ANNUAL REPORT

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Niles Co., Ltd. • Headquarters: Japan • Industry: Automotive Components – Electronics Components Segment • Privately Held • RHJI ownership as of March 31, 2009: 96.4% Overview of Activities Niles (www.niles.co.jp) manufactures switches for automobiles. The switches serve as key components in many vehicle systems that are typically developed and assembled by larger, more diversified suppliers or by automobile OEMs themselves. Niles’ main switch product categories include those related to the steering column, doors and power-train/pedal. Niles also manufactures sensors for automobiles. Niles’ customers are automobile OEMs, such as Nissan and General Motors, and suppliers to automobile OEMs. Niles seeks to capitalize on its production engineering capability, its quality control, and its ability to respond quickly to new design demands from its customers. Geographical distribution of revenue (single operating segment) Japan 75% US 17% Asia (excl.Japan) 8% Key figures Condensed consolidated income statement for the fiscal year ended March 31 (1) (In millions) JPY EUR 2009 2008 2009 2008 Revenue 45,444 59,318 346.5 452.2 Gross profit 6,040 10,278 46.0 78.4 Gross margin 13.3 % 17.3 % 13.3 % 17.3 % EBITDA 2,846 6,299 21.7 48.0 EBITDA margin 6.3 % 10.6 % 6.3 % 10.6 % Operating profit (loss) (1,265) 2,351 (9.6) 17.9 Profit (loss) for the year (5,771) 1,887 (44.0) 14.4 (1) Excluding the effect of the purchase price allocation carried out in connection with the contribution of the ownership interests to the Company at March 31, 2005. Consolidated cash and financial debt for the fiscal year ended March 31 (In millions) JPY EUR 2009 2008 2009 2008 Cash 2,078 2,957 15.8 22.5 Financial debt 28,326 27,741 215.9 211.5 18
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW Niles successfully strengthens its capital structure During the fiscal year ended March 31, 2009, Niles suffered from the US auto market slowdown that gradually expanded to Asia, forcing some of Niles’ main customers into reducing and even temporarily halting production. In addition to the downturn in the automotive industry, Niles saw demand for contact switches decrease in a challenging global cellular handset market. Niles’ revenue for the fiscal year ended March 31, 2009, consequently decreased by 23.4 %, from JPY 59,318 million during the previous fiscal year, to JPY 45,444 million. Especially in the US, the volume decline was so significant that Niles’ US operations ran at negative gross profit margins, bringing down the overall gross profit margin from 17.3% during the fiscal year ended March 31, 2008 to 13.3% during the fiscal year ended March 31, 2009. Niles designed and started the implementation of a series of drastic short term restructuring measures focused on mitigating the impact from the volume shortfall on its financial performance. By the end of March 31, 2009, Niles had significantly reduced headcount, cut salaries and bonuses, and limited capital expenditures. Notwithstanding those cost saving measures, Niles reported an operating loss of JPY 1,265 million for the fiscal year ended March 31, 2009, compared to an operating profit of JPY 2,351 million a year earlier. Consequently EBITDA for the fiscal year ended March 31, 2009, amounted to JPY 2,846 million, down from JPY 6,299 million a year earlier. In addition to the results reported in the table above, the Company recorded an impairment charge of JPY 9,770 million on goodwill recorded at the time of the initial contribution of Niles to RHJI. production levels that are not expected to significantly increase during the next twelve months. Despite the operational restructuring efforts, Niles faced a liquidity shortfall and engaged in discussions with the Company, its main customer and its lenders with a view to securing sufficient liquidity and strengthening its financial position. On May 20, 2009, Niles bolstered its capital structure through a total capital injection of JPY 6 billion of which JPY 3.5 billion was provided by the Company and JPY 2.5 billion by a third party, which resulted in the Company's ownership being reduced from 96.4% to 77.3%. Part of the proceeds was used to repay JPY 2.5 billion of short-term debt that was previously secured by a cash deposit from the Company. Furthermore, syndicate lenders agreed on a refinancing of the existing debt structure with new bullet loans maturing in June 2011. Further to the short term restructuring measures, Niles decided to (a) reduce its manufacturing footprint, mainly in the US, by transferring production to Japan and Thailand, (b) further reduce headcount and (c) scale down capital expenditure to 19
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PART III CORPORATE GOVERNANCE
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CORPORATE GOVERNANCE The Belgian Co
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CORPORATE GOVERNANCE The following
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CORPORATE GOVERNANCE (1997 to 2000)
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CORPORATE GOVERNANCE INVESTMENT AND
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CORPORATE GOVERNANCE Mr. Fischer ha
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CORPORATE GOVERNANCE OTHER TERMS RH
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CORPORATE GOVERNANCE STATUTORY AUDI
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PART IV SHAREHOLDERS’ INFORMATION
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SHAREHOLDERS’ INFORMATION SHARE P
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Co-ordination and Production : IPAC
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ANNUAL REPORT

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