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1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Securities and Exchange Law and its related accounting regulations, and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Accounting Standards. The consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. The consolidated financial statements are stated in Japanese yen, the currency of the country in which Yamato Transport Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥133 to $1, the approximate rate of exchange at March 31, 2002. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate. |
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidation The consolidated financial statements include the accounts of the Company and its significant 17 subsidiaries (together, the “Group”). Under the control or influence concept, those companies in which the Parent, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method. The remaining non-consolidated subsidiaries, whose combined assets, net sales, net income and retained earnings in the aggregate are not significant to the consolidated financial statements, have not been consolidated with the Company. Investments in 3 affiliates are accounted for by the equity method. Investments in the remaining non-consolidated subsidiaries and affiliates are stated at cost less a valuation allowance representing possible losses on the investments that is deemed to be other than temporary. If the equity method of accounting had been applied to the investments in such companies, the effect on the accompanying consolidated financial statements would not be material. The excess of the costs over the underlying net equity of investments in consolidated subsidiaries is allocated to identifiable assets, and the remaining amount is recognized as goodwill and amortized on a straight-line basis over a five-year period, with the exception of minor amounts which are charged or credited to income in the period of acquisition. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated. b. Recognition of Operating Revenues The Group recognizes freight charge income as operating revenuesat the time when freight has been received from the shipping customer for transportation. c. Cash Equivalents Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificate of deposits and mutual funds investing in bonds that represent short-term investments, all of which mature or become due within three months of the date of acquisition. The difference between cash and time deposits in the accompanying consolidated balance sheets and cash and cash equivalents in the accompanying consolidated statements of cash flows is as follows: |
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d. Inventories Inventories which mainly consist of supplies are stated at cost as determined by the first-in, first-out method. e. Marketable and Investment Securities Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) trading securities, which are held for the purpose of earning capital gains in near term are reported at fair value, and the related unrealized gains and losses are included in the earnings, (2) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity are reported at amortized cost and (3) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of shareholders’ equity. The Group has no such trading securities. Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income. f. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to the buildings acquired after April 1, 1998, and to the equipment used for refrigerated delivery service. The depreciation of property, plant and equipment of foreign consolidated subsidiaries is computed on the straight-line method over the estimated useful lives of the assets. The range of useful lives is principally as follows:
Maintenance and repairs including minor renewals and improvements are charged to income as incurred. g. Other Assets Amortization of intangible assets is computed on the straight-line method over the period specified by the Japanese Commercial Code (the “Code”). Bond discounts are deferred as other assets and amortized on the straight-line method over the lives of the bonds. Bond issuance costs are deferred as other assets and amortized on the straight-line method over a three-year period. h. Retirement and Pension Plan The Company and certain consolidated subsidiaries have a contributory trusteed pension plan and an unfunded retirement benefits plan which cover 35% and 65%, respectively, of retirement benefits. One consolidated subsidiary has a non-contributory trusteed pension plan to cover the retirement benefits for employees who retire at 55 years or more with at least 10 years of service. The foreign subsidiaries also have a defined contribution retirement plan which covers employees who have worked over 1 year, subject to certain limitations. Other consolidated subsidiaries have an unfunded retirement benefits plan. Effective April 1, 2000, the Group adopted a new accounting standard for employees’ retirement benefits and accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The amount of ¥47,963 million ($360,624 thousand), which is the net amount of the transitional obligation determined as of the beginning of year and the full amount of prior service cost (credit), is charged to income in 2001 and presented as “Provision for retirement benefits” in other expenses. Directors and corporate auditors are not covered by the retirement and pension plans described above. Benefits paid to such persons are charged to income as paid. Any amounts payable to directors and corporate auditors upon retirement are subject to approval of the shareholders. i. Leases All leases are accounted for as operating leases. Under Japanese accounting standards for leases, finance leases that deem to transfer ownership of the leased property to the lessee are to be capitalized, while other finance leases are permitted to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the notes to the lessee’s financial statements. j. Income Taxes The provision for income taxes is computed based on the pretax income included in the consolidated statements of operations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences. k. Appropriations of Retained Earnings Appropriations of retained earnings at each year end are reflected in the consolidated financial statements for the following year upon shareholders’ approval. l. Foreign Currency Transactions All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. m. Foreign Currency Financial Statements The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for shareholders’ equity, which is translated at the historical rate. Differences arising from such translation were shown as “Foreign currency translation adjustments” in a separate component of shareholders’ equity. Revenue and expense accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rates as of the balance sheet date. n. Per Share Information The computation of net income per share is based on the weighted average number of shares of common stock outstanding during each year. The average number of common shares used in the computation was 461,319 thousand shares for 2002 and 451,802 thousand shares for 2001. Diluted net income per share of common stock assumes full conversion of the outstanding convertible debentures at the beginning of the year with an applicable adjustment for related interest expense (net of tax). For the year ended March 31, 2001, diluted net income per share is not disclosed because of the Group’s net loss position. Cash dividends per share presented in the accompanying consolidated statements of operations are dividends applicable to the respective years including dividends to be paid after the end of the year. |
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3. MARKETABLE AND INVESTMENT SECURITIES Marketable and investment securities as of March 31, 2002 and 2001 consisted of the following: |
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Information regarding each category of the securities classified as available-for-sale and held-to-maturity at March 31, 2002 and 2001, was as follows: |
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The majority of available-for-sale securities whose fair value is not readily determinable as of March 31, 2002 and 2001, was as follows: |
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Proceeds from sales of available-for-sale
securities for the years ended March 31, 2002 and 2001 were ¥369 million
($2,774 thousand) and ¥10,283 million, respectively. Gross realized
gains and losses on these sales, computed on the moving average cost basis,
were ¥1 million ($8 thousand) and ¥72 million ($541 thousand), respectively,
for the year ended March 31, 2002 and ¥259 million and ¥6,449 million,
respectively, for the year ended March 31, 2001. The carrying values of debt securities by contractual maturities for securities classified as held-to-maturity at March 31, 2002, were as follows: |
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4. BANK LOANS AND LONG-TERM DEBT Short-term bank loans at March 31, 2002 and 2001 consisted of notes to banks and bank overdrafts. The annual interest rates applicable to the bank loans ranged from 0.4% to 1.375% and 0.5399% to 7.58% at March 31, 2002 and 2001, respectively. Long-term debt at March 31, 2002 and 2001 consisted of the following: |
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Annual maturities of long-term debt at March 31, 2002, were as follows: |
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The carrying amount of property, plant and equipment pledged as collateral
for long-term bank loans of ¥493 million ($3,707 thousand), and the
above secured bonds at March 31, 2002, was ¥7,476 million ($56,211 thousand). In addition, the carrying amount of investment securities amounted to ¥27 million ($203 thousand) was deposited as security for dealings at March 31, 2002. All outstanding convertible debentures of the Company at March 31, 2002, were convertible into 19,024 thousand shares of common stock of the Company. The conversion prices are subject to adjustments to reflect stock splits and certain other events. |
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5. RETIREMENT AND PENSION PLANS The Company and its consolidated subsidiaries have severance payment plans for employees. Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or from the consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages prior to the mandatory retirement age. The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders. The liability for employees’ retirement benefits at March 31, 2002 and 2001, consisted of the following: |
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The components of net periodic benefit costs for the years ended March 31, 2002 and 2001, are as follows: |
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Assumptions used for the years ended March 31, 2002 and 2001, are set forth as follows: |
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6. SHAREHOLDERS' EQUITY Japanese companies are subject to the Code to which certain amendments became effective from October 1, 2001. Prior to October 1, 2001, the Code required at least 50% of the issue price of new shares, with a minimum of the par value thereof, to be designated as stated capital as determined by resolution of the Board of Directors. Proceeds in excess of amounts designated as stated capital were credited to additional paid-in capital. Effective October 1, 2001, the Code was revised and common stock par values were eliminated resulting in all shares being recorded with no par value. Prior to October 1, 2001, the Code also provided that an amount at least equal to 10% of the aggregate amount of cash dividends and certain other cash payments which are made as an appropriation of retained earnings applicable to each fiscal period shall be appropriated and set aside as a legal reserve until such reserve equals 25% of stated capital. Effective October 1, 2001, the revised Code allows for such appropriations to be set aside as a legal reserve until the total additional paid-in capital and legal reserve equals 25% of stated capital. The amount of total additional paid-in capital and legal reserve which exceeds 25% of stated capital can be transferred to retained earnings by resolution of the shareholders, which may be available for dividends. The Company’s legal reserve amount, which is included in retained earnings, totals ¥6,435 million ($48,384 thousand) and ¥6,106 million as of March 31, 2002 and 2001, respectively. Under the Code, companies may issue new common shares to existing shareholders without consideration as a stock split pursuant to a resolution of the Board of Directors. Prior to October 1, 2001, the amount calculated by dividing the total amount of shareholders’ equity by the number of outstanding shares after the stock split could not be less than ¥50. The revised Code eliminated this restriction. Prior to October 1, 2001, the Code imposed certain restrictions on the repurchase and use of treasury stock. Effective October 1, 2001, the Code eliminated these restrictions allowing companies to repurchase treasury stock by a resolution of the shareholders at the general shareholders meeting and dispose of such treasury stock by resolution of the Board of Directors after March 31, 2002. The repurchased amount of treasury stock cannot exceed the amount available for future dividend plus amount of stated capital, additional paid-in capital or legal reserve to be reduced in the case where such reduction was resolved at the general shareholders meeting. The Code permits companies to transfer a portion of additional paid-in capital and legal reserve to stated capital by resolution of the Board of Directors. The Code also permits companies to transfer a portion of unappropriated retained earnings, available for dividends, to stated capital by resolution of the shareholders. Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividends are applicable. Semiannual interim dividends may also be paid upon resolution of the Board of Directors, subject to certain limitations imposed by the Code. |
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7. INCOME TAXES The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 41% for the years ended March 31, 2002 and 2001. Tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March 31, 2002 and 2001 were as follows: |
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A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2002 and 2001 and the actual effective tax rates reflected in the accompanying consolidated statements of operations was as follows: |
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8. LEASES Total lease payments under finance lease arrangements that do not transfer ownership of the leased property to the lessee were ¥2,660 million ($20,000 thousand) and ¥2,691 million for the years ended March 31, 2002 and 2001, respectively. Pro forma information of leased property such as acquisition cost, accumulated depreciation and obligations under finance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2002 and 2001, was as follows: |
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Obligations under finance leases which included the imputed interest expense portion, and noncancelable operating leases as of March 31, 2002 and 2001, were as follows: |
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9. CONTINGENT LIABILITIES Contingent liabilities for guarantees and items of a similar nature at March 31, 2002, amounted to ¥396 million ($2,977 thousand), which was guaranteed of loans of unaffiliated company jointly and severally by the Company and 18 other unaffiliated companies and ¥531 million ($3,992 thousand), which was guaranteed of loans of non-consolidated subsidiaries. |
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10. SEGMENT INFORMATION Information about industry segments, geographic segments and operating revenues to foreign customers of the Company and consolidated subsidiaries for the years ended March 31, 2002 and 2001, is as follows: |
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(1) Industry Segments |
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(2) Geographic Segments The geographic segments of the Company and consolidated subsidiaries for the years ended March 31, 2002 and 2001, are summarized as follows: |
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Operating revenues and
assets are summarized by geographic area based on the countries where subsidiaries
are located. (3) Operating Revenues to Foreign Customers Operating revenues to foreign customers for the years ended March 31, 2002 and 2001, amounted to ¥20,845 million ($156,729 thousand) and ¥21,809 million, respectively. |
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11. SUBSEQUENT EVENT a. Appropriations of Retained Earnings The following appropriations of retained earnings at March 31, 2002 were approved at the Company’s shareholders meeting held on June 27, 2002: |
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b. Purchase of Treasury Stock The Company is authorized to repurchase up to 4,500 thousand shares of the Company’s common stock or aggregate amount of ¥10,000 million ($75,188 thousand). |