Consolidated Financial Statements - ?· Consolidated Financial Statements MODEC, INC. and Consolidated…

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  • Consolidated Financial Statements

    MODEC, INC. and Consolidated Subsidiaries

    For the years ended December 31, 2016 and 2015

  • 1

    MODEC, INC. and Consolidated Subsidiaries

    CONSOLIDATED BALANCE SHEETS

    December 31, 2016 and 2015

    ASSETS

    The accompanying notes are an integral part of these consolidated financial statements.

    Millions of Japanese yen 2016 2015

    CURRENT ASSETS:

    Cash and time deposits (Notes 1(t), 3 and 18) 42,807 57,956Accounts receivable trade (Notes 17, 18 and 21) 95,544 145,752Inventories (Note 2) 2,360 3,814 Short-term loans receivable (Notes 18 and 21) 55,012 20,239Deferred tax assets (Note 14) 3,263 4,214Other current assets 21,026 11,539Less- Allowance for bad debts (Note 18) (1,971) (1,395)

    Total current assets 218,042 242,120 PROPERTY AND EQUIPMENT (Note 20):

    Buildings and structures 130 165Machinery and equipment 43,542 45,166Other property and equipment 4,078 4,302Construction in progress 186 16Less- Accumulated depreciation (33,776) (31,165)

    Net property and equipment 14,161 18,485 INTANGIBLE ASSETS (Notes 5 and 13) 7,420 7,476 INVESTMENTS AND OTHER ASSETS:

    Investment securities (Notes 4 and 18) 55,162 50,987Long-term loans receivable from affiliates (Notes 18 and 21) 28,165 27,009Long-term time deposits (Note 3) 3,781 Deferred tax assets (Note 14) 2,666 4,663Bankrupt and substantially bankrupt claims (Note 18) 1,823Other investments 3,848 3,722Less- Allowance for bad debts (Note 18) (1,823)

    Total investments and other assets 93,624 86,381Total assets 333,249 354,464

  • 2

    LIABILITIES

    Millions of Japanese yen

    2016 2015 CURRENT LIABILITIES:

    Accounts payable trade (Notes 18 and 21) 96,738 145,230Current portion of long-term loans payable (Notes 6 and 18) 7,812 6,044 Lease obligations 20 30Accrued expenses 14,377 8,822 Income taxes payable (Note 14) 9,713 4,360 Advances received 5,252 4,031Accrued employees bonuses 7 12Accrued directors bonuses 13 14Provision for product warranty 6,860 6,699Provision for repairs 43 3Other provisions 5 5Deferred tax liabilities (Note 14) 1 0Foreign exchange contracts 87Other current liabilities 1,688 1,910

    Total current liabilities 142,536 177,251

    LONG-TERM LIABILITIES: Long-term loans payable (Notes 6 and 18) 42,478 50,219Lease obligations 9 29Net defined benefit liabilities (Note 11) 265 220Liabilities from application of equity method 7,350 4,906Other long-term liabilities 5,998 6,855

    Total long-term liabilities 56,102 62,229 CONTINGENT LIABILITIES AND COMMITMENTS (Note 15)

    Total liabilities 198,639 239,481

  • 3

    NET ASSETS

    Millions of Japanese yen

    2016 2015 NET ASSETS: SHAREHOLDERS EQUITY (Note 9):

    Common stock Authorized 102,868,000 shares in 2016 and in 2015 Issued 56,408,000 shares in 2016 and in 2015 30,122

    30,122Capital surplus 30,852 30,852Retained earnings 57,227 38,259Treasury stock, at cost

    663 shares in 2016 and in 2015 (1) (1)Total shareholders equity 118,200 99,232

    ACCUMULATED OTHER COMPREHENSIVE INCOME:

    Unrealized holding gains (losses) on securities, net of tax (11) 7Unrealized gains (losses) on hedging derivatives, net of tax (10,453) (15,667)Foreign currency translation adjustments 15,490 18,170Retirement liability adjustments for foreign consolidated subsidiaries (176)

    (187)

    Total accumulated other comprehensive income 4,849 2,322 NON-CONTROLLING INTERESTS 11,560 13,428

    Total net assets 134,609 114,983Total liabilities and net assets 333,249 354,464

  • 4

    MODEC, INC. and Consolidated Subsidiaries

    CONSOLIDATED STATEMENTS OF INCOME

    For the years ended December 31, 2016 and 2015

    Millions of Japanese yen 2016 2015 SALES (Notes 20 and 21) 229,987 295,596COST OF SALES (Note 21) 198,443 275,517

    Gross profit 31,544 20,078

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 12) 13,526

    15,003

    Operating profit 18,018 5,075

    OTHER INCOME (EXPENSES): Interest and dividend income 4,055 3,652Foreign exchange losses, net (1,807) (5,306)Equity in earnings of unconsolidated subsidiaries and affiliates,

    net 9,618

    8,345Gain on revaluation of derivatives 397 2,078Interest expense (1,421) (1,395)Gain on sales of investment securities (Note 4) 12Loss on liquidations of subsidiaries and affiliates, net (99)Insurance income 3,117Removal expenses of property and equipment (645)Loss on disposal of property and equipment and intangible

    assets (107)

    (161)Impairment loss (Note 13) (1,524) Provision of allowance for bad debts (212)Others, net (Note 1(x)) 548 370

    Total other income (expenses) 9,758 9,754

    PROFIT BEFORE INCOME TAXES 27,776 14,829

    INCOME TAXES (Note 14): Current 6,290 7,768Deferred 1,873 797

    PROFIT 19,612 6,263

    PROFIT (LOSS) ATTRIBUTABLE TO NON-CONTROLLING

    INTERESTS (1,400)

    438

    PROFIT ATTRIBUTABLE TO OWNERS OF PARENT 21,012 5,824

    Japanese yen Earnings per share (Note 10) 372.52 103.26Dividends per share (Note 10) 37.50 35.00

    The accompanying notes are an integral part of these consolidated financial statements.

  • 5

    MODEC, INC. and Consolidated Subsidiaries

    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    For the years ended December 31, 2016 and 2015

    Millions of Japanese yen 2016

    (Note 16) 2015

    (Note 16) PROFIT 19,612 6,263OTHER COMPREHENSIVE INCOME:

    Unrealized holding gains (losses) on securities, net of tax (19) 6Unrealized gains (losses) on hedging derivatives, net of tax 1,740 (911)Foreign currency translation adjustments (945) 2,987Retirement liability adjustments for foreign consolidated subsidiaries 13

    18

    Share of other comprehensive income (loss) of unconsolidated subsidiaries and affiliates accounted for using equity method 1,269

    (737)

    Total other comprehensive income 2,058 1,362COMPREHENSIVE INCOME 21,671 7,626

    Millions of Japanese yen 2016 2015

    Comprehensive income attributable to owners of parent 23,538 6,683Comprehensive income attributable to non-controlling interests (1,867) 943

    The accompanying notes are an integral part of these consolidated financial statements.

  • 6

    MODEC, INC. and Consolidated Subsidiaries

    CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS For the years ended December 31, 2016 and 2015

    Millions of Japanese yen

    Common stock Capital surplus

    Retained earnings

    Treasury stock, at cost

    Unrealized holding gains

    (losses) on securities, net

    of tax

    Unrealized gains

    (losses)on hedging

    derivatives, net of tax

    Foreign currency

    translation adjustments

    Retirement liability

    adjustments for foreign

    consolidated subsidiaries

    Non- controlling

    interests

    Total net assets

    Balance at January 1, 2015 30,122 30,852 34,338 (1) 1 (13,741) 15,402 (197) 12,855 109,631

    Cash dividends paid (1,903) (1,903)

    Profit attributable to owners of parent

    5,824 5,824

    Net changes of items other than those in shareholders equity during the year

    6 (1,926) 2,767 10 572 1,431

    Balance at January 1, 2016 30,122 30,852 38,259 (1) 7 (15,667) 18,170 (187) 13,428 114,983

    Cash dividends paid (2,044) (2,044)

    Profit attributable to owners of parent

    21,012 21,012

    Net changes of items other than those in shareholders equity during the year

    (19) 5,214 (2,679) 10 (1,867) 658

    Balance at December 31, 2016 30,122 30,852 57,227 (1) (11) (10,453) 15,490 (176) 11,560 134,609

    The accompanying notes are an integral part of these consolidated financial statements.

  • 7

    MODEC, INC. and Consolidated Subsidiaries

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the years ended December 31, 2016 and 2015 Millions of Japanese yen 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES:

    Profit before income taxes 27,776 14,829Adjustments to reconcile profit before income taxes to net cash provided by

    operating activities: Depreciation and amortization 5,364 5,652Impairment loss 1,524 Amortization of goodwill 369 386Increase (decrease) of allowance for bad debts (1,495) 913Increase (decrease) of net defined benefit liabilities 45 27Increase (decrease) of accrued directors bonuses (0) (1)Increase (decrease) of provision for product warranty 385 1,007Increase (decrease) of provision for repairs 42 (1,133)Interest and dividend income (4,055) (3,652)Interest expense 1,421 1,395Foreign exchange (gains) losses, net (2,019) 4,099Equity in earnings of unconsolidated subsidiaries and affiliates, net (9,618) (8,345)Loss (gain) on revaluation of derivatives (397) (2,078)Insurance income (3,117)Loss on disposal of property and equipment and intangible assets 107 161Removal expenses of property and equipment 645Loss (gain) on sales of investment securities (12)Loss (gain) on liquidations of subsidiaries and affiliates, net 99Changes in assets and liabilities:

    Decrease (increase) in Accounts receivable trade 48,618 20,472 Inventories 1,595 (1,628)

    Bankrupt and substantially bankrupt claims 1,823 0Increase (decrease) in

    Accounts payable trade (40,107) (13,168) Consumption tax payable 393 110

    Others, net (6,931) (4,739)Total adjustments 24,844 11,924

    Interest and dividend received 9,804 7,299Interest paid (1,447) (1,079)Income taxes paid (2,851) (12,799)Proceeds from insurance income 3,117Net cash provided by operating activities 30,350 8,462

    The accompanying notes are an integral part of these consolidated financial statements.

  • 8

    Millions of Japanese yen 2016 2015 CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchases of property and equipment and intangible assets (2,862) (3,415)Disbursements of removal of property and equipment (645)Purchases of investments in subsidiaries and affiliates (4,474) (6,425)Proceeds from sales of investments in affiliates 1Decrease (increase) in short-term loans receivable (26,605) (28,387)Proceeds from sales of investment securities (Note 4) 161Disbursements of long-term loans receivable (4,430) (6,639)Collections of long-term loans receivable 32,643Proceeds from liquidation of subsidiaries and affiliates 3

    Net cash used in investing activities (38,373) (12,703) CASH FLOWS FROM FINANCING ACTIVITIES:

    Increase (decrease) in short-term loans payable 105 (4,064)Proceeds from long-term loans payable 1,182 38,902Repayments of long-term loans payable (6,067) (1,478)Cash dividends paid (2,044) (1,902)Repayments of finance lease obligations (30) (30)

    Net cash provided by (used in) financing activities (6,853) 31,426 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH

    EQUIVALENTS (885)

    137NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15,762) 27,323CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 57,956 30,632CASH AND CASH EQUIVALENTS AT END OF YEAR

    (Note 1 (t)) 42,194

    57,956

  • 9

    MODEC, Inc. and Consolidated Subsidiaries

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    1. Significant Accounting and Reporting Policies

    (a) Basis of Presenting Consolidated Financial Statements

    The accompanying consolidated financial statements of MODEC, Inc. (the Company) have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (Japanese GAAP), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.

    The accounts of the Companys foreign subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile and any significant differences between Japanese GAAP and Local GAAP are adjusted in consolidation. The accompanying consolidated financial statements have been restructured and translated into English with some expanded descriptions from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. Some supplementary information reported in the statutory Japanese language consolidated financial statements but not required for fair presentation is not presented in the accompanying consolidated financial statements.

    All of the Japanese yen and U.S. dollar amounts presented in the accompanying consolidated financial statements and notes of the Company are rounded down to millions.

    (b) Principles of Consolidation and Equity Method

    The accompanying consolidated financial statements include the accounts of the Company and 20 of its subsidiaries for the years ended December 31, 2016 and 2015. Material inter-company balances, transactions and profits have been eliminated in consolidation.

    Investments in significant unconsolidated subsidiaries and affiliates, which were 18 companies for the years ended December 31, 2016 and 2015 were accounted for using the equity method.

    Another 5 subsidiaries for the year ended December 31, 2016 and 4 subsidiaries for the year ended December 31, 2015 were neither consolidated nor accounted for using the equity method as they would not have had a material effect on the accompanying consolidated financial statements.

    The consolidated financial statements are required to include the accounts of the Company and significant companies that are controlled by the Company through substantial ownership of more than 50% of the voting rights or through ownership of a high percentage of the voting rights even if it is equal to or less than 50% and existence of certain conditions evidencing control by the Company of decision-making bodies of such companies.

    Investments in significant unconsolidated subsidiaries and affiliates, of which the Company has ownership of 20% or more but less than or equal to 50%, and of 15% or more and less than 20% and can exercise significant influences over operating financial policies of investees, have been accounted for using the equity method.

    All consolidated subsidiaries have the same balance sheet date, December 31, corresponding with that of the Company.

  • 10

    (c) Valuation of Assets and Liabilities of Subsidiaries

    In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to non-controlling shareholders, were evaluated by using the fair value at the time the Company acquired the control of the respective subsidiaries.

    (d) Goodwill

    The excess of cost over the underlying investments in consolidated subsidiaries is recognized as goodwill and is amortized using the straight-line method over their estimated useful lives. The excess of cost over the underlying investments in affiliates accounted for using the equity method is treated in the same manner.

    (e) Securities

    In accordance with the Japanese accounting standard for financial instruments, all companies are required to examine the intent of holding each security and classify those securities as (a) securitie...

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