April 1997 March 1998 Financial Report | IRライブラリー | 株主・投資家の皆様へ | アマノ

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FINANCIAL REPORT

April 1997 March1998

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Yasuyoshi Komoto

President and CEO

Dear Shareholders:

It is my pleasure to present you with the financial report of Amano Corporation for the fiscal

year ended March 31,1998.

Since its foundation, Amano has endeavored to develop and provide products and systems

dealing with "people and time" and "people and environment" to use time more effectively

and create a better environment. During the past fiscal year, business trying to achieve better

time and resource management and the resultant cost savings sought Amano’s information

technology systems. Likewise, business, investing in better infrastructures made purchases of

Amano’s many advanced environmental control systems. These factors have resulted in

increased sales across all divisions over the previous fiscal year.

In addition to increased sales, Amano continued efforts to improve its future financial strength,

Amano decided to take an extraordinary loss on the write-down of investments in securities

made in years past. Therefore, net profits decreased from last year. However, Management

felt it was better to take a proactive approach in dealing with these loans, and decided to

take the loss during such a successful year.

With "Time & Ecology" as its new business theme, Amano will develop and provide new

systems that continue to maximize the use of people and time. These new systems will focus

on versatility and functionality to meet the ever changing needs of the marketplace. For its

ecology business unit, Amano will continue to concentrate in the development and creation

of new environmental systems in consideration with safety, sanitation, cleanliness, and health.

Amano will continue to develop new technologies and products, and to take on challenges to

improve the company's profitability. We ask for your continued support in the coming year.

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Yokohama and Tsukui Operations Facility Acquire ISO9002 Certi- fication

Both the Yokohama Operations Fa- c i l i t y ( l o c a t e d i n Yo ko h a m a , Kanagawa Prefecture) and Tsukui Operations Facility (located in Tsukui, Kanagawa Prefecture) received recommendations from SGS (Société Générale de Surveillance) Japan, an ISO9000 testing, inspec- tion, and certification organization. Both facilities have received ISO9002 certification between the end of the last year and the beginning of this year. The facilities have also been accredited by UKAS

UKAS accreditation JAB accreditation

Expansion of Time Infor-

mation Products

HRM System Software certified by leading ERP vendors increases domestic and international partner- ships

Global software development and strong sales support of the Human Resource Management(HRM) Total Solution product has won great re- views from the world's first-class Enterprise Resource Planning(ERP) vendors such as SAP, JD Edwards, and ORACLE, and has led to many international partnership contracts. The synergy effect of this is that Amano is establishing its brand name as the top vendor of time information products due to increasing cooperation with major domestic dealers. This will fur ther open new areas for Amano's real-time data gathering products.

* The HRM (Human Resource Manage- ment) Total Solution product is a new solution that was developed based on Amano's many years of sales experience and acquired know-how. It treats people not as workers, but as resources, and instantly provides necessar y information when it is needed in order to maximize resource utility.

Parking System Network

Integration

Recently developed parking management software

Parking management systems are drastically changing as a result of improvements in computer network- ing technologies. Parking facility management that had been previ- ously controlled by using a monitor board can now be controlled using computer software. Amano's new par king management software,

"Counter and Monitoring System" ties the entrance gate, ticket ma- chine, pay station, and the parking availability sign together, and moni- tors parking conditions on the computer screen. In addition to these conventional functions, many new functions that can only be achieved through computer use are now included, such as parking facility lay- out, device control, device status monitoring, and statistical graphs which indicate parking facility occu- pancy and other statistical data. Other system innovations include

improved software and hardware, which include items such as auto- matic pay stations which suppor t credit cards.

These types of innovations also provide efficient and easy to use parking facilities for users. Therefore, high sales volume has won confidence and continues to gain recognition in both the domestic and overseas markets.

Counter and Monitoring System

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"FW-1000M" Receives Ministry of Health & Welfare Pharmaceutical Certification

Amano's "FW-1000M," that gener- ates highly acidic electrolytic water, has received pharmaceutical certification from the Ministry of Health and Welfare as medical equipment. This electrolytically activated water has been proven to instantly destroy MRSA, an antibiotic resistant bac- teria and infectious pathogen found in hospitals. Electrolytically activated water's active agent has been scientifically verified and

Ecology & Wellness

(E&W) Project

Comprehensive food safety control solution in accordance with HACCP

Food poisoning incidents caused by Enteropathogenic E. coli (O-157) which occurred last year in Japan have made the food industry real- ize the importance of sanitary food handling and preparation. Food in- dustr y organizations have established their own standards based on guidelines provided by the govern- ment. To meet these industry trends, Amano established its "E & W Head- quarters" in April, which is a combi- nation of the Aqua and the Ecology Products Divisions. It is promoting comprehensive food safety control with an emphasis on HACCP, the most advanced sanitation manage- (United Kingdom Accreditation Ser- vices) and JAB (Japan Accreditation Board for Quality Assurance).

The Yokohama Operations Facility manufactures parking products, while the Tsukui Operations Facil- ity manufactures time recorders and time information products. Under the motto "Quality is the entrance ticket to the market," the staff at these facilities works diligently to provide customers with products of the highest quality.

ment methodology of today. Sales operations are being carried out dynamically towards food manufacturing and processing companies, hotels, restaurants and cafeterias.

*HACCP (Hazard Analysis Critical Control Point) was developed in the USA, and is an internationally recognized food safety methodology which provides the framework for hazard identification and control. In Japan, various ministries and agencies provide similar guidelines, including the Ministry of Health and Welfare.

clinically tested by doctors, and has been frequently reported-on by scientific societies.

Electrolytically activated water has the following characteristics: 1) Independence from previous dis-

infectants and has equal or greater disinfecting ability. 2) Made only of tap water and salt,

easier to handle than chemicals and is safer.

3) Leaves minimal residue, and is friendly to the environment. The wide use of this product (for example, cleansing fingertips) in the areas of medical treatment and welfare is promising.

FW-1000M

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ware and software sales increased 38% and 25%, respec- tively, over last year.

Time Management Equipment

Time Recorders and Time Stamps Sales volume of this product line was 6,721 million yen, up 6.2% from the previous fiscal year, with significant increases in exports. The num- ber of units sold increased by 9%, consisting of exports mainly to Asian n a t i o n s , s u c h a s Ta i w a n a n d Singapore. In monetary terms, there was a 21.5% increase which includes increased sales of spare parts.

Parking Systems

Parking Management Systems and Management Services

Sales volume of parking systems and equipment this year was 13,623 million yen, up 14.8% from last year. There was a 14.8% increase in domestic sales and a 15.1% increase in expor ts due to the increased orders received from local business in Asia.

There was significant demand arising from public parking facility ex

Intelligent Time Recorder, Exceroder

This Year's Business

Results

Japan's recession became more evi- dent this fiscal year due to the de- cline in domestic consumption and confusion in the Asian economy. In the industries in which Amano is involved, active investments by business in information technology and in environmental control have increased demand for our products. In addition, a new business opportunity has become apparent. This new opportunity involves ecology (environmental health) and sanitation (food sanitation management) systems which deal with the safety, sanitation, cleanliness, and health of the environment in which people live. Under these circumstances, Amano reinforced its comprehensive proposals, reformulated support services to meet its end-user's needs, introduced new products, opened up new mar kets, and strengthened the company's profitability.

This year's total sales volume was 50,212 million yen, up 13.3% from the previous fiscal year. Of this amount, 46,236 million yen comprised domestic sales (up 12.7 % from the previous fiscal year) and exports accounted for 3,976 million yen (up 20.8% from last year, equal- ing 7.9% of sales volume). Operat- ing profit was 6,950 million yen, an increase of 18.1% over the previous year. Due to a decrease in port-

folio income, however, ordinar y profit was 6,560 million, up only 3.1% from last year. Also, due to the write-down of investments in securities, net earnings were 2,139 million yen, down 31.2% from the previous fiscal year.

Business Results

by Product Line

Time Information Systems

Time and Attendance, Payroll, Scheduling, and Personnel Informa- tion Systems

Sales volume this year for TIS was 10,153 million yen, up 12.5 % from last year. In this segment, information systems sales increased 17.0% and sales of intelligent time recorders decreased by 4.4%.

Because of the rapid increase in the use of client-server systems and the Internet, many businesses have begun to use ERP packages in conjunc- tion with their information systems. This allows them to run their business more efficiently, and keep up with the rapidly changing business environment. This trend has led to an increasing demand for Amano's information system, Time Pro. Hard-

Information system, Time Pro

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Sales volume of these systems this year was 13,756 million yen, up 21.8% from the previous fiscal year. In environmental systems, the sales of large-sized dust collectors rose 46.5%. The sales of pneumatic powder conveyance systems rose 27.5%, and sales of standard dust collectors rose 2.2%.

In ecology and sanitation systems, deodorization systems sales increased by 127.8%, and sales of hazardous gas removal systems increased by 51.8%. Aqua systems sales also rose 48.0%.

The sales of dust collectors and pneumatic powder conveyance systems increased due to rising demand from manufacturing industries. These industries are investing money into environmental management such as ISO14000 and recy- cling and waste disposal, as well as technological renovation and old equipment renewal.

The sales volume of sanitation systems was 1,686 million yen. Sales of aqua systems, deodorization systems, and cleaning systems are all included in this amount.

The demand for sanitation management (safety and sanitation) became prominent in commercial kitchens and food processing industries in

o r d e r t o d e a l with food poisoning caused by En- teropathogenic E. coli (O-157).

Amano's comprehensive safety sanitation management system comprised of aqua systems (highly acidic electrolytic water disinfection); ecology systems (ozone de- odorizing and disinfection); and cleanliness systems (antibacterial floor coatings and floor cleaning); are achieving good results.

Carpet cleaner, CHC-60 Pulse Jet Dust Collectors, SNP

Amano Ginza Sanitation Plaza

Cleaning Systems

Vacuum Cleaners, Dry Care Clean- ing Systems, and Cleanliness Man- agement Services

Sales volume of this product line was 5,957 million yen, up 2.6% from the previous fiscal year.

As companies recognize total cleanliness as a fundamental requirement to quality and ser vice, there has been a significant demand for high quality cleaning products and services. In recent years, new building construction starts have slowed due to a maturing market. However, cleaning management services are proving to be quite successful. pansion by municipal governments

and hospitals, With increased demands for improved revenue of parking business in shopping districts by use of IC cards, credit cards, and common parking tickets, Amano met these demands by providing customer ser vices and proposing strategic business solutions comprised of central control systems for parking facilities. These systems are based on the central pay system concept that provides monitoring and data analysis via PC. In addition, Amono's 24-hour customer ser vice and equipment maintenance is a valued feature, and has led to a demand increase both in new orders and renewals. Sales of parking management services also expanded during the year.

Environmental Systems

Standard Dust Collectors, Large- sized Dust Collectors, Pneumatic Powder Conveyance Systems, Ecology (Environmental Health) and Sanitation (Food Sanitation Management) Systems, Hazardous Gas Removal Systems, Deodoriza- tion Systems, Aqua Systems and Nursing Equipment

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Sharp Projects in Malaysia

Amano Blick International Singapore (Advanced Business Integration ) recently obtained contracts from five of six existing Sharp subsidiary companies in Malaysia. It star ted with two of the Sharp group companies: Sharp-Roxy Sales & Service

Amano in Sapphire 97/98

Amano's high quality real-time in- tegrated system, the CS500 and its related application software, has proven to be a highly efficient and intelligent front-end system to ERP (Enterprise Resource Planning) packages. ERP packages are known for their efficient re-engineering of business processes and organizations in many enterprises all over the world. They are also highly accepted by large multi-national enterprises due to their quick system implementation with existing business templates, as well as their cost effectiveness. Amano's high quality systems enable these ERP packages to be even more efficient by auto- mating data collection with instant validation and integration to ERP package databases. Amano's high quality systems ensure high produc- tivity when they are used as front- end systems to ERP packages, by eliminating all manual processes, such as manual data collection, key- punch entry, and manual processing, and the human errors which arise from those manual processes.

Typical examples are the CS500 system and the HR-COM and Shop Floor Data Collection-COM, which offer real-time integration to PA- TIM (HR) module and the PP (Pro- duction Planning) module by the leading ERP package vendor, SAP. SAP holds an annual regional business convention called Sapphire, and Amano Blick International Singapore (Advanced Business Integration )and Amano par ticipate in this convention every year as SAP R/3 Comple- mentary Software Program (CSP) providers. Amano's high quality system solutions and our continuous commitment towards automated system products are thus widely known and accepted by many of today's large enterprises.

Company (Malaysia) Sdn. Bhd. and Sharp Electronics (Malaysia) Sdn. Bhd. in Shah Alam, Malaysia. These projects entailed automation of Door Access Control, Time & At- tendance Control, Payroll, and Can- teen Management Systems in their new facilities. These two companies greatly valued Amano's unique "One Badge Card Solution" with real-time validation and data processing, due to its ease-of-use factor and integration over LAN/WAN. These cases are typical Amano CS500 Sys- tem Solution examples which not so many system vendors can offer to the market today.

With these two company system implementations, we obtained other Sharp group companies in Malaysia, such as Sharp-Roxy Appliances Corporation(M) Sdn. Bhd., followed by Sharp-Roxy Electronics Corpo- ration (Malaysia) Sdn. Bhd. and Sharp Manufacturing Corporation (Malay- sia) Sdn. Bhd. These companies were interested in the CS500 Real- time Systems solution specifically de- signed to integrate with SAP R/3 HR module Interfaces. These SAP R/3 HR module interface system implementations are the first and second

Real-Time server, CS500

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“7in1” Marketing by

AMANO. TIME & AIR

SINGAPORE PTE, LTD.

By packaging four major amenities (Hardware, Software, Services and Management), Amano Singapore has been expanding its business domain, while providing its customers with a total solution. The current goal of Amano Singapore is to provide the local Singapore market

with a total solution package for buildings and facilities. This includes all hardware, software and engineering work solutions for access control, parking facility revenue, total building cleaning solutions and electrolytic water ionization systems (7in1).

Our focus is to eventually provide each customer with all Amano products. To start with, we secure customers by selling one or more products, and maintain them with our excellent services. Then, we rec- ommend other Amano products or management services to them.

As a result, our customers are provided with a multi-system total solution from a single vendor. They obtain true value from a single vendor, as Amano provides everything including hardware, software, after- sales services, and management services. HESHE and Citimac Build- ings in Singapore are prime examples of this. Customers then have the ability to concentrate on their core business by leaving aux- iliary operations or problems to us as a single solution provider.

Using Singapore as a case model, we intend to implement the same business concept in other countries.

Establishment of

PT. AMANO INDONESIA

Amano has received permission from the Republic of Indonesia to make investments, and has established a 100% owned local subsidiary on February 6, 1998.

An office has been established in central Jakarta, in the Kunningan Dis- trict, and is in operation to cover Indonesia's massive market. Indo- nesia has a population of 200 million and has an area which is five times that of Japan.

Operations there entail design, manufacturing, sales, and maintenance of Amano's time information systems and dust collectors. And while the Indonesian economy is

currently at its worst, many restric- tions to foreign businesses are being lifted, making operations much easier. The construction of a large- sized pneumatic conveyance system (an order amounting to 300 million yen) for Bakri Dia Foil Co. is well under way, and the final product is

planned to be completed this De- cember after successful testing. In addition, several orders of time information systems have already been received. Amano has hired local engineers with experience in the field, and future business expansion in Indonesia is promising. ERP package system integration ref-

erences in our Asian territory.

With these examples of successful system integration and customer references, though they are some of our many existing multi-national clients, we believe that Amano has begun to establish its existence and reputation in the high quality system integration business market here in Asia.

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AMANO Corporation and Subsidiaries

Financial Highlights

For the years ended March 31, 1998 and 1997.

Millions of Yen Thousands of U.S. Dollars

1998 1997 1998 1997

For the year:

Net sales ... ¥60,099 ¥54,025 $455,295 $409,280 Net income ... 2,019 2,510 15,298 19,015 Net income per share (in Yen and U.S. Dollars) ... 21.08 26.29 0.160 0.199 Cash dividends per common share

(in Yen and U.S. Dollars) ... 13.00 13.00 0.098 0.098 At year-end:

Total assets ... 100,467 98,290 761,116 744,623 Working capital ... 48,043 48,788 363,969 369,606 Shareholders’ equity ... 78,308 77,573 593,250 587,675 Sales by product:

Time management system equipment ... 11,191 9,840 84,780 74,545 Time control equipment ... 9,949 9,710 75,371 73,561 Parking control system equipment ... 15,503 13,590 117,448 102,955 Dust collectors, Industrial cleaners,

Dust collecting systems ... 13,840 11,514 104,848 87,227 Floor cleaning equipment ... ¥9,616 ¥9,371 $72,848 $70,992 Note: U.S. dollar amounts are translated from yen at the rate of ¥132=U.S.$1. Refer to Note 4 of the Consolidated

Financial Statements.

0

'94 '95 '96 '97 '98

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000

0

'94 '95 '96 '97 '98

500

0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00

1,000 1,500 2,000 2,500 3,000

'94 '95 '96 '97 '98

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Consolidated Balance Sheets

As at March 31, 1998 and 1997.

Thousands of U.S. Millions of Yen Dollars (Note 4)

ASSETS 1998 1997 1998 1997

Current assets:

Cash and deposits ... ¥10,688 ¥9,426 $80,970 $71,409 Marketable securities ... 29,361 30,058 222,433 227,712 Notes and accounts receivable:

Trade ... 20,245 19,404 153,371 147,000 Other ... 252 272 1,908 2,061 20,497 19,676 155,279 149,061 Less: allowance for doubtful accounts ... (224) (196) (1,694) (1,485)

20,273 19,480 153,585 147,576 Inventories ... 5,901 5,549 44,707 42,038 Other current assets ... 389 1,297 2,944 9,826 Total current assets ... 66,612 65,810 504,639 498,561

Investments and advances:

Investments in securities ... 4,688 5,010 35,514 37,955 Other investments ... 2,512 2,120 19,031 16,061

7,200 7,130 54,545 54,016

Property, plant and equipment, at cost:

Buildings ... 19,591 18,997 148,417 143,917 Machinery and equipment ... 14,648 14,174 110,972 107,379 34,239 33,171 259,389 251,296 Less accumulated depreciation ... (19,863) (18,481) (150,481) (140,008)

14,376 14,690 108,908 111,288 Land ... 5,690 4,949 43,105 37,492 Construction in progress ... 1,053 400 7,977 3,030 21,119 20,039 159,990 151,810

Fixed leasehold deposits... 1,385 1,249 10,496 9,462 Deferred charges and other assets... 2,800 2,561 21,215 19,402 Difference between investment costs

and equity in net assets acquired... 712 687 5,394 5,205 Adjustment of foreign currency

statement translation ... 639 814 4,837 6,167

¥100,467 ¥98,290 $761,116 $744,623 The accompanying notes are an integral part of this statement.

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LIABILITIES AND SHAREHOLDERS’ EQUITY 1998 1997 1998 1997

Current liabilities:

Short-term bank loans ... ¥1,415 ¥1,427 $10,716 $10,811 Notes and accounts payable:trade ... 9,560 8,467 72,426 64,144 Accrued expenses ... 3,229 2,957 24,466 22,402 Accrued income taxes ... 1,918 2,317 14,532 17,553 Other current liabilities ... 2,447 1,854 18,530 14,045 Total current liabilities ... 18,569 17,022 140,670 128,955

Long-term liabilities:

Accrued retirement benefits to employees ... 2,347 2,315 17,779 17,538 Accrued retirement benefits to directors ... 771 750 5,842 5,682 Other ... 240 353 1,821 2,674

3,358 3,418 25,442 25,894

Minority interest in consolidated subsidiaries... 232 277 1,754 2,099

Shareholders’ equity:

Common stock, ¥50 ($0.38) par value per share: Authorized: 200,000,000 shares

Issued, as of 1997, 1998: 95,781,829 shares ... 18,240 18,240 138,182 138,182 Additional paid-in capital ... 19,293 19,293 146,159 146,159 Legal reserve ... 1,948 1,816 14,758 13,758 Retained earnings ... 38,831 38,266 294,183 289,894 78,312 77,615 593,282 587,993 Less, treasury stock at cost, 3,324 shares in 1998

and 31,386 shares in 1997 ... (4) (42) (32) (318) 78,308 77,573 593,250 587,675

¥100,467 ¥98,290 $761,116 $744,623 The accompanying notes are an integral part of this statement.

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Consolidated Statements of Income

1998 1997 1998 1997

Net sales ... ¥60,099 ¥54,025 $455,295 $409,280 Cost of sales... 32,001 28,506 242,432 215,955 Gross profit ... 28,098 25,519 212,863 193,325 Selling, general and administrative expenses ... 20,290 18,569 153,712 140,674 Operating income ... 7,808 6,950 59,151 52,651 Other income (expenses) :

Interest and dividend income ... 955 1,142 7,232 8,652 Interest expenses ... (189) (169) (1,433) (1,280) Amortization of research and development cost ... (1,231) (1,148) (9,325) (8,697) Foreign exchange gain / (loss) ... – (186) – (1,409)

Gain on sales of property and equipment ... 2 – 18 –

Loss on disposal of property and equipment ... (107) (74) (812) (561) Loss on liquidation of subsidiaries ... – (134) – (1,015) Write-down of marketable securities ... (1,449) (236) (10,973) (1,788) Other, net ... 24 182 183 1,379 Income before income taxes ... 5,813 6,327 44,041 47,932 Income taxes... 3,821 3,817 28,950 28,917 Minority interests in earnings of consolidated subsidiaries 45 20 338 152 Amortization of equity in net assets of consolidated

subsidiaries over investment cost... (20) (18) (148) (137) Equity in earnings of affiliates... 2 (2) 17 (15) Net income ... ¥2,019 ¥2,510 $15,298 $19,015

Yen U.S. Dollars (Note 4)

Net income per share, adjusted-primary... ¥21.08 ¥26.29 $0.160 $0.199 Net income per share, adjusted-fully diluted... – 26.21 – 0.199 Cash dividends per common share ... ¥13.00 ¥13.00 $0.098 $0.098 The accompanying notes are an integral part of this statement.

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Consolidated Statement of Cash Flows

1998 1997 1998 1997

Cash Flows from Operating Activities:

Net income ... ¥2,019 ¥2,510 $15,298 $19,015 Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation ... 1,697 1,769 12,858 13,402 Amortization ... 1,269 1,455 9,614 11,023 Minority interests in net income... (45) (20) (338) (152) Provision for accrued retirement benefits ... 53 257 401 1,947 Equity in earnings of affiliates ... (2) 2 (17) 15 Loss on write-off of investments in securities ... 1,247 – 9,447 – Loss on sales / disposal of property, plant and equipment 104 74 788 561 Changes in assets and liabilities:

Decrease / (increase) in receivables ... (793) 405 (6,007) 3,068 Decrease / (increase) in inventories ... (352) 158 (2,669) 1,197 Decrease / (increase) in current assets ... 946 (996) 7,167 (7,545) Increase / (decrease) in payables ... 1,093 (869) 8,282 (6,583) Increase / (decrease) in income taxes ... (399) 151 (3,023) 1,144 Increase / (decrease) in current liabilities ... 865 156 6,553 1,182 Other ... 98 372 742 2,816 Net cash provided by operating activities ... 7,800 5,424 59,096 41,090 Cash Flows from Investing Activities:

Acquisition of property and equipment ... (2,747) (1,586) (20,811) (12,015) Decrease / (increase) in investments in securities ... (925) (1,066) (7,008) (8,076) Decrease / (increase) in investments in

subsidiaries and affiliates ... 2 637 15 4,826 Decrease / (increase) in investments in other investments ... (437) (624) (3,311) (4,727) Proceed from sales of property and equipment ... (134) – (1,015) – Transfer of investments in securities

to / from cash equivalents ... – 188 – 1,424 Decrease / (increase) in fixed leasehold deposits ... (136) (32) (1,034) (242) Decrease / (increase) in intangibles ... (1,488) (928) (11,273) (7,030) Net cash used in investing activities ... (5,865) (3,411) (44,437) (25,840) Cash Flows from Financing Activities:

Increase / (decrease) in short-term bank loans ... (12) 382 (95) 2,894 Redemption of bonds ... – (122) – (924) Increase / (decrease) in other long-term debt ... (113) (80) (853) (606) Cash dividends ... (1,245) (1,241) (9,429) (9,402) Net cash used in financing activities ... (1,370) (1,061) (10,377) (8,038) Cash and cash equivalents at beginning of year ... 39,484 38,532 299,121 291,909

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Millions of Yen

Amount of Additional

Common Stock Common Paid-In Legal Retained (In Thousands) Stock Capital Reserve Earnings

Balance at March 31, 1996... 95,171 ¥17,851 ¥18,906 ¥1,682 ¥37,200

Net income for the year ended March 31, 1997 .... – – – – 2,510

Cash dividends ... – – – – (1,241)

Directors’ and statutory auditors’ bonuses ... – – – – (77)

Transfer to legal reserve ... – – – 134 (134) Increase due to application of equity method to

additional companies ... – – – – 8 Conversion of convertible bonds ... 611 389 387 – – Balance at March 31, 1997... 95,782 ¥18,240 ¥19,293 ¥1,816 ¥38,266

Cash dividends ... – – – – (1,245)

Transfer to legal reserve ... – – – 132 (132) Increase due to cosolidation of additional

subsidiaries ... – – – – 0 Balance at March 31, 1998... 95,782 ¥18,240 ¥19,293 ¥1,948 ¥38,831

Thousands of U.S. Dollars (Note 4)

Amount of Additional

Common Stock Common Paid-In Legal Retained (In Thousands) Stock Capital Reserve Earnings

Balance at March 31, 1996... 95,171 $135,235 $143,227 $12,743 $281,815

Cash dividends ... – – – – (9,401)

Transfer to legal reserve ... – – – 1,015 (1,015) Increase due to application of equity methad to

additional companies ... – – – – 63 Conversion of convertible bonds ... 611 2,947 2,932 – – Balance at March 31, 1997... 95,782 $138,182 $146,159 $13,758 $289,894

Cash dividends ... – – – – (9,429)

Transfer to legal reserve ... – – – 1,000 (1,000) Increase due to cosolidation of additional

subsidiaries ... – – – – 3 Balance at March 31, 1998... 95,782 $138,182 $146,159 $14,758 $294,183 The accompanying notes are an integral part of this statement.

Consolidated Statements of Shareholders’ Equity

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Notes to the Consolidated Financial Statements

2. Principles of Consolidation

(1) Scope of Consolidation The Company had 22 subsidiaries at March 31, 1998 (21 at March 31, 1997). The consolidated financial statements include the accounts of the Company and all majority owned subsidiaries (referred to as

"the Companies"). Pioneer / Eclipse West Corp. was closed on March 31, 1997, and its accounts are excluded from the consolidated financial statements for the year ended March 31, 1998.

The accounts of Amano Interna- tional Trading (Shanghai) Co., Ltd. are recorded using a fiscal year ending on December 31, and are consolidated accordingly with the accounts of the Company at March 31, 1998 and 1997 and for the years then ended.

The consolidated subsidiaries are:

Amano USA, Inc. (*1)

100% US$ 55,623 Amano Cincinnati Inc.

100% US$ 29,493 Amano Cincinnati Canada Inc.

100% C$ 430

Pioneer / Eclipse Corp.

100% US$ 4,606 Amano Pioneer Credit Corp.

(d.b.a. Amano Business Credit)

84% US$ 135

Accutime Corp. 100% US$ 750 Amano Electronics

Europe NV 100% BEF 413,574 Amano Deutschland,

GmbH 100% DM 500

Amano Cleantech

Malaysia Sdn. Bhd. 60% MR 200 PT. Amano

Indonesia (*2) 100%IDR 1,928,000 Amano Time & Air

Singapore Pte. Ltd. 100% S$ 350 Amano International Trading

(Shanghai) Co., Ltd.100% US$ 200 Amano Korea Corp.100% W 2,010,000 Amano Blick

International, Inc. 55% US$ 6,086 Trutrac, Inc. 55% US$ 3,112 A m ano Bli c k In ter na ti on al( No rth America), Inc. (*3) 55% C$ 0.1 Amano Europe Investments Ltd.

100% STG£ 15 Advanced Business Integration Singapore Pte. Ltd. 55% S$ 51 Amano System Solution Corp.

98% ¥20,000

Environmental Technology Company 100% ¥10.000 Amano Management Service Corp.

100% ¥10,000 Amano Handy Aid Corp. (*2)(*4)

100% ¥10,000

(*1) Due to a name change effective January 9, 1998, Amano Partners USA, Inc. became Amano USA, Inc. (*2) Newly consolidated as of March 31,

1998.

(*3) Trutrac Canada, Inc. merged with Business Machines Interfaces, Inc. and became Amano Blick Interna- tional (North America) on April 1, 1997.

(*4) Handy Aid Corp. was acquired by the Company and became Amano Handy Aid Corp. on April 2, 1997. Company Name Paid In Capital

(Thousands)

1. Basis of Consolidated Financial Statements

The consolidated financial statements of AMANO Corporation (the

"Company") and its subsidiaries (majority-owned companies) have been prepared in accordance with the accounting standards for consolidated financial statements in Japan. The accounts of the Com- pany included in the consolidation are based on the accounting records maintained in accordance with the provisions of the Japanese Com- mercial Code and accounting principles generally accepted in Japan. The accounts of consolidated overseas subsidiaries, as shown below, are based on audited financial statements prepared in conformity with accounting practices prevailing in the country of incorporation. In general, no adjustments to the accounts of overseas consolidated subsidiaries have been reflected in the accompanying consolidated financial statements, since the accounting practices of the overseas subsidiaries are essentially the same as those in Japan.

The consolidated financial statements of the Company and its consolidated subsidiaries are essentially translations of statements in the Annual Report filed with both the Minister of Finance and the To- kyo and Osaka Stock Exchanges, as required by the Securities and Ex-

change Law and related regulations in Japan. The information in the consolidated financial statements is derived from the original text, scope, and nature of that information, and is therefore limited to that contained in the original text. However, certain reclassifications or summarization's of accounts have been made to present the consolidated financial statements in a form which will be more familiar to readers outside Japan.

Equity ownership

%

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(2) Investments in Affiliates The Company had three affiliates at March 31, 1998 (two at March 31, 1997) and applied the equity method to the investments in all affiliates.

Affiliate Companies as of March 31, 1998:

Amano Agency Corp. ATAS Services, Pte Ltd. Amano Blick International (Europe), Ltd.

(3) Consolidation and Elimination All significant intercompany trans- actions, account balances, and un- realized profits among the Compa- nies have been eliminated from the consolidated financial statements. Intracompany profit included in the assets sold from the Company to the consolidated subsidiaries has been entirely eliminated and charged against the consolidated earnings of the Companies. Intra- company profit included in the assets sold from the consolidated subsidiaries to the Company has been entirely eliminated and the portion applicable to minority, interests is charged against minority interests. Significant differences arising from the elimination of investments in the consolidated overseas subsidiaries are amortized over a period of 40 years on a straight-line basis, in accordance with USA practice.

The other difference is directly charged/credited against income for the year, since it is not mate- rial.

3. Summary of Significant Accounting Policies

The accounting practices of the Companies which had a significant impact on the consolidated financial statements are as follows:: (1) Inventories

Inventories are stated at cost. Cost is determined principally using the periodic average method.

(2) Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is com- puted using the declining balance method at rates based on the esti- mated useful lives of assets, as prescribed by Japanese income tax laws. Useful lives of assets are:

Buildings 3-65 years

Machinery and equipment 3-16 years The cost of property, plant and equipment, retired or otherwise disposed of, and related accumulated depreciation, is eliminated from the respective accounts, and the resulting gain or loss is reflected in income during the applicable period. Normal repairs and main-

tenance, including minor renewals and improvements, are charged to income as incurred.

(3) Deferred charges and other assets

Intangible assets are amortized using the straight-line method. Good- will arising from the acquisition of Pioneer/Eclipse Corp. in the U.S.A. is amortized over a 40 year period on a straight basis.

Research and development costs are deferred and amortized on a straight-line basis over a period of two years.

(4) Marketable Securities and Investment Securities

Marketable securities (current portfolio) and investments in securities (non-current portfolio) are valued at cost. In both cases, cost is determined by the moving average method.

(5) Foreign Currency Translation

Foreign currencies, short-term receivables, and payables denominated in foreign currencies held by the Company are translated into Japanese yen at the current exchange rate prevailing at the balance sheet date. The resulting translation gain or loss is included in the determination of net income for the year. Long-term receivables and payables denominated in for-

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eign currencies, including investments in unconsolidated subsidiaries, are translated at the historical exchange rates prevailing at the time such translations were made. (6) Translation of Foreign

Currency Financial Statements (Accounts of Overseas Subsidiaries) Foreign currency denominated statements of overseas subsidiaries are translated into Japanese yen using the method prescribed by the Business Accounting Council (BAC) of Japan. This method applies the current exchange rate prevailing at the balance sheet date to all items, except common stock and additional paid in capital, which are translated at historical rates. Ap- plying the BAC method requires certain adjustments to the balance sheets, income statements, and retained earnings to enable the bal- ancing of debit and credit totals, as well as the reconciliation of the beginning and ending balances of retained earnings. Those adjustments appear as "Foreign currency translation adjustment" in the consolidated financial statements. (7) Income Taxes

Income tax calculations for the Company are based on annual tax returns. No tax effect is recorded for timing differences between tax and financial reporting. Income tax calculations for consolidated sub-

sidiaries use the interperiod tax al- location method, a common practice in the subsidiaries' countries. (8)Appropriation of Retained

Earnings

Under the Japanese Commercial Code and the Articles of Incorpo- ration of the Company, the plan for the appropriation of retained earnings (primarily cash dividend payments) proposed by the Board of Directors is subject to approval at the annual shareholders' meeting, which is held within three months after the end of each year. The appropriation of retained earnings reflected in the consolidated financial statements represents the results of appropriations applicable to the immediately preceding financial year, which was approved at the shareholders' meeting and disposed of during that year. Divi- dends are paid to shareholders on the shareholders' register at the end of each fiscal year. As is custom- ary practice in Japan, bonuses are paid to officers out of retained earnings, instead of being charged to income of the year, which consti- tutes a part of the appropriation cited above.

(9) Provision for Accrued Expenses (a) "Allowance for doubtful accounts" is equivalent to the legal limit established by the tax laws for allowable deductions, in addition to the individual account balances

deemed uncollectable. The limit for tax purposes is determined by applying a fixed percentage to the balance of accounts receivable out- standing at year-end.

(b) "Accrued bonuses to employees" is an estimate of bonuses earned during the last six months of the fianancial year, and payable to employees three months after the year-end date.

(c) "Accrued retirement benefits to employees" represents 100% of the liabilities that the Company would be required to pay if all eligible employees voluntarily terminated em- ployment at the respective balance sheet dates.

Under the current retirement ben- efit program, the Company has a funded pension plan which covers a portion of retirement benefits payable to employees. The 100% liability is reduced by the portion payable by the pension fund. As of March 31, 1998, past service costs amounted to ¥945 million and are being amortized over a five-year period. The Company also provides for the accrual of lump-sum retirement benefits payable to directors and statutory auditors upon retirement in an amount equivalent to 100% of such liability.

4. United States Dollar Amounts The Company maintains its accounting records in Japanese yen.

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The US dollar amounts included in the consolidated financial statements and notes hereto are the results of translating Japanese yen to US dollars at a rate of ¥132=$1US,

5. Breakdown of SGA Expenses

Selling, general, and administrative expenses during the years ended March 31, 1998 and 1997 include:

7. Accounting for Leases

The Companies have various lease agreements whereby the Companies act as the lessee. Finance lease contracts other than those which are deemed to transfer the ownership of the leased assets to the lesasses are accounted for by the method that is applicable to ordinary operating leases.

the approximate effective rate of exchange. The inclusion of US dollar amounts is solely for the con- venience of readers and is not in- tended to imply that yen amounts

could be converted, realized, or settled in US dollars at that, or any other rate.

6. Provisions

Provisions for accrued expenses and allowances during the years ended March 31, 1998 and 1997 are: Millions of Yen

1998 1997

¥9,198 ¥7,982

1,348 1,275

968 931

Thousands of U.S.Dollars(Note4) 1998

$69,682 10,212 7,333 Labor and Payroll

Rental for Properties Travel and Transport.

Millions of Yen

1998 1997

SGA COS SGA COS

1,013 618 931 505

280 107 275 1,035

81 - 12 -

SGA COS

7,674 4,682

2,121 811

614 -

Employees' Bonuses Retirement Benefits Doubtful Accounts

As a lessee:

The scheduled maturities of future lease rantal payments on such lease contracts are as follows:

Due within on year Due over one year

$2,379 6,041

$8,420

$2,557 Lease rental expenses for the year

Certain key information on such lease contracts of the Companies as a lessee for the years ended March 31, 1998 and 1997 are as follows:

Millions of Yen

1998 1997

¥314 797

¥1,111

¥337 ¥308

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8. Information by Segment

(1) Industrial Segment Information

The Companies operate primarily in the following two businesses: 1. Office equipment

2. Industrial machines

Thousands of U.S. Dollars (Note4) 1998

Office Industrial Total Consolidation Consolid. Total Net Sales:

Outside Customers $277,595 $177,700 $455,295 – $455,295

Intra-Company Sales 23,407 5,529 28,936 $(28,936) –

Total 301,002 183,229 484,231 (28,936) 455,295

Operating Expenses & Costs 258,444 158,037 416,481 (20,337) 396,144

Operating Income 42,558 25,192 67,750 (8,599) 59,151

Total Assets: 235,080 91,481 326,561 434,555 761,116

Depreciation: 6,292 3,803 10,095 2,763 12,858

Millions of Yen 1997

Outside Customers ¥33,140 ¥20,885 ¥54,025 – ¥54,025

Intra-Company Sales 2,528 373 2,901 ¥(2,901) –

Total 35,668 21,258 56,926 (2,901) 54,025

Total Assets: 30,948 10,874 41,822 56,468 98,290

Depreciation: 922 470 1,392 377 1,769

Capital expenditure: ¥1,284 ¥167 ¥1,451 ¥91 ¥1,542

Millions of Yen 1998

Total 39,733 24,186 63,919 (3,820) 60,099

Total Assets: 31,031 12,075 43,106 57,361 100,467

Depreciation: 830 502 1,332 365 1,697

Capital expenditure: ¥1,031 ¥290 ¥1,321 ¥746 ¥2,067

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(2) Geographical Segment Information

Net sales and operating income of the Companies for the years ended March 31, 1998 and 1997, classified by geographical segment:

Millions of Yen 1998

Domestic Overseas

Total Consolidation Consolid. Total (in Japan) Asia North America Europe

Net Sales:

Outside Customers ¥47,722 ¥1,430 ¥9,441 ¥1,506 ¥60,099 – ¥60,099

Intra-Company Sales 3,086 142 582 10 3,820 ¥(3,820) –

Total 50,808 1,572 10,023 1,516 63,919 (3,820) 60,099

Operating Expenses & Costs 41,988 1,466 9,882 1,641 54,977 (2,686) 52,291

Operating Income 8,820 106 141 (125) 8,942 (1,134) 7,808

Total Assets: ¥31,968 ¥956 ¥8,514 ¥1,668 ¥43,106 ¥57,361 ¥100,467

Thousands of U.S. Dollars (Note4) 1998

Domestic Overseas

Total Consolidation Consolid. Total (in Japan) Asia North America Europe

Net Sales:

Outside Customers $361,527 $10,835 $71,521 $11,412 $455,295 – $455,295

Intra-Company Sales 23,379 1,074 4,408 75 28,936 $(28,936) –

Total 384,906 11,909 75,929 11,487 484,231 (28,936) 455,295

Operating Expenses & Costs 318,088 11,105 74,860 12,428 416,481 (20,337) 396,144

Operating Income 66,818 804 1,069 (941) 67,750 (8,599) 59,151

Total Assets: $242,185 $7,242 $64,497 $12,637 $326,561 $434,555 $761,116

As a result of the amendment to the Consolidated Financial Statement Regulations, the disclosure of information to each segment classified by principal nations or area has become mandatory with effect from the year ended March 31, 1998.

Millions of Yen 1997

Domestic Overseas Total Consolidation Consolid. Total Net Sales:

Total 44,753 12,173 56,926 (2,901) 54,025

Operating Income 7,841 338 8,179 (1,229) 6,950

Total Assets: ¥30,886 ¥10,936 ¥41,822 ¥56,468 ¥98,290

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(3) Overseas Sales Information

Overseas sales for the Companies for the years ended March 31, 1998 and 1997:

Export sales and sales by overseas subsidiaries

Asia

North America Europe

Other Total

Percetage of such sales against consolidated net sales

Millions of Yen

1998 1997

¥2,510 9,448 1,530 310

¥13,798 ¥12,953

23.0% 24.0%

Thousands of U.S.Dollars (Note4) 1998

$19,015 71,579 11,587 2,348

$104,529

23.0%

9. Per Share Data

Net assets and income, listed per share as of and for the year ended March 31, 1998 and 1997:

Yen U.S.Dollars (Note4)

1998 1997 1998

¥817.56 ¥810.15 $6.194

21.08 26.29 0.160

– 26.21 –

Net Assets / Share

Net Income / Share Adjusted-Primary Net Income / Share Adjusted-Diluted

As a result of the amendment to the Consolidated Financial Statement Regulations, the disclosure of information about export sales classified by principal nations or area has become mandatory with effect from the year ended March 31,1998.

10. Subsequent Events

Treasury Stock Purchase Authorization

At the General Meeting of Stockholders of the Company held on June 26, 1998, the Board of Directors of the Company were authorized, subject to provisions set out in the articles of incorporation, to approve purchase of up to 9,480thousaund shares of the Company’s common stock out of retained earnings available for distribution on and affter July 1, 1998.

(23)

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275 MAMEDO, KOHOKU, YOKOHAMA,KANAGAWA, JAPAN 222-8558

PHONE : +81 (45) 439-1508 FAX : +81 (45) 439-1151

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