1. Attach relevant Certificate of Good Standing from the Secretary of State of the Commonwealth of Massachusetts.

Transcription

1 The MBTA specification currently requires that the primary suppliers of subsystems delineated in Tab 1.1 to have the following information included in a Bidder s Proposal. We request that you provide this information to us so that it can be incorporated into our submittal. As noted in our cover letter, we are requesting clarification from MBTA regarding the need for this material. We will advise you of their response, but we must currently proceed as if it will be required. We request your return of this information by January 31, Attach relevant Certificate of Good Standing from the Secretary of State of the Commonwealth of Massachusetts. LECIP: Not Applicable LECIP Inc. is incorporated in Illinois. 2. Provide the names and telephone numbers of all business owners, shareholders if not a publicly held corporation, and/or members if a limited liability company. LECIP Holdings Corporation Provide the names, title and telephone numbers of all officers. Kazuo Ueno CEO Chung Chung Tam President & COO Fumitoshi Nakamura CFO Toyoji Sugisawa Secretary Has the business or an owner or shareholder of the business ever had a prior contractual relationship with the MBTA? If yes, please describe relationship. No. 5. Has the business or an owner or shareholder of the business ever been in default of any obligations under a contract with the MBTA, any other Massachusetts state agency or any federal agency? If yes, please describe the circumstances. Please indicate whether it resulted in a termination for cause. No.

2 6. Have any of the business owners, shareholders, or officers ever been convicted of felony violations of Federal, state or local laws? If yes, please describe the circumstances. No. 7. Are there any pending recent law suits against the business or any of its owners or shareholders? If yes, please describe the circumstances. No. 8. Provide the name, address, account number, contact person and telephone number of the insurance agent responsible for procuring insurance required by the Solicitation Documents. Secure Futures 1622 Willow Road, Suite 111, Northfield, IL Auto: 35UECJE7438 Pack: 355BAPJ4952 Workers Comp: 35WECVY0168 Contact person: Diane Klimek Telephone Number: Provide the name, address, contact person and telephone of three business credit references, including but not limited to your primary banking institution. Vitaltech 850 W. Jackson, Suite 575, Chicago, IL Contact Person: Micheal Berk Telephone: Bank of Tokyo Mitsubishi UFJ 227 WE Monroe St, Chicago, Il Contact Person: Natsuko Dunn Telephone: Northstar Metal Products, Inc. 591 Mitchell Road, Glendale Heights, IL Contact Person: Jeffery True Telephone:

3 10. Has the business or any of the business s owners or shareholders ever filed for bankruptcy or invoked insolvency proceedings under state law? No 11. Provide the last three (3) years of audited financial statements, or reasonable equivalent of the Offeror. If the Offeror is a joint venture or other combination of business entities, provide the last three (3) years audited financial statements for each entity. Please see attached Financial Statement from LECIP Holdings Corporation. 12. Provide the business s current code of business ethics or equivalent. Please see LECIP Inc. Code of Ethics document. 13. Provide the responses to Questions Nos. 1 through 12 for all proposed suppliers of major subsystems identified in response to Tab I.1 - Technical Approach. N/A

4 LECIP HOLDINGS CORPORATION and Consolidated Subsidiaries Consolidated Financial Statements for the Years Ended March 31, 2011 and 2010 and Independent Auditors Report

5

6 LECIP HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2011 AND 2010 U.S. Dollars Yen (Note 1) ASSETS CURRENT ASSETS: Cash and cash equivalents 883, ,046 $ 10,643 Time deposits 70,000 70, Notes and accounts receivable: Trade notes and accounts 4,391,926 5,723,193 52,915 Non-consolidated subsidiaries 7, Other 41,406 51, Allowance for doubtful accounts (1,900) (2,630) (23) 4,438,749 5,771,849 53,479 Inventories (Note 4) 1,383,312 1,332,027 16,666 Deferred tax assets (Note 10) 102, ,404 1,239 Prepaid expenses and other current assets 40,505 69, Total current assets 6,918,787 7,987,043 83,359 PROPERTY, PLANT AND EQUIPMENT (Note 7): Buildings and structures 3,042,417 3,192,715 36,655 Machinery and equipment 4,267,694 4,147,709 51,418 7,310,111 7,340,424 88,073 Accumulated depreciation (5,855,224) (5,731,523) (70,545) 1,454,887 1,608,901 17,528 Land 120, ,957 1,448 Construction in progress 1, Net property, plant and equipment 1,576,380 1,740,135 18,992 INVESTMENTS AND OTHER ASSETS: Investment securities (Note 3) 238, ,597 2,879 Investments in non-consolidated subsidiaries 207, ,845 2,497 Deferred tax assets (Note 10) 400, ,992 4,823 Other assets (Notes 6) 356, ,168 4,298 Total investments and other assets 1,203, ,602 14,497 TOTAL 9,698,387 10,521,780 $ 116,848 (Continued) 2

7 LECIP HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2011 AND 2010 U.S. Dollars Yen (Note 1) LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term borrowings (Note 7) - 660,000 - Current portion of long-term debt (Note 7) 265, ,228 3,194 Notes and accounts payable: Trade notes and accounts 2,145,398 2,549,273 25,848 Other 489, ,635 5,900 2,635,056 2,896,908 31,748 Accrued expenses 359, ,993 4,336 Income taxes payable 177,042 56,616 2,133 Other current liabilities 48,270 75, Total current liabilities 3,485,339 4,324,263 41,992 LONG-TERM LIABILITIES: Long-term debt (Note 7) 707, ,594 8,519 Liability for employees' retirement benefits (Note 8) 14,120 11, Other long-term liabilities 216, ,581 2,603 Total long-term liabilities 937, ,485 11,292 EQUITY (Note 9): Common stock: Authorized - 22,000,000 thousand shares Issued - 6,399,100 thousand shares in 2011 and , ,645 8,863 Capital surplus 719, ,407 8,668 Retained earnings 3,838,438 3,887,402 46,246 Treasury stock - at cost: 8,797 shares in 2011 and 8,685 shares in 2010 (14,104) (14,030) (170) Accumulated other comprehensive income Unrealized gain on available-for-sale securities 37,036 33, Foreign currency translation adjustments (40,592) (72,700) (489) Total (3,556) (39,392) (43) Total equity 5,275,830 5,289,032 63,564 TOTAL 9,698,387 10,521,780 $ 116,848 See notes to consolidated financial statements. (Concluded) 3

8 LECIP HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED MARCH 31, 2011 AND 2010 U.S. Dollars Yen (Note 1) NET SALES 12,575,652 13,633,296 $ 151,514 COST OF SALES (Note 11) 10,087,192 10,905, ,533 Gross profit 2,488,460 2,727,583 29,981 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 11) 2,348,502 2,661,767 28,295 Operating income 139,958 65,816 1,686 OTHER INCOME (EXPENSES): Interest and dividend income 4,526 4, Interest expense (13,879) (22,380) (167) Grants received 3,835 18, Gain on sales and disposals of long-lived asses, net 45,290 1, Refunded import duty 6, Gain on sales of scraps 10,353 3, Foreign exchange loss, net (7,270) (10,016) (88) Prior year adjustment - 31,440 - Write-down of investment securities (59) (7,862) (1) Impairment loss of long-lived assets - (19,619) - Special retirement payments - (29,757) - Compensation income 37,981 3, Other-net 15,932 6, Other income (expenses) - net 103,371 (19,379) 1,246 NET INCOME BEFORE MINORITY INTERESTS 243,329 46,437 2,932 INCOME BEFORE INCOME TAXES 243,329 46,437 2,932 INCOME TAXES (Note 10): Current 204,292 58,765 2,461 Deferred (7,856) (54,163) (94) Total income taxes 196,436 4,602 2,367 NET INCOME 46,893 41,835 $ 565 Yen U.S. Dollars PER SHARE OF COMMON STOCK (Notes 2.s and 16): Basic net income $ 0.08 Cash dividends applicable to the year See notes to consolidated financial statements. 4

9 LECIP HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME YEAR ENDED MARCH 31, 2011 Thousands U.S. Dollars of (Note 1) NET INCOME BEFORE MINORITY INTERESTS 46,893 $ 565 OTHER COMPREHENSIVE INCOME (Note 15): Unrealized gain on available-for-sale securities 3, Foreign currency translation adjustments 32, Total other comprehensive income 35, COMPREHENSIVE INCOME (Note 15) 82, TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO (Note 15): Owners of the parent company 82, Minority interests - - See notes to consolidated financial statements. 5

10 LECIP HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED MARCH 31, 2011AND 2010 Shares Yen Accumulated other comprehensive income Number of Unrealized Gain on Foreign Currency Common Stock Common Capital Retained Treasury Available-for-sale Translation Total Outstanding Stock Surplus Earnings Stock Securities Adjustments Equity BALANCE AT MARCH 31, ,390, , ,407 3,954,204 (14,030) 14,238 (70,343) 5,339,121 Net income , ,835 Cash dividends, 17 per share (108,637) (108,637) Net changes in the year ,070 (2,357) 16,713 BALANCE AT MARCH 31, ,390, , ,407 3,887,402 (14,030) 33,308 (72,700) 5,289,032 Net income , ,893 Cash dividends, 15 per share (95,857) (95,857) Purchase of treasury stock (112) (74) - - (74) Net changes in the year ,728 32,108 35,836 BALANCE AT MARCH 31, ,390, , ,407 3,838,438 (14,104) 37,036 (40,592) 5,275,830 U.S. Dollars (Note 1) Unrealized Gain on Foreign Currency Common Capital Retained Treasury Available-for-sale Translation Stock Surplus Earnings Stock Securities Adjustments Total BALANCE AT MARCH 31, 2010 $ 8,863 $ 8,668 $ 46,836 $ (169) $ 401 $ (876) - $ 63,723 Net income Cash dividends, 0.18 per share - - (1,155) (1,155) Purchase of treasury stock (1) - - (1) Net changes in the year BALANCE AT MARCH 31, 2011 $ 8,863 $ 8,668 $ 46,246 $ (170) $ 446 $ (489) $ 63,564 See notes to consolidated financial statements. 6

11 LECIP HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 31, 2011 AND 2010 U.S. Dollars (Note 1) Yen OPERATING ACTIVITIES: Income before income taxes 243,329 46,437 $ 2,932 Adjustments for: Income taxes - paid (84,310) (372,668) (1,016) Depreciation and amortization 308, ,721 3,723 Gain on sales and disposals of long-lived assets, net (45,290) (1,912) (546) Impairment loss on long-lived assets - 19,619 - Changes in assets and liabilities: Decrease (increase) in notes and accounts receivable 1,215,461 (709,080) 14,644 (Increase) decrease in inventories (52,601) 231,945 (634) (Decrease) increase in notes and accounts payable - trade (225,083) 101,094 (2,712) Increase (decrease) in liability for retirement benefits 2,809 (9,297) 34 Other - net (61,685) (186,364) (743) Total adjustments 1,058,278 (572,942) 12,750 Net cash provided by (used in) operating activities 1,301,607 (526,505) 15,682 INVESTING ACTIVITIES: Purchases of investment securities (9,231) (24,967) (111) Proceeds from sales of investment securities - 11,380 - Acquisition of shares of a non-consolidated subsidiary (98,400) (45,245) (1,186) Purchases of property, plant and equipment (144,402) (197,329) (1,740) Proceeds from sales of property, plant and equipment 89,464 27,035 1,078 Other - net (98,364) (10,204) (1,185) Net cash used in investing activities (260,933) (239,330) (3,144) FINANCING ACTIVITIES: (Decrease) increase in short-term borrowings - net (660,000) 436,140 (7,952) Proceeds from long-term debt 300, ,000 3,614 Repayment of long-term debt (213,510) (164,392) (2,572) Cash dividends (95,714) (108,300) (1,153) Other-net (14,333) (8,763) (173) Net cash (used in) provided by financing activities (683,557) 434,685 (8,236) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS 2,184 (8,757) 27 NET DECREASE IN CASH AND CASH EQUIVALENTS 359,301 (339,907) 4,329 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 524, ,953 6,314 CASH AND CASH EQUIVALENTS, END OF YEAR 883, ,046 $ 10,643 See notes to consolidated financial statements 7

12 LECIP HOLDINGS CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2011 AND BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in conformity with accounting principles generally accepted in Japan ( Japanese GAAP ), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards. Under Japanese GAAP, a consolidated statement of comprehensive income is required from the fiscal year ended March 31, 2011 and has been presented herein. Accordingly, accumulated other comprehensive income is presented in the consolidated balance sheet and the consolidated statement of changes in equity. Information with respect to other comprehensive income for the year ended March 31, 2010 is disclosed in Note 15. In addition, net income before minority interests is disclosed in the consolidated statement of income from the year ended March 31, In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2010 financial statements to conform to the classifications used in The consolidated financial statements are stated in Japanese yen, the currency of the country in which LECIP HOLDINGS CORPORATION (the Company ) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of 83 to $ 1, the approximate rate of exchange at March 31, Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidation The consolidated financial statements as of March 31, 2011 include the accounts of the Company and its 5 significant (3 in 2010) subsidiaries (together, the Group ). Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated. Investments in remaining non-consolidated subsidiaries are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated. b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements In May 2006, the Accounting Standards Board of Japan (the ASBJ ) issued ASBJ Practical Issues Task Force (PITF) No.18, Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated 8

13 Financial Statements. PITF No.18 prescribes: (1) the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the presentation of the consolidated financial statements, (2) financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States of America tentatively may be used for the consolidation process, (3) however, the following items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model of accounting for property, plant, and equipment and investment properties and incorporation of the cost model of accounting; 5) recording the prior years effects of changes in accounting policies in the income statement where retrospective adjustments to financial statements have been incorporated; and 6) exclusion of minority interests from net income, if contained. c. Cash Equivalents Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits which mature within three months from the date of acquisition. d. Inventories Inventories are stated at the lower of cost, determined by the average method for finished products and work in process, by the weighted average cost for merchandise and raw materials, and by the last purchase price method for supplies, or net selling value. e. Investment Securities All investment securities are classified and accounted for, depending on management's intent, as available-for-sale securities, which are not classified as either trading securities or held-to-maturity securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported as a separate component of equity. Non-marketable available-for-sale securities are stated at cost determined by the movingaverage method. For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income. f. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiary is computed substantially by the declining-balance method based on the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after April 1, 1998 and lease assets of the Company and its consolidated domestic subsidiary, and all property, plant and equipment of consolidated foreign subsidiaries. The range of useful lives is principally from 3 to 47 years for buildings and structures, and from 4 to 12 years for machinery and equipment. The useful lives for lease assets are the terms of the respective leases. g. Long-lived assets The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured at the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. h. Other assets Software for internal use is amortized over 5 years by the straight-line method. 9

14 i. Retirement and Pension Plans The Company and its domestic consolidated subsidiary have defined contribution pension plans for employees and unfunded retirement benefit plans for part-time employees. For part-time employees, the Company and its domestic consolidated subsidiary have defined benefit pension plans and account for the liability for retirement benefits based on the amount that would be required if all the part-time employees are retired at each balance sheet date. j. Asset Retirement Obligations In March 2008, the ASBJ published the accounting standard for asset retirement obligations, ASBJ Statement No.18 Accounting Standard for Asset Retirement Obligations and ASBJ Guidance No.21 Guidance on Accounting Standard for Asset Retirement Obligations. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost. This standard was effective for fiscal years beginning on or after April 1, The Company applied this accounting standard effective April 1, The effect of this change was to decrease operating income by 477 thousand ($ 6 thousand) and income before income taxes and minority interests by 2,702 thousand ($ 33 thousand). k. Research and Development Costs Research and development costs are charged to income as incurred. l. Leases In March 2007, the ASBJ issued ASBJ Statement No.13, Accounting Standard for Lease Transactions, which revised the previous accounting standard for lease transactions issued in June The revised accounting standard for lease transactions was effective for fiscal years beginning on or after April 1, Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain as if capitalized information was disclosed in the note to the lessee s financial statements. The revised accounting standard requires that all finance lease transactions be capitalized to recognize lease assets and lease obligations in the balance sheet. The Company and its domestic consolidated subsidiary applied the revised accounting standard effective April 1, In addition, the Company accounted for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions as perrmitted under the revised accounting standard. All other leases are accounted for as operating leases. 10

15 m. Bonuses to directors and corporate auditors Bonuses to directors and corporate auditors are accrued in the year to which such bonuses are attributable. n. Construction Contracts In December 2007, the ASBJ issued ASBJ Statement No. 15, Accounting Standard for Construction Contracts, and ASBJ Guidance No. 18, Guidance on Accounting Standard for Construction Contracts. Under the previous Japanese GAAP, either the completed-contract method or the percentage-of-completion method was permitted to account for construction contracts. Under this new accounting standard, the construction revenue and construction costs should be recognized by the percentage-of-completion method, if the outcome of a construction contract can be estimated reliably. When total construction revenue, total construction costs and the stage of completion of the contract at the balance sheet date can be reliably measured, the outcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts. This standard is applicable to construction contracts and software development contracts and was effective for fiscal years beginning on or after April 1, The Company applied the accounting standard effective April 1, 2009 for its software sales contracts. o. Income Taxes The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences. p. Foreign Currency Transactions All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the income statement to the extent that they are not hedged by forward exchange contracts. q. Foreign Currency Financial Statements The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation were shown as Foreign currency translation adjustments under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate. r. Derivatives and Hedging Activities The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the Group to reduce foreign currency exchange risks. The Group does not enter into derivatives for trading or speculative purposes. Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the income statement and b) for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of the high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions. 11

16 The foreign currency forward contracts employed to hedge foreign exchange exposures for export sales are measured at fair value and the unrealized gains and losses are recognized in income. Trade receivables and payables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting. s. Per Share Information Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. Diluted net income per share is not disclosed since the Company has no dilutive securities. Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year. t. New Accounting Pronouncements Accounting Changes and Error Corrections In December 2009, ASBJ issued ASBJ Statement No. 24 Accounting Standard for Accounting Changes and Error Corrections and ASBJ Guidance No. 24 Guidance on Accounting Standard for Accounting Changes and Error Corrections. Accounting treatments under this standard and guidance are as follows: (1) Changes in Accounting Policies - When a new accounting policy is applied with revision of accounting standards, the new policy is applied retrospectively unless the revised accounting standards include specific transitional provisions. When the revised accounting standards include specific transitional provisions, an entity shall comply with the specific transitional provisions. (2) Changes in Presentations - When the presentation of financial statements is changed, prior period financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates - A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior Period Errors - When an error in prior period financial statements is discovered, those statements are restated. This accounting standard and the guidance are applicable to accounting changes and corrections of prior period errors which are made from the beginning of the fiscal year that begins on or after April 1,

17 3. INVESTMENT SECURITIES Investment securities at March 31, 2011 and 2010 consisted of the following: Yen U.S. Dollars Non-current: Equity securities 238, ,597 $2,879 Total 238, ,597 $2,879 The costs and aggregate fair values of investment securities at March 31, 2011 and 2010 were as follows: Unrealized Gains Yen Unrealized Losses Fair Value March 31, 2011 Cost Securities classified as: Available-for-sale: Equity securities 123,220 72,326 10, ,710 Unrealized Gains Yen Unrealized Losses Fair Value March 31, 2010 Cost Securities classified as: Available-for-sale: Equity securities 114,047 56,557 1, ,349 U.S. Dollars Unrealized Unrealized Gains Losses Fair Value March 31, 2011 Cost Securities classified as: Available-for-sale: Equity securities $ 1,485 $ 871 $ 131 $ 2,225 Available-for-sale securities whose fair value is not readily determinable as of March 31, 2011 and 2010 were as follows: Carrying amount Yen U.S. Dollars Available-for-sale: Equity securities 54,248 54,248 $ 654 There were no available-for-sale securities sold during the year ended March 31,

18 The information of available-for-sale securities which were sold during the year ended March 31, 2010 was as follows: Yen March 31, 2010 Proceeds Realized Gains Realized Losses Available-for-sale: Equity securities 11, The impairment losses on available-for-sale equity securities for the years ended March 31, 2011 and 2010 were 59 thousand ($1 thousand) and 7,862 thousand, respectively. 4. INVENTORIES Inventories at March 31, 2011 and 2010 consisted of the following: Yen U.S. Dollars Merchandise and finished products 331, ,781 $3,999 Work-in-process 364, ,276 4,396 Raw materials 676, ,592 8,146 Supplies 10,343 14, Total 1,383,312 1,332,027 $ 16, LONG-LIVED ASSETS The Group reviewed its long-lived assets for impairment as of March 31, 2011 and As a result, for the year ended March 31, 2010, the Group recognized an impairment loss of 19,619 thousand as other expense for certain assets of Thai LECIP Corporation Limited due to the close down of a plant. No impairment loss was recognized in INVESTMENT PROPERTY On November 28, 2008, the ASBJ issued ASBJ Statement No. 20, Accounting Standard for Investment Property and Related Disclosures, and issued ASBJ Guidance No.23, Guidance on Accounting Standard for Investment Property and Related Disclosures. This accounting standard and the guidance were applicable to investment property and related disclosures at the end of the fiscal years ending on or after March 31, The Group applied the new accounting standard and guidance effective March 31, The Group was some rental properties such as office buildings in Gifu City. Rental income net of operating expenses for those rental properties was 29,407 thousand ($354 thousand) for the fiscal year ended March 31, In addition, the carrying amounts, changes in such balances and market prices of such properties are as follows: April 1, 2010 Yen Carrying Amount Fair Value Increase/ (Decrease) March 31, 2011 March 31,

19 89,233 (134) 89, ,000 Yen Carrying Amount Fair Value April 1, 2009 Increase/ (Decrease) March 31, 2010 March 31, ,041 (5,808) 89, ,000 U.S.Dollars Carrying Amount Fair Value April 1, 2010 Increase/ (Decrease) March 31, 2011 March 31, 2011 $ 1,075 $(2) $1,073 $4,253 Notes: 1) Carrying amount recognized in balance sheet is net of accumulated depreciation and accumulated impairment losses, if any. 2) Fair values of properties as of March 31, 2011 and 2010 are measured by the Group in accordance with its Real-estate Appraisal Standard. 7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT Short-term borrowings at March 31, 2010 consisted mainly of bank overdrafts and notes to banks. The weighted average interest rate on short-term borrowings as of March 31, 2010 was 0.67%. There were no short-term borrowings at March 31, Long-term debt at March 31, 2011 and 2010 consisted of the following: Borrowings from banks due serially to March 2014 with weighted average interest rates of 1.24% (2011) and 1.38% (2010) Yen U.S. Dollars , ,408 $ 10,396 Lease obligations 109,292 51,414 1,317 Total 972, ,822 11,713 Less: portion due within one year (265,101) (176,228) (3,194) Long-term debt, less current portion 707, ,594 $ 8,519 Annual maturities of long-term debt and lease obligations at March 31, 2011, were as follows: Year ending March 31 Yen U.S. Dollars ,101 $ 3, ,979 5, ,808 2, , , and thereafter - - Total 972,190 $11,713 15

20 The carrying amounts of assets pledged as collateral for short-term borrowings and long-term debt (including current portion) of 669,170 thousand ($8,062 thousand) at March 31, 2011 were as follows: Yen U.S. Dollars Property, plant and equipment net of accumulated depreciation 1,108,908 $ 13, LIABILITY FOR RETIREMENT BENEFITS The Company and its consolidated domestic subsidiary have retirement benefit plans for employees. The Company and its domestic consolidated subsidiary have defined contribution plans for employees and unfunded defined benefit pension plans for part-time employees. The liability for employees retirement benefits at March 31, 2011 and 2010 consisted of the following: Yen U.S. Dollars Projected benefit obligation 14,120 11,310 $ 170 Amount recognized as liability 14,120 11,310 $ 170 The components of net periodic benefit costs for the years ended March 31, 2011 and 2010 were as follows: Yen U.S. Dollars Service cost 79, ,851 $ 954 Additional retirement payments 10,698 2, Net periodic benefit costs 89, ,885 $1, EQUITY Japanese companies are subject to the Companies Act of Japan (the Companies Act ). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: (a) Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies meeting certain criteria such as; (1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company cannot do so because it does not meet all of the above criteria. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Company qualifies for this provision. The Companies Act provides 16

21 certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than 3 million. (b) Increases / decreases and transfer of common stock, reserve and surplus The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders. (c) Treasury stock and treasury stock acquisition rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights. 10. INCOME TAXES The Company and its domestic consolidated subsidiary are subject to Japanese national and local income taxes which, in the aggregate, resulted in normal effective statutory tax rate of approximately 39.8% for the years ended March 31, 2011 and The tax effects of significant temporary differences and tax loss carry-forwards which resulted in deferred tax assets and liabilities at March 31, 2011 and 2010 were as follows: 17

22 Yen U.S. Dollars Deferred Tax Assets: Allowance for bad debt 17,222 10,115 $208 Accrued bonuses 75, , Accrued warranty 21,840 24, Accrued enterprise tax 16,985 4, Accrued retirement benefits to 52,792 52, directors and corporate auditors Accrued social insurance 10,491 14, Property, plant and equipment 27,540 32, Small depreciable property 21,185 10, Inventories 40,952 57, Impairment of long-lived assets 20,465 25, Loss on liquidation of a subsidiary 134, ,242 1,621 Amount of tax loss carry forwards 251, ,293 3,030 Other 30,542 33, Total 721, ,654 8,688 Less: valuation allowance (193,292) (142,116) (2,329) Total deferred tax assets 527, ,538 $6,359 Deferred Tax Liabilities: Unrealized gain on available-for-sale securities 24,455 21,993 $ 295 Other Total deferred tax liabilities 24,582 22, Net deferred tax assets 503, ,396 $ 6,062 Reconciliations between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements of income for the years ended March 31, 2011 and 2010 were as follows: Normal effective statutory tax rate 39.8 % 39.8 % Expenses not deductible for income tax purposes Revenues excluded from income tax such as - dividend received (1.6) Per capita tax Net change in valuation allowance Tax adjustments Different income rate applicable to certain (4.8) consolidated subsidiaries (6.3) Loss on liquidation of a subsidiary - (280.5) Foreign currency translation adjustment Other - net (1.0) (0.7) Actual effective tax rate 80.7 % 9.9 % 18

23 11. RESEARCH AND DEVELOPMENT COSTS Research and development costs were 168,127 thousand ($2,026 thousand) and 164,460 thousand for the years ended March 31, 2011 and 2010, respectively. 12. LEASES The Group leases certain machinery, computers and software. Pro forma information of leased property whose lease inception was before March 31, 2008 ASBJ Statement No.13, Accounting Standard for Lease Transactions requires that all finance lease transactions be capitalized to recognize lease assets and lease obligations in the balance sheet. However, the ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to the lessee and whose lease inception was before March 31, 2008 to continue to be accounted for as operating lease transactions if certain as if capitalized information is disclosed in the note to the financial statements. The Company applied ASBJ Statement No. 13 effective April 1, 2008 and accounted for such leases as operating lease transactions. Pro forma information of leased property whose lease inception was before March 31, 2008 was as follows: (As lessee) Yen March 31, 2011 Machinery Tools Other Total Acquisition cost 353,230 14,820 48, ,712 Accumulated depreciation 338,587 13,039 42, ,674 Net leased property 14,643 1,781 6,614 23,038 Yen March 31, 2010 Machinery Tools Other Total Acquisition cost 553,904 73,326 49, ,929 Accumulated depreciation 460,653 65,450 33, ,391 Net leased property 93,251 7,876 16, ,538 U.S. Dollars March 31, 2011 Machinery Tools Other Total Acquisition cost $ 4,255 $ 178 $ 587 $ 5,020 Accumulated depreciation 4, ,743 Net leased property $ 176 $ 21 $ 80 $ 277 Obligations under finance leases: Yen U.S. Dollars Due within one year 20,493 97,007 $ 247 Due after one year 3,502 23, Total 23, ,002 $ 289 Depreciation expense, interest expense and other information under finance leases: 19

24 Yen U.S. Dollars Depreciation expense 94, ,875 $ 1,139 Interest expense 858 2, Total 95, ,047 $ 1,149 Lease payments 97, ,418 $ 1,179 Depreciation expense and interest expense, which are not reflected in the accompanying statements of income, are computed by the straight-line method and the interest method, respectively. (As lessor) Pro forma information of such leases which existed at the transition date on an as if sold basis for the years ended March 31, 2011 and 2010 was as follows: Buildings and structures U.S. Yen Dollars March Acquisition cost 102, ,500 $ 1,235 Accumulated 55,888 59, depreciation Net leasing property 46,612 77,614 $ 562 Expected revenue: Yen U.S. Dollars Due within one year 3,876 6,132 $ 46 Due after one year 33,592 59, Total 37,468 65,408 $ 451 The amounts of expected revenue under the finance leases include the imputed interest revenue portion. Lease revenue and depreciation expenses under finance leases: Yen U.S. Dollars Lease revenue 3,876 6,132 $ 47 Depreciation expenses 4,969 5, Expected lease revenues to be received under the non-cancelable operating lease subsequent to March 31, 2011 and 2010 were as follows: 20

25 Yen U.S. Dollars Due within one year 17,280 36,252 $ 208 Due after one year 150, ,775 1,808 Total 167, ,027 $ 2, FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES On March 10, 2008, the ASBJ revised ASBJ Statement No. 10, Accounting Standard for Financial Instruments, and issued ASBJ Guidance No.19, Guidance on Accounting Standard for Financial Instruments and Related Disclosures. This accounting standard and the guidance was applicable to financial instruments and related disclosures at the end of the fiscal years ending on or after March 31, The Group applied the revised accounting standard and the new guidance effective March 31, (1) Group policy for financial instruments The Group uses financial instruments, mainly long-term debt including bank loans, based on its management and financing plan. Short-term bank borrowings are used to fund its ongoing operations. Derivatives are used, not for speculative purposes, but to manage exposure to financial risks as described in (2) below. (2) Nature and extent of risks arising from financial instruments Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position is hedged by using forward foreign currency contracts. Investment securities, mainly equity instruments of customers and suppliers of the Group, are exposed to the risk of market price fluctuations. Payment terms of payables, such as trade notes and trade accounts, are five months or less. Although payables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, those risks are hedged by using forward foreign currency contracts. Maturities of bank loans and long-term debt are six years or less after the balance sheet date. Derivatives include forward foreign currency contracts, which are used to manage exposure to market risks from changes in foreign currency exchange rates of receivables and payables. Please see Note 14 for more detail about derivatives. (3) Risk management for financial instruments Credit Risk Management Credit risk is the risk of economic loss arising from a counterparty s failure to repay or service debt according to the contractual terms. The Company and its subsidiaries manage their credit risks from receivables on the basis of internal guidelines, which include monitoring of payment terms and balances of customers to identify the default risk of customers at an early stage. Please see Note 14 for the detail about derivatives. Market risk management Foreign currency trade receivables and payables are exposed to market risk resulting from 21

26 fluctuations in foreign currency exchange rates. forward foreign currency contracts. Such foreign exchange risk is hedged by Investment securities are managed by monitoring the market values and financial position of issuers on a regular basis. Liquidity risk management Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on maturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets, along with adequate financial planning by the planning and accounting department. (4) Fair values of financial instruments Fair values of financial instruments are based on a quoted price in active markets. price is not available, other rational valuation techniques are used instead. If a quoted (a) Fair value of financial instruments Yen March 31, 2011 Carrying Amount Fair Value Unrealized Gain/Loss Cash and cash equivalents 883, ,347 - Time deposits 70,000 70,000 - Trade notes and accounts receivable 4,399,243 4,399,243 - Investment securities 184, ,710-5,537,300 5,537,300 - Trade notes and accounts payable 2,145,398 2,145,398 - Long-term debt including current portion 972, ,683 7,493 Other accounts payable 489, ,658 - Income taxes payable 177, ,042-3,784,288 3,791,781 7,493 Yen March 31, 2010 Carrying Amount Fair Value Unrealized Gain/Loss Cash and cash equivalents 524, ,046 - Time deposits 70,000 70,000 - Trade notes and accounts receivable 5,723,193 5,723,193 - Investment securities 169, ,349-6,486,588 6,486,588 - Trade notes and accounts payable 2,549,273 2,549,273 - Short-term borrowings 660, ,000 - Long-term debt including current portion 827, ,488 3,666 Other accounts payable 347, ,635 - Income taxes payable 56,616 56,616-4,441,346 4,445,012 3,666 22

27 U.S. Dollars March 31, 2011 Carrying Amount Fair Value Unrealized Gain/Loss Cash and cash equivalents $ 10,643 $ 10,643 - Time deposits Trade notes and accounts receivable 53,003 53,003 - Investment securities 2,225 2,225 - $ 66,714 $ 66,714 - Trade notes and accounts payable $ 25,848 $ 25,848 - Long-term debt including current portion 11,713 11,803 $ 90 Other accounts payable 5,900 5,900 - Income taxes payable 2,133 2,133 - $ 45,594 $ 45,684 $ 90 Cash and cash equivalents and Time deposits The carrying values of cash and cash equivalents and time deposits approximate fair value because of their short maturities. Trade notes and accounts receivables The carrying values of trade notes and accounts receivables approximate fair value because of their short maturities. Investment securities The fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments. Trade notes and accounts payables, Short-term borrowings, Other accounts payable and Income taxes payable The carrying values of these financial instruments approximate fair value because of their short maturities. Long-term debt including current portion The fair values of long-term debt are determined by discounting the cash flows related to the debt at the Group s assumed corporate borrowing rate. (b) Financial instruments whose fair value cannot be reliably determined Yen U.S.Dollars Investments in equity instruments that do not have a quoted market price in an active market 54,249 54,249 $ 654 Investments in non-consolidated subsidiaries 163, ,845 $1,972 (5) Maturity analysis for financial assets and securities with contractual maturities Please see Note 7 for annual maturities of long-term debt. 23