大同メタル工業（7245） – [Summary] Consolidated Financial Results for the Year Ended March 31, 2022

Note:This document is a translation of a part of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail. May 13, 2022 Consolidated Financial Results for the Year Ended March 31, 2022 [Japanese GAAP] Daido Metal Co., Ltd. Tokyo, Nagoya 7245 https://www.daidometal.com/ Seigo Hanji Hiroki Iwakura +81-52-205-1400 Company name: Stock exchange listing: Code number: URL: Representative: Contact: Phone: Scheduled date of Annual General Meeting of Shareholders: Scheduled start date of dividend payments: Scheduled filing date of annual securities report: Availability of supplementary briefing material on annual financial results: Yes Schedule of annual financial results briefing session: June 29, 2022 June 30, 2022 June 29, 2022 Chairman and Chief Executive Officer Executive Officer and Head of Corporate Planning Division Yes (For analysts and financial institutions) (Fractional amounts of less than one million yen are rounded down) 1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (April 01, 2021 to March 31, 2022) (1) Consolidated Operating Results Operating profit Ordinary profit Net sales (% indicates changes from the previous corresponding period.) Fiscal year ended March 31, 2022 March 31, 2021 (Note) Comprehensive income: Million yen 104,024 84,720 Million yen % 5,042 22.8 1,315 (15.4) Fiscal year ended March 31, 2022: Fiscal year ended March 31, 2021: % 283.2 (68.4) ¥ ¥ % Million yen 453.2 4,836 874 (76.1) 5,475 million 1,624 million Profit attributable to owners of parent Million yen 1,897 104 237.0 %] (21.3) %] % － (96.2) [ [ Basic earnings per share Diluted earnings per share Rate of return on equity Ordinary profit to total assets ratio Operating profit to net sales ratio Fiscal year ended March 31, 2022 March 31, 2021 Yen 40.70 2.25 (Reference) Equity in earnings of affiliated companies: Yen － － % 3.3 0.2 Fiscal year ended March 31, 2022: Fiscal year ended March 31, 2021: % 3.0 0.6 ¥ ¥ % 4.8 1.6 108 million 26 million (2) Consolidated Financial Position Total assets Net assets Capital adequacy ratio Net assets per share As of March 31, 2022 March 31, 2021 Million yen 166,155 155,176 (Reference) Net assets less non-controlling interests: Million yen 68,695 64,538 As of March 31, 2022: As of March 31, 2021: % 36.3 36.3 ¥ ¥ Yen 1,289.96 1,213.08 60,340 million 56,388 million (3) Consolidated Cash Flows Fiscal year ended March 31, 2022 March 31, 2021 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash and cash equivalents at the end of period Million yen 13,207 10,098 Million yen (8,072) (7,043) Million yen (5,076) (3,098) Million yen 18,868 18,637 ―1― 2. Dividends Fiscal year ended March 31, 2021 March 31, 2022 Fiscal year ending March 31, 2023 (Forecast) Annual dividends 1st quarter-end Yen 2nd quarter-end Yen 3rd quarter-end Yen Year-end Total Total dividends Payout ratio (consolidated) Dividends to net assets (consolidated) － － － 10.00 10.00 10.00 － － － Yen Yen Million yen 10.00 15.00 20.00 25.00 950 1,187 % 888.7 61.4 15.00 25.00 68.4 % 1.6 2.0 3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2023 (April 01, 2022 to March 31, 2023) (% indicates changes from the previous corresponding period.) Basic earnings per Profit attributable to owners of parent share % Operating profit Ordinary profit % Million yen % Million yen % Million yen Net sales Million yen Yen 52,500 108,000 4.3 3.8 1,550 (42.1) 1,450 (44.3) 750 (36.9) 3,500 (30.6) 3,300 (31.8) 1,700 (10.4) 16.03 36.34 Six months ended September 30, 2022 Full year * Notes: (1) Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting in changes in scope of consolidation): New Exclusion: – – No (Company name: (Company name: ) ) (2) Changes in accounting policies, changes in accounting estimates and retrospective restatement 1) Changes in accounting policies due to the revision of accounting standards: Yes No 2) Changes in accounting policies other than 1) above: No 3) Changes in accounting estimates: 4) Retrospective restatement: No For details, please refer to page 15, “(5) Notes to Consolidated Financial Statements, Changes in Accounting Policy” (3) Total number of issued shares (common shares) 1) Total number of issued shares at the end of the period (including treasury shares): 47,520,253 shares 47,520,253 shares March 31, 2022: March 31, 2021: 2) Total number of treasury shares at the end of the period: March 31, 2022: March 31, 2021: 3) Average number of shares during the period: Fiscal Year ended March 31, 2022: Fiscal Year ended March 31, 2021: 743,664 shares 1,036,793 shares 46,628,139 shares 46,322,538 shares Note: The Company introduced an E-Ship® Trust-Type Employee Stock Purchase Incentive Plan and a performance-linked stock-based remuneration for Directors and Executive Officers. For the calculation of total number of treasury shares at the end of the period and average number of shares during the period, Company shares held in the trusts are included in treasury shares to be deducted. ―2― (Reference) Summary of Non-consolidated Financial Results 1. Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (April 01, 2021 to March 31, 2022) (1) Non-consolidated Operating Results Operating profit Ordinary profit Net sales (% indicates changes from the previous corresponding period.) Net income Fiscal year ended March 31, 2022 March 31, 2021 Million yen 65,868 54,197 % 21.5 (13.8) Million yen 1,499 723 % 107.4 (49.5) Million yen 2,564 2,159 % 18.7 (18.6) Million yen (197) 1,690 % – (56.7) Basic earnings per share Diluted earnings per share Yen (4.24) 36.49 Yen － － Fiscal year ended March 31, 2022 March 31, 2021 (2) Non-consolidated Financial Position As of March 31, 2022 March 31, 2021 (Reference) Net assets: Total assets Net assets Capital adequacy ratio Net assets per share Million yen 109,208 110,247 Million yen 51,482 52,372 % 47.1 47.5 As of March 31, 2022: As of March 31, 2021: ¥ ¥ 51,482 million 52,372 million Yen 1,100.59 1,126.69 (Reasons for the Difference between Non-consolidated Actual Results for the Fiscal Year Ended March 31, 2021 and 2022) Net sales exceed that of the fiscal year ended March 31, 2021, as a result of a recovery in demand that exceeded initial expectations in the automotive sector, which is the Group’s core business area, as well as in the shipbuilding industry and construction machinery industry, despite the impact of production cuts caused by the resurgence of the COVID-19 infection and the global semiconductor supply shortage. In addition, net income is below that of the fiscal year ended March 31, 2021, due to the recording of a loss on valuation of shares of subsidiaries and associates, the provision for loss on guarantees, and a loss on valuation of investments in capital of subsidiaries and associates as extraordinary losses as an extraordinary loss. * Numbers in parentheses denote negative numbers. * This financial result is not required to be reviewed by certificated public accountants or audit firm. * Explanation of appropriate use of earnings projections, other explanatory notes Future prospects are prepared as information purpose only, based on the information available to us at this moment, and are under certain condition which we assumed reasonable. We will not guarantee the realization of such prospects and actual performance fluctuates due to various factors. ―3― (Million yen) As of March 31,2021 As of March 31,2022 1. Consolidated Financial Statements (1) Consolidated Balance Sheets Assets Current assets Cash and deposits Notes and accounts receivable – trade Notes receivable – trade Accounts receivable – trade Electronically recorded monetary claims – operating Merchandise and finished goods Work in process Raw materials and supplies Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Land Leased assets Accumulated depreciation Leased assets, net Construction in progress Other Accumulated depreciation Other, net Total property, plant and equipment Intangible assets Goodwill Leased assets Other Total intangible assets Investments and other assets Investment securities Long-term loans receivable Retirement benefit asset Deferred tax assets Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets ―4― 22,007 23,069 － － 2,393 10,821 8,380 6,326 2,510 (267) 75,242 36,853 (19,654) 17,198 100,270 (75,772) 24,497 9,726 4,963 (1,644) 3,318 2,207 7,384 (6,401) 982 57,931 5,724 34 6,863 12,623 5,031 188 2,110 1,152 949 (52) 9,379 79,934 155,176 23,018 － 1,107 23,444 2,732 14,606 10,864 8,073 2,206 (126) 85,928 37,884 (21,191) 16,693 105,755 (81,635) 24,119 9,875 5,013 (1,915) 3,097 2,577 7,836 (6,909) 926 57,291 5,152 19 6,325 11,497 5,450 212 3,203 1,541 1,084 (52) 11,439 80,227 166,155 (Million yen) As of March 31,2021 As of March 31,2022 Liabilities Current liabilities Notes and accounts payable – trade Electronically recorded obligations – operating Short-term loans payable Current portion of long-term loans payable Lease liabilities Income taxes payable Contract liabilities Provision for bonuses Provision for bonuses for directors (and other officers) Provision for product compensation Provision for environmental measures Electronically recorded obligations – non-operating Other Total current liabilities Non-current liabilities Long-term loans payable Lease liabilities Deferred tax liabilities Provision for share-based remuneration Provision for share-based remuneration for directors (and other officers) Provision for loss on guarantees Retirement benefit liability Asset retirement obligations Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets ―5― 6,192 8,069 26,575 7,604 898 415 － 1,269 － 70 33 501 5,820 57,452 21,315 2,074 1,948 16 30 145 7,207 17 430 33,185 90,637 8,413 13,114 36,609 (780) 57,356 995 (1,170) (793) (968) 8,150 64,538 155,176 8,555 11,130 27,055 7,733 668 1,522 88 1,555 39 74 － 521 6,467 65,414 19,678 1,992 2,201 49 41 143 7,514 17 406 32,045 97,460 8,413 13,114 37,567 (560) 58,534 981 906 (82) 1,805 8,355 68,695 166,155 (2) Consolidated Statements of Income and Comprehensive Income Consolidated Statements of Income (Million yen) For the fiscal year ended March 31,2021 For the fiscal year ended March 31,2022 Net sales Cost of sales Gross profit Selling, general and administrative expenses Freightage expenses Outsourcing expenses Provision of allowance for doubtful accounts Remuneration for directors (and other officers) Salaries and allowances Provision for bonuses Provision for bonuses for directors (and other officers) Provision for product compensation Retirement benefit expenses Welfare expenses Depreciation Rent expenses Research and development expenses Other Total selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Foreign exchange gains Share of profit of entities accounted for using equity method Subsidy income Other Total non-operating income Non-operating expenses Interest expenses Loss on retirement of non-current assets Foreign exchange losses Other Total non-operating expenses Ordinary profit Extraordinary income Gain on sale of non-current assets Total extraordinary income Extraordinary losses Impairment loss Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit attributable to non-controlling interests Profit attributable to owners of parent ―6― 84,720 65,200 19,520 2,022 1,317 (268) 591 4,815 268 － (495) 495 1,005 945 1,105 1,916 4,484 18,205 1,315 89 57 － 26 236 236 646 710 52 111 214 874 571 571 － － 737 111 848 597 493 104 1,088 1,445 104,024 77,266 26,758 3,477 1,442 (32) 552 5,115 367 39 74 460 1,121 1,427 1,137 1,881 4,649 21,715 5,042 80 74 227 108 61 337 890 620 222 － 253 1,096 4,836 － － 456 456 4,379 2,364 (480) 1,884 2,494 597 1,897 Consolidated Statements of Comprehensive Income (Million yen) For the fiscal year ended March 31,2021 For the fiscal year ended March 31,2022 Profit Other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax Share of other comprehensive income of entities accounted for using equity method Total other comprehensive income Comprehensive income Comprehensive income attributable to owners of parent non-controlling interests 597 643 (785) 1,135 33 1,027 1,624 1,351 272 2,494 (12) 2,190 740 62 2,980 5,475 4,671 803 ―7― (3) Consolidated Statements of Changes in Net Assets For the fiscal year ended March 31,2021 Capital stock Capital surplus Treasury shares Shareholders’ equity Retained earnings 8,413 13,114 37,693 (1,016) 58,204 (Million yen) Total shareholders’ equity 8,413 13,114 37,693 (1,016) 58,204 (1,187) 104 (0) 0 － (1,187) 104 (0) 0 236 236 － 8,413 0 (1,083) 13,114 36,609 235 (780) (847) 57,356 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets 361 (654) (1,922) (2,216) 8,180 64,168 361 (654) (1,922) (2,216) 8,180 64,168 － (1,187) 104 (0) 0 236 1,217 369 Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Change in ownership interest of parent due to transactions with non-controlling interests Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Change in ownership interest of parent due to transactions with non-controlling interests Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period 633 633 995 (515) (515) (1,170) 1,129 1,247 1,129 (793) 1,247 (968) (30) (30) 8,150 64,538 ―8― For the fiscal year ended March 31,2022 Capital stock Capital surplus Treasury shares Shareholders’ equity Retained earnings (Million yen) Total shareholders’ equity 8,413 13,114 36,609 (780) 57,356 8,413 13,114 36,619 (780) 57,367 10 10 (950) 1,897 (950) 1,897 (0) 220 1,167 58,534 (0) 220 220 (560) － 8,413 － 947 13,114 37,567 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets 995 (1,170) (793) (968) 8,150 64,538 995 (1,170) (793) (968) 8,150 64,548 10 (950) 1,897 (0) 220 2,979 4,146 68,695 (13) (13) 981 2,076 2,076 906 710 710 (82) 2,774 2,774 1,805 205 205 8,355 Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period ―9― (4) Consolidated Statements of Cash Flows Cash flows from operating activities Profit before income taxes Depreciation Impairment loss Amortization of goodwill Share of loss (profit) of entities accounted for using equity method Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provision for bonuses Increase (decrease) in provision for bonuses for directors (and other officers) Increase or decrease in net defined benefit asset and liability Increase (decrease) in provision for share based remuneration Increase (decrease) in provision for share based remuneration for directors (and other officers) Increase (decrease) in provision for environmental measures Increase (decrease) in provision for loss on guarantees Interest and dividend income Interest expenses Foreign exchange losses (gains) Loss (gain) on sale of non-current assets Loss on retirement of non-current assets Decrease (increase) in trade receivables Decrease (increase) in inventories Increase (decrease) in trade payables Increase (decrease) in accrued consumption taxes Increase (decrease) in other liabilities Other, net Subtotal Interest and dividends income received Proceeds from dividend income from entities accounted for using equity method Interest paid Income taxes paid Net cash provided by (used in) operating activities (Million yen) For the fiscal year ended March 31,2021 For the fiscal year ended March 31,2022 1,445 8,790 － 709 (26) (175) (417) (105) 140 8 13 (17) (41) (147) 710 846 (571) 52 351 2,312 (1,135) (264) (812) 198 11,865 138 53 (693) (1,265) 10,098 4,379 9,240 456 724 (108) (157) 275 39 207 32 11 (33) (1) (155) 620 485 － 222 (911) (7,045) 4,812 109 1,075 623 14,904 159 65 (631) (1,290) 13,207 ―10― (Million yen) For the fiscal year ended March 31,2021 For the fiscal year ended March 31,2022 Cash flows from investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of investment securities Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Purchase of intangible assets Payments of loans receivable Collection of loans receivable Other, net Net cash provided by (used in) investing activities Cash flows from financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayments of long-term loans payable Proceeds from sale and leaseback transactions Repayments of finance lease liabilities Purchase of treasury shares Proceeds from disposal of treasury shares Cash dividends paid Dividends paid to non-controlling interests Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period (3,334) 3,102 (21) (6,645) 1,197 (1,609) (255) 329 192 (7,043) (1,468) 9,693 (8,305) 359 (2,150) (0) 163 (1,186) (202) (3,098) (489) (532) 19,170 18,637 (4,858) 4,001 (328) (6,453) 5 (486) (60) 46 61 (8,072) (799) 6,640 (8,681) 244 (1,051) (0) 162 (948) (642) (5,076) 171 230 18,637 18,868 ―11― (Significant matters that form the basis of presenting the consolidated financial statements) DAIDO METAL SALES CO., LTD. NDC Co., Ltd. Daido Industrial Bearings Japan Co., Ltd. DAIDO METAL SAGA CO., LTD. Iino Manufacturing Co., Ltd. Daido Precision Metal (Suzhou) Co., Ltd. Chung Yuan Daido Co., Ltd. Dyna Metal Co., Ltd. DM Casting Technology (Thailand) Co., Ltd. PT. Daido Metal Indonesia PHILIPPINE IINO CORPORATION Daido Metal U.S.A. Inc. Daido Metal Mexico, S.A. de C.V. DAIDO METAL KOTOR AD DAIDO METAL EUROPE LIMITED Daido Metal Europe GmbH (5) Notes to Consolidated Financial Statements (Notes on going concern assumption) Not applicable 1. Scope of consolidation Company name (1) Number of consolidated subsidiaries 33 companies DAIDO LOGITECH CO., LTD. Daido Plain Bearings Co., Ltd. NDC Sales Co., Ltd. Asia Kelmet Co., Ltd. Iino Holding Ltd. ATA Casting Technology Japan Co., Ltd. IINO (Foshan) Technology Co., Ltd. Dong Sung Metal Co., Ltd. ATA Casting Technology Co., Ltd. PT. IINO INDONESIA SUPER CUB FIN ANCIAL CORPORATION ISS America, Inc. Daido Metal Mexico Sales, S.A. de C.V. ISS MEXICO MANUFACTURING S.A. de C.V. Daido Industrial Bearings Europe Limited Daido Metal Russia LLC DAIDO METAL CZECH s.r.o. (2) Names of unconsolidated subsidiaries 3 companies Company name Korea Dry Bearing Co., Ltd. Chung Yuan Daido (Guangzhou) Co., Ltd. DMS Korea Co., Ltd. Reason for exclusion from scope of consolidation Korea Dry Bearing Co., Ltd., Chung Yuan Daido (Guangzhou) Co., Ltd., and DMS Korea Co., Ltd. have been excluded from the scope of consolidation because these companies are immaterial from the Group’s point of view in terms of total assets, net sales, profit attributable to owners of parent, and retained earnings for the year and do not have a significant impact on the net a ssets, financial position and results of operations of the Group. (1) Number of unconsolidated subsidiaries to which the equity method was applied 1 company 2. Application of equity method Company name Korea Dry Bearing Co., Ltd. (2) Number of associates to which the equity method was applied 3 companies (3) Names of unconsolidated subsidiaries and associates to which the equity method was not applied Company name BBL Daido Private Limited Shippo Asahi Moulds (Thailand) Co., Ltd. NPR of Europe GmbH Chung Yuan Daido (Guangzhou) Co., Ltd. DMS Korea Co., Ltd. ―12― Reason for non-application of equity method Chung Yuan Daido (Guangzhou) Co., Ltd. and DMS Korea Co., Ltd. have been excluded from the scope of consolidation because these companies are immaterial from the Group’s point of view in terms of profit attributable to owners of parent and retained earnings for the year and do not have a significant impact on the net assets, financial position and results of operations of the (4) For companies consolidated under equity method with closing dates different from the consolidated closing date, financial statements as of their year-end are used. 3. Matters relating to the accounting period of consolidated subsidiaries The closing date for Daido Metal U.S.A. Inc., DAIDO METAL KOTOR AD, Daido Industrial Bearings Europe Limited, DAIDO METAL CZECH s.r.o., Dyna Metal Co., Ltd., Chung Yuan Daido Co., PT. Daido Metal Indonesia, Dong Sung Metal Co., Ltd., Daido Precision Metal (Suzhou) Co., Ltd., Daido Metal Europe GmbH., DAIDO METAL EUROPE LIMITED, Daido Metal Russia LLC, Daido Metal Mexico, S.A. de C.V., Daido Metal Mexico Sales, S.A. de C.V., PHILIPPINE IINO CORPORATION, IINO (Foshan) Technology Co., Ltd., ISS America, Inc., ISS MEXICO MANUFACTURING S.A. de C.V., PT. IINO INDONESIA, and SUPER CUB FINANCIAL CORPORATION is December 31. Financial statements as of the same date are used in compiling the consolidated financial statements as of March 31, with necessary adjustment for the effects of significant transactions or events that occur between the date of those financial statements Group. Stated at market value (Valuation differences are recorded directly in net assets, and the net sales cost is calculated by the and the date of the consolidated financial statements. 4. Matters relating to accounting policies (1) Basis and method of valuation of important assets 1) Securities Other securities Securities etc. other than shares without market value moving average method.) Shares without market value Stated at cost using moving average method 2) Inventories profitability). 3) Derivatives Stated at market value Basis of valuation is in accordance with the cost basis (with writing down of the carrying value based on any decreased Merchandise and finished goods ······················Principally by weighted average method Work in process··········································Principally by weighted average method Raw materials ························ ····················Principally by weighted average method Supplies ··················································Principally by moving average method (2) Method of depreciation of important depreciable assets 1) Property, plant and equipment (excluding leased assets) The Company and six domestic consolidated subsidiaries use the declining balance method (with the exception of buildings (excluding facilities annexed to buildings) acquired on or after April 1, 1998 and facilities annexed to buildings and structures acquired on or after April 1, 2016, for which the straight-line method is used), while other subsidiaries use the straight-line method. ―13― Estimated useful lives of major assets are as follows: Buildings and structures 3-60 years Machinery, equipment and vehicles 4-10 years 2) Intangible assets (excluding leased assets) Straight-line method is used. 3) Leased assets Leased assets relating to finance lease transactions which transfer the ownership of leased assets The same depreciation method as applied to our own assets is used. Leased assets relating to finance lease transactions which do not transfer the ownership of leased assets Straight-line method based on the depreciation period equal to the lease period and residual value of zero is used. Right-of-use assets Straight-line method based on the depreciation period equal to the lease period and residual value of zero is used. For overseas consolidated subsidiaries other than U.S. subsidiaries, financial statements are prepared in accordance with International Financial Reporting Standards, and International Financial Reporting Standard No. 16, “Leases” (“IFRS 16”) is applied. Under IFRS 16, Regarding the accounting treatment for lessees, in principle, all leases are recorded as assets and liabilities on the balance sheet. (3) Reserves and Provisions 1) Allowance for doubtful accounts In order to prepare for any losses arising from bad debt receivables, an amount estimated to be unrecoverable is provided. General reserve is calculated based on the past loss experience, and specific reserve is calculated by reviewing the probability of recovery in each individual case where there is concern over claims. 2) Provision for bonuses An amount corresponding to the period out of the estimated amount of bonuses payable to employees is provided. 3) Provision for bonuses for directors (and other officers) An estimated amount of bonuses payable is provided. 4) Provision for product compensation In order to prepare for any expenditure for quality claims, an estimated amount required to be paid in future is provided. 5) Provision for loss on guarantees period, an estimated amount of loss is provided. In order to prepare for the loss on guarantee balance remains at the end of an Employee Shareholding Incentive Plan (E-Ship®) 6)Provision for share based remuneration, Provision for share based remuneration for directors (and other officers) In order to prepare for the payment of share-based remuneration for directors (and other officers), an estimated share-based remuneration amounts based on the estimated points to be granted to eligible directors (and other officers) under the Share Grant Rule of the Company is provided. ―14― (4) Accounting for retirement benefits In order to prepare for the payment of retirement benefits to employees (excluding operating officers etc.), an amount estimated to have occurred at the balance sheet date is provided based on the projected benefit obligation and plan assets at the balance sheet date. When calculating retirement benefit obligations the benefit formula basis is used to allocate to the current period. Past service cost is recorded as an expense by a pro-rated amount by the straight-line method over a period within the average remaining service years of employees (mainly 14 years) at the time of occurrence thereof. For actuarial differences, an amount prorated by the straight-line method over a period within the average remaining service years of employees (mainly 14 years) at the time of occurrence thereof in each consolidated fiscal year is expensed starting from the consolidated fiscal year that follows the consolidated fiscal year of occurrence. In order to prepare for the payment of retirement benefits to operating officers etc., the amount that would need to be paid if all eligible officers retired at the balance sheet date is provided. (5) Conversion of foreign currency denominated assets and liabilities into Japanese Yen Foreign currency denominated monetary assets and liabilities are converted into Japanese Yen at the spot exchange rates prevailing at the balance sheet date, and the resulting exchange differences are recorded as gains or losses. Assets and liabilities, income and expenses of overseas subsidiaries are converted into Japanese Yen at the spot exchange rates prevailing at the balance sheet date, and the resulting exchange differences are recorded in net assets as foreign currency translation adjustments and non-controlling interests. (6) Amortization of goodwill and the amortization period Goodwill is amortized by the straight-line method within a period of 14 years based on the estimated period during which the benefits are expected to arise. (7) Scope of cash and cash equivalents in consolidated statement of cash flows The cash and cash equivalents in consolidated statement of cash flows comprise cash on hand, demand deposits, and short-term investments with a maturity of three months or less from the date of acquisition that are readily convertible into cash and that are subject to an insignificant risk of changes in vales. (Changes in Accounting Policy) (Adoption of Accounting standard for revenue recognition, etc.) The Group has applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020; hereinafter referred to as the “Accounting Standard for Revenue Recognition”), etc. from the beginning of the current consolidated fiscal year, and recognizes revenue at the amount expected to be received in exchange for promised goods or services when control of the goods or services is transferred to customers. The main changes resulting from the application are as follows. (1) Consideration paid to customers The Group previously recorded revenue from fee-based payment transactions, etc., in which raw materials, etc. are purchased from customers and processed, and then such processed products are sold to those customers, at the gross amount of consideration including the purchase price of the raw materials, etc. Effective from the beginning of the fiscal year ending March 31, 2022, the Group records revenue at the net amount of consideration excluding the purchase price of raw materials, etc. (2) Export transactions of semi-finished goods The Group previously recorded revenue from export transactions of semi-finished products at the time of delivery of the semi-finished products to the trading company. Effective from the beginning of the current consolidated fiscal year, the Group records revenue upon arrival of the semi-finished products at customers. ―15― In accordance with the transitional treatment prescribed in the proviso to Paragraph 84 of the Accounting Standard for Revenue Recognition, the cumulative effect of retroactive application of the new accounting policy prior to the beginning of the current consolidated fiscal year was added to or deducted from retained earnings at the beginning of the current consolidated fiscal year, and the new accounting policy has been applied from the beginning balance of the period under review From the current consolidated fiscal year, “Notes and accounts receivable-trade” presented under “Current assets” and “Other” presented under “Current liabilities” are included in “Notes receivable-trade” and “Accounts receivable-trade” and in “Contract liabilities” and “Other”, respectively. In accordance with the transitional treatment prescribed in Paragraph 89-2 of the Accounting Standard for Revenue Recognition, no reclassification using the new presentation has been made to the consolidated financial statements of the previous consolidated fiscal year. As a result of this change, for the current consolidated fiscal year, net sales decreased by 223 million yen, cost of sales decreased by 224 million yen and operating income, ordinary income, and profit before income taxes and minority interests increased by 0 million yen, compared with those calculated by the previous method. The balance of retained earnings at the beginning of the fiscal year increased by 10 million yen. (Adoption of Accounting Standard for Fair Value Measurement) The Group has applied the “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019; hereinafter referred to as the “Accounting Standard for Fair Value Measurement”), etc. from the beginning of the current consolidated fiscal year, and will apply the new accounting policy prescribed by the Accounting Standard for Fair Value Measurement prospectively in accordance with the transitional treatment prescribed in Paragraph 19 of the Accounting Standard for Fair Value Measurement and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019). There is no impact on the consolidated financial statements. (Changes in presentation) (Consolidated statement of income) “Other”. (Consolidated statements of cash flows) Loss on retirement of non-current assets, which was included in “Other”, under “Non-operating expenses” in the previous consolidated fiscal year, is stated separately in the current consolidated fiscal year, since its quantitative materiality increased. In order to reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified. As a result, 266 million yen presented as “Other” under “Non-operating expenses” in the Consolidated statement of income for the previous fiscal year has been reclassified as 52 million yen of “Loss on retirement of non-current assets” and 214 million yen of Loss on retirement of non-current assets, which was included in “Other”, under “Net cash provided by (used in) operating activities” in the previous consolidated fiscal year, is stated separately in the current consolidated fiscal year, since its quantitative materiality increased. In order to reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified. As a result, 250 million yen presented as “Other” under “Cash flows from operating activities” in the consolidated statements of cash flows for the previous fiscal year has been reclassified as 52 million yen of “Loss on retirement of non-current assets” and 198 million yen of “Other”. (Additional Information) (Granting Company Stock to Employees, etc. through a Trust) In order to incentivize employees to achieve the Mid-Term Plan goals and raise corporate value in medium to long term, and to enrich the employee welfare program, the Company introduced an E Ship® Trust Type Employee Stock Purchase Incentive Plan (hereinafter “the Incentive Plan”). ―16― (i) The Incentive Plan Overview The Incentive Plan is available to Daido Metal group employees who participate in the Daido Metal Employee Stock Purchase Plan (hereinafter, ESPP). Under the Incentive Plan, the Company will set up a trust Daido Metal ESPP Trust (hereinafter, “ESPP Trust”) with a trust bank. The ESPP Trust will purchase Company shares up front for the amount ESPP will likely to purchase over a certain period, financing its transaction with bank loans. Afterwards, the ESPP Trust will sell Company shares to the ESPP Trust for its periodical purchases. At the end of the trust period, if the ESPP Trust asset balance resulted positive with the accumulated gains on Company shares, such residual assets will be distributed to members of the ESPP who meet beneficiary eligibility criteria. As the Company will guarantee ESPP Trust for its bank borrowing in financing its purchase of Company shares, any shortfalls in repayment at the end of Trust period, due to the accumulated loss at ESPP Trust caused by the drop in Company share price. (ii) Residual Company shares held in the ESPP Trust Any residual shares of the Company held in the ESPP Trust will be recorded at the ESPP Trust’s book value (excluding incidental expenses) as treasury stock under net assets. As of the end of the previous consolidated fiscal year, book value of the treasury stock was 453 million yen and the number of shares was 604,000 shares. As of the end of the current consolidated fiscal year, book value of the treasury stock is 248 million yen and the number of shares is 330,000 shares. (iii) Book value of debt posted through the application of the total amount method As of the end of the previous consolidated fiscal year: 520 million yen As of the end of the current consolidated fiscal year: 349 million yen (Introduction of Performance-linked Stock-based Remuneration Scheme for Directors and Executive Officers) The Company introduced new performance-linked stock-based remuneration (“the Scheme”) for Directors (excluding Outside Directors, the same applying hereinafter) and Executive Officers (excluding a Director concurrently serving as an Executive Officer, the same applying hereinafter) in order to incentivize Directors and Executive Officers to improve the business performance of the Company and to enhance the corporate value over medium to long term. (i) The Scheme Overview A Board Benefit Trust (“the BBT”) is created with the contribution from the Company. The BBT purchases Company shares, and the Company gives eligible Directors and Executive Officers the shares based on accumulated number of points conferred in accordance with their individual rank and their achievement in meeting goals etc., as set forth in Share Grant Rule. Beneficiaries of the BBT shall be those who serve as Directors and Executive Officers during the period. The Company shares are granted to each Direct and Executive Officer when they retire from their position. (ii) Residual Company shares held in the BBT Any residual shares of the Company held in the BBT will be recorded at the BBT’s book value (excluding incidental expenses) a s treasury stock under net assets. As of the end of the previous consolidated fiscal year, book value of the treasury stock was 326 million yen and the number of shares was 431,000 shares. As of the end of the current consolidated fiscal year, book value of the treasury stock is 311 million yen and the number of shares is 411,000 shares. ―17― (Segment information) 1. Description of reportable segments The reportable segments of the Group are defined as individual units, where separate financial information is available and which are subject to regular review by the Board of Directors to evaluate their results and decide the allocation of management resources. The Group produces and sells bearings for automotive, shipbuilding, construction machine industry, dry bearings, special types of bearings for general industries, high-precision and high-quality parts for automotive engines and transmissions, and aluminum die cast automotive parts as its core business and other products (metal dry bearings, rotary pump, centralized lubrication, electrode sheet business for electric double layer capacitors, etc. ). The Group is, therefore, composed of segments based on products, and has four reportable segments, “Automotive engine bearings,” “Automotive non-engine bearings,” “Non-automotive bearings,” and “Other automotive parts.” (Changes in Reporting Segments) As stated under the “Change in Accounting Policy”, Accounting Standards for Revenue Recognition, etc. has been applied to the consolidated financial statements for the current fiscal year. In accordance with a change in the method of accounting treatment for revenue recognition, the method of measuring profit or loss in each business segment has also been changed. As a result of this change, for the current consolidated fiscal year, net sales of ” Automotive engine bearings” decreased by 0 million yen and the segment profit decreased by 0 million yen, net sales of ” Automotive non-engine bearings” decreased by 111 million yen and the segment profit increased by 1 million yen, and net sales of ” Other automotive parts” decreased by 111 million yen, compared with those calculated by the previous method. 2. Methods of measurement for sales and profit (loss) by each reportable segment The accounting treatment for each reportable segment is nearly the same as that set forth in the “Significant matters that form the basis of presenting the consolidated financial statements.” Profit by each reportable segment is based on operating profit. Internal sales or transfer between segments is based on actual market value. 3. Information on sales and profit (loss) by each reporting segment I The previous fiscal year (from April 01, 2020 to March 31, 2021) Reporting Segment Automotive engine bearings Automotive non-engine bearings Non-automotive bearings Other automotive parts Sub total (Unit JPY million) Others (*) Total Net sales External sales 46,718 15,940 10,262 10,358 83,280 1,440 84,720 Internal sales or transfer between segments 427 83 29 371 912 604 1,516 Total 47,146 16,024 10,291 10,730 84,192 2,044 86,237 Segment profit(loss) 6,052 1,829 1,458 (1,852) 7,487 318 7,806 (*) “Others” includes business areas not included in above reporting segments. It includes electrode sheets for electric double layer capacitors, the metallic dry bearings business, pump-related products businesses, and real estate leasing business. ―18― II The current fiscal year (from April 01, 2021 to March 31, 2022) Reporting Segment Automotive engine bearings Automotive non-engine bearings Non-automotive bearings Other automotive parts Sub total (Unit JPY million) Others (*) Total Net sales External sales 57,595 20,255 11,033 13,688 102,572 1,451 104,024 Internal sales or transfer between segments 792 143 43 748 1,728 671 2,399 Total 58,388 20,399 11,076 14,436 104,301 2,122 106,423 Segment profit (loss) 8,380 3,338 1,750 (1,649) 11,818 343 12,162 (*) “Others” includes business areas not included in above reporting segments. It includes electrode sheets for electric double layer capacitors, the metallic dry bearings business, pump-related products businesses, and real estate leasing business. 4. Reconciliation between Reporting segments total and numbers reported in Consolidated Financial Statements Net Sales The previous fiscal year The current fiscal year Profit The previous fiscal year The current fiscal year 84,192 2,044 (1,516) 84,720 7,487 318 13 (6,504) 1,315 (Unit JPY million) (Unit JPY million) 104,301 2,122 (2,399) 104,024 11,818 343 (4) (7,115) 5,042 Reporting segments total Net sales from “Others” category Elimination of intersegment transactions Net sales as per Consolidated Financial Statements Reporting segments total Profit from “Others” category Elimination of intersegment transactions Unattributable costs (*) Operating profit as per Consolidated Financial Statements (Per share information) Net assets per share Earnings per share (Notes) (*) Unattributable costs are principally general administrative expenses not attributable to reporting segments. The previous fiscal year The current fiscal year 1,213.08 yen 2.25 yen 1,289.96 yen 40.70 yen 1. Diluted earnings per share is not stated because no latent shares existed. 2. The shares of the company held by the trusts recorded as treasury stock under shareholders’ equity are included in the treasury stock to be deducted in calculating the number of common shares at the end of the consolidated fiscal year for the purpose of calculating “Net assets per share”. (Net assets per share) The previous consolidated fiscal year : 1,035 thousand shares The current consolidated fiscal year : 742 thousand shares In addition, these shares are included in the treasury stock to be deducted in calculating the average number of shares during the period for the purpose of calculating “Earnings per share”. (Earnings per share) The previous consolidated fiscal year : 1,196 thousand shares The current consolidated fiscal year : 890 thousand shares ―19― 3. Basis of calculation for Net assets per share is shown below. The previous fiscal year The current fiscal year Net assets (JPY million) Deductions from net assets (JPY million) (Non-controlling interests) (JPY million) Net assets available to common stock (JPY million) Number of common stock at the end of fiscal year for calculation of Net assets per share (thousand shares) Profit attributable to owners of parent (JPY million) Not attributable to common stockholders (JPY million) Profit attributable to owners of parent available to common stock (JPY million) Average number of common stock (thousand shares) (Material subsequent events) None 64,538 (8,150) 8,150 56,388 46,483 104 － 104 46,322 68,695 (8,355) 8,355 60,340 46,776 1,897 － 1,897 46,628 4. Basis of calculation of Earnings per share is shown below. The previous fiscal year The current fiscal year ―20― (Million yen) As of March 31,2021 As of March 31,2022 2. Non-consolidated Financial Statements (1) Non-consolidated Balance Sheets Assets Current assets Cash and deposits Notes receivable – trade Accounts receivable – trade Electronically recorded monetary claims – operating Merchandise and finished goods Work in process Raw materials and supplies Prepaid expenses Short-term loans receivable from subsidiaries and associates Accounts receivable – other Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings Structures Machinery and equipment Vehicles Tools, furniture and fixtures Land Leased assets Construction in progress Total property, plant and equipment Intangible assets Software Leased assets Right of using facilities Other Total intangible assets Investments and other assets Investment securities Shares of subsidiaries and associates Investments in capital of subsidiaries and associates Long-term loans receivable from employees Long-term loans receivable from subsidiaries and associates Claims provable in bankruptcy, claims provable in rehabilitation and other Long-term prepaid expenses Prepaid pension costs Other Allowance for doubtful accounts Total investments and other assets 5,900 281 15,556 2,463 1,724 3,185 1,839 145 3,616 1,811 97 (0) 36,622 8,487 601 4,726 8 352 5,080 2,268 300 2,923 5 12 463 3,405 1,841 31,654 9,854 17 3,090 2 22 2,666 540 (1,297) 48,393 73,625 2,922 163 17,695 2,518 2,837 4,106 2,652 158 2,393 2,051 90 (0) 37,590 7,933 574 4,018 3 337 5,079 2,257 148 2,588 2 12 303 2,907 2,129 29,933 10,257 20 4,018 2 58 2,994 477 (1,535) 48,357 71,617 Total non-current assets Total assets 110,247 109,208 ―21― 21,826 20,353 Liabilities Current liabilities Accounts payable – trade Electronically recorded obligations – operating Short-term loans payable Current portion of long-term loans payable Lease liabilities Accounts payable – other Accrued expenses Income taxes payable Accrued consumption taxes Advances received Contract liabilities Deposits received Unearned revenue Provision for bonuses Provision for bonuses for directors (and other officers) Provision for environmental measures Electronically recorded obligations – non-operating Other Total current liabilities Non-current liabilities Long-term loans payable Lease liabilities Deferred tax liabilities Provision for retirement benefits Provision for share based remuneration Provision for share based remuneration for directors (and other officers) Provision for loss on guarantees Provision for loss on business of subsidiaries and associates Asset retirement obligations Long-term accounts payable – other Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Capital stock Capital surplus Legal capital surplus Other capital surplus Total capital surplus (Million yen) As of March 31,2021 As of March 31,2022 5,556 9,380 9,440 5,757 338 1,685 883 138 102 5 － 66 49 693 － 33 491 2 16 30 631 － 1 313 22 34,624 15,610 1,578 661 4,383 23,250 57,874 8,413 8,789 3,449 12,238 6,506 12,222 5,825 5,232 388 1,160 932 472 － － 458 61 49 956 39 － 491 2 49 41 480 438 1 297 17 34,800 15,057 1,402 479 4,659 22,925 57,726 8,413 8,789 3,449 12,238 ―22― (Million yen) As of March 31,2021 As of March 31,2022 Retained earnings Legal retained earnings Other retained earnings Reserve for advanced depreciation of non-current assets General reserve Retained earnings brought forward Total retained earnings Treasury shares Total shareholders’ equity Valuation and translation adjustments Valuation difference on available-for-sale securities Total valuation and translation adjustments Total net assets Total liabilities and net assets 743 4,359 21,000 5,597 31,700 (780) 51,572 800 800 52,372 110,247 743 4,259 21,000 4,598 30,601 (560) 50,693 789 789 51,482 109,208 ―23― (2) Non-consolidated Statements of Income Selling, general and administrative expenses Net sales Cost of sales Gross profit Operating profit Non-operating income Interest and dividend income Foreign exchange gains Other Total non-operating income Non-operating expenses Interest expenses Loss on retirement of non-current assets Other Total non-operating expenses Ordinary profit Extraordinary losses Loss on valuation of investments in capital of subsidiaries and associates Loss on valuation of shares of subsidiaries and associates Provision for loss on guarantees Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit (loss) (Million yen) For the fiscal year ended March 31,2021 For the fiscal year ended March 31,2022 54,197 43,294 10,902 10,179 723 1,215 36 404 1,656 155 44 18 219 2,159 176 － － 176 1,983 113 179 292 1,690 65,868 52,207 13,660 12,160 1,499 1,419 40 129 1,589 133 179 212 525 2,564 244 1,720 336 2,302 261 657 (198) 459 (197) ―24― (3) Non-consolidated Statements of Changes in Net Assets For the fiscal year ended March 31,2021 (Million yen) Shareholders’ equity Capital surplus Retained earnings Capital stock Legal capital surplus Other capital surplus Legal retained earnings Other retained earnings Reserve for advanced depreciation of non-current assets General reserve Retained earnings brought forward 8,413 8,789 3,449 743 4,451 21,000 5,003 8,413 8,789 3,449 743 4,451 21,000 5,003 Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Reversal of reserve for advanced depreciation of non-current assets Dividends of surplus Profit Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Reversal of reserve for advanced depreciation of non-current assets Dividends of surplus Profit Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period 91 (1,187) 1,690 594 5,597 － － － (91) － 8,413 8,789 3,449 4,359 21,000 － 743 Shareholders’ equity Valuation and translation adjustments Treasury shares Total shareholders’ equity Valuation difference on available-for-sale securities Total valuation and translation adjustments Total net assets (1,016) 50,833 328 328 51,162 (1,016) 50,833 328 328 51,162 － － (1,187) 1,690 (0) 236 (0) 236 235 738 (780) 51,572 472 472 800 472 472 800 ―25― (91) － － (1,187) 1,690 (0) 236 472 1,210 52,372 For the fiscal year ended March 31,2022 Shareholders’ equity Capital surplus Retained earnings (Million yen) Capital stock Legal capital surplus Other capital surplus Legal retained earnings Other retained earnings Reserve for advanced depreciation of non-current assets General reserve Retained earnings brought forward 8,413 8,789 3,449 743 4,359 21,000 5,597 8,413 8,789 3,449 743 4,359 21,000 5,646 Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Reversal of reserve for advanced depreciation of non-current assets Dividends of surplus Profit (loss) Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period Balance at beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during period Reversal of reserve for advanced depreciation of non-current assets Dividends of surplus Profit (loss) Purchase of treasury shares Disposal of treasury shares Net changes of items other than shareholders’ equity Total changes of items during period Balance at end of current period 48 100 (950) (197) － － － (100) － (1,048) 8,413 8,789 3,449 4,259 21,000 4,598 － 743 Shareholders’ equity Valuation and translation adjustments Treasury shares Total shareholders’ equity Valuation difference on available-for-sale securities Total valuation and translation adjustments Total net assets (780) 51,572 800 800 52,372 (780) 51,621 800 800 52,421 48 － (950) (197) (0) 220 (0) 220 220 (928) (560) 50,693 (11) (11) 789 (11) (11) 789 ―26― (100) 48 － (950) (197) (0) 220 (11) (939) 51,482