Law.

1945 (Apr.)

Haneda Plant damaged in war. All operations, except for a pump testing facility, fabrication and welding shop, and main building, deemed no longer functional. As a result, production was transferred to the Kawasaki Plant.

1955 (Jan.)

The Haneda Plant was reopened to spearhead the Company’s manufacturing operations.

1956 (Jan.)

Ebara-Infilco was set up to manufacture and sell water treatment equipment.

1964 (Apr.)

EBARA’s first post-World War II overseas sales office was opened in Bangkok.

1964 (June)

Ebara Service Co., Ltd., was established to provide for after-sales service for EBARA’s products.

1965 (Apr.)

The Fujisawa Plant was opened as the first facility in Japan to mass-produce standard pumps, and it took over the production of chillers from the Haneda Plant.

1975 (Jan.)

EBARA’s first overseas production facility, Ebara Indústrias Mecánicas e Comércio Ltda., was established in Brazil.

1975 (Nov.)

The Sodegaura Plant was opened to manufacture main-ly compressors and turbines.

1979 (Dec.)

P.T. Ebara Indonesia was established in Indonesia to manufacture standard pumps in Southeast Asia.

1981 (Jan.)

Ebara International Corporation was established in the United States to provide a North American base for the pumps business.

1985 (Jan.)

EBARA realigned its production systems by integrating the Kawasaki Plant into the Fujisawa Plant.

1987 (July)

A precision machining facility was opened at the Fujisawa Plant dedicated to production of vacuum equipment for the semiconductor industry.

1989 (Jan.)

Ebara Italia S.p.A. (currently, Ebara Pumps Europe S.p.A.) was established to manufacture stainless steel standard pumps.

1992 (Aug.)

Ebara Qingdao Co., Ltd., was founded in China as a center for pump production.

1994 (Oct.)

Ebara-Infilco was merged into the Company.

2000 (Apr.)

Ebara Techno-serve Co., Ltd., was formed to combine sales and maintenance services for the standard pumps business.

2000 (Apr.)

New Elliott Corporation, a leading company in the compressors and turbines business, became a wholly owned subsidiary.

2001 (June)

Ebara Kyushu Co., Ltd., established in Kumamoto Prefecture for producing CMP and other equipment, went into full operation.

2002 (Apr.)

The compressors and turbines business was split off into a separate company, Elliott Ebara Turbomachinery Corporation, located in Chiba Prefecture.

2002 (June)

The Executive Officer System was introduced.

2002 (Sept.)

The chillers business was split off into a separate company, Ebara Refrigeration Equipment & Systems Co., Ltd.

2003 (May)

Ebara Great Pumps Co., Ltd., was established in China to manufacture and sell pumps in China for the oil and gas industries.

2005 (Apr.)

An in-house company system was introduced with a corporate structure comprising a Corporate Sector for headquarters functions and three core companies: Fluid Machinery & Systems, Environmental Engineering, and Precision Machinery.

2005 (Aug.)

Ebara Boshan Pumps Co., Ltd., was established in China to manufacture and sell large-scale, high- pressure pumps in China.

2006 (May)

Ebara Machinery (China) Co., Ltd., was formed to serve as the manufacturing, sales, and service center for stan-dard pumps in China.

2009 (Apr.)

EBARA integrated its water treatment plant businesses into Ebara Engineering Service Co., Ltd.

2009 (Oct.)

EBARA integrated its environmental plant businesses into Ebara Environmental Plant Co., Ltd.

2010 (Jan.)

The Futtsu Plant (Chiba, Japan) was newly established, and the functions of the former Haneda Plant were transferred there.

2010 (Mar.)

EBARA, Mitsubishi Corp., and JGC Corp. started a joint venture in the water business, Ebara Engineering Service Co., Ltd. (renamed Swing Corporation).

2010 (Oct.)

Ebara Kyushu Co., Ltd., was merged into the Company.

2012 (Apr.)

In a realignment of the pumps business, Ebara Techno-serve Co., Ltd., Ebara Yoshikura Hydro-Tech Co., Ltd., and Ebara Environmental Technologies Hokkaido Co., Ltd., were merged.

2012 (Nov.)

100th anniversary of the commencement of Ebara oper-ations

EBARA CORPORATION ANNUAL REPORT 2013 73 EBARA CORPORATION ANNUAL REPORT 2013 73

Corporate Data (As of March 31, 2013)

Corporate ProfileEBARA CORPORATION

Head Office11-1, Haneda Asahi-cho, Ohta-ku, Tokyo 144-8510, Japan Phone: 81-3-3743-6111 Fax: 81-3-5736-3100URL: http://www.ebara.co.jp/en

Stock Information

Securities Code6361 (Japan)

Common Stock Issued and outstanding: 465,118,658 shares

Number of Shareholders45,800

Securities TradedTokyo Stock Exchange and Sapporo Securities Exchange

Major Shareholders (% of total)

The Master Trust Bank of Japan, Ltd. (Trust Account) 7.5Japan Trustee Services Bank, Ltd. (Trust Account) 5.7Mizuho Corporate Bank, Ltd. 2.2PICTET AND CIE (EUROPE) S.A. 1.8DEUTSCHE BANK AG LONDON-PB NON-TREATY CLIENTS 613 1.8MSIP CLIENT SECURITIES 1.6The Bank of Tokyo-Mitsubishi UFJ, Ltd. 1.5EBARA CORPORATION Employee Shareholders 1.1Nippon Life Insurance Company 1.1Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) 1.1Note: Treasury stock is eliminated from the total number of shares issued in calculating

the percentage.

Stock Price Range and Turnover

0

250

500

750

1,000

0

4,000

8,000

12,000

16,000

4/12 6/12 8/12 10/12 12/12 2/13

EBARA Stock Price (Yen) Nikkei Average (Yen)

150,000

100,000

200,000

Nikkei AverageEBARA Stock PriceEBARA Stock Turnover (Thousand shares per month)

10/11 12/11 2/12

50,000

4/11 6/11 8/1112/10 2/1110/10

Date of FoundationNovember 1912

Number of Employees (Consolidated)15,170

Paid-in Capital ¥68,613 million

Transfer Agent and RegistrarSumitomo Mitsui Trust Bank, Limited4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8233, Japan

Number of Shares Constituting One Unit1,000

Accounting AuditorErnst & Young ShinNihon LLC

Composition of Shareholders

Foreign Corporations and Individuals26.1%

Securities Companies4.0%

Treasury Stock0.2%

Individualsand Others

30.4%

Financial Institutions33.1%

Other Domestic Corporations6.2%

For more investor relations information, please access http://www.ebara.co.jp/en/ir/ 74 EBARA CORPORATION ANNUAL REPORT 2013

Printed in Japan on recycled paper using non-VOC ink

EBARA CORPORATIONHead Office

11-1, Haneda Asahi-cho, Ohta-ku,

Tokyo 144-8510, Japan

Phone: 81-3-3743-6111

URL: http://www.ebara.co.jp/en

E-mail: [email protected]

Date post:	12-Mar-2020
Category:	Documents
Upload:	others
View:	1 times
Download:	0 times

EBARA CORPORATION Annual Report 2013 · EBARA CORPORATION Annual Report 2013 For the Year Ended...

Documents