ONOKEN CO., LTD. and a Consolidated Subsidiary Consolidated Balance Sheets Assets Current assets: September 30, 2007 2006 2007 (Millions of Yen) (Thousands of U.S. Dollars) (Note 1) Cash and time deposits (Notes 3 and 7) 1,880 2,266 $ 16,287 Trade notes and accounts receivable 49,588 43,467 429,594 Merchandise 11,657 7,633 100,988 Other current assets 2,889 2,369 25,028 Allowance for doubtful accounts (219) (214) (1,897) Total current assets 65,796 55,523 570,008 Property, plant and equipment (Notes 5 and 7): Land 13,129 12,850 113,740 Buildings and structures 10,401 8,077 90,107 Machinery and equipment 997 691 8,637 24,527 21,618 212,484 Accumulated depreciation (4,725) (4,437) (40,934) Property, plant and equipment, net 19,802 17,181 171,550 Investments and other assets: Investment securities (Notes 4 and 7) 1,264 1,437 10,950 Other 2,817 2,341 24,404 Allowance for doubtful accounts (1,303) (1,092) (11,288) Total investments and other assets 2,778 2,686 24,067 Total assets 88,377 75,391 $ 765,633-1 -
September 30, 2007 2006 2007 (Millions of Yen) (Thousands of U.S. Dollars) (Note 1) Liabilities and net assets Current liabilities: Short-term bank loans (Notes 6 and 7) 1,800 2,300 $ 15,594 Trade notes and accounts payable (Note 7) 35,942 29,716 311,375 Income taxes payable 1,063 1,055 9,209 Accrued employees' bonuses 311 302 2,694 Accrued directors' and corporate auditors' bonuses 18 19 156 Other current liabilities 3,152 2,798 27,307 Total current liabilities 42,288 36,192 366,352 Long-term liabilities: Bonds 5,024 43,524 Accrued employees retirement benefits (Note 9) 496 532 4,297 Accrued directors and corporate auditors retirement benefits 262 242 2,270 Other long-term liabilities (Note 7) 318 300 2,755 Total long-term liabilities 6,103 1,076 52,872 Total liabilities 48,391 37,268 419,224 Contingent liabilities (Note 12) Net assets: Shareholders equity: Common stock: Authorized: 50,000,000 shares at September 30, 2007 and 2006 Issued: 20,782,725 shares at September 30, 2007 and 2006 3,358 3,358 29,091 Capital surplus 3,077 3,072 26,657 Retained earnings 33,869 31,804 293,416 Treasury stock, at cost: 547,287 shares at September 30, 2007 and 475,630 shares at September 30, 2006 (634) (538) (5,493) Total shareholders equity 39,670 37,697 343,671 Valuation and translation adjustments: Net unrealized gains on other securities 314 416 2,720 Deferred gains on hedges 1 8 9 Total valuation and translation adjustments 315 425 2,729 Total net assets 39,986 38,123 346,409 Total liabilities and net assets 88,377 75,391 $ 765,633 See accompanying notes to consolidated financial statements. - 2 -
ONOKEN CO., LTD. and a Consolidated Subsidiary Consolidated Statements of Income Six-month periods ended September 30, 2007 2006 2007 (Millions of Yen) (Thousands of U.S. Dollars) (Note 1) Net sales 67,616 58,986 $ 585,775 Cost of sales 62,811 54,598 544,148 Gross profit before adjustment for unrealized profit on installment sales 4,804 4,387 41,618 Adjustment for unrealized profit on installment sales 0 0 0 Gross profit 4,805 4,388 41,627 Selling, general and administrative expenses 2,695 2,402 23,347 Operating income 2,109 1,985 18,271 Other income (expenses): Interest and dividend income 17 15 147 Interest expenses (27) (4) (234) Losses on disposal of property, plant and equipment, net (3) (1) (26) Impairment loss (Note 5) (1,055) Other, net 81 630 702 68 (415) 589 Income before income taxes 2,176 1,571 18,851 Income taxes: Current 1,040 1,038 9,010 Deferred (136) (380) (1,178) Total income taxes 904 658 7,832 Net income 1,271 913 $ 11,011 (Yen) (U.S. Dollars) Amounts per share (Note 13): Net income: Basic 62.87 44.98 $ 0.54 Diluted 62.70 44.94 0.54 Cash dividends 15.00 15.00 0.13 See accompanying notes to consolidated financial statements. - 3 -
ONOKEN CO., LTD. and a Consolidated Subsidiary Consolidated Statements of Changes in Net Assets Number of shares of common stock issued Common stock Capital surplus Retained earnings Treasury stock, at cost Total shareholders' equity (Millions of Yen) Balance at March 31, 2006 20,712,725 3,301 3,015 31,333 (538) 37,112 Net income 913 913 Cash dividends (404) (404) Bonuses to directors and corporate auditors (37) (37) Repurchases of treasury stock (0) (0) Issuance of new shares 70,000 57 57 114 Net changes in items other than shareholders' equity during the period Balance at September 30, 2006 20,782,725 3,358 3,072 31,804 (538) 37,697 Balance at March 31, 2007 20,782,725 3,358 3,072 33,002 (647) 38,786 Net income 1,271 1,271 Cash dividends (404) (404) Repurchases of treasury stock (0) (0) Retirement of treasury stock 4 12 17 Net changes in items other than shareholders' equity during the period Balance at September 30, 2007 20,782,725 3,358 3,077 33,869 (634) 39,670 Common stock Capital surplus Retained earnings (Thousands of U.S. Dollars) (Note 1) Treasury stock, at cost Total shareholders' equity Balance at March 31, 2007 $ 29,091 $ 26,614 $ 285,905 $(5,605) $ 336,013 Net income 11,011 11,011 Cash dividends (3,500) (3,500) Repurchases of treasury stock (0) (0) Retirement of treasury stock 35 104 147 Net changes in items other than shareholders' equity during the period Balance at September 30, 2007 $ 29,091 $ 26,657 $ 293,416 $(5,493) $ 343,671-4 -
ONOKEN CO., LTD. and a Consolidated Subsidiary Consolidated Statements of Changes in Net Assets (continued) Net unrealized gains on other securities Deferred gains on hedges Total valuation and translation adjustments New share subscription rights Total net assets Balance at March 31, 2006 555 555 1 37,668 Net income 913 Cash dividends (404) Bonuses to directors and corporate auditors (37) Repurchases of treasury stock (0) Issuance of new shares 114 Net changes in items other than shareholders' equity during the period (138) 8 (129) (1) (131) Balance at September 30, 2006 416 8 425 38,123 Balance at March 31, 2007 437 2 440 39,226 Net income 1,271 Cash dividends (404) Repurchases of treasury stock (0) Retirement of treasury stock 17 Net changes in items other than shareholders' equity during the period (123) (1) (125) (125) Balance at September 30, 2007 314 1 315 39,986 Net unrealized gains on other securities Deferred gains on hedges Total valuation and translation adjustments New share subscription rights Total net assets Balance at March 31, 2007 $ 3,786 $ 17 $ 3,812 $ $ 339,825 Net income 11,011 Cash dividends (3,500) Repurchases of treasury stock (0) Retirement of treasury stock 147 Net changes in items other than shareholders equity during the period (1,066) (9) (1,083) (1,083) Balance at September 30, 2007 $ 2,720 $ 9 $ 2,729 $ $ 346,409 See accompanying notes to consolidated financial statements. - 5 -
ONOKEN CO., LTD. and a Consolidated Subsidiary Consolidated Statements of Cash Flows Six-month periods ended September 30, 2007 2006 2007 (Millions of Yen) (Thousands of U.S. Dollars) (Note 1) OPERATING ACTIVITIES: Income before income taxes 2,176 1,571 $ 18,851 Depreciation and amortization 200 164 1,733 Losses on disposal of property, plant and equipment, net 3 1 26 Impairment loss 1,055 Interest and dividend income (18) (15) (156) Interest expenses 27 4 234 Decrease (increase) in trade notes and accounts receivable 4,373 (910) 37,884 Decrease (increase) in merchandise (3,004) 2,138 (26,024) Increase (decrease) in allowance for doubtful accounts 84 (587) 728 Increase (decrease) in trade notes and accounts payable (3,197) 3,481 (27,696) Other, net (213) 365 (1,845) 433 7,270 3,751 Interest and dividends received 18 15 156 Interest paid (26) (4) (225) Income taxes paid (1,381) (92) (11,964) Net cash provided by (used in) operating activities (957) 7,189 (8,291) INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment 1 9 Purchases of property, plant and equipment (1,751) (3,914) (15,169) Purchases of investment securities (12) (2) (104) Other, net 17 (13) 147 Net cash used in investing activities (1,743) (3,931) (15,100) FINANCING ACTIVITIES: Decrease in short-term bank loans, net (2,200) (1,700) (19,059) Proceeds from issuance of bonds 5,005 43,360 Proceeds from issuance of common stock 114 Repurchases of treasury stock (0) (0) (0) Exercise of stock acquisition rights 17 147 Cash dividends paid (404) (404) (3,500) Net cash provided by (used in) financing activities 2,417 (1,990) 20,939 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (283) 1,267 (2,452) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,052 887 17,777 CASH AND CASH EQUIVALENTS, END OF PERIOD (Note 3) 1,768 2,154 $ 15,317 See accompanying notes to consolidated financial statements. - 6 -
ONOKEN CO., LTD. and a Consolidated Subsidiary Notes to Consolidated Financial Statements Six-month periods ended September 30, 2007 and 2006 1. BASIS FOR PRESENTATION The accompanying consolidated financial statements for the six-month period ended September 30, 2007 have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law of Japan (as for the consolidated financial statements for the six-month period ended September 30, 2006, the Securities and Exchange Law of Japan) and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which differ in certain respects in terms of application and disclosure requirements from international financial reporting standards. In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements of the consolidated financial statements issued domestically have been made in order to present them in a form that is more familiar to readers outside Japan. The consolidated financial statements are stated in Japanese yen, the currency of the country in which ONOKEN CO., LTD. (the "Company") is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of 115.43 to $1, the rate of exchange in effect at September 28, 2007. Such translation should not be construed as a representation that the Japanese yen amounts could be converted into U.S. dollars at this or any other rate. As permitted under the Financial Instruments and Exchange Law of Japan, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements (both in yen and in U.S. dollars) do not necessarily agree with the sums of the individual amounts. - 7 -
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidation The accompanying consolidated financial statements include the accounts of the Company and one significant subsidiary controlled directly by the Company (together, the Group ). Investment in an unconsolidated subsidiary, not significant in amount, is stated at cost. All significant intercompany balances and transactions have been eliminated in the consolidation. All material unrealized profit included in assets resulting from transactions within the Group has also been eliminated. b. Cash Equivalents Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to an insignificant risk of changes in value. Cash equivalents include time deposits which become due within three months of the date of acquisition. c. Allowance for Doubtful Accounts The allowance for doubtful accounts is provided at an amount determined based on the historical experience of bad debts with respect to ordinary receivables, plus an estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers who are experiencing financial difficulties. d. Merchandise Merchandise is stated at cost as determined by the moving-average method. e. Investment Securities Marketable securities classified as other securities are reported at fair value, with unrealized gains or losses, net of applicable income taxes, included in a separate component of net assets. Non-marketable securities classified as other securities are stated at cost as determined by the moving-average method. Except as concerns temporary declines in fair value, securities are reduced to their respective net realizable value by a charge to income. - 8 -
f. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of the Group s property, plant and equipment is generally computed by the declining-balance method. The straight-line method is applied, however, to buildings acquired by the Group on or after April 1, 1998. The range of estimated useful lives is principally from 10 to 47 years for buildings and structures and from 4 to 12 years for machinery and equipment. Effective the six-month period ended September 30, 2007, the Group has adopted new depreciation methods for long-lived assets acquired on or after April 1, 2007, in accordance with revisions of the Corporation Tax Law. The effect of the adoption of this new standard was to reduce both operating income and income before income taxes by 7 million ($61 thousand). The revisions of the Corporation Tax Law also affected long-lived assets acquired on or before March 31, 2007, which are depreciated using methods provided for under the pre-revision law. When the depreciated value of such assets reaches 5% of their acquisition price, the new standard requires the Group to amortize the difference between this depreciated value and the memorandum value of the assets in equal installments over a five-year period. It further requires that the Group begin to amortize this difference in the fiscal year following that in which the 5% value is reached and to recognize the expense as a part of the depreciation. The effect of the adoption of this new standard was to reduce both operating income and income before income taxes by 4 million ($35 thousand). g. Impairment Loss on Long-lived Assets The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss is 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 disposal of the asset or asset group. Impairment loss is measured as the amount by which the carrying amount of an asset or asset group exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposal of the asset or asset group or the net selling price at disposal. - 9 -
h. Software Certain costs for computer software for internal use are capitalized and amortized using the straight-line method over an estimated useful life of five years. i. Accrued Employees Bonuses Accrued employees bonuses are provided at an amount estimated to be paid for services rendered by the employees for the period under review. j. Accrued Directors and Corporate Auditors Bonuses Accrued directors and corporate auditors bonuses are provided at an amount estimated to be paid in bonuses to directors and corporate auditors for the current year s services subsequent to the balance sheet date. k. Retirement Benefit Plans The Company has a non-contributory funded defined benefit retirement plan, and its consolidated subsidiary has an unfunded retirement benefit plan. The Group accounts for the liability for retirement benefits based on the projected benefit obligation and plan assets at the balance sheet date. Actuarial gains and losses are fully charged or credited to income in the year following the year in which the gains or losses are recognized. Retirement benefits to directors and corporate auditors of the Company are provided at the amount that would be required if all directors and corporate auditors retired at the balance sheet date based on the Company s internal rules. l. Revenue recognition Revenue on installment sales is recognized when the related receivables become due. The unrealized profit on installment sales corresponding to the portion of such receivables is deferred and is recorded as a component of Other current liabilities in the accompanying consolidated balance sheets. m. Leases All leases are accounted for as operating leases. Under the Japanese accounting standard for leases, finance leases that are deemed to transfer ownership of the leased property to the lessee are capitalized, while other finance leases may be accounted for as operating lease transactions if certain as if capitalized information is disclosed in the notes to the lessee's financial statements. - 10-
n. Income Taxes Deferred tax assets and liabilities are determined based on the differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured using the enacted tax rates and laws which are to be in effect when the differences are expected to reverse. o. 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 prevailing at the balance sheet date, except for assets and liabilities hedged by forward foreign exchange contracts. All revenues and expenses associated with foreign currency transactions are translated at the rates of exchange prevailing when such transactions were conducted. The resulting foreign exchange gains and losses are credited or charged to income. p. Derivatives and Hedging Activities The Company employs derivative financial instruments to manage its exposures to fluctuations in foreign exchange rates. Specifically, forward foreign exchange contracts are employed by the Company to reduce foreign currency exchange risks. The Company 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 credited or charged to income; and b) gains or losses on derivatives used for hedging purposes that qualify for hedge accounting because of a high correlation and degree of effectiveness between the hedging instruments and the hedged items are deferred until the hedged transactions reach maturity. q. 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. Diluted net income per share reflects the potential dilution that might occur if securities were exercised or converted into common stock. - 11-
Cash dividends per share presented in the accompanying consolidated statements of income are based on dividends applicable to the respective periods, including dividends to be paid after the end of the periods. 3. RECONCILIATION OF CASH AND TIME DEPOSITS TO CASH AND CASH EQUIVALENTS Cash and time deposits in the consolidated balance sheets were reconciled to cash and cash equivalents in the consolidated statements of cash flows as of September 30, 2007 and 2006 as follows: Thousands of Millions of Yen U.S. Dollars 2007 2006 2007 Cash and time deposits 1,880 2,266 $ 16,287 Time deposits with original maturities of more than three months (112) (112) (970) Cash and cash equivalents 1,768 2,154 $ 15,317-12-
4. INVESTMENT SECURITIES The aggregate cost, gross unrealized gains and losses, and aggregate fair values of investment securities classified as other securities at September 30, 2007 and 2006 were as follows: Millions of Yen September 30, 2007 Cost Unrealized Gains (Losses) Fair Value Equity securities 633 527 1,160 September 30, 2006 Equity securities 641 699 1,341 Thousands of U.S. Dollars September 30, 2007 Cost Unrealized Gains (Losses) Fair Value Equity securities $ 5,484 $ 4,566 $ 10,049 Securities whose fair value as of September 30, 2007 and 2006 is not readily determinable were as follows: Other securities: Carrying Amount Thousands of Millions of Yen U.S. Dollars 2007 2006 2007 Unlisted equity securities 103 99 $ 892 No securities classified as other securities were sold for the six-month periods ended September 30, 2007 and 2006. Impairment loss of 1 million ($8.7 thousand) was recognized on investment securities due to other than temporary declines in fair value for the six-month period ended September 30, 2007. - 13-
5. IMPAIRMENT LOSS The Group recognized an impairment loss of 1,055 million ($9,140 thousand) for the six-month period ended September 30, 2006 on the land of a branch office to be closed. 6. SHORT-TERM BANK LOANS Short-term bank loans at September 30, 2007 and 2006 represented outstanding balances, with weighed average interest rates of 0.58% and 0.88% per annum, respectively, under overdraft agreements with banks of up to 21,000 million ($181,928 thousand) and 21,700 million in the aggregate, respectively. As described in Note 7, certain assets are collateralized for short-term bank loans. As is customary in Japan, moreover, the Company maintains substantial deposit balances in banks from which it has borrowings. Such deposit balances are not legally or contractually restricted with respect to withdrawal. 7. PLEDGED ASSETS The carrying amounts of assets pledged as collateral and the corresponding liabilities secured at September 30, 2007 and 2006 were as follows: Thousands of Millions of Yen U.S. Dollars 2007 2006 2007 Assets pledged as collateral: Time deposits 112 112 $ 970 Buildings and structures at book value 6 7 52 Land 529 529 4,583 Investment securities 20 20 173 Total 669 670 $ 5,796 Liabilities secured: Trade notes and accounts payable 54 90 $ 468 Short-term bank loans 390 390 3,379 Other long-term liabilities 100 100 866 Total 544 580 $ 4,713-14-
8. STOCK OPTION PLANS The Company has two stock option plans for the granting of non-transferable options to certain eligible directors of the Company and key employees of the Group. On August 5, 2002, options were granted to certain eligible directors of the Company and key employees of the Company for a term of eight years to purchase an aggregate of 462,000 shares of the Company s common stock at 613 ($5.31) per share. The exercise price could be subject to adjustment for certain events. The options became exercisable on June 28, 2004. Additionally, on July 26, 2004, options were granted to certain eligible directors of the Company and key employees of the Group for a term of six years to purchase an aggregate of 586,000 shares of the Company s common stock at 1,585 ($13.73) per share. The exercise price could be subject to adjustment for certain events. The options became exercisable on June 26, 2006. 9. RETIREMENT BENEFIT PLANS The Company has a non-contributory funded defined benefit retirement plan, and its consolidated subsidiary has an unfunded retirement benefit plan. Payments of retirement benefits to the Company s employees are made by the trustees in the form of lump-sum severance payments or annuity payments at the discretion of the retiring employees. Payments of retirement benefits to the subsidiary s employees are made by the subsidiary in the form of lump-sum severance payments. - 15-
10. LEASES The following pro forma amounts represent the acquisition cost (including the interest portion thereof), accumulated depreciation and net book value of the leased property as of September 30, 2007 and 2006 which would have been reflected in the consolidated balance sheets if finance lease accounting had been applied to the finance leases currently accounted for as operating leases: Machinery and equipment: Thousands of Millions of Yen U.S. Dollars 2007 2006 2007 Acquisition cost 171 152 $ 1,481 Accumulated depreciation (82) (70) (710) Net book value 88 82 $ 762 Lease payments related to finance leases accounted for as operating leases amounted to 18 million ($156 thousand) and 14 million, which were equal to the depreciation expense of the leased assets computed by the straight-line method over the respective lease terms, for the six-month periods ended September 30, 2007 and 2006, respectively. Future minimum lease payments (including the interest portion thereof) subsequent to September 30, 2007 for finance leases accounted for as operating leases are summarized as follows: Six-month period ending September 30, 2007 Millions of Yen Thousands of U.S. Dollars Due within one year 33 $ 286 Due after one year 55 476 Total 88 $ 762-16-
11. DERIVATIVES The Company enters into forward foreign exchange contracts to hedge foreign exchange risk associated with certain assets and liabilities denominated in foreign currencies. All derivative transactions are entered into in order to hedge foreign currency exposures related to the Company s business. Accordingly, the market risk associated with these derivatives is essentially offset by opposite movements in the value of hedged assets or liabilities. Because the counterparties to these derivatives are limited to major international financial institutions, the Company does not anticipate any losses arising from credit risk. Derivative transactions entered into by the Company have been conducted by its accounting department under the supervision of responsible management personnel in accordance with the applicable internal policies. Disclosure of the fair value of derivatives at September 30, 2007 and 2006 has been omitted, since all derivatives have been accounted for as hedges. 12. CONTINGENT LIABILITIES At September 30, 2007, the Company (plaintiff/respondent) is in a pending lawsuit arising from an appeal made to the Fukuoka High Court. The Company originally filed an action in the Oita District Court against one of its customers for recovery of unreceived payment amounting to 12 million ($104 thousand) on December 4, 2001 and amended the complaint on January 17, 2002. On March 12, 2002, a counterclaim was filed by the defendant seeking monetary damages of 591 million ($5,120 thousand) for loss of a construction contract due to an alleged deficiency in a product sold by the Company. On April 25, 2005, the Oita District Court held that the Company s complaint was sufficient and dismissed the defendant s counterclaim. The defendant filed an appeal to the Fukuoka High Court. - 17-
13. NET INCOME PER SHARE The differences between basic and diluted net income per share ("EPS") for the six-month periods ended September 30, 2007 and 2006 are reconciled as follows: Millions of Yen Thousands of Shares Yen U.S. Dollars Net Income Weighted Average Number of Shares EPS For the six-month period ended September 30, 2007: Basic EPS: Net income available to common shareholders 1,271 20,231 62.87 $ 0.54 Effect of dilutive securities: Stock options 52 Diluted EPS: Net income for computation 1,271 20,283 62.70 $ 0.54 For the six-month period ended September 30, 2006: Basic EPS: Net income available to common shareholders 913 20,300 44.98 Effect of dilutive securities: Stock options 17 Diluted EPS: Net income for computation 913 20,317 44.94-18-
14. SUBSEQUENT EVENT The Company acquired the shares of Sankyo Noritake Steel Co., Ltd. at October 31, 2007 in order to enlarge its business. Sankyo Noritake Steel Co., Ltd. became an affiliate of the Company as a result of the acquisition. Summary of the acquisition: Number of shares acquired Shares held after the acquisition 36,840 shares (value: 130 million) ($1,126 thousand) 40,578 shares (31.15% of capital) Corporate data for the acquired company: Company name Sankyo Noritake Steel Co., Ltd. Content of business Processing of steel plates Common stock 87 million ($754 thousand) Sales 6,431 million ($55,713 thousand) (for the year ended March 31, 2007) Net income 67 million ($580 thousand) (for the year ended March 31, 2007) Total assets 3,137 million ($27,177 thousand) (at March 31, 2007) Shareholders equity 519 million ($4,496 thousand) (at March 31, 2007) 15. SEGMENT INFORMATION The Company and its consolidated subsidiary are primarily engaged in the following three business segments: Sale of Steel Products and Construction Materials segment: Sale of the Company s major products, including steel plates, steel shapes and steel bars, and construction materials Construction Contractor segment: Construction contracts accompanying sales of construction materials Property Leasing segment: Property leasing and management of golf driving ranges The business segments of the Company and its consolidated subsidiary for the six-month periods ended September 30, 2007 and 2006 are summarized as follows: - 19-
a. Sales and Operating Income Sales of Steel Products and Construction Materials Construction Contractor Millions of Yen 2007 Property Leasing Eliminations/ Corporate Consolidated Sales to customers 57,157 10,104 353 67,616 Inter-segment sales and transfers 18 (18) Net sales 57,157 10,104 371 (18) 67,616 Operating expenses 55,385 9,859 153 109 65,506 Operating income 1,772 245 218 (127) 2,109 Sales of Steel Products and Construction Materials Construction Contractor Thousands of U.S. Dollars 2007 Property Leasing Eliminations/ Corporate Consolidated Sales to customers $ 495,166 $ 87,534 $ 3,058 $ $ 585,775 Inter-segment sales and transfers 156 (156) Net sales 495,166 87,534 3,214 (156) 585,775 Operating expenses 479,815 85,411 1,325 944 567,495 Operating income $ 15,351 $ 2,122 $ 1,889 $ (1,100) $ 18,271-20-
Sales of Steel Products and Construction Materials Construction Contractor Millions of Yen 2006 Property Leasing Eliminations/ Corporate Consolidated Sales to customers 50,002 8,621 361 58,986 Inter-segment sales and transfers 18 (18) Net sales 50,002 8,621 379 (18) 58,986 Operating expenses 48,393 8,336 144 125 57,000 Operating income 1,608 285 234 (143) 1,985 Neither geographical segment information nor information on overseas sales has been presented, since the Group operates primarily in Japan and had no overseas subsidiaries or branch offices during the six-month periods ended September 30, 2007 and 2006. Sales to domestic customers represented more than 90% of consolidated net sales, moreover, for the six-month periods ended September 30, 2007 and 2006. * * * * * * - 21-