Profit/Loss
Net income
attributable toowners of the parent
YoY -9.6%

From a profit perspective, operating income decreased 60.3% compared with the previous fiscal year to 423 million yen. Ordinary income decreased 37.3% compared with the previous fiscal year to 757 million yen. Net income attributable to owners of the parent decreased 9.6% to 977 million yen, as a result of efforts to cut somecross-shareholdings.

2020

Cash flows from operating activities (Unit: Million yen)

FY 2016

819

840

792

927
FY 2016

2018

2019

2020

2019

FY 2016

2017

2019

2020

FY 2016

2017

2018

2019

Cash flow fromoperating activities
Net cash provided by operating activities amounted to 1,776 million yen (net cash of 2,148 million yen provided
Net cash provided by in the previous fiscal year), principally due to a decrease in trade notes and accounts receivable.
operating activities
1,776 million yen
Cash flow frominvesting activities
Net cash used ininvesting activities
155 million yen

Net cash used in investing activities totaled 155 million yen (net cash of 41 million yen provided in the previous
fiscal year), principally due to purchases of property, plant and equipment.

Cash flow fromfinancing activities
Net cash used infinancing activities
971 million yen

Net cash used in financing activities was 971 million yen (net cash of 1,126 million yen used in the previous fiscal year), primarily owing to repayment of debt.

Japan

China

FY 2016

Others20172020(Unit: Million yen)Overseas net sales ratio

2018

-971

-1,126-2,012
2018

Net sales by region

Cash Flows

2020

2,868

-1,0192018

Cash flows from financing activities (Unit: Million yen)

41

2017

2017

-3,087

Net assets as of May 31, 2021 stood at 24,008 million yen, a decrease of 174 million yen compared with theend of the previous fiscal year. This decrease was largely attributable to a decrease of 924 million yen in unrealized holding gain on available-for-sale securities, offset by an increase of 709 million yen in retained earnings.

2020-4,691

Net assets
Total net assets
24,008 million yen

2019

1,776

Total liabilities as of May 31, 2021 stood at 27,958 million yen, a decrease of 3,023 million yen compared withthe end of the previous fiscal year. This decrease was largely attributable to a decrease of 1,727 million yen in
trade notes and accounts payable and a decrease of 707 million yen in debt.

2,148

Liabilities
Total liabilities
27,958 million yen-1,572

Total assets as of May 31, 2021 stood at 51,967 million yen, a decrease of 3,198 million yen compared with theend of the previous fiscal year. The decrease in total assets was largely attributable to a decrease of 1,554 million yen in trade notes and accounts receivable and a decrease of 1,602 million yen in investment securities, offset by an increase of 670 million yen in cash on hand and in banks.

1,505

AssetsTotal assets
51,967 million yen

2018

Cash flows from investing activities (Unit: Million yen)

3,720

Financial Position

2017

4,140

2019

-155

2018

632

2017

545

1,090
FY 2016

FY 201627

731

Net sales decreased 15.2% compared with the previous fiscal year to 33,143 million yen due to a decrease in
the Transportation Systems segment.

Research and development costs(Unit: Million yen)

1,413

Net sales
YoY -15.2%

Depreciation and amortization (Unit: Million yen)

1,487

Orders received decreased 22.0% compared with the previous fiscal year to 30,055 million yen due to a decrease in orders received in the Transportation Systems segment, the Industrial Systems segment, and the Information Equipment Systems segment.

(Unit: Million yen)801

Orders received
YoY -22.0%

Capital investment 

1,774

Results of Operation

Reference Data for Management Indices

1,237

Consolidated Operating Results, Consolidated Financial Position, and Consolidated Cash Flow for Fiscal
2020 (from June 1, 2020 to May 31, 2021) are as follows:

Financial Report

4,772

Financial Review

4,606

Financial Report

2019

2017

2018

2019

2020

2021

Japan

28,00632,124

31,74530,997

27,876

China

5,882

4,085

3,663

4,282

3,628

Others

6,778

6,317

5,763

3,791

1,638

Total

40,66842,527

41,172

39,07133,143

Overseas net sales ratio

31.1%

25.3%

22.9%

20.7%

15.9%

2020

Toyo Denki Seizo Report 2021

28

TOYO DENKI SEIZO K.K.
Consolidated Balance Sheets

As of

May 31,
2021

May 31,
2020(Millions of yen)

May 31,
2021(Thousands of
U.S. dollars)(Note 1)

AssetsCurrent assets:
Cash on hand and in banks (Notes 16 and 18)¥3,964¥3,293$36,118

Trade notes and accounts receivable (Notes 2 and 16)

13,21814,135

120,426

Electronically recorded receivables (Note 16)

901

1,538

8,209

Inventories (Note 3)

6,901

7,178

62,877

Other current assets

318

139

2,898

Allowance for doubtful accounts

(2)

(0)

(24)

25,30026,284

230,506

Total current assets

Property, plant and equipment (Note 4):
Buildings and structures

6,410

6,753

58,401

Machinery and vehicles

966

1,059

8,805

Land

1,301

1,301

11,855Construction in progress

24

86

227

Other

622

724

5,675

9,325

9,925

84,964

13,832

15,434

126,021

Deferred tax assets (Note 11)

223

170

2,037

Intangible assets

303

490

2,765

Other

2,988

2,865

27,230Allowance for doubtful accounts

(6)

(6)

(62)

Total investments and other assets

17,341

18,954

157,992

Total assets (Note 20)¥51,967¥55,165$473,462

Total property, plant and equipment

Investments and other assets (Note 5):
Investment securities (Notes 5, 16 and 17)

29

As of

May 31,
2021

May 31,
2020(Millions of yen)

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable (Notes 2 and 16)
Electronically recorded payables (Note 16)
Short-term borrowings and current portion of long-term debt
(Notes 6 and 16)
Income taxes payable (Note 11)
Accrued expenses
Accrued directors’ bonuses
Accrued employees’ bonuses
Reserve for losses on order acknowledgements (Note 3)
Other
Total current liabilities

May 31,
2021(Thousands of
U.S. dollars)(Note 1)

¥1,668
4,705¥2,224
5,877$15,198
42,870

2,085

2,207

18,998

161
611
36
827
871
660
11,628

334
606
36
876
732
773
13,669

1,472
5,574
327
7,539
7,941
6,018
105,942

11,759
427
4,124
17
1
16,33012,344
930
4,010
25
3
17,312

107,134
3,891
37,579158
17148,782

Net assets (Notes 8 and 15):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity¥4,998
3,177
12,320(1,281)
19,214¥4,998
3,177
11,610(1,280)18,505$45,539
28,949112,251(11,677)
175,062

Accumulated other comprehensive income:Unrealized holding gain on securities
Translation adjustments
Retirement benefits liability adjustments (Note 7)
Total accumulated other comprehensive income
Total net assets

4,803
88
(97)
4,793
24,008

5,727
79
(129)
5,677
24,183

43,760802(887)
43,676
218,738

Total liabilities and net assets¥51,967¥55,165$473,462

Long-term liabilities:
Long-term debt (Notes 6, 16 and 19)
Deferred tax liabilities (Note 11)
Liability for retirement benefits (Note 7)Long-term payables
Other
Total long-term liabilities
Commitments and contingencies (Note 14)

See notes to consolidated financial statements.

Toyo Denki Seizo Report 2021

30

TOYO DENKI SEIZO K.K.
Consolidated Statements of Income

For the Years Ended

Net sales (Note 20)
Cost of sales (Note 3)
Gross profit
Selling, general and administrative expenses (Note 9)
Operating income (Note 20)
Non-operating income (expenses):
Interest and dividend income
Interest expense
Equity in losses of unconsolidated subsidiaries and affiliates
Foreign exchange gain (loss)
Insurance claim income related to disaster
Subsidy income
Disaster recover expenses
Other (expenses) income, net
Ordinary income
Special gains, net (Note 10)
Income before income taxes
Income taxes (Note 11):
Current
Deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

TOYO DENKI SEIZO K.K.
Consolidated Statements of Changes in Net Assets
May 31,
2021

May 31,
2020(Millions of yen)

May 31,
2021(Thousands of
U.S. dollars)(Note 1)

¥33,143
25,805
7,338¥39,071
30,8288,242$301,962
235,106
66,856

6,914
423

7,174
1,068

62,996
3,860

202
(67)
(4)
133
34
40
—
(5)
333
757
407
1,164

235
(83)
(39)
(56)
104
40
(79)
19
139
1,207
445
1,653

1,848
(615)
(41)
1,214
318
364
—
(50)
3,038
6,899
3,714
10,613

352
(165)
186
977
—
¥977

(Millions of yen)
Shareholders’ equity

577
(5)
571
1,081
—
¥1,0813,209(1,506)
1,703
8,910
—
$8,910

Commonstock

Capitalsurplus31

Translation
adjustments¥(1,280)¥17,693¥7,176¥126¥(192)¥7,110¥24,804

—

—

(268)

—

(268)

—

—

—

—

(268)

—
—

—
—

(0)

—
—

—
—

—
—

—
—

Balance as of May 31, 2020——
¥4,998

Balance as of June 1, 2020

Cash dividends paid
Net income attributable toowners of the parent
Purchases of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year

1,081

1,081

1,081

—

—
(0)

—
—
¥3,177—813¥11,610—(0)¥(1,280)—812¥18,505(1,448)(1,448)¥5,727

(47)
(47)
¥79

62
62
¥(129)(1,433)(1,433)¥5,677(1,433)(620)¥24,183¥4,998¥3,177¥11,610¥(1,280)¥18,505¥5,727¥79¥(129)¥5,677¥24,183

—

—

(268)

—

(268)

—

—

—

—

(268)

—
—

—
—

977

977
(0)

—
—

—
—

—
—

—
—

977

—

—
(0)

—
—
¥4,998——¥3,177—709¥12,320—(0)¥(1,281)—708¥19,214

(924)
(924)
¥4,803

8
8
¥88

32
32
¥(97)(883)(883)¥4,793(883)(174)¥24,008(0)

Changes during the year
Cash dividends paid
Net income attributable toowners of the parent
Purchases of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2021

(0)(Thousands of U.S. dollars) (Note 1)
Shareholders’ equity

May 31,
2021

Accumulated other comprehensive income
Total
Retirement
accumulated
benefitsotherliability
comprehensive
adjustments
incomeCommonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityUnrealized
holding
gain onsecurities$45,539$28,949$105,784$(11,669) $168,603$52,184$724$(1,181)$51,726$220,330——(2,443)—(2,443)

—

—

—

—

(2,443)

—
—

—
—

8,910
—

—
(7)

8,910
(7)

—
—

—
—

—
—

—
—

8,910
(7)

—
—
$45,539——$28,949—6,466$112,251

—
—
(7)
6,458
$(11,677) $175,062(8,423)(8,423)$43,760

78
78
$802

294
294
$  (887)

Translation
adjustments

Total net
assetsChanges during the year
Cash dividends paid
Net income attributable toowners of the parent

May 31,
2020(Millions of yen)

¥977

Total net
assets¥10,797

Purchases of treasury stock¥1,081

May 31,
2021

Net changes in items
other than those inshareholders’ equity(Thousands of
U.S. dollars)(Note 1)

Total changes during the year$8,910

Balance as of May 31, 2021

(8,050)(8,050)(8,050)(1,592)$43,676 $218,738

See notes to consolidated financial statements.

(924)
(6)
32

(1,448)(12)
62(8,423)
(55)
294

14

(34)

133

(883)

(1,433)(8,050)Comprehensive income (loss)¥94¥(351)$859

Comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests¥94—¥(351)—$859—

See notes to consolidated financial statements.

Total
shareholders’equity¥3,177

Balance as of June 1, 2020

Other comprehensive loss (Note 12):
Unrealized holding loss on securities
Translation adjustments
Retirement benefits liability adjustments
Share of other comprehensive income (loss) of affiliates accounted forby the equity method
Total other comprehensive loss

Treasury
stock

Total
Retirement
accumulated
benefitsotherliability
comprehensive
adjustments
incomeChanges during the year

TOYO DENKI SEIZO K.K.
Consolidated Statements of Comprehensive Income (Loss)

Net income

Retainedearnings

Unrealized
holding
gain onsecurities¥4,998

Balance as of June 1, 2019

See notes to consolidated financial statements.

For the Years Ended

Accumulated other comprehensive income

Toyo Denki Seizo Report 2021

32

TOYO DENKI SEIZO K.K.
Consolidated Statements of Cash Flows

For the Years Ended

TOYO DENKI SEIZO K.K.
Notes to Consolidated Financial Statements
May 31,
2021

May 31,
2020(Millions of yen)

Operating activities
Income before income taxes
Depreciation and amortization
Reversal of allowance for doubtful accounts
Provision for accrued employees’ bonuses
Increase in liability for retirement benefits
Interest and dividend income
Interest expense
Insurance claim income related to disaster
Subsidy income
Disaster recover expenses
Gain on sales of investment securities
Changes in operating assets and liabilities:
Trade notes and accounts receivable
Inventories
Trade notes and accounts payable
Reserve for losses on order acknowledgements
Advances received
Accrued expenses
Other, net
SubtotalInterest and dividend income received
Interest expense paid
Proceeds from insurance income related to disaster
Subsidies received
Payments for disaster recover expenses
Income taxes paid
Net cash provided by operating activities
Investing activities
Purchases of property, plant and equipment
Purchases of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Payments for investments in capital of subsidiaries and affiliates
Other, net
Net cash (used in) provided by investing activities
Financing activities
Decrease in short-term loans payable
Repayment of long-term debt
Purchases of treasury stock
Cash dividends paid
Other, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 18)

May 31,
2021(Thousands of
U.S. dollars)(Note 1)

¥1,164
1,413
2
(49)
97
(202)
67
(34)
(40)
—
(407)

¥1,653
1,487
(7)
57
138
(235)
83
(104)
(40)
79
(447)

$10,613
12,87423(449)
890(1,848)
615
(318)
(364)
—
(3,714)

1,567
274(1,743)
142
(11)
(14)
(86)
2,138
210
(68)
34
40
—
(580)
1,776

(64)
372
(481)
166
(13)
(64)
(164)
2,418
235
(91)
104
40
(79)
(477)
2,148

14,2792,497(15,886)
1,298
(101)
(136)
(787)
19,487
1,919
(622)
318
364
—
(5,285)
16,182

(548)
(43)
(14)
693
(111)
11
(88)
(53)
(155)

(647)
(33)
(14)
1,132
(26)
—
(338)
(31)
41

(5,001)
(399)
(129)
6,318
(1,013)
103
(810)
(484)
(1,415)

(83)
(617)
(0)
(268)
(1)
(971)
21
670
3,293
¥3,964

(287)
(568)
(0)
(268)
(1)
(1,126)
(10)
1,053
2,240
¥3,293(762)(5,624)(7)(2,447)(10)(8,852)
195
6,108
30,009$36,118

1. Summary of Significant Accounting Policies(a) Basis of presentation
The accompanying consolidated financial statements of TOYO DENKI SEIZO K.K. (the “Company”) and consolidated subsidiaries(collectively the “Group”) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial Reporting Standards (IFRS), and are compiled
from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act ofJapan.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation.
Amounts of less than one million yen and one thousand U.S. dollars have been rounded down to the nearest million yen andthousand U.S. dollars, respectively, in the presentation of the accompanying consolidated financial statements. As a result, the totals
in yen and U.S. dollars do not necessarily agree with the sum of the individual amounts.
(b) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements included the accounts of the Company and any significant companies controlled
directly or indirectly by the Company.
Companies over which the Company exercises significant influence in terms of their operating and financial policies have beenaccounted for by the equity method. The Company applies the “Practical Solution of Unification of Accounting Policies Applied toForeign Subsidiaries for Consolidated Financial Statements” (Accounting Standards Board of Japan (ASBJ) Practical Issues Task
Force (PITF) No. 18) and “Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for using Equity
Method” (PITF No. 24). In accordance with these PITF, the accompanying consolidated financial statements have been prepared byusing the accounts of foreign consolidated subsidiaries and affiliates prepared in accordance with either IFRS or accounting principles
generally accepted in the United States as adjusted for certain items including goodwill, actuarial differences and capitalized
development costs.
As of May 31, 2021, the numbers of consolidated subsidiaries and affiliates accounted for by the equity method were 6 and 3 (6and 3 in 2020). A subsidiary, TOYO DENKI USA, INC., for which fiscal year end is December 31, is consolidated by using their pro
forma financial statements as of March 31 which are prepared solely for consolidation purposes and necessary adjustments are madeto their financial statements to reflect any significant transactions from April 1 to May 31. All significant intercompany balances andtransactions have been eliminated in consolidation.
Investments in subsidiaries and affiliates which are neither consolidated nor accounted for by the equity method are carried at costor less. Where there has been a permanent decline in the value of such investments, the Company has written down the investments.
(c) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance
sheet date, and differences arising from the translation are included in the consolidated statements of income.
The balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effect at thebalance sheet date, except for the components of net assets excluding non-controlling interests which are translated at their historicalexchange rates. Revenue and expense accounts are translated at the average rate of exchange in effect during the year. Differences
arising from the translation are presented as translation adjustments in the consolidated financial statements.
(d) Cash and Cash equivalents
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term investmentswith a maturity of three months or less from the date of purchase, which can easily be converted to cash and are subject to little riskof change in value.
(e) Inventories
Inventories are stated principally at the lower of cost or net realizable value, cost being determined principally by the specificidentification method for finished products and work in process and by the moving average cost method for raw material andsupplies.

See notes to consolidated financial statements.

33

Toyo Denki Seizo Report 2021

34

(f) Short-term investments and investment securities
Securities other than equity securities issued by subsidiaries and affiliates are classified into three categories: trading, held-tomaturity or other securities (available-for-sale securities). Trading securities are carried at fair value and held-to-maturity securities
are carried at amortized cost. Available-for-sale securities with market quotation are carried at fair value with changes in unrealized
holding gain or loss, net of the applicable income taxes, included directly in net assets. Available-for-sale securities without market
quotation are carried at cost. Cost of securities sold is determined by the moving average method.
(g) Property, plant and equipment (except for leased assets) and depreciation
Depreciation of property, plant and equipment of the Company and its consolidated subsidiaries is calculated principally by the
declining-balance method based on the estimated useful lives and the residual value, while buildings except for facilities attached tobuildings acquired on or after April 1, 1998 and facilities attached to buildings and structures acquired on or after June 1, 2016 aredepreciated by the straight-line method. The estimated useful lives of these assets are as follows:
Buildings and structures:		
8 to 60 years
Machinery and vehicles:		
3 to 12 years
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income.
(h) Intangible assets (except for leased assets)
Intangible assets are amortized using the straight-line method. Software for internal use is amortized over the internal available period(5 years) using the straight-line method.
(i) Leases
Leased assets capitalized under the finance lease arrangements which do not transfer ownership to the lessee are depreciated overthe lease period without any residual value using the straight-line method.
All other lease transactions are accounted for as operating leases and related payments are charged to income as incurred.
(j) Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.
(k) Accrued directors’ bonuses
Accrued directors’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future for the
performance incentive bonuses.
(l) Accrued employees’ bonuses
Accrued employees’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future.
(m) Reserve for losses on order acknowledgements
Reserve for losses on order acknowledgements is provided based on the amounts expected to be incurred during the current fiscal
year and which are able to estimate the losses reasonably to cover the future losses on order acknowledgements. Provision of reserve
for losses on order acknowledgements in the amounts of ¥142 million ($(1,298) thousand) and ¥166 million is included in cost of
sales for the years ended May 31, 2021 and 2020, respectively.
(n) Retirement benefits
Retirement benefit obligation is attributed to each period by the benefit formula method over the estimated years of service of theeligible employees.
Prior service cost is amortized as incurred by the straight-line method over a fixed period (10 years) within the average remaining
years of service of the employees.
Actuarial differences are amortized by the straight-line method over a fixed period (10 years) within the average remaining years ofservice of the employees from the following year when incurred.

35(o) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial statements with respect to the temporary
differences between the financial reporting and tax bases of the assets and liabilities, and were measured using the enacted tax rates
and laws which will be in effect when the differences are expected to reverse.

(p) Construction revenue and costs
Construction revenue and construction costs are recognized by the percentage-of-completion method, if the outcome of aconstruction contract can be estimated reliably. The percentage of completion is measured based on the percentage of the costs
incurred to the estimated total costs. For other construction contracts, the completed-contract method is applied.
(q) Research and development expenses
Research and development expenses are charged to income when incurred.
(r) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(s) Derivative financial instruments
The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage certain risks arisingfrom adverse fluctuations in interest rates. Derivative financial instruments are carried at fair value with changes in unrealized gain orloss charged or credited to operations, except for these which meet the criteria for deferred hedge accounting under which unrealized
gain or loss is deferred as a component of net assets.
Deferred hedge accounting is adopted for derivatives which qualify as hedges, under which unrealized gain or loss is deferred.
Hedging instruments are derivative transactions and hedged items are primarily interest on debts. Hedge effectiveness is notassessed if the substantial terms and conditions of the hedging instruments and the hedged items are the same.
(t) Significant accounting estimates(Impairment of certain assets or groups of assets in the Industrial Systems segment)(1) The amount recorded in the consolidated financial statements for the year ended May 31, 2021
Property, plant and equipment, intangible assets and long-term prepaid expenses belonging to certain groups of assets in the
Industrial Systems segment:¥5,928 million ($54,011 thousand)(2) Other information that is useful for the reader of the consolidated financial statements to understand the contents of accounting
estimates
a. Calculation method for the amount recorded in the consolidated financial statements for the year ended May 31, 2021
In preparing the consolidated financial statements, the Group groups its assets so that the estimates on impairment of fixed
assets appropriately reflect the Group’s actual management condition, and assesses indication of impairment. Assessment of
indication of impairment is carried out based on the information available to the Group on the status of profit or loss generated
from operating activities using the assets, etc. and whether the business environment has deteriorated significantly inconnection with the business using the assets or groups of assets. Whenever an indication of impairment is found, the Group
determines whether the aggregated amount of undiscounted future cash flows exceeds the corresponding carrying value.
Certain groups of assets in the Industrial Systems segment have recorded ongoing operating loss for the year ended May 31,
2021 mainly because sales projects were postponed due to the impact of COVID-19, and indication of impairment has been
identified. However, since the aggregated amount of undiscounted future cash flows generated from such groups of assets
exceeds their corresponding carrying value, the Group has not recognized any impairment loss.
The aggregated amount of undiscounted future cash flows generated from such assets or groups of assets are computed
based on the business plan approved by the management and the growth rate for the period that exceeds the business plan
period.
b. Main assumptions used for computing the amount recorded in the consolidated financial statements for the year ended May
31, 2021
In the computation of undiscounted future cash flows, the main assumption is net sales based on the projection of future orderacknowledgements. Net sales based on the projection of future order acknowledgements are computed based on the
management’s evaluation of future trends of the industry, historical performances and internal and external information.
The number of certain sales projects postponed due to the impact of COVID-19 in the year ended May 31, 2021 is expected tobe reduced in the following fiscal year.
c. Effects on the consolidated financial statements for the following fiscal year
Estimates on undiscounted future cash flows involve uncertainties, since they are subject to changes of demand trends ofsome customers and unforeseeable events such as natural disasters. Accordingly, when the undiscounted future cash flows
significantly differ from the assumption by the Group, the assessment of impairment might be significantly affected.
Toyo Denki Seizo Report 2021

36

(Recoverability of deferred tax assets)(1) The amount recorded in the consolidated financial statements for the year ended May 31, 2021
Deferred tax assets, before offsetting deferred tax liabilities: ¥1,983 million ($18,075 thousand)(2) Other information that is useful for the reader of the consolidated financial statements to understand the contents of accounting
estimates
a. Calculation method for the amount recorded in the consolidated financial statements for the year ended May 31, 2021
Regarding deductible temporary differences and the carryforward of unused tax losses, the Group determines the recoverabilityof deferred tax assets based on projected future taxable income and tax planning. Estimates of future taxable income of theCompany are based mainly on its business plan.
b. Main assumptions used for computing the amount recorded in the consolidated financial statements for the year ended May
31, 2021
In preparing the business plan, which forms the basis for estimating future taxable income of the Group, the main assumption
is net sales based on the projection of future order acknowledgements. Net sales based on the projection of future orderacknowledgements are computed based on the management’s evaluation of future trends of the industry, historicalperformances and internal and external information.
The number of certain sales projects postponed due to the impact of COVID-19 in the year ended May 31, 2021 is expected tobe reduced in the following fiscal year.
c. Effects on the consolidated financial statements for the following fiscal year
Deferred tax assets already recorded are assessed for recoverability every fiscal year and the contents are reviewed. However,if the assessment of recoverability of deferred tax assets is changed based on changes in the estimated future taxable income
or due to other factors, net income may fluctuate due to reversal of or additional provision for deferred tax assets.
(u) Accounting standards issued but not yet effective(Accounting Standard for Revenue Recognition and Related Implementation Guidance)
The ASBJ issued “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29) on March 31, 2020 and “Implementation
Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No.30) on March 26, 2021.
(1) Overview
The International Accounting Standards Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) of the U.S. havejointly developed a comprehensive accounting standard for revenue recognition. In May 2014, the IASB and the FASB each issued“Revenue from Contracts with Customers” (IASB: IFRS 15 and FASB: Topic 606). Considering that IFRS 15 has been applied fromfiscal years beginning on or after January 1, 2018 and Topic 606 has been applied from fiscal years beginning after December 15,
2017, the ASBJ has developed a comprehensive accounting standard for revenue recognition, which was issued together with its
implementation guidance.
As a basic policy in developing the accounting standard for revenue recognition, the ASBJ has incorporated the basic
principles of IFRS 15 from the viewpoint of comparability between financial statements, a factor essential for facilitating
consistency with IFRS 15. In addition, if there are any business practices in Japan for which consideration is required, alternative
accounting treatments shall be added to the accounting standard to the extent that they do not impair comparability.
(2) Scheduled date of adoption
The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal year ending
May 31, 2022.
(3) Impact of the adoption of accounting standard and implementation guidance
The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its
consolidated financial statements.
(Accounting Standard for Fair Value Measurement and Related Implementation Guidance)
On July 4, 2019, the ASBJ issued “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30), and “Implementation
Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31), along with related updates to “AccountingStandard for Measurement of Inventories” (ASBJ Statement No. 9), and “Accounting Standard for Financial Instruments” (ASBJ
Statement No. 10). In addition, on March 31, 2020, the ASBJ issued “Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No.19).

37(1) Overview
In light of the circumstances that the IASB and the FASB provide nearly identical guidance on fair value measurement, that is,
IFRS 13 “Fair Value Measurement” and FASB Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurement,”
the ASBJ had been working to align Japanese accounting standards with international accounting standards mainly concerning
guidance and disclosures about the fair value of financial instruments, and therefore issued “Accounting Standard for Fair Value
Measurement” along with other standards and guidance.
As a basic policy of the ASBJ in developing accounting standards for fair value measurement, from the viewpoint of enhancing
comparability of financial statements among domestic and foreign companies by using unified measurement methods, the ASBJ
determined to incorporate substantially all of the provisions in IFRS 13, and defined other treatments for specific matters as longas they do not significantly impair the comparability among financial statements, in consideration for conventional practices
prevailing in Japan.
(2) Scheduled date of adoption
The Company expects to adopt the accounting standards and related implementation guidance from the beginning of the fiscal
year ending May 31, 2022.
(3) Impact of adoption of revised accounting standard and related implementation guidance
The Company is currently evaluating the effect of the adoption of the accounting standards and related implementation guidanceon its consolidated financial statements.
(v) Change in presentation(Adoption of “Accounting Standard for Disclosure of Accounting Estimates”)
The Company has adopted “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31 issued on March
31, 2020) for the consolidated financial statements as of May 31, 2021 and the note on significant accounting estimates is presented
in the consolidated financial statements.
However, the note does not include the contents for the fiscal year ended May 31, 2020 pursuant to the transitional treatmentprescribed in the proviso of the paragraph 11 of the Accounting Standard.

Toyo Denki Seizo Report 2021

38

2. Other Explanatory Information
Note 1. U.S. Dollar Amounts
The accompanying consolidated financial statements are expressed in yen, and solely for the convenience of the reader, have beentranslated into U.S. dollars at the rate of ¥109.76=U.S.$1, the approximate rate of exchange prevailing at May 31, 2021. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.
Note 2. Notes Receivable and Payable
As May 31, 2020 fell on a bank holiday, the following notes receivable and payable are deemed to have been settled on the maturity
date:

As of

May 31,
2021

May 31,
2020(Millions of yen)¥——

Notes receivable
Notes payableMay 31,
2021(Thousands of
U.S. dollars)

¥64
6

$—
—

Goods and finished products
Work in process
Raw materials and supplies

May 31,
2021

May 31,
2020(Millions of yen)

¥ 514
3,565
2,821
¥6,901

May 31,
2021(Thousands of
U.S. dollars)

¥ 756
3,424
2,996
¥7,178$ 4,688
32,48025,708$62,877

Inventories were stated at the lower of cost or net realizable value and the Company recognized losses on write-down of
inventories held for the ordinary sales purpose due to a decline in profitability in the amount of ¥190 million ($1,737 thousand) and¥212 million for the years ended May 31, 2021 and 2020, respectively. These amounts were included in “Cost of sales.”Inventories related to construction contracts which are estimated to make losses were stated after deducting the corresponding
reserve for losses on order acknowledgements in the following amounts:

As of

May 31,
2021

May 31,
2020(Millions of yen)

¥ 28
144
¥173

Goods and finished products
Work in process

May 31,
2021(Thousands of
U.S. dollars)

¥ 2
135
¥138

$ 259
1,317
$1,576Note 4. Property, Plant and Equipment
The following table sets forth the acquisition costs and related accumulated depreciation:

As of
Buildings and structures
Machinery and vehicles
Other
Accumulated depreciation

39

For the Years Ended

May 31,
2021

May 31,
2020(Millions of yen)

¥ 12,338
8,397
4,857
25,593(17,593)¥ 7,999¥ 12,269
8,179
4,654
25,103(16,565)¥ 8,538

May 31,
2021(Thousands of
U.S. dollars)$ 112,410
76,50344,258233,172(160,290)$ 72,881

May 31,
2021

May 31,
2020(Millions of yen)

¥1,413

May 31,
2021(Thousands of
U.S. dollars)¥1,487$12,874

Accumulated depreciation of property, plant and equipment amounted to ¥17,593 million ($160,290 thousand) and ¥16,565
million as of May 31, 2021 and 2020, respectively.
Note 5. Investments and Other Assets
Investments in unconsolidated subsidiaries and affiliates included in “Investment securities” as of May 31, 2021 and 2020 were as
follows:

As ofInvestments in capital

Note 3. Inventories
Inventories as of May 31, 2021 and 2020 were as follows:

As ofDepreciation of property, plant and equipment for the years ended May 31, 2021 and 2020 were as follows:

May 31,
2021

May 31,
2020(Millions of yen)

¥2,249May 31,
2021(Thousands of
U.S. dollars)¥2,158$20,496Note 6. Short-Term Borrowings and Long-Term Debt
As of May 31, 2021 and 2020, short-term borrowings and the current portion of long-term debt consisted of the following:

As ofLoans, principally from banks
Current portion of long-term debt

May 31,
2021

May 31,
2020(Millions of yen)

¥1,500585¥2,085

May 31,
2021(Thousands of
U.S. dollars)¥1,590617¥2,207$13,666
5,332$18,998

The annual weighted average interest rates applicable to short-term borrowings and current-portion of long-term debt as of May
31, 2021 were 0.455% and 0.607%, respectively.
As of May 31, 2021 and 2020, long-term debts were as follows:

As of

May 31,
2021

May 31,
2020(Millions of yen)

Long-term debt, excluding current portion, serially due from 2022 through 2032

¥11,759

May 31,
2021(Thousands of
U.S. dollars)¥12,344$107,134

The annual weighted average interest rate applicable to long-term debt as of May 31, 2021 was 0.416%.
The maturities of long-term debt are summarized as follows:

Years ended May 31(Millions of yen)(Thousands of
U.S. dollars)

2022
2023
2024
2025
2026 and thereafter

¥585
585
885
4,525
5,763
¥12,344$  5,332
5,332
8,065
41,22852,507$112,467

Toyo Denki Seizo Report 2021

40

As of May 31, 2021 and 2020, the assets pledged as collateral for short-term borrowings and long-term debt were as follows:

As of
Buildings and structures
Machinery and vehicles
Other property, plant and equipment
Land

May 31,
2021

May 31,
2020(Millions of yen)

¥5,485
596
376
1,232
¥7,691

May 31,
2021(Thousands of
U.S. dollars)¥5,768
588
436
1,232
¥8,025$49,974
5,439
3,432
11,228$70,075

The following assets included in the above are set by factory foundation fixed collateral security for short-term borrowings as of
May 31, 2021 and 2020:

As of
Buildings and structures
Machinery and vehicles
Other property, plant and equipment

May 31,
2021

May 31,
2020(Millions of yen)

¥1,474596
376¥2,447

May 31,
2021(Thousands of
U.S. dollars)¥1,542588
436¥2,566$13,430
5,439
3,432$22,301

Note 7. Retirement Benefit Plans
The Company and its consolidated subsidiaries have retirement benefit plans combined by defined contribution plans and lump-sum
payment plans.
The Company and its consolidated subsidiaries introduced the point system in the lump-sum payment plans, under which
retirement benefit amounts are computed based on the accumulated points granted according to the job ranking and performances.
Under the lump-sum payment plans held by certain consolidated subsidiaries, the liability for retirement benefits and retirement
benefit expenses are calculated using a simplified method.
The changes in the retirement benefit obligation during the years ended May 31, 2021 and 2020 were as follows:

For the Years Ended
Retirement benefit obligation as of June 1
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Retirement benefit obligation as of May 31

May 31,
2021

May 31,
2020(Millions of yen)

¥4,010
284
15
16
(202)
¥4,124

May 31,
2021(Thousands of
U.S. dollars)¥3,893
290
14
(21)
(166)
¥4,010$36,534
2,596
136
154
(1,843)$37,579

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of
May 31, 2021 and 2020 for the Company’s and the consolidated subsidiaries’ defined benefit plans:

As of

May 31,
2020(Millions of yen)

May 31,2021¥4,124
4,124¥4,0104,010$37,579
37,579Liability for retirement benefits
Net liability (asset) for retirement benefits on the consolidated balance sheets¥4,124
4,124¥4,0104,010$37,579
37,579May 31,2021

For the Years Ended

May 31,
2020

May 31,
2021(Millions of yen)

¥284
15
63
¥363

Service cost
Interest cost
Amortization of actuarial loss
Retirement benefit expenses(Thousands of
U.S. dollars)

¥290
14
68
¥373

$2,596136579$3,312Retirement benefits liability adjustments included in other comprehensive income (before tax effect) as of May 31, 2021 and 2020
were as follows:

May 31,
2021

As of

May 31,
2020

May 31,
2021(Millions of yen)

¥46
¥46

Actuarial gain
Total

(Thousands of
U.S. dollars)

¥90
¥90

$424
$424

Retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of May 31,
2021 and 2020 were as follows:

May 31,
2021

As of

May 31,
2020

May 31,
2021(Millions of yen)

¥140
¥140

Unrecognized actuarial gain
Total

(Thousands of
U.S. dollars)

¥186
¥186

$1,278$1,278Major actuarial assumptions (weighted average) used in accounting for the above plans as of May 31, 2021 and 2020 were as
follows:

May 31,2021
0.4%

For the Years Ended
Discount rate

May 31,2020
0.4%

Note: The Company does not use the expected rate of salary increase in computing retirement benefit obligation since the Company adopts the point system.

The amounts of the required contribution to the defined contribution plans of the Company and its consolidated subsidiaries were¥118 million ($1,075 thousand) and ¥118 million for the years ended May 31, 2021 and 2020, respectively.
Note 8. Net Assets
Information regarding changes in net assets for the years ended May 31, 2021 and 2020 was as follows:a. Shares issued and outstanding/ Treasury stock
For the year ended May 31, 2021

(Thousands of
U.S. dollars)

Unfunded retirement benefit obligation
Net liability (asset) for retirement benefits on the consolidated balance sheets

Note: The plan adopting the simplified method is included.

41

May 31,
2021

The components of retirement benefit expenses for the years ended May 31, 2021 and 2020 were as follows:

Type of shares

Number ofshares as ofJune 1, 2020

Increase

Decrease

Number ofshares as of
May 31, 2021

(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock
Details of the increase are as follows:
Increase due to purchase of shares of less than standard unit

9,735,000——

9,735,000

793,403

725—

794,128725 shares
Toyo Denki Seizo Report 2021

42

For the year ended May 31, 2020

Number ofshares as ofJune 1, 2019

Type of shares

Increase

Decrease

Number ofshares as of
May 31, 2020

(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock

9,735,000——

9,735,000

792,966

437—

793,403

Details of the increase are as follows:
Increase due to purchase of shares of less than standard unit

437 sharesb. Dividends
1) Dividends paid
For the year ended May 31, 2021
Resolution
Annual general meetingof the shareholders on
August 26, 2020

Type of shares

Total dividends Total dividends
Dividends per(Millions of (Thousands of Dividends per share (U.S.
yen)
U.S. dollars)
share (Yen)dollars)¥268

Common stock$2,443¥30.00$0.27

Cut-off date

Effective date

May 31, 2020 August 27, 2020

For the year ended May 31, 2020
Resolution
Annual general meetingof the shareholders on
August 28, 2019

Type of shares

Total dividends(Millions of Dividends per
yen)share (Yen)Common stock¥268

Cut-off date

Effective date

¥30.00 May 31, 2019 August 29, 20192) Dividends with the cut-off date in the year ended May 31, 2021 and the effective date in the year ending May 31, 2022
Total
dividends Total dividends
Dividends per(Millions of (Thousands of Source of Dividends per share (U.S.
Type of shares
yen)
U.S. dollars) dividends
share (Yen)dollars)Cut-off date Effective date
Resolution
Annual general meetingof the shareholders on
CommonRetained
May 31,
August 30,
August 27, 2021
stock
2021
¥268
$2,443 earnings¥30.00$0.27 2021

Note 10. Special Gains, Net
The components of “Special gains, net” for the years ended May 31, 2021 and 2020 were as follows:

For the Years Ended
Special gains:
Gain on sales of investment securities
Special losses:
Loss on valuation of investment securities
Total

May 31,
2021

May 31,
2020(Millions of yen)

May 31,
2021(Thousands of
U.S. dollars)

¥407

¥447

$3,714

—
¥407

1
¥445

—
$3,714Note 11. Income Taxes
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’taxes and enterprise tax, which, in the aggregate, resulted in a statutory rate of approximately 30.6% for the years ended May 31,
2021 and 2020. Income taxes of a foreign consolidated subsidiary are based generally on the tax rates applicable in the country ofincorporation.
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the effective statutory tax
rate for the years ended May 31, 2021 and 2020 was as follows:

For the Years Ended
Effective statutory tax rate
Effect of:
Non-deductible expenses for income tax purpose
Non-taxable income such as dividends income, etc.
Per capita inhabitant tax
Valuation allowance
Income from affiliates accounted for by the equity method
Liquidation of an affiliate
Difference arising from the rates used by subsidiaries
Retained profit of affiliates
Research and development tax credit
Investment incentive tax credit
Other
Effective tax rate

May 31,
2021
30.6%

May 31,
2020
30.6%

1.2
(1.9)
2.5
4.9
(0.1)
(21.0)
1.1
0.3
(1.2)
—
(0.4)
16.0%

1.2
(0.9)
1.7
4.8
0.7
—
1.5
(0.2)
(1.2)
(2.5)
(1.1)
34.6%

Note 9. Selling, General and Administrative Expenses
The main components of “Selling, general and administrative expenses” for the years ended May 31, 2021 and 2020 were as follows:

For the Years Ended
Salaries and allowances
Provision for accrued directors’ bonuses
Provision for accrued employees’ bonuses
Retirement benefit expenses
Provision for allowance for doubtful accounts
Research and development expenses

43

May 31,
2021

May 31,
2020(Millions of yen)

¥1,895
36
322
205
2
819

May 31,
2021(Thousands of
U.S. dollars)¥1,931
36
348
216
(1)
792

$17,265
327
2,934
1,869
23
7,462

Toyo Denki Seizo Report 2021

44

The significant components of deferred tax assets and liabilities as of May 31, 2021 and 2020 were as follows:

May 31,
2021

As of

May 31,
2020(Millions of yen)

Deferred tax assets:
Write-down of inventories
Liability for retirement benefits
Accrued employees’ bonuses
Reserve for losses on order acknowledgements
The carryforward of unused tax losses (Note 1)
Other
Total gross deferred tax assets
Valuation allowance for the carryforward of unused tax losses (Note 1)
Valuation allowance for deductible temporary differences
Total valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities

Year ended May 31, 2020

May 31,
2021(Thousands of
U.S. dollars)

¥270
1,269
258
157
549
361
2,867
(536)
(346)
(883)
1,983

¥235
1,234
274
104
472
333
2,655
(466)
(359)
(825)
1,830

$2,467
11,562
2,353
1,437
5,008
3,292
26,120(4,886)(3,158)(8,045)
18,075(2,136)(50)(2,187)¥(203)(2,541)(48)(2,589)¥(759)(19,464)(464)(19,928)$(1,853)(Note 1) The breakdown of the carryforward of unused tax losses and valuation allowance by expiry date is as follows:Year ended May 31, 2021

(Millions of yen)
The carryforward of unused
tax losses (a)Valuation allowance
Deferred tax assets(Thousands of U.S.
dollars)
The carryforward of unused
tax losses (a)Valuation allowance
Deferred tax assets

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years

¥435

¥5

¥—

¥—

¥—

¥109

¥549

(435)
—

(5)
—

—
—

—
—

—
—

(96)
13

(536)
13(b)

Due inOne Year or Less

Total

Due inOne Year or Less

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years$3,964

$45

$—

$—

$—

$998

$5,008(3,964)
—

(45)
—

—
—

—
—

—
—

(876)
121

(4,886)121(b)Total(a) The amount is determined by multiplying the corresponding carryforward of unused tax losses by the effective statutory tax rate.
(b) Deferred tax assets of ¥13 million ($121 thousand) is recognized on the carryforward of unused tax losses of ¥549 million($5,008 thousand) (amount multiplied by the effective statutory tax rate). The said deferred tax assets of ¥13 million($121 thousand) is recognized on the carryforward of unused tax losses of ¥13 million ($122 thousand) (amount multiplied by
the effective statutory tax rate) of Toyo Shoji Co., Ltd., which is a consolidated subsidiary of the Company.

(Millions of yen)

Due after
Due after
Due after
Due after
One Year
Two Years
Three Years Four Years
Due inthrough Two through Three through Four through FiveOne Year or Less
Years
Years
Years
Years

The carryforward of unused
tax losses (a)Valuation allowance
Deferred tax assets

Due after
Five Years

Total

¥—

¥—

¥5

¥—

¥39

¥427

¥472

—
—

—
—

(5)
—

—
—

(33)
6

(427)
—

(466)
6(b)

(a) The amount is determined by multiplying the corresponding carryforward of unused tax losses by the effective statutory tax rate.
(b) Deferred tax assets of ¥6 million is recognized on the carryforward of unused tax losses of ¥472 million (amount multiplied by theeffective statutory tax rate). The said deferred tax assets of ¥6 million is recognized on the carryforward of unused tax losses of¥6 million (amount multiplied by the effective statutory tax rate) of Toyo Koki Co., Ltd., which is a consolidated subsidiary of theCompany.
Note 12. Other Comprehensive Loss
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive loss forthe years ended May 31, 2021 and 2020:

For the Years Ended

May 31,
2021

Unrealized holding loss on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectUnrealized holding loss on securities¥(1,737)407(1,330)405(924)¥(1,653)(447)(2,100)652(1,448)$(15,831)
3,714(12,117)
3,694(8,423)

Translation adjustments
Amount arising during the year
Amount before tax effectTranslation adjustments

(6)
(6)
(6)

(12)
(12)
(12)

(55)
(55)
(55)

Retirement benefits liability adjustments
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effect
Retirement benefits liability adjustments

(16)
63
46
(14)
32

21
68
90
(27)
62

(154)
579
424
(129)
294

14

(34)

133

14
¥(883)(34)¥(1,433)133$(8,050)

Share of other comprehensive income (loss) of affiliates accounted forby the equity method
Amount arising during the year
Share of other comprehensive income (loss) of affiliates accounted forby the equity method
Total other comprehensive loss

May 31,
2020(Millions of yen)

May 31,
2021(Thousands of
U.S. dollars)Note 13. Lease Transactions
The information about finance leases that do not transfer ownership of the leased property to the lessee is omitted since there is nomateriality in terms of value.

45

Toyo Denki Seizo Report 2021

46

Note 14. Contingent Liabilities
As of May 31, 2021 and 2020, the Company was committed to provide guarantees on bank borrowings of the following affiliates:

As of

May 31,
2021

May 31,
2020(Millions of yen)

May 31,
2021(Thousands of
U.S. dollars)

¥374
222

¥334
181

$3,4082,022

For the Years Ended

May 31,
2021

May 31,
2020

May 31,2021

Net income:Basic¥109.38¥120.98

$0.99

As of

May 31,
2021

May 31,
2020

May 31,2021

Net assets¥2,685.28

Changzhou Ruiyang Transmission Technology Co., Ltd.
Beijing Jingche Shuangyang Traction System Co., Ltd.
Note 15. Amounts Per Share(Yen)(U.S. dollars)(Yen)(U.S. dollars)¥2,704.61$24.46

Note: Diluted net income per share is omitted since there is no dilution of equity.

(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arising from receivables, each related division monitors
credit worthiness of their main customers periodically, and monitors due dates and outstanding balances by individual customer. In
addition, the Group is making efforts to identify and mitigate risks of bad debts from customers who are having financial difficulties.
Investment securities are composed of mainly the shares of common stock of highly rated companies with which the Group hasbusiness relationships. Accordingly, the Group believes that the credit risk deriving from such investment securities is insignificant.
The Group also believes that the credit risk of derivatives is insignificant as it enters into derivative transactions only with financial
institutions which have a sound credit profile.
(b) Monitoring of market risks (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Group utilizes interest rate swap transactions to reduce interest rate fluctuation risk on long-term debt.
For investment securities, the Group periodically reviews the fair values of such financial instruments and the financial position of
the issuers.
In conducting derivative transactions, the division in charge of each derivative transaction follows the internal policies, which set
forth delegation of authority and maximum upper limit on positions. Monthly reports including actual transactions data are submitted
to the Board of Directors for their review.
(c) Monitoring of liquidation risk (the risk that the Group may not be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidation
risk.

The bases for calculation are as follows:
Basic net income per share

For the Years Ended
Net income attributable to owners of the parent
Net income not attributable to common shareholders
Net income attributable to owners of the parent related to common stock

May 31,
2021

May 31,
2020(Millions of yen)

¥977
—
977

May 31,
2021(Thousands of
U.S. dollars)¥1,081—
1,081$8,910—8,910(Thousand shares)

Average number of shares of common stock during the year

8,941

8,941

Note 16. Financial Instruments
Overview(1) Policy for financial instruments
The Group raises its necessary funds for capital investments to reinforce and renew production facilities and working capital
principally through bank borrowings. The Group manages temporary cash surpluses through low risk financial assets. The Group
uses derivatives in order to avoid the following risks and does not enter into derivatives for speculative or trading purposes.

47(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivable and electronically recorded receivables—are exposed to credit risk in relation
to customers. Trade receivables denominated in foreign currencies arising from international business are exposed to foreignexchange fluctuation risk, but the Group utilizes forward foreign exchange contracts to reduce such risk as a hedging instrument.
Investment securities are composed of mainly the shares of common stock of other companies with which the Group has business
relationships and exposed to market risk.
Certain long-term debt raised for the purpose of making capital investments with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates, the Grouputilizes interest rate swap transactions as a hedging instrument.
Regarding hedging instruments and hedged items in hedge accounting, hedging policy, and assessment of the effectiveness ofhedging activities, etc., please see “1. Summary of Significant Accounting Policies (s) Derivative financial instruments.”(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in Note 19, Derivative
Transactions are not necessarily indicative of the actual market risk involved in derivative transactions.
Estimated Fair value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheets as of May 31, 2021 and 2020 and estimated fair value areshown in the following table. The following table does not include financial instruments for which it is extremely difficult to determine
the fair value (Please refer to Note 2 below):

As of May 31, 2021

Carrying value

Fair value

Difference(Millions of yen)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Electronically recorded receivables
4) Investment securities
Total assets
Liabilities
5) Trade notes and accounts payable6) Electronically recorded payables
7) Short-term borrowings
8) Long-term debt
Total liabilities
9) Derivative transactions*¥3,964
13,218901
12,767¥30,851¥3,964
13,218901
12,767¥30,851

¥—
—
—
—
¥—

¥1,668
4,705
1,500
12,344¥20,218¥—¥1,668
4,705
1,500
12,373¥20,247
¥—

¥—
—
—
29
¥29
¥—

Toyo Denki Seizo Report 2021

48

As of May 31, 2021

Carrying value

Fair value

Difference

2. Financial instruments for which it is extremely difficult to determine the fair value

May 31,
2021(Thousands of U.S. dollars)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Electronically recorded receivables
4) Investment securities
Total assets
Liabilities
5) Trade notes and accounts payable6) Electronically recorded payables
7) Short-term borrowings
8) Long-term debt
Total liabilities
9) Derivative transactions*As of$36,118
120,426
8,209
116,326$281,081$36,118
120,426
8,209
116,326$281,081

$—
—
—
—
$—

$15,198
42,87013,666112,467$184,202$—$15,198
42,87013,666
112,733$184,468
$—

$—
—
—
266
$266
$—

Fair value

Difference(Millions of yen)

¥1,064

Unlisted equity securities

Carrying value(Millions of yen)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Electronically recorded receivables
4) Investment securities
Total assets
Liabilities
5) Trade notes and accounts payable6) Electronically recorded payables
7) Short-term borrowings
8) Long-term debt
Total liabilities
9) Derivative transactions*(Thousands of
U.S. dollars)¥1,065$9,694

3. Redemption schedule for receivables and securities with maturities on May 31, 2021 and 2020 were as follows:

As of May 31, 2021

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years(Millions of yen)¥3,962
13,189901¥18,052

Cash on hand and in banks
Trade notes and accounts receivable
Electronically recorded receivables

As of May 31, 2021

Due in One Yearor Less

¥—
29
—
¥29

¥—
—
—
¥—

¥—
—
—
¥—

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years(Thousands of U.S. dollars)¥3,293
14,135
1,538
14,369¥33,337¥3,293
14,135
1,538
14,369¥33,337

¥—
—
—
—
¥—

¥2,224
5,877
1,590
12,961¥22,653¥—¥2,224
5,877
1,590
13,005¥22,696
¥—

¥—
—
—
43
¥43
¥—

*Derivative transactions are presented in a net amount of receivables and payables and net payables are shown in parenthesis.
Notes:
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Assets:Cash on hand and in banks, trade notes and accounts receivable and electronically recorded receivables
Since these items are settled in a short period of time, their carrying value approximates fair value.
However, if they are settled in a long period of time, the fair value of receivables is based on the present value of the receivables classified by definite periods discounted
using interest rates on the corresponding period until settlement.
Investment securities
The fair value of stocks is based on quoted market prices. Investment securities held by the Group are classified as available-for-sale securities and please see Note 17“Securities.”
Liabilities:
Trade notes and accounts payable, electronically recorded payables and short-term borrowings
Since these items are settled in a short period of time, their carrying value approximates fair value.
Long-term debt
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings
were entered into. The fair value of long-term debt with variable interest rates, which is hedged by the interest rate swaps and to which hedge accounting is applied (referto the following paragraph), is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings wereentered into.
Derivative transactions
The fair value of interest rate swaps accounted for by the hedge accounting is included in the fair value of the related long-term debt, since such interest rate swaps areaccounted for together with long-term debt as hedged items.
The fair value of interest rate swaps accounted for by the normal method is determined based on the price, etc. provided by the financial institutions.

49

May 31,
2021

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in the above table.

*Derivative transactions are presented in a net amount of receivables and payables and net payables are shown in parenthesis.

As of May 31, 2020

May 31,
2020

Cash on hand and in banks
Trade notes and accounts receivable
Electronically recorded receivables

As of May 31, 2020

$36,101
120,162
8,209$164,473
Due in One Yearor Less

$—
264
—
$264

$—
—
—
$—

$—
—
—
$—

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years(Millions of yen)

Cash on hand and in banks
Trade notes and accounts receivable
Electronically recorded receivables¥3,291
13,9401,538¥18,770

¥—
194
—
¥194

¥—
—
—
¥—

¥—
—
—
¥—

4. The redemption schedule for long-term debt is disclosed in Note 6.
Note 17. Securities
Information regarding securities classified as available-for-sale securities
Available-for-sale securities

As of May 31, 2021

Carrying value Acquisition cost

Unrealized
gain (loss)(Millions of yen)

Securities for which carrying value exceeds acquisition cost:
Stock
Subtotal
Securities for which acquisition cost exceeds carrying value:
Stock
Subtotal
Total¥12,514¥12,514¥5,511¥5,511¥7,003¥7,003¥253¥253¥12,767

¥317
¥317
¥5,828¥(63)¥(63)¥6,939Toyo Denki Seizo Report 2021

50

As of May 31, 2021

Carrying value Acquisition cost

Unrealized
gain (loss)

Hedging policies(Thousands of U.S. dollars)

Securities for which carrying value exceeds acquisition cost:
Stock
Subtotal
Securities for which acquisition cost exceeds carrying value:
Stock
Subtotal
Total$114,015$114,015$50,211$50,211$63,804$63,804$2,310$2,310$116,326$2,889$2,889$53,101$(579)$(579)$63,224

Notes: 1. Unlisted stocks were not included in the above table because there were no quoted market prices available and they were extremely difficult to determine the fairvalue.
2. Acquisition cost in the above table represents carrying value reflecting impairment losses.
If the market value of the securities declines by 50% or more from the acquisition cost as of the end of the fiscal year, the Group recognizes the difference between
the market value and the acquisition cost as an impairment loss. If the decline ranges between about 30% and 50%, the Group recognizes an impairment loss forthe necessary amount considering its recoverability.

As of May 31, 2020

Carrying value Acquisition cost

Unrealized
gain (loss)(Millions of yen)

Securities for which carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities for which acquisition cost exceeds their carrying value:
Stock
Subtotal
Total¥14,218¥14,218¥5,868¥5,868¥8,349¥8,349¥151¥151¥14,369

¥229
¥229
¥6,098¥(78)¥(78)¥8,271

Notes: 1. Unlisted stocks were not included in the above table because there were no quoted market prices available and they were extremely difficult to determine the fairvalue.
2. Acquisition cost in the above table represents carrying value reflecting impairment losses.
If the market value of the securities declines by 50% or more from the acquisition cost as of the end of the fiscal year, the Group recognizes the difference between
the market value and the acquisition cost as an impairment loss. If the decline ranges between about 30% and 50%, the Group recognizes an impairment loss forthe necessary amount considering its recoverability.

Information regarding available-for-sale securities soldFor the Years Ended
Stock:
Sales proceeds
Gain on sales
Loss on sales

May 31,
2021

May 31,
2020(Millions of yen)

¥693
407
—

May 31,
2021(Thousands of
U.S. dollars)

¥780
447
—

Note 19. Derivative Transactions$6,3183,714—

The Company utilizes forward foreign exchange contracts and interest rate swaps for the purpose of hedging its exposure tofluctuations in foreign exchange rates and interest rates, respectively. However, based on internal management rules on financial
market risk approved by the Company’s Board of Directors, Group companies do not enter into transactions involving derivatives for
speculative or trading purposes.
Types and purpose of derivative transactions
The Company primarily uses forward foreign exchange contracts to hedge against the fluctuations in foreign currency exchange rates
on trade receivables denominated in foreign currencies and interest rate swaps to hedge against the adverse impact of fluctuations ininterest rates on interest-bearing debt.
Derivative transactions to which hedge accounting is not applied:
As of May 31, 2021 and 2020, there were no currency-related derivatives.
Derivative transactions to which hedge accounting is applied:Interest-related derivatives:
There were no derivatives as of May 31, 2021.

As of May 31, 2020

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

Fair value(Millions of yen)Interest rate swaps accounted for by the exceptional method:
Receive/floating and pay/fixedLong-term debt

¥32

¥—

Note

Note: Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received
under the swap agreement is recognized and included in interest expenses. Accordingly, the fair value of interest rate swaps is included in the fair value of long-term
debt. The notional amount of long-term debt includes current portion of long-term debt.

Note 20. Segment Information
The reportable segments of the Group are components for which discrete financial information is available and operating results are
regularly reviewed by the Board of Directors to make decisions about resource allocation and to assess performance.
The Group establishes business units by product and each business unit designs domestic and overseas comprehensive strategies
for its products and is developing business activities. Accordingly, the Group consists of the three reportable segments by productbased on the business units, which are Transportation Systems, Industrial Systems and Information Equipment Systems.
The accounting policies of the segments are substantially the same as those described in the significant accounting policies in “1.
Summary of Significant Accounting Policies.” Segment profit is evaluated based on operating income.

Note 18. Supplementary Cash Flow Information
Cash and cash equivalents in the consolidated statements of cash flows for the years ended May 31, 2021 and 2020 were reconciled
to cash on hand and in banks in the consolidated balance sheets as follows:

As ofCash on hand and in banks
Cash and cash equivalents

51

May 31,
2021

May 31,
2020(Millions of yen)

¥3,964¥3,964

May 31,
2021(Thousands of
U.S. dollars)¥3,293¥3,293$36,118$36,118

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Inter-segment sales are recorded at the same prices used in transactions with third parties.

For the year ended May 31, 2020
Reportable segments

For the year ended May 31, 2021

Transportation
Systems

Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers
Segment profit
Segment assets
Other items:
Depreciation
Capital expenditures¥21,528¥10,541¥1,067¥5¥33,143¥—¥33,143

50
21,579¥2,211¥17,151

0
10,542¥718¥13,838

—
1,067
¥267
¥674

346
352
¥(39)¥479

397
33,541¥3,157¥32,144

(397)
(397)
¥(2,734)¥19,822—
33,143¥423¥51,967

¥607
¥454

¥527
¥113

¥25
¥10

¥4
¥2

¥1,165
¥580

¥247
¥51

¥1,413¥632

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers¥24,269¥13,023¥1,772¥5¥39,071¥—¥39,071

Segment profit
Segment assets

12
24,282¥2,474¥20,364

1
13,024¥1,008¥13,679

—
1,772
¥460
¥1,062

510
516
¥5
¥536

524
39,595¥3,948¥35,642

(524)
(524)
¥(2,880)¥19,522—
39,071¥1,068¥55,165

Other items:
Depreciation
Capital expenditures

¥592
¥356

¥608
¥111

¥27
¥24

¥4
¥5

¥1,232
¥497

¥255
¥47

¥1,487¥545

Note: “Other” represents business units which are not included in reportable segments and consists of worker dispatching services related activities, etc.

Geographical information

For the year ended May 31, 2021

Net sales to third parties by countries or areas grouped according to geographical classification for the years ended May 31, 2021
and 2020 were summarized as follows:

Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Thousands of U.S. dollars)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers$196,145$96,042$9,723$52$301,962$—$301,962

Segment profit
Segment assets

457
196,602$20,152$156,267

7
96,049$6,542$126,079—
9,723$2,433$6,1493,161
3,213$(359)$4,367

3,625
305,588$28,769$292,863(3,625)(3,625)$(24,909)$180,599—
301,962$3,860$473,462

Other items:
Depreciation
Capital expenditures$5,534$4,137$4,810$1,034

$228
$93

$42
$22

$10,616$5,287$2,258$473$12,874$5,761

Note: “Other” represents business units which are not included in reportable segments and consists of worker dispatching services related activities, etc.

For the Years Ended

May 31,
2021

Japan
China
Other
Consolidated¥27,876
3,628
1,638¥33,143

May 31,
2020(Millions of yen)

May 31,
2021(Thousands of
U.S. dollars)¥30,997
4,282
3,791¥39,071$253,973
33,057
14,932$301,962

Note: Net sales information above is based on customers’ location.

Major customer information
Major customer information for the years ended May 31, 2021 and 2020 was omitted since there was no customer to whom sales
exceeds 10% of net sales recorded in the accompanying consolidated statements of income.

Note 21. Significant Subsequent Events
There were no significant subsequent events to be noted.

53

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Report of Independent Auditors

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