Financial Overview

(in millions of JPY)

	FY2009	FY2008	Rate of Change (%)	Factors
Overall
Sales	404,143	440,908	(8.3)	-Sales decreased due to a decline in orders as a result of reduced automotive production volumes.
Operating income	18,785	10,459	79.6	-Income increased as a result of the Company's efforts to improve income such as by running more efficient production operations and implementing cost reductions company wide.
Ordinary income	17,631	12,925	36.4
Net income	10,290	5,262	95.6
Suspension Springs Division
Sales	81,623	101,194	(19.3)	-Although orders from customers decreased due to reduced automotive production volumes, operating income increased as a result of the Company's efforts to reduce costs. -Sales and operating income were negatively impacted by a decrease in production volume of commercial trucks in Japan and passenger trucks in Thailand.
Operating income	468	344	36.0
Seat Division
Sales	163,331	169,870	(3.8)	-Although orders from customers decreased due to reduced automotive production volumes, operating income increased as a result of the Company's efforts to reduce costs. -Since production of vehicle models to which the Company supplied parts remained strong, the company experienced a slight decrease in sales year-on-year.
Operating income	6,848	3,537	93.6
Precision Parts Division
Sales	126,922	132,404	(4.1)	-Although orders received from customers in the automotive industry decreased, operating income increased as a result of the Company getting more orders for information equipment and because of the Company's efforts to reduce costs. Nevertheless, sales decreased slightly year-on-year.
Operating income	9,345	4,333	115.7

Business Restructuring

-The Company announced reorganization of its U.S. operations producing automotive suspension parts. The Toledo plant, Toledo, Ohio, of New Mather Metals, Inc., Ohio, its subsidiary's subsidiary, will be closed as early as March 2010. Experiencing a sharp downturn in demand from automakers, the Company has decided that turnaround in its financial position cannot be expected with the current corporate structure. After the plant closure, the operation will be consolidated into the Franklin plant, Franklin, Kentucky. The Company aims to improve profits by reducing fixed costs through reorganization of production bases. (From an article in the Nikkan Jidosha Shimbun on Aug. 18, 2009)

-The Company will accelerate cutbacks in workforce at its U.S. operations. While it has repeatedly reduced production workers in response to drastic output cuts by the Big 3 automakers as well as decreased orders from Japanese manufacturers, it will also adjust the number of office staff from the second half of this fiscal year. Although its North American operations only account for about 10% of the consolidated sales, the prospect for demand recovery is more clouded and the labor cost is higher in North America than in Japan and Asia. By further decreasing fixed costs and improving production and business efficiency, The Company will rush to achieve a turnaround. (From an article in the Nikkan Jidosha Shimbun on Sept. 11, 2009)

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income, etc.)

Earnings Forecast for the 2010 Fiscal Year Ending March 2011

Earnings Forecast by Segment

(in hundred million of JPY)

Segment	Item	FY2010 (Forecast)	FY2009 (Actual)	Rate of Change (%)
Suspension springs	Sales	900	816	10.3
	Operating income	42	5	740.0
	Operating income ratio (%)	4.7	0.6	-
Seats	Sales	1,720	1,633	5.3
	Operating income	90	69	30.4
	Operating income ratio (%)	5.2	4.2	-
Precision parts	Sales	1,350	1,269	6.4
	Operating income	120	93	29.0
	Operating income ratio (%)	8.9	7.4	-
Industrial Machinery & Equipment	Sales	330	323	2.2
	Operating income	28	21	33.3
	Operating income ratio (%)	8.5	6.6	-
Total	Sales	4,300	4,041	6.4
	Operating income	280	188	48.9
	Operating income ratio (%)	6.5	4.6	-

 

Earnings Forecast by Region

(in hundred million of JPY)

Region	Item	FY2010 (Forecast)	FY2009 (Actual)	Rate of Change (%)
Japan	Sales	3,130	3,044	2.8
	Operating income	170	97	75.3
	Operating income ratio (%)	5.4	3.2	-
North America	Sales	390	375	4.0
	Operating income	10	6	66.7
	Operating income ratio (%)	2.6	1.7	-
Asia	Sales	930	794	17.1
	Operating income	100	85	17.6
	Operating income ratio (%)	10.8	10.6	-
Deleted	Sales	(150)	(172)	-
Total	Sales	4,300	4,041	6.4
	Operating income	280	188	48.9
	Operating income ratio (%)	6.5	4.6	-

R&D Expenditure

(in millions of JPY)

	FY2009	FY2008	FY2007
Overall	9,612	11,452	9,989
Rate of expenditure to sales (%)	2.4	2.6	2.1

R&D Structure

-The Company had 753 research and development staff members in fiscal year 2009, which ended in March 2010.

R&D Activities

Suspension Spring Division
-R&D Expenses: 1,639 million yen
-Major issues: To reduce the costs of coil springs and develop tapered coil springs. To improve the durability of stabilizers and address the issue of three-dimensional bending. To develop high-strength leaf springs.
-Major achievements: The Company succeeded in improving durability, ensuring quality, and further reducing prices.

-The Company has developed a hollow spring especially for use in suspension coils. The new spring offers some 20 percent reduction in weight, while ensuring the same level of spring performance as that of existing products. The Company achieved this through a joint development project with other companies including a manufacturer of specialized steel such as spring wire rods. The project team was able to engineer the weight-saving hollow spring by developing a new material and a surface treatment technology. Currently, the only hollow springs used in automotive suspensions are those used in stabilizers or torsion bar springs. The Company, which intends to provide this spring to mass production vehicles, will make proposals to automakers, targeting all vehicle classes without regard to their prices. It is expecting the new hollow spring to be used in models coming to the market a few years from now. (From an article in the Nikkan Jidosha Shimbun on Nov. 12, 2009)

Seat Division
-R&D Expenses: 3,151 million yen
-Major issues: (1) Reducing product weight: The Company worked to reduce product weight by using a new structural design for seat frames, applying high-tensile steel and improving and reducing the size of mechanical components. (2) Reducing costs: The Company worked to reduce costs through standardizing products and components and improving productivity such as by using a new method for welding.
-Major achievement: The Company won new orders for standard seat frames and completed seats for passenger vehicles.
-The Company also conducted research and development activities to improve the basic performance of car seats such as by reducing occupant fatigue and improving seating comfort.

Collaboration Between R&D Departments

-The Company will further enhance collaboration between its R&D departments in Japan and Thailand in an aim to reinforce its Asian business. In the Asian market, where automakers are making more efforts to launch low-priced vehicles, there is a growing need for lower-priced parts. In response, the Company's R&D department in Thailand will work more closely with its Japanese counterpart in sharing information in the broad areas of design, development, procurement and production technology so as to reduce manufacturing costs. The Company will also consider expansion of the R&D capacity in Thailand. To respond to automakers' overseas strategies, meeting their needs for lower-priced parts has become more and more important. The Company, therefore, plans to establish itself so as to be capable of responding to local situations as quickly as possible in its aim to improve profits in Asia. (From an article in the Nikkan Jidosha Shimbun on Jan. 22, 2010)

Capital Expenditure

(in millions of JPY)

	FY2009	FY2008	FY2007
Overall	15,695	34,800	34,779

Suspension Spring Division
-The NHK Group made a capital investment of 2 billion 356 million yen mainly to win orders for new products and improve the productivity of its existing products.
-The Company made a major investment in the production facilities manufacturing suspension springs at the Shiga Plant and NHK Spring (Thailand) Co., Ltd.

Seat Division
-The NHK Group made a capital investment of 3 billion 363 million yen mainly to win orders for new products and improve the productivity of its existing products.
-The Company made a major investment in seat production facilities at the Toyota Plant, NHK Spring (Thailand) Co., Ltd., and ITES Co., Ltd.

Planned Capital Investment for FY2010

-The NHK Group plans to invest 19 billion 515 million yen in FY2010, which ends March 2011, to construct major, new facilities and improve existing facilities, although the Group does not plan to construct any major, new facilities for the suspension spring business and the seat business.