TOYO KANETSU K.K.
Annual Report 2016
For the year ended March 31, 2016

CONTENTS

Consolidated Financial Highlights

2

To Our Shareholders

3

Medium-Term Business Plan

4

Board of Directors, Audit & Supervisory Committee Members
and Corporate Officers

6

Lines of Business

6

TKK Group Companies

7

Analysis of Operating Environment and Results

8

Business Risks

9

Financial Section
Consolidated Balance Sheet

10

Consolidated Statement of Income and Comprehensive Income

12

Consolidated Statement of Changes in Equity

13

Consolidated Statement of Cash Flows

16

Notes to Consolidated Financial Statements

18

Independent Auditor’s Report

51

Corporate Data

53

Directory53

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Financial Highlights
For the years ended March 31

Thousands of
U.S. dollars

Millions of yen

2016

2015

2014

2013

2012

2016

For the Years Ended March 31:¥46,572¥52,457¥48,395¥45,504¥40,733$413,532

Plant & Machinery Business

22,78829,425

26,90324,027

23,625

202,344

Material Handling Systems Business

17,206

15,68915,158

14,966

11,624

152,779

Other

6,577

7,341

6,333

6,511

5,484

58,399Operating Income

3,024

3,588

4,341

2,272

1,474

26,851

Profit Attributable to Owners of Parent

1,906

3,019

2,879

1,527

714

16,924Comprehensive Income

1,302

4,390

3,223

1,971

1,083

11,561

514

460

594

477

482

4,564

Current Assets¥29,995¥33,463¥33,841¥37,149¥32,750$266,338

Property, Plant and Equipment

13,661

13,577

12,912

13,655

12,579121,301

Investments and Other Assets

7,340

8,504

7,368

6,810

5,920

65,174

Net Sales

Cash Dividends

At March 31:

370

382

393

465

244

3,285

Total Assets

51,36855,92854,51558,07951,493456,117

Current Liabilities

12,866

15,57016,724

23,16918,593

114,242

Total Non-Current Liabilities

4,125

3,777

4,000

4,048

3,275

36,627

Shareholders’ Equity

32,13633,525

32,10529,53028,724285,348

Accumulated Other Comprehensive Income

2,239

2,814

1,471

1,174

794

19,881

–

240

212

158

107

–

Total Liabilities and Net Assets

51,36855,92854,51558,07951,493456,117

Order Backlog

24,12632,25649,06546,45950,940214,225

Intangible Assets

Non-Controlling Interests

Yen

Per Share:
Profit Attributable to Owners of Parent
Cash Dividends
Shareholders’ Equity

Number of Shareholders
Number of Employees

U.S. dollars

2016

2015

2014

2013

¥17.45¥26.08¥24.18¥12.53

¥5.93

$0.15

5.00

4.00

5.00

4.00

4.00

0.04

333.91315.91

282.18257.71

244.77

2.96

2016

2015

2014

2013

2012

12,83915,22916,73817,277

17,189

884

753

742

787

694

2012

The U.S. dollar amounts in this annual report represent translations of Japanese yen at the rate of ¥112.62=$1.00, solely for readers’ convenience.

2

Toyo Kanetsu K.K. Annual Report 2016

2016

To Our Shareholders

The Toyo Kanetsu K.K.(TKK) Group has built up a considerable
base of technology since it was established in 1941. By using
this technology to provide industries with optimum products,
systems, and services, we have not only gained thesatisfaction and trust of our customers but also contributed
to society and environmental protection.
Beginning in 1950, the Plant & Machinery Business employedhigh-grade welding technology to manufacture all-weldedtanks. This technology enabled us to produce structurally
superior tanks more safely and economically than before, andin larger sizes. Now the TKK Group has delivered more than
5,700 oil storage tanks and low-temperature LNG storage
tanks all over the world, where they form an integral part of
the global energy infrastructure.
Since 1955, the Material Handling Systems Business has followed a “customer first” policy in delivering its specialty
sorting and picking systems and automated case storage systems to distribution centers, airports, and otherfacilities. We have long been a leader in constructing systems that respond flexibly to increasingly diversified andsophisticated needs.
The year of 2016 marks TKK’s 75th anniversary as a company. To continue contributing to social infrastructure with
our advanced energy and distribution technology, all members of the TKK Group will work as one to fulfill the needsof our times in the spirit of “Challenge & Change.” We will renew the Group from within as we encounter new
challenges on the way to a century of business.
In closing, I would like to thank you in advance for your understanding and continued support of our efforts.
June 2016

Toru Yanagawa
President and Representative Director

Toyo Kanetsu K.K. Annual Report 20163

Medium-Term Business Plan
The TKK Group has devised a medium-term business plan covering the fiscal years 2017–2019. Under the slogan“Challenge & Change,” the Group will not be bound by conventional business domains and processes as it embarks on
the following four management policies.
( 1 ) Expansion of business domains( 2 ) Switch to a more profitable and competitive structure( 3 ) Launch of new businesses that build on the strengths of existing businesses( 4 ) Construction of a corporate governance system that enables appropriate risk-taking
Strategies to be adopted and issues to be addressed by our major businesses are as follows.

Business Strategy
Plant & Machinery Business
Low oil prices have led to the postponement or cancellation of some plant projects, while economic slowdowns inemerging countries, along with progress in energy-saving technologies, have lowered energy demand. Owing to thesedevelopments, we believe that the number of new projects will be limited in the short to medium term. Over the longer
term, however, oil and gas demand should grow in accordance with rising populations and economic growth in emerging
countries, leading to an increase in projects to construct or expand facilities. Using the following business policies willreinforce our ability to win orders and expand our business domains.
( 1 ) Gaining projects in Southeast Asia and the Middle East
( 2 ) Alliance strategy with facilities developers( 3 ) Entry into the small tank market( 4 ) Improvement of business productivity( 5 ) Shortening and standardization of project operations( 6 ) Expansion of the maintenance business

Material Handling Systems Business
Demand for material handling systems is expected to keep growing based on expansion of the online shopping market
due to the spread of smartphones, higher demand for airport facilities as inbound tourism to Japan increases, andexpansion of the material handling market driven by the growth of emerging Asian economies. Within this demand,
expectations are running high for more efficient systems that will reduce delivery time as well as systems that will reducelabor and energy inputs to counteract the effects of the decline in Japan’s working-age population.
Under these business conditions, we will employ the following business strategies to construct a more profitable earning
structure while providing products and services that answer the high-level needs of our customers.
( 1 ) Expansion of sales where our systems have an advantage( 2 ) A stronger advance into the refrigeration and freezing field( 3 ) Expansion of business domains through alliances( 4 ) Reinforcement of the value chain from sales through maintenance( 5 ) Reinforcement of the maintenance business( 6 ) Development of future strategic products
On April 1, 2015, Toyo Kanetsu Solutions K.K., the core company in our Material Handling Systems Business, mergedwith its subsidiary and our sub-subsidiary, K-Techno Inc., which was in charge of maintenance work on material handlingsystems. The merger will enable the TKK Group to carry out higher-value-added work more efficiently and thus tosteadily implement the business strategies described above.

4

Toyo Kanetsu K.K. Annual Report 2016

Development of New Products and Services, Launch of New Businesses That Build on Existing Strengths
In the Plant & Machinery Business, we are developing large liquefied hydrogen tanks to fill the needs of a low-carbon
society. Hydrogen energy emits no CO2 and is expected to play a major role in reducing mankind’s environmental impact,
and we anticipate the need for storage facilities.
In the Material Handling Systems Business, we are rising to the challenges presented by changing retail formats,progress in the Internet of Things (IoT), and the decline of Japan’s working-age population. Our response is to constructnext-generation systems that employ the IoT and robots.
Given our affinity with the energy industry and the numerous sales channels we have built up over the years, we areconsidering entry into the electric power business.

Important Companywide Policies
To foster a corporate atmosphere of “Challenge & Change” and help us aim for sustained growth and development, we
will implement the following policies in preparation for constructing a corporate governance system that enables
appropriate risk-taking.
( 1 ) Put governance guidelines into practice and make Board of Directors’ meetings more functional( 2 ) Release information in a timely manner and raise TKK’s image and name recognition( 3 ) Hold earnings explanation meetings and step up dialog with shareholders( 4 ) Reinforce Environmental, Social, Governance (ESG) initiatives( 5 ) Consider the Group’s optimum organization based on medium- to long-term management issues and thebusiness environment( 6 ) Optimize fund procurement aimed at both capital efficiency and management stability( 7 ) Foster a corporate atmosphere of “Challenge & Change”( 8 ) Train and strengthen the next generation of management( 9 ) Encourage women’s activity and contributions in the workplace
Details of our consolidated earnings targets for fiscal 2019, the last year of the current medium-term business plan, andbeyond that in fiscal 2021, are as follows.

Consolidated Net Sales and Operating Income Targets by Segment
Plant & Machinery Business
60

Material Handling Systems Business

Others, net adjusted amount
Net sales(unit: billions of yen)

50

40

30

55.0

Net sales

Net sales

48.2

46.6

6.6
Operatingincome

17.2

20

10

22.8

Increased sales and profits atother subsidiary businesses

3.0

0.4
0.7
1.9

0

10.0

7.4
Operatingincome20.0
Increase in projects for online
retailers, co-ops, airports;
important policies lead to a major
increase in sales and profits

Postponement of large
projects leads to a majordecline in sales and profits

New businesses produce
increased sales and operating
incomeOperatingincome

22.0

3.1

0.5
1.6

20.8
1.0

Increase in maintenancecontracts leads to sales
and profit growth

Domestic maintenance andoverseas small tank projects
lead to sales and profit growth

3.5

0.6
1.8

23.0
1.2

FY2016FY2019 (target)

FY2021 (target)

ROE

5.4%

6.5%

6.7%

Dividend payout
ratio

28.6%

20.0% –30.0%

Total return ratio

131.9%

50.0% –75.0%

Overseas sales
ratio
New businesssales ratio

22.3%

15.0%

25.0%
4.7%

Toyo Kanetsu K.K. Annual Report 20165

Board of Directors, Audit & Supervisory Committee Members
and Corporate Officers
Directors

Corporate Officers

President and Representative Director

Toru Yanagawa

Directors and Senior Corporate Officers

Isao Shimomae
Masayuki Takeda
Keisuke Kodama

Directors and Audit& Supervisory Committee Members

Senior Corporate Officers Tetsuya Watanabe

Shiro Ito
Yukio Kurosaka
Corporate Officers

Kazuto Abe
Toshiaki Hiwatari
Tsuneo Nagai
Shigeharu Nakamura

Yasuhiro Yamada
Hiroshi Ohgi
Hiromi Tanaka
Takeshi YoneharaLines of BusinessToyo Kanetsu K.K. (President: Toru Yanagawa) was established as Toyo Kanetsu Kogyo K.K. in May 1941 and soon
began producing and selling industrial furnaces. Currently, the Plant & Machinery Business and Material Handling Systems
Business are the two pillars of our operations.

Plant & Machinery
Business

Material Handling
Systems Business

Other BusinessNet sales

Net sales

Net sales

Operating income

Operating income

Operating income

Design, production, and installationof storage tanks for LNG, LPG,
crude oil, and other gases andliquids, as well as all types of tankmaintenance.

Development, design, andinstallation of distribution systems,
especially those for sorting, picking,and conveyance, as well as all
types of maintenance work onthese systems.

Construction on contract of social
service facilities, rental housing,and others; manufacture and saleof industrial equipment such asbalancers and winches; and realestate rental and property
management.

¥22,788 million¥1,921 million¥17,206 million¥667 million¥6,577 million *¥855 million*Before the elimination of inter-segment transactions.

6

Toyo Kanetsu K.K. Annual Report 2016

TKK Group Companies
Other Business

Plant & Machinery Business

TOYO KANETSU K.K.
Toyo Kanetsu Builtec K.K.

Material Handling Systems BusinessToyo Kanetsu Solutions K.K.

P.T. Toyo Kanetsu Indonesia

Toyo Service System K.K.

Toyo Koken K.K.

Toyo Kanetsu (Malaysia) SDN. BHD.
TOYO KANETSU
SINGAPORE PTE. LTD.
TKK-USA, Inc.

Domestic
Subsidiaries

Overseas
Subsidiaries

Subsidiaries
Domestic

Overseas

Toyo Kanetsu Solutions K.K.

P.T. Toyo Kanetsu Indonesia

Establishment October 1, 2002
Capital¥400 million
BusinessPlanning, design, manufacturing,
construction, maintenance and sales ofmaterial handling systems

Establishment September 9, 1974
Capital
US$2 million
Business
Manufacturing and sales of tanks and steel
framing

Toyo Kanetsu Builtec K.K.

Toyo Kanetsu (Malaysia) SDN. BHD.

Establishment April 1, 2014
Capital¥50 million
BusinessBuilding construction business andprovisional equipment operations

Establishment April 13, 1992
Capital
RM2 million
Business
Manufacturing and sales of storage tanks;
manufacturing and sales of material
handling system equipment and devices

Toyo Service System K.K.

TOYO KANETSU SINGAPORE PTE. LTD.

Establishment September 19, 1986
Capital¥60 million
BusinessBuilding management, real estate, leasing
operations and OA-related operations

Establishment August 8, 2006
Capital
S$500,000
Business
Manufacturing and sales of storage tanks,pressure vessels, and onshore and offshore
steel structures

Toyo Koken K.K.

TKK-USA, Inc.

Establishment February 11, 1957
Capital¥90 million
Business
Design, manufacturing and construction of
winches and hoists, lift ladders, conveyors,balancers, industrial robots and othermachinery

Establishment June 7, 2003
Capital
US$10,000
Business
Manufacturing and sales of storage tanks,pressure vessels, and onshore and offshore
steel structures

Toyo Kanetsu K.K. Annual Report 20167

Analysis of Operating Environment and Results
In fiscal 2016 (ended March 31, 2016), improvements inhowever, oil prices showed no sign of rising, andcorporate earnings and the employment environment

demand for oil- and gas-related facilities consequently

supported a modest economic recovery in Japan, but thefailed to rise. We poured our energy into cost-reduction

decline of resource prices and geopolitical instability

efforts and development of new construction methods

contributed to a sense of stagnation in calendar 2016.

while maintaining an emphasis on profitability in our

While the U.S. and European economies generally stayedmarketing activity. As a result, large orders for new

on a recovery path, China and many resource-dependent

installations declined from the previous fiscal year.

economies experienced a deepening slowdown.
Against this background, consolidated net sales in thisOur Plant & Machinery Business should benefit over thebusiness decreased by 22.6% year on year to ¥22,788

long term from economic growth in emerging economies,

million. Operating income dropped by 31.1% to ¥1,921

especially in Southeast Asia, and from rising energy

million (before adjustment), while orders received

demand driven by population growth. In the short term,

declined by 6.6% to ¥12,387 million.

however, depressed oil prices and a looser LNG supplydemand relationship have led to postponement of someMaterial Handling Systems Businessplanned investments in oil- and gas- related facilities.

The material handling systems market remained intenselyConsequently, opportunities to construct or expand large

competitive. Our sales consisted mainly of Multishuttle

tanks have dwindled.

automated case storage systems for online retailers andthe logistics industry, and airport baggage handling

The market for our Material Handling Systems Business is

systems. We made great strides toward improving

likely to grow due to the falling birthrate and an aging

profitability through the merger of a maintenancepopulation, and lifestyle changes. As Internet access andsubsidiary and implementation of policies to raiseease of use improve, growth in online shopping willprocedural efficiency. These efforts coincided with our

expand the market for our products. In addition, increasingreceipt of some large orders with high profit margins.

inbound tourism to Japan is accompanied by risingdemand for airline services, which leads to orders for new

As a result, consolidated net sales in this businessconstruction and renovation of airport facilities. Demand

increased by 9.7% year on year to ¥17,206 million, while

for the products of this business continues to expand.

operating income rose by 66.0% to ¥667 million (before
adjustment) and orders received grew by 18.9% to

In this business environment, the Material Handling¥19,604 million.

Systems Business recorded positive sales growth in fiscal
2016, but not enough to offset the decline in the Plant &In businesses other than those above, we concentrated

consolidated net sales totaled ¥46,572 million (downon improving results in a way suited to the

11.2% year on year), operating income was ¥3,024

characteristics of each business. Consolidated net sales

million (down 15.7%), and ordinary income was ¥3,227

declined by 10.4% year on year to ¥6,577 million,

million (down 17.1%). Profit attributable to owners of theoperating income rose by 6.9% to ¥855 million (before

parent company was ¥1,906 million, a decline of 36.8%,

adjustment), and orders received increased by 20.3% todue in part to a large insurance payment received in the¥1,748 million.

previous fiscal year for snow damage. Orders received infiscal 2016 rose by 8.1% to ¥33,741 million.

Segment results are as follows.
Plant & Machinery BusinessIn the maintenance market, we secured a steady streamof contracts, notably for modification works to floatingroof storage tanks made necessary by a partial revisionof the Fire Service Act. In the new installation field,

8

Other Businesses

Machinery Business. Overall, the TKK Group’s

Toyo Kanetsu K.K. Annual Report 2016

Business Risks
The following risks may affect the business results, stock

entering into forward exchange contracts or option

price and financial position of the TKK Group.

contracts, and by implementing structural solutions suchas using overseas manufacturing bases and internationallyEffect of the Global Economy and Energy Market Trends

procuring raw materials. However, an unexpected change

The Plant & Machinery Business, the TKK Group’s

in exchange rates may adversely affect the TKK Group’s

mainstay business, is subject not only to global

business results and financial position.

economic trends but also to economic and social
conditions in oil- and gas-producing and consuming

Project Execution

countries, energy and environmental policies in each

The business results of the TKK Group may be affected

country, and the prices of crude oil and LNG. Owing toby situations where, for customer reasons, projects arethese factors, some customers have halted, postponed,

suspended or postponed or the project content isor reviewed their investment plans in ways that could

otherwise altered.

adversely affect Plant & Machinery Business orders andthe TKK Group’s earnings and financial standing.

Further, as our projects take the form of inclusive
contracts, deterioration in project profitability may impact

Potential Risks Associated with Internationalon business results in the event of a sudden change inActivities and Overseas Advancethe economic situation leading to unforeseen rises in

The TKK Group conducts some operations in overseas

equipment and material prices, transportation costs,

markets, primarily those of the Plant & Machinery

construction costs or other expenses, or in the event of

Business. Further, its subsidiary manufactures tanka natural disaster, outbreak of disease, serious accident

materials in Indonesia. These overseas operations carryor other eventualities.

inherent risks as stated below, and the TKK Group’sbusiness results and financial position may be adversely

Intense Competition for Winning Orders

affected by such risks.

All of the major businesses of the TKK Group are being
operated under the make-to-order type system, and the(1) Unexpected changes in laws and regulations(2) Political and economic instability(3) Difficulties in securing human resources(4) Tax system revisions that could be unfavorable to

TKK Group is facing severe competition to win orders.

the TKK Group(5) Social confusion arising from acts of terror, war
or any other factors

Although the TKK Group strives to reduce all kinds ofDepending on the circumstances, we recognize thepossibility that a competitor may disregard profitability
and enter into price competition with the TKK Group.
costs and reinforce its price competitiveness, suchunreasonable downward pressure on the TKK Group’s
earnings may adversely affect the TKK Group’s business

Exchange Rate Fluctuations

results and financial position.

The TKK Group’s business activities include
manufacturing products, selling materials andDisasters

implementing construction operations overseas. Foreign-

The TKK Group takes necessary measures such as acurrency-denominated accounting items such as sales,

daily check, drill and establishment of a contact system

expenses and assets are translated into Japanese yen

to continue it’s business activities to prepare for fire,

for the purpose of preparing consolidated financial

earthquakes or other large-scale natural disasters. In

statements. The exchange rates used in currency

addition, major personal and property damages areconversion may affect the yen-denominated value. As

adequately covered by insurance against such disasters.

most of our payments and receipts are denominated in

However, the TKK Group’s business results and financial

U.S. dollars or euros, a stronger yen will adversely affectposition may be adversely affected if projections are

the TKK Group’s business, while a weaker yen will

exceeded by the scale of the direct or indirect materialfavorably affect the TKK Group’s business.

damage or human injury, or by the burden of restoration
costs or other expenses.

The TKK Group makes an effort to minimize the adverse
effects of such exchange rate fluctuations by flexibly

Toyo Kanetsu K.K. Annual Report 20169

Financial Section
For the years ended March 31, 2015 and 2016

The following “Consolidated financial statements, etc.” is an English translation of the consolidated financial statements, etc. of Toyo
Kanetsu Kabushiki Kaisha (“the Company”). The Company provides this translation for your reference and convenience only and without
any warranty as to its accuracy or otherwise.

Consolidated financial statements, etc.
(1) Consolidated financial statements(i) Consolidated balance sheet
Previous fiscal period(As of March 31, 2015)(Millions of yen)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Lease investment assets
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Accounts receivable - other
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
LandConstruction in progress
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

10

Toyo Kanetsu K.K. Annual Report 2016

*1

*3

*4
*4
*4
*4, *5*2

10,907
10,256
1,444
3,700
65
3,853
1,091
1,137
455
605
(54)
33,463

2,190
1,603
192
9,498
91
1
13,577
382
7,379
81
524
865
(345)
8,504
22,46455,928Current fiscal period(As of March 31, 2016)(Millions of yen)

*1

*4
*4
*4
*4, *5*2(Thousandsof U.S.
dollars)

13,608
9,474
1,527
500
55
2,644
1,310
101
380
414
(22)
29,995

120,831
84,123
13,5584,439
488
23,477
11,632
896
3,374
3,676
(195)
266,338

2,325
1,208
202
9,427
498
0
13,661
370

20,644
10,726
1,793
83,7064,421
0121,301
3,285

6,240
41
390
923
(256)
7,340
21,37251,36855,407
364
3,462
8,195
(2,273)65,174
189,770
456,117

Previous fiscal period(As of March 31, 2015)(Millions of yen)
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Accrued expenses
Income taxes payable
Deferred tax liabilities
Advances received
Provision for bonuses
Provision for loss on order received
Provision for warranties for completed construction
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

*4
*4

*4

*5

2,646
2,518
728
3,304
1,215
22
3,635
285
362
255
595
15,570
615
888
1,611
350
224
87
3,777
19,348Current fiscal period(As of March 31, 2016)(Millions of yen)

*4
*4

*4

*5

18,5801,104
18,797(4,957)33,525

*5

2,035
995
(549)
334
2,814
240
36,58055,928*5(Thousandsof U.S.
dollars)

3,231
2,357
60
3,434
669
10
1,478
275
521
181
646
12,866

28,68920,928532
30,4915,940
8813,123
2,441
4,626
1,607
5,736
114,242

1,155
607
1,529
462
332
39
4,125
16,991

10,255
5,389
13,576
4,102
2,947
346
36,627150,870

18,5801,273
15,170(2,887)32,136

164,979
11,303
134,700(25,634)
285,348

1,788
1,077
(639)
12
2,239
–
34,37651,36815,876
9,563(5,673)106
19,881–
305,238
456,117

Toyo Kanetsu K.K. Annual Report 2016

11

(ii)

Consolidated statement of income and comprehensive income
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Gain on sales of scraps
Reversal of allowance for doubtful accounts
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Miscellaneous loss
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Insurance income
Other
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Impairment loss
Merger expenses
Head office relocation expenses
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable toProfit attributable to owners of parent
Profit (loss) attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

12

Toyo Kanetsu K.K. Annual Report 2016

Current fiscal year
(From April 1, 2015
to March 31, 2016)(Millions of yen)
52,457*1, *344,562
7,895*2, *3
4,306
3,588(Millions of yen)
46,572*1, *339,361
7,211*2, *3
4,186
3,024(Thousandsof U.S.
dollars)
413,532
349,502
64,02937,16926,851

50
195
50
1
71
369

44
206
59
91
88
489

390
1,829
523
808
781
4,342

15
4
47
66
3,891

14
228
43
287
3,227

124
2,024
381
2,548
28,653

9
556
8
574

14
8
5
29

124
71
44
257

27
19
25
11
11
95
3,161
1,011
253
1,264
1,897

239
168
221
97
97
843
28,067
8,977
2,246
11,223
16,844

3,019
9

1,906
(9)

16,924
(79)

1,001
164
86
108
1,361
4,390

(246)
82
(109)
(321)
(594)
1,302

(2,184)728(967)(2,850)(5,274)
11,561

4,362

1,331

11,818

27

(28)

(248)

–
–
–
–
6
6
4,459
1,667
(236)
1,430
3,028

*5

*4

*5

(iii) Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2014 to March 31, 2015)(Millions of yen)
Shareholders’ equity

Balance at beginning ofcurrent period
Changes of items during
periodCapital stock

Capital surplus

18,580

1,104

Retained earnings
16,373

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
periodTotal shareholders’equityTreasury shares(3,951)

32,105

(594)

(594)

3,019

3,019
(1,005)(1,005)

–

–

2,424

(1,005)

1,419

18,5801,104

18,797(4,957)33,525

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period1,033

Revaluation
reserve for land
830

Foreigncurrencytranslation
adjustment(618)

Remeasurements ofdefined benefit
plans
225

Total
Non-controlling
Total net assets
accumulated
interests
othercomprehensive
income1,471

212

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period33,789(594)
3,019(1,005)
1,001

164

68

108

1,343

27

1,371

1,001

164

68

108

1,343

27

2,790

2,035

995

(549)

334

2,814

240

36,580Toyo Kanetsu K.K. Annual Report 201613

Current fiscal year (From April 1, 2015 to March 31, 2016)(Millions of yen)
Shareholders’ equity

Balance at beginning ofcurrent period
Changes of items during
periodCapital stock

Capital surplus

18,580

1,104

Retained earnings
18,797

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesRetirement of treasury
sharesPurchase of shares of
consolidated subsidiaries
Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
periodTotal shareholders’equityTreasury shares(4,957)33,525

(460)

(460)

1,906

1,906

(5,074)(3,004)(3,004)

5,074

–

169

169

–

169

(3,627)2,069(1,388)18,5801,273

15,170(2,887)32,136

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities
Balance at beginning ofcurrent period
Changes of items during
period2,035

Revaluation
reserve for land995

Foreigncurrencytranslation
adjustment(549)

Remeasurements ofdefined benefit
plans
334

Total
Non-controlling
Total net assets
accumulated
interests
othercomprehensive
income2,814

240

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesRetirement of treasury
sharesPurchase of shares of
consolidated subsidiaries
Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period14

Toyo Kanetsu K.K. Annual Report 2016

36,580(460)
1,906(3,004)
–
169
(246)

82

(89)

(321)

(575)

(240)

(815)

(246)

82

(89)

(321)

(575)

(240)

(2,204)

1,788

1,077

(639)

12

2,239

–

34,376

Current fiscal year (From April 1, 2015 to March 31, 2016)(Thousands of U.S. dollars)
Shareholders’ equity

Balance at beginning ofcurrent period
Changes of items during
periodCapital stock

Capital surplus

164,979

9,802

Total shareholders’equityTreasury shares

166,906

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesRetirement of treasury
sharesPurchase of shares of
consolidated subsidiaries
Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
periodRetained earnings(44,015)

297,682(4,084)(4,084)

16,924

16,924(45,054)(26,673)(26,673)

45,054

–

1,500

1,500

–

1,500

(32,205)

18,371(12,324)

164,979

11,303

134,700(25,634)

285,348

Accumulated other comprehensive income

Balance at beginning ofcurrent period
Changes of items during
periodValuationdifference on
available-forsale securities
18,069

Revaluation
reserve for land

Foreigncurrencytranslation
adjustment

Remeasurements ofdefined benefit
plans

8,835

(4,874)

2,965

Total
Non-controlling
Total net assets
accumulated
interests
othercomprehensive
income24,986

2,131

Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
sharesRetirement of treasury
sharesPurchase of shares of
consolidated subsidiaries
Net changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period324,809(4,084)
16,924(26,673)–
1,500(2,184)

728

(790)

(2,850)(5,105)(2,131)(7,236)(2,184)

728

(790)

(2,850)(5,105)(2,131)(19,570)

15,876

9,563(5,673)106

19,881–

305,238

Toyo Kanetsu K.K. Annual Report 201615

(iv) Consolidated statement of cash flows
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of long-term prepaid expenses
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in net defined benefit liability
Decrease (increase) in net defined benefit asset
Increase (decrease) in provision for loss on order
received
Increase (decrease) in provision for warranties forcompleted construction
Interest and dividend income
Interest expenses
Merger expenses
Head office relocation expenses
Foreign exchange losses (gains)
Loss (gain) on sales of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable trade
Decrease (increase) in lease investment assets
Decrease (increase) in inventories
Decrease (increase) in advance payments
Decrease (increase) in accounts receivable - other
Increase (decrease) in notes and accounts payable trade
Increase (decrease) in advances received
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Payments for merger expenses
Payments for head office relocation expenses
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of securities
Proceeds from sales and redemption of securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales and redemption of investment
securities
Other, net
Net cash provided by (used in) investing activities

16

Toyo Kanetsu K.K. Annual Report 2016

(Millions of yen)

Current fiscal year
(From April 1, 2015
to March 31, 2016)(Millions of yen)(Thousandsof U.S.
dollars)

4,459
806
3
–
62
29
(19)
(76)

3,161
765
2
19
62
(121)
(78)
(148)

28,067
6,792
17
168
550
(1,074)(692)(1,314)

(50)

186

1,651

(65)

(73)

(648)

(246)
15
–
–
(301)
(8)
(9)
9

(250)
14
25
11
286
(5)
12
15

(2,219)
124
221
97
2,539
(44)
106
133

(2,083)

758

6,730

(173)
1,621
(121)
(933)

(93)
997
38
987

(825)
8,852
337
8,763

219

765

6,792

(2,200)
(279)
657
249
(14)
–
–
(1,105)(213)(2,137)
215
5,417
251
(14)
(25)
(4)
(1,582)
4,041(18,975)
1,909
48,099
2,228
(124)
(221)
(35)
(14,047)
35,881

(87)
160
(399)
399
(1,379)
15
(603)

(0)
32
–
200
(1,175)
65
(102)

(0)
284
–
1,775
(10,433)
577
(905)

812

208

1,846

(37)
(1,120)

4
(766)

35
(6,801)

Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Purchase of treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period(Millions of yen)

*1

Current fiscal year
(From April 1, 2015
to March 31, 2016)(Millions of yen)(Thousandsof U.S.
dollars)

(122)
480
(535)
(1,005)(592)(1,774)

(48)
600
(728)
(3,004)(459)(3,640)

(426)
5,327
(6,464)(26,673)(4,075)(32,321)

586

(399)

(3,542)(2,521)
16,893
14,372(765)
14,372
13,606(6,792)
127,614120,813*1

Toyo Kanetsu K.K. Annual Report 201617

NotesBasis of presenting the consolidated financial statements
1. Basis of presenting the consolidated financial statements
The accompanying consolidated financial statements of the Company and its domestic consolidated subsidiaries
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. The accounts of overseas-consolidated subsidiaries are based on theirfinancial statements prepared in conformity with generally accepted accounting principles and practices
prevailing in the respective countries in which the subsidiaries are incorporated.
2. United States dollar amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥112.62=U.S. $1.00, the approximate rate of exchange prevailing at March 31, 2016, has been used in translation. The
inclusion of such amounts is not intended to imply that the Japanese yen has been or could be readily converted,
realized or settled in U.S. dollars at this rate or any other rates.
Significant accounting policies for preparation of the consolidated financial statements
1. Disclosure of scope of consolidation
Number of consolidated subsidiaries: 8 companies
Names of major consolidated subsidiaries are omitted since those names are described in “TKK Group
Company.”
As of April 1, 2015, Toyo Kanetsu Solutions K.K., a consolidated subsidiary of the Company, absorbed
K-Techno Inc., a sub-subsidiary of the Company, through an absorption-type merger.
2. Disclosure about application of the equity method
Not applicable
3. Disclosure about fiscal years, etc. of consolidated subsidiaries
Of the Company’s consolidated subsidiaries, P.T. Toyo Kanetsu Indonesia, TKK-USA, INC., TOYO KANETSU
SINGAPORE PTE. LTD. and Toyo Kanetsu (Malaysia) SDN. BHD. have a closing date of December 31. In
preparation of consolidated financial statements, their financial statements as of December 31 are used. However,for major transactions that occurred between that date and the consolidated balance sheet date, the necessary
adjustments are made in the consolidated financial statements.
4. Disclosure of accounting policies(1) Accounting policy for measuring significant assets(i) Securitiesa) Held-to-maturity bonds: Stated at amortized cost (straight-line method)b) Available-for-sale securities
Available-for-sale securities with available fair market values are stated at fair value based on the market
price or the like on the consolidated balance sheet date (valuation differences are directly charged or
credited to net assets, and cost of securities sold is determined by the moving-average method).
Available-for-sale securities without available fair market value are valued at cost determined by themoving-average method.
(ii)

18

Derivatives
Derivatives are valued at fair value.

Toyo Kanetsu K.K. Annual Report 2016

(iii) Inventoriesa) Finished goods: Primarily, at cost using the first-in first-out method(The value on the balance sheet is written down to reflect a decline in profitability.)b) Work in process: Primarily, at cost using the specific identification method(The value on the balance sheet is written down to reflect a decline in profitability.)c) Raw materials: Primarily, at cost using the weighted-average method(The value on the balance sheet is written down to reflect a decline in profitability.)(2) Accounting policy for depreciation of significant assets(i) Property, plant and equipment
The Company and its domestic consolidated subsidiaries use the declining balance method, and overseas
consolidated subsidiaries use the straight-line method in accordance with provisions of accounting standards
in their respective countries.
However, the Company and its domestic consolidated subsidiaries use the straight-line method to depreciatebuildings (excluding facilities attached to buildings) acquired on or after April 1, 1998.
The estimated useful lives of major items are as follows:
Buildings and structures
3 to 57 years
Machinery and equipment
2 to 13 years(ii) Intangible assets
Intangible assets are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated useful life asinternally determined (5 years).
(3) Accounting policy for significant provisions(i) Allowance for doubtful accounts
To cover losses from bad debts for notes and accounts receivable - trade, loans receivable and others, anallowance for doubtful accounts is provided based on historical experience of bad debts for general
receivables. For specific receivables such as highly doubtful receivables, the collectibility is individuallyconsidered and the estimated amount of uncollectible accounts is provided as the allowance.
(ii) Provision for bonuses
To pay bonuses to employees, out of the estimated amount to be paid in the following fiscal year, an amountattributable to the current fiscal year is recorded.
(iii) Provision for loss on order received
To make provision for losses on orders received, as for existing construction, for which an amount of loss canbe reasonably estimated at the end of the current fiscal year, an expected amount of loss in future is recorded
as the provision.
(iv) Provision for warranties for completed construction
To cover costs of warranty against defects and after-sales service for completed construction, an amount isrecorded based on the historical loss rate as well as consideration of an amount for individual constructionthat is expected to incur in future at the end of the current fiscal year.
(4) Method for accounting for retirement benefits(i) Method of attributing estimated retirement benefits to periods
For the purpose of attributing estimated retirement benefits over the period up to the end of the current fiscal
year in the calculation of retirement benefit obligations, the benefit formula method is applied.
(ii) Method of amortizing actuarial gain or loss and past service cost
Past service costs are recorded as an expense in the year they are incurred.
With regard to actuarial gain or loss, the amount is amortized by the straight-line method over a certain term
within the average remaining service period of the eligible employees (5 years) for each applicable fiscal year,
and expensed from the year following the year in which the gain or loss is recognized.
(5) Accounting policies for significant revenues and expenses(i) Recognition of revenues and costs of completed construction contracts
The percentage-of-completion method is applied to construction showing certainty of performance on the
progress made up until the end of the current fiscal year (the cost-to-cost method is applied to estimate theextent of progress toward completion), and the completed-contract method is applied to other construction.
(ii) Standards for recognition of revenues and expenses related to finance lease transactions
Sales and costs are recognized at the time of receiving lease payments.

Toyo Kanetsu K.K. Annual Report 201619

(6) Accounting policy for hedging(i) Method of hedge accounting
In principle, the deferral accounting is applied. The assignment method is applied to forward foreign exchange
contracts that meet requirements thereof, and the exceptional treatment is applied to interest rate swaps thatmeet requirements thereof.
(ii) Hedging instruments and hedged items
Hedging instrument: ........... Forward foreign exchange contracts, Interest rate swaps
Hedged item: ...................... Forecast transactions denominated in foreign currencies and borrowings(iii) Hedging policy
In accordance with the “Rules on Handling of Derivative Transactions” established by the Company, theCompany and its consolidated subsidiaries (collectively, the “Group”) do not enter into any derivativetransaction for speculative purposes but use derivative transactions only to hedge exchange rate fluctuation
risk and interest rate fluctuation risk.
(iv) Method of assessing the hedging effectiveness
The Group confirms effectiveness by comparing and examining cash flows of hedging instruments andhedged items in advance. However, the Group omits assessment of effectiveness on interest rate swaps towhich the exceptional treatment is applied.
(7) Accounting policy for goodwill
Goodwill is amortized evenly over the period of 5 years.
(8) Scope of cash and cash equivalents in consolidated statement of cash flows
Cash and cash equivalents include cash in hand, readily available deposits and short-term investments withmaturities of three months or less from the purchase date whose value is not subject to significant fluctuation
risk.
(9) Other significant information for preparation of the consolidated financial statements
Accounting policy for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of taxes.

Notes - Changes in accounting policies
Application of Accounting Standard for Business Combinations
The Company has applied the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21,
September 13, 2013. Hereinafter, the “Statement No. 21.”), the “Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, September 13, 2013. Hereinafter, the “Statement No. 22.”), the “AccountingStandard for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013. Hereinafter, the “Statement No.
7.”), etc. effective from the current fiscal year. As a result, the method of recording the amount of difference causedby changes in the Company’s ownership interests in subsidiaries in the case of subsidiaries under ongoing controlof the Company was changed to one in which it is recorded as capital surplus, and the method of recording
acquisition-related costs was changed to one in which they are recognized as expenses for the fiscal year in which
they are incurred. Furthermore, for business combinations carried out on or after the beginning of the current fiscal
year, the accounting method was changed to one in which the reviewed acquisition cost allocation resulting fromthe finalization of the provisional accounting treatment is reflected in the consolidated financial statements for the
fiscal year to which the date of business combination belongs. In addition, the presentation method for “netincome” and other related items was changed, and the presentation of “minority interests” was changed to“non-controlling interests.” To reflect these changes, the Company has reclassified its consolidated financial
statements for the previous fiscal year.
Application of the Statement No. 21, etc. is in line with the transitional measures provided in Paragraph 58-2 (4) of
the Statement No. 21, Paragraph 44-5 (4) of the Statement No. 22 and Paragraph 57-4 (4) of the Statement No. 7.
The Company is applying the said standard, etc. prospectively from the beginning of the current fiscal year.
This change did not affect operating income, ordinary income, profit before income taxes and basic earnings per
share. Capital surplus, however, increased by ¥169 million ($1,500 thousand) and net assets per share increased by¥1.65 ($0.01).

20

Toyo Kanetsu K.K. Annual Report 2016

Notes - Unapplied accounting standards“Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016)(1) Overview
The “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26) was
formulated on the occasion of the transferal of authority on the Japanese Institute of Certified Public
Accountants’ practical guidelines on accounting related to tax effect accounting and practical guidelines forauditing (sections related to accounting treatment) to the Accounting Standards Board of Japan (ASBJ). By still
following the methods of classifying entities into five categories and assessing the amount of deferred tax assets
recorded according to those classifications, ASBJ Guidance No. 26 basically follows the aforementioned
practical guidelines’ framework for assessing recoverability of deferred tax assets principally provided by theJapanese Institute of Certified Public Accountants Auditing Committee Report No. 66, “Auditing Treatment for
Judgment of Recoverability of Deferred Assets.” It does however make some necessary revisions to category
criteria and a part of treatment on the amount of deferred tax assets recorded, and it provides guidance for theapplication of the “Accounting Standards for Tax Effect Accounting” (Business Accounting Council) for therecoverability of deferred tax assets.
(2) Scheduled date of adoption
The Company and its domestic consolidated subsidiaries will adopt the accounting standards to the consolidated
financial statements for the fiscal years beginning on or after April 1, 2016.
(3) Impact of the adoption of the accounting standards
The Company considers the effects of applying the accounting standard to be immaterial.

Notes - Changes in presentation
Consolidated balance sheet“Lease obligations” under current liabilities, which was set down separately until the previous fiscal year, has been
included in “other” under current liabilities from the current fiscal year since significance of the amount has
decreased. In order to reflect this change in the method of presentation, the amount in the consolidated financial
statements for the previous fiscal year has been reclassified.
As a result, ¥0 million ($0 thousand) included in “lease obligations” under current liabilities in the consolidatedbalance sheet as of the end of the previous fiscal year has been reclassified to “other.”“Lease obligations” under non-current liabilities, which was set down separately until the previous fiscal year, hasbeen included in “other” under non-current liabilities from the current fiscal year since significance of the amount
has decreased. In order to reflect this change in the method of presentation, the amount in the consolidated financial
statements for the previous fiscal year has been reclassified.
As a result, ¥0 million ($0 thousand) included in “lease obligations” under non-current liabilities in the consolidatedbalance sheet as of the end of the previous fiscal year has been reclassified to “other.”Consolidated statement of income and consolidated statement of comprehensive income“Reversal of allowance for doubtful accounts” under non-operating income which was included in “miscellaneous
income” under non-operating income for the previous fiscal year, has been set down separately from the current
fiscal year since significance of the amount has increased. In order to reflect this change in the method ofpresentation, the amount in the consolidated financial statements for the previous fiscal year has been reclassified.
As a result, ¥72 million ($639 thousand) included in “miscellaneous income” under non-operating income in the
consolidated statement of income and consolidated statement of comprehensive income for the previous fiscal year
has been reclassified to “reversal of allowance for doubtful accounts” of ¥1 million ($8 thousand) and“miscellaneous income” of ¥71 million ($630 thousand).
“Provision of allowance for doubtful accounts” under non-operating expenses, which was set down separately forthe previous fiscal year, has been included in “miscellaneous loss” under non-operating expenses from the current
fiscal year since significance of the amount has decreased. In order to reflect this change in the method ofpresentation, the amount in the consolidated financial statements for the previous fiscal year has been reclassified.
As a result, ¥25 million ($221 thousand) included in “provision of allowance for doubtful accounts” under
non-operating expenses in the consolidated statement of income and consolidated statement of comprehensive
income for the previous fiscal year has been reclassified to “miscellaneous loss.”“Gain on sales of non-current assets” under extraordinary income included in “other” under extraordinary income
for the previous fiscal year has been set down separately from the current fiscal year since significance of theamount has increased. In order to reflect this change in the method of presentation, the amount in the consolidated
financial statements for the previous fiscal year has been reclassified.

Toyo Kanetsu K.K. Annual Report 201621

As a result, ¥17 million ($150 thousand) included in “other” under extraordinary income in the consolidated
statement of income and consolidated statement of comprehensive income for the previous fiscal year has been
reclassified to “gain on sales of non-current assets” of ¥9 million ($79 thousand) and “other” of ¥8 million ($71
thousand).
“Loss on retirement of non-current assets” under extraordinary losses, which was set down separately for theprevious fiscal year, has been included in “other” under extraordinary losses from the current fiscal year sincesignificance of the amount has decreased. In order to reflect this change in the method of presentation, the amountin the consolidated financial statements for the previous fiscal year has been reclassified.
As a result, ¥6 million ($53 thousand) included in “loss on retirement of non-current assets” under extraordinary
losses in the consolidated statement of income and consolidated statement of comprehensive income for theprevious fiscal year has been reclassified to “other.”

Notes - Consolidated balance sheet*1.

Use of a certain part of the Company’s current deposits is restricted by a bank in return for its issuing a bankguarantee, which was provided by the Company to the Ministry of Economy and Planning of the United ArabEmirates in connection with corporate registration in the country.
The restricted deposits are as follows:
Previous fiscal year
(As of March 31, 2015)
Current deposit
Time deposit*2.

¥1 million(50,000 AED)
¥33 million(380,000 BND)

¥1 million(50,000 AED)

$8 thousand¥– million$– thousand

Accumulated depreciation of property, plant and equipment are as follows:
Previous fiscal year
(As of March 31, 2015)¥13,166 million*3.

Current fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2016)¥13,405 million$119,028 thousand

Both inventories and provision for loss on order received with regard to construction contracts that are
expected to result in losses are presented without offsetting one against the other. Of the inventories withregard to construction contracts that are expected to result in losses, the amount corresponding to theprovision for loss on order received is as follows:
Previous fiscal year
(As of March 31, 2015)

Work in process¥0 million

Current fiscal year
(As of March 31, 2016)¥– million$– thousand*4. Assets pledged and liabilities secured
Assets pledged and liabilities secured as collateral are as follows:
Assets pledged
Previous fiscal year
(As of March 31, 2015)
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total

22

Toyo Kanetsu K.K. Annual Report 2016

Current fiscal year
(As of March 31, 2016)¥498 million[¥475 million]
0
[0]
0
[0]
5,523
[5,458]¥464 million[¥464 million]
0
[0]
0
[0]
5,523
[5,523]$4,120 thousand[$4,120 thousand]
0
[0]
0
[0]
49,041[49,041]

6,022[5,934]

5,988[5,988]53,169[53,169]

Previous fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

Previous fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

Liabilities secured

Short-term loans payable
Long-term loans payable
Total¥1,025 million[¥956 million]
480
[480]

¥427 million[¥427 million]
980
[980]

$3,791 thousand[$3,791 thousand]
8,701[8,701]

1,505[1,436]

1,407[1,407]

12,493[12,493]

In the above table, figures in brackets present mortgages on factory foundation and the relevant debts. The amountsof land are after revaluation.
*5.

In accordance with the “Act on Revaluation of Land” (Act No. 34 promulgated on March 31, 1998), theCompany revalues its land for business use and, as for the valuation difference, records an amount equivalent
to tax relating to the valuation difference as “deferred tax liabilities for land revaluation” in the liabilities
section and an amount after deducting said amount as “revaluation reserve for land” in the net assets section.
Method of revaluation – The Company revalues the land by the calculation method where a value based on
the assessed value of fixed asset tax set forth in Article 2, Item 3 and road rating set forth in Article 2, Item 4of the “Order for Enforcement of the Act on Revaluation of Land” (Cabinet Order No. 119 promulgated on
March 31, 1998) is reasonably adjusted.

Date of revaluation – March 31, 2002
Previous fiscal year
(As of March 31, 2015)
Difference between the year-end value ofrevaluated land and the book value after therevaluation¥(3,265) million

Current fiscal year
(As of March 31, 2016)¥(3,250) million$(28,858) thousand

Notes - Consolidated statement of income and consolidated statement of comprehensive income*1.

Provision for loss on order received included in cost of sales
Previous fiscal year
(From April 1, 2014
to March 31, 2015)¥64 million*2.

¥158 million$1,402 thousand

Major components of selling, general and administrative expenses
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Salaries and allowances
Bonuses
Provision for bonuses
Retirement benefit expenses
Provision of allowance for doubtful accounts*3.

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥1,462 million
429
97
88
4

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥1,407 million
325
103
80
(30)

$12,493 thousand
2,885
914
710
(266)

Total of research and development expenses included in general and administrative expenses andmanufacturing costs
Previous fiscal year
(From April 1, 2014
to March 31, 2015)¥327 million

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥352 million$3,125 thousand

Toyo Kanetsu K.K. Annual Report 2016

23

*4.

Impairment loss

The Group recorded impairment loss on the asset groups as follows:
Previous fiscal year (From April 1, 2014 to March 31, 2015)
Not applicable
Current fiscal year (From April 1, 2015 to March 31, 2016)
Location

Use

Type

Minami-Alps City, Yamanashi

Idle assets

Land

In principle, the Group’s assets for business use are grouped on the basis of the business, and the Group’s idle assets
are grouped by each asset.
For the fiscal year ended March 31, 2016, an impairment loss (¥19 million ($168 thousand)) was recorded under
extraordinary losses since the Group recognized that land owned by the Group continued to be idle.
The recoverable amount of this asset group was measured based on the net realizable value.
*5.

Reclassification adjustments and tax effects relating to other comprehensive income
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Valuation difference on available-for-sale securities:
Amount recorded during the period
Reclassified amount24

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥1,306 million–¥(517) million(5)$(4,590) thousand(44)

Pre-adjustment of tax effectTax effect amount

1,306
(304)

(523)
276

(4,643)
2,450

Valuation difference on available-for-salesecurities

1,001

(246)

(2,184)

Revaluation reserve for land:
Amount recorded during the period
Reclassified amount

–
–

–
–

–
–

Pre-adjustment of tax effectTax effect amount

–
164

–
82

–
728

Revaluation reserve for land

164

82

728

Foreign currency translation adjustment:
Amount recorded during the period
Reclassified amount

86
–

(109)
–

(967)
–

Pre-adjustment of tax effectTax effect amount

86
–

(109)
–

(967)
–

Foreign currency translation adjustment

86

(109)

(967)

Remeasurements of defined benefit plans, net of tax:
Amount recorded during the period
Reclassified amount

262
(118)

(360)
(113)

(3,196)(1,003)Pre-adjustment of tax effectTax effect amount

143
(34)

(474)
152

(4,208)
1,349

Remeasurements of defined benefit plans,
net of tax

108

(321)

(2,850)Total other comprehensive income

1,361

(594)

(5,274)

Toyo Kanetsu K.K. Annual Report 2016

Notes - Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2014 to March 31, 2015)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period(Thousands of shares)
Number of shares Number of shares atdecreased in period
end of period

Issued shares
Common shares

138,730––

138,730

Total

138,730––

138,730

19,736

3,960–

23,697

19,736

3,960–

23,697

Treasury shares
Common shares (Note)
Total(Note)

2.

The number of common shares in treasury increased by 3,960 thousand shares due to purchase of treasury shares basedon a resolution by the Board of Directors of 3,940 thousand shares and purchase of shares less than one unit of 20
thousand shares.

Matters concerning dividends(1) Cash dividends paid
Resolution

Total cash
dividends

Class of shares

Ordinary General Meeting of¥594
Shareholders on June 27,
Common shares
million2014(Note)The dividends per share include special dividends of ¥1.

(2)

Dividends per
share

Record date

Effective date¥5

March 31, 2014

June 28, 2014

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next
fiscal year

Resolution

Class ofsharesTotal cash
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June
26, 2015

Commonshares¥460
millionRetainedearnings¥4

March 31, 2015

June 29, 2015

Current fiscal year (From April 1, 2015 to March 31, 2016)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period

Number of shares
decreased in period(Thousands of shares)
Number of shares at
end of period

Issued shares
Common shares

138,730–

23,700115,030

Total

138,730–

23,700115,030

23,697

12,08423,70012,081

Treasury shares
Common shares (Note)(Notes) 1.
2.

Total
23,697
12,08423,70012,081
The number of common shares in treasury increased by 12,084 thousand shares due to purchase of treasury sharesbased on a resolution by the Board of Directors of 12,063 thousand shares and purchase of shares less than one
unit of 21 thousand shares.
The number of issued common shares decreased by 23,700 thousand shares and the number of common shares intreasury decreased by 23,700 thousand shares due to cancellation of treasury shares based on a resolution by the
Board of Directors.

Toyo Kanetsu K.K. Annual Report 2016

25

2.

Matters concerning dividends(1) Cash dividends paid
Resolution

Class of shares

Total cash
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 26,
2015

Common shares¥460
million[$4,084
thousand]¥4[$0.03]

March 31, 2015

June 29, 2015

(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next
fiscal year

Resolution

Class ofsharesTotal cash
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June29, 2016

Commonshares¥514
million[$4,564
thousand]Retainedearnings¥5[$0.04]

March 31, 2016

June 30, 2016

Notes - Consolidated statement of cash flows*1.

Reconciliation of ending balance of cash and cash equivalents with account balances per balance sheet
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Current fiscal year
(From April 1, 2015
to March 31, 2016)

Cash and deposits
Restricted deposits
Money held in trust (Securities)¥10,907 million
(35)
3,500

¥13,608 million(1)–$120,831 thousand(8)–

Cash and cash equivalents

14,372

13,606

120,813

Notes - Leases(Borrower)
Operating lease transactions
Future lease payments under non-cancelable operating leases
Previous fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

Due within 1 year

¥6 million¥7 million$62 thousandDue over 1 year

13

15

133

19

23

204

Total

(Lender)
Finance lease transactions(1) The components of lease investment assets
Current assets
Previous fiscal year
(As of March 31, 2015)
Lease payments receivable¥1,648 million$14,633 thousand

71

76

674

Amount equivalent to interest income

(221)

(197)

(1,749)Lease investment assets

1,444

1,527

13,558Estimated residual value

26¥1,594 million

Current fiscal year
(As of March 31, 2016)

Toyo Kanetsu K.K. Annual Report 2016

(2)Amounts expected to be collected on lease payments receivable of lease investment assets after consolidatedbalance sheet dateCurrent assets(Millions of yen)Previous fiscal year (As of March 31, 2015)
Within 1 year
Lease investment
assets491

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

397

383

238

83

–

(Millions of yen)
Current fiscal year (As of March 31, 2016)
Within 1 year
Lease investment
assets530

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

515

370

215

16

–

(Thousands of U.S. dollars)
Current fiscal year (As of March 31, 2016)

Lease investment
assetsWithin 1 year

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

4,706

4,572

3,285

1,909

142

–

Notes - Financial instruments
1.
Status of financial instruments(1) Policy on treatment of financial instruments
The Group raises funds necessary to run its business smoothly by borrowing from banks. In the case where theGroup has temporary surplus funds, it invests them only in safe financial instruments.
The Group uses derivative transactions to hedge various risks described in (2) in accordance with the “Rules on
Handling of Derivative Transactions” established by the Company and has a policy not to enter into any
speculative transaction.
(2) Content and risks of financial instruments and risk management system therefor
The Group’s notes and accounts receivable - trade are subject to credit risk of its customers, and its certain
receivables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigatesthe credit risk of its customers by periodically confirming whether there is any overdue receivable using an aging
schedule and other documents and the exchange rate fluctuation risk such as by borrowing in foreign currencies
as needed.
The Company’s securities are subject to credit risk of its investees, but the Company invests surplus funds in safe
financial instruments with high ratings thorough prescribed internal procedures.
The Group’s investment securities are subject to credit risk of its investees and market price fluctuation risk.
They are equity securities of listed companies with which the Group has business relationships, most of which
are categorized as available-for-sale securities, and the Group periodically ascertains the fair value thereof.
Certain bond securities include hybrid financial instruments that were accounted for with embedded derivatives.
The Group’s notes and accounts payable - trade and accrued expenses are subject to liquidity risk, and its certain
payables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigates theliquidity risk by periodically preparing a schedule of cash receipts and disbursements and other documents andthe exchange rate fluctuation risk by forward exchange contracts and other means as needed.
Of borrowings, short-term loans payable are primarily for daily business transactions, and long-term loans
payable are primarily for temporary advances on large-scale projects. Variable-rate borrowings are subject tointerest rate fluctuation risk, for most of the long-term loans payable, the Group uses interest rate swaps as
hedging instruments for respective contracts in order to hedge the fluctuation risk of the interest rates to be paid
and fix interest expenses. The Group limits interest rate swaps to those to which the exceptional treatment can beapplied and omits assessment of hedge effectiveness thereon. The Group mitigates the liquidity risk by
periodically preparing a schedule of cash receipts and disbursements and other documents.
The Group executes and manages derivative transactions in accordance with the Company’s Rules on Handlingof Derivative Transactions and, when using derivatives, enters into transactions with financial institutions withhigh ratings to mitigate credit risk. Please see “Accounting policy for hedging” of “Disclosure of accounting

Toyo Kanetsu K.K. Annual Report 201627

policies” in “Significant accounting policies for preparation of consolidated financial statements” describedabove for the hedging instruments, hedging policy, method of assessing the hedging effectiveness and otherinformation on hedge accounting.
(3) Supplementary explanation concerning fair values of financial instruments
Fair values of financial instruments comprise values based on market prices and reasonably measured values
where market prices are unavailable. As several variable factors are incorporated in calculating the relevant fairvalue, the resulting amount may vary depending on the different preconditions employed. In addition, thecontract amounts of derivative transactions, mentioned in “Notes - Derivatives” in Notes, should not be
considered indicative of the sizes of the market risks involved in the derivative transactions.
2.
Fair values of financial instruments
Carrying amounts on the consolidated balance sheet, fair values and differences therebetween of the financial
instruments as of March 31, 2015 and 2016, are as shown below. However, financial instruments whose fair values
are deemed to be extremely difficult to determine are not included therein (Note 2).
Previous fiscal year (As of March 31, 2015)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

10,907
10,256(44)

10,907–

10,212

10,212

–

3,700
6,453

3,700
6,457

–
3

Total assets

31,274

31,2783

Notes and accounts payable - trade
Short-term loans payable
Accrued expenses
Long-term loans payable(including within 1 year)

2,646
2,518
3,304

2,646
2,518
3,304

–
–
–

1,343

1,351

8

Total liabilities

9,813

9,821

8

–
–

–
–

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1)
Those not qualifying for hedge accounting(2)
Those qualifying for hedge accounting

Total derivatives–––(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.

28

Toyo Kanetsu K.K. Annual Report 2016

Current fiscal year (As of March 31, 2016)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

13,6089,474(19)13,608

–

9,455

9,455

–

500
5,317

500
5,317

–
0

Total assets

28,88028,8800Notes and accounts payable - trade
Short-term loans payable
Accrued expenses
Long-term loans payable(including within 1 year)

3,231
2,357
3,434

3,231
2,357
3,434

–
–
–

1,215

1,229

14

Total liabilities

10,238

10,252

14

–
–

–
–

–
–

–

–

–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1)
Those not qualifying for hedge accounting(2)
Those qualifying for hedge accounting
Total derivatives(Thousands of U.S. dollars)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

120,831
84,123(168)

120,831–

83,954

83,954–

4,439
47,211

4,439
47,211–0

Total assets

256,437

256,437

0Notes and accounts payable - trade
Short-term loans payable
Accrued expenses
Long-term loans payable(including within 1 year)

28,68920,92830,491

28,68920,92830,491–––

10,788

10,912

124

Total liabilities

90,90791,031

124

–
–

–
–

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1)
Those not qualifying for hedge accounting(2)
Those qualifying for hedge accounting

Total derivatives–––(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.
(Notes) 1.

Calculation method of fair values of financial instruments and matters concerning short-term investment securities
and derivatives
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade
Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,
the fair values are based on the book values.
(3) Securities
Because this account has a short-term maturity, its fair value approximates its book value. Therefore, the fairvalue is based on the book value.

Toyo Kanetsu K.K. Annual Report 201629

(4) Investment securities
Fair value of this account is based on the price on exchanges, the price provided by counterparty financial
institutions or other prices. Please refer to “Notes - Securities” for the notes.
Liabilities(1) Notes and accounts payable - trade, (2) Short-term loans payable and (3) Accrued expenses
Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,
the fair values are based on the book values.
(4) Long-term loans payable (including within 1 year)
Fair value of this account is determined by discounting the total amount of principal and interest at theinterest rate available for a similar borrowing. Fair values of long-term loans payable with variable rates, towhich the exceptional treatment for the interest rate swap is applied, are determined by discounting the total
amount of principal and interest accounted for with the relevant interest rate swaps at the reasonably
estimated interest rates applied to similar borrowings.
Derivatives
Please refer to “Notes - Derivatives” in Notes.
2.
3.

“Assets (4) Investment securities” do not include unlisted equity securities (carrying amount on the consolidatedbalance sheet of ¥922 million ($8,186 thousand)) because there is no market price and their future cash flows
cannot be estimated and accordingly it is extremely difficult to ascertain their fair values.
Projected redemption amounts for monetary claims and securities with maturities after the consolidated balance
sheet datePrevious fiscal year (As of March 31, 2015)
Due within 1 year

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities
Total

Due after 1 year
through 5 years

10,876
9,961
3,700

–
251
–

Total

1,100

–

–

199

–

–

24,537

1,551

–

–

Available-for-sale securities
Total

30

Toyo Kanetsu K.K. Annual Report 2016

Due after 1 year
through 5 years(Millions of yen)
Due after 5 years
Due over 10 years
through 10 years

13,588
9,455
500

–
–
–

–
–
–

–
–
–

–

600

–

–

–

87

–

–

23,543687––

Due within 1 year
Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds

–
–
–

–

Due within 1 year

Available-for-sale securities

–
–
–

–

Current fiscal year (As of March 31, 2016)

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds(Millions of yen)
Due after 5 years
Due over 10 years
through 10 years

Due after 1 year
through 5 years(Thousands of U.S. dollars)
Due after 5 years
Due over 10 years
through 10 years

120,653
83,954
4,439

–
–
–

–
–
–

–
–
–

–

5,327
772

–

–

–

–

–

209,048

6,100

–

–

4.

Scheduled repayment amounts of long-term loans payable and other interest-bearing liabilities
Previous fiscal year (As of March 31, 2015)
Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

60

60

15

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

60

15

480

Over 1 year
to 2 years

Over 2 years
to 3 years

532

133

Long-term loans payable
Current fiscal year (As of March 31, 2016)

Long-term loans payable

Long-term loans payable(Millions of yen)Over 4 years
to 5 years
480(Millions of yen)Over 4 years
to 5 years
600(Thousands of U.S. dollars)Over 3 years
Over 4 years
to 4 years
to 5 years
4,262

5,327

Notes - Securities
1.

Held-to-maturity bonds
Previous fiscal year (As of March 31, 2015)
Type

Securities for which the fair value
exceeds the carrying amount on the
consolidated balance sheet(1) Government
bonds and municipal
bonds, etc.
(2) Corporate bonds

Difference

100

0

–

–

–

1,003

3

1,100

1,104

4

(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

100

99

(0)

(3) Other

100

99

(0)

200

199

(0)

1,300

1,303

3

Subtotal
Total

100

Fair value

1,000(3) Other
Subtotal

Securities for which the fair value
does not exceed the carrying amounton the consolidated balance sheet(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Toyo Kanetsu K.K. Annual Report 201631

Current fiscal year (As of March 31, 2016)
Type

Securities for which the fair value
exceeds the carrying amount on the
consolidated balance sheet

Securities for which the fair value
does not exceed the carrying amounton the consolidated balance sheet(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Fair value

Difference(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

100

100

0

–

–

–

Subtotal

100

100

0

(1) Government
bonds and municipal
bonds, etc.

–

–

–

(3) Other(2) Corporate bonds(3) Other
Subtotal

Total

–

–

–

1,000

999

(0)

1,000

999

(0)

1,100

1,099

(0)

(Thousands of U.S. dollars)
Type

Securities for which the fair value
exceeds the carrying amount on the
consolidated balance sheet

Securities for which the fair value
does not exceed the carrying amounton the consolidated balance sheet

32

Toyo Kanetsu K.K. Annual Report 2016

Fair value

Difference(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

887

887

0

(3) Other–––

Subtotal

887

887

0

(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds(3) Other
Subtotal

Total

Carrying amount on
the consolidatedbalance sheet

–

–

–

8,879

8,870

(0)

8,879

8,870

(0)

9,767

9,758

(0)

2.

Available-for-sale securities (securities classified as other securities under Japanese GAAP)
Previous fiscal year (As of March 31, 2015)
Type(1) Stocks(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Acquisition cost

Difference

5,043

2,056

2,986

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

5,043

2,056

2,986

110

178

(68)

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

199

200

(0)

–

–

–

310

378

(68)

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost

Subtotal(1) Stocks(2) Bonds
Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost(iii) Other(3) Other
Subtotal(Note)

Total
5,353
2,435
2,918
“Available-for sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥925 million) because there is no market value and accordingly it is extremely difficult
to ascertain their fair values. In addition, “Available-for sale securities” do not include jointly operated designatedmoney trusts (¥3,500 million) because they have short term maturities and their fair values approximate their bookvalues.

Toyo Kanetsu K.K. Annual Report 201633

Current fiscal year (As of March 31, 2016)
Type(1) Stocks(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Acquisition cost

Difference

4,071

1,517

2,554

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost(iii) Other

–

–

–

(3) Other

–

–

–

4,071

1,517

2,554

558

717

(159)

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

87

100

(12)

Subtotal(1) Stocks(2) Bonds
Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost(3) Other
Subtotal
Total

–

–

–

645

817

(171)

4,717

2,334

2,382

(Thousands of U.S. dollars)Type(1) Stocks

Carrying amount on
the consolidatedbalance sheet

Acquisition cost

Difference

36,14813,47022,678(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost(3) Other–––

36,14813,47022,678

4,954

6,366

(1,411)(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

772

887

(106)

–

–

–

5,727

7,254

(1,518)41,884

20,724

21,150Subtotal(1) Stocks(2) Bonds
Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost(iii) Other(3) Other
Subtotal
Total

34

Toyo Kanetsu K.K. Annual Report 2016

(Note)3.

“Available-for sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥922 million ($8,186 thousand)) because there is no market value and accordingly it isextremely difficult to ascertain their fair values.

Available-for-sale securities that were sold
Previous fiscal year (From April 1, 2014 to March 31, 2015)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount12

Total gain on sales
8(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

12

8

–

Current fiscal year (From April 1, 2015 to March 31, 2016)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Type
(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount8

Total gain on sales
5(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

8

5

–

Sales amount71(Thousands of U.S. dollars)
Total gain on sales
Total loss on sales
44
–

–

–

–

–
–
–

–
–
–

–
–
–

71

44

–

Notes - Derivatives
1. Derivative transactions to which hedge accounting is not applied
Not applicable
2. Derivative transactions to which hedge accounting is applied(1) Currencies
Not applicable

Toyo Kanetsu K.K. Annual Report 201635

(2) Interest rates
Previous fiscal year (As of March 31, 2015)(Millions of yen)Type of derivativetransaction, etc.

Principal hedged
itemsInterest rate swap
Exceptionaltransactions
treatment of interest
Receive variable,
rate swaps
pay fixed

Long-term loans
payableClassification(Note)

Contract
amount1,175

Portion ofcontract
amount over
1 year615

Fair value
calculation
methodFair value(Note)(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that ofcorresponding long-term loans payable, as those interest rate swaps are treated as an adjustment to long-term loans
payable as hedged items.

Current fiscal year (As of March 31, 2016)

Type of derivativetransaction, etc.

Principal hedged
itemsInterest rate swap
Exceptionaltransactions
treatment of interest
Receive variable,
rate swaps
pay fixed

Long-term loans
payableClassification(Millions of yen)Contract
amount1,115

Portion ofcontract
amount over
1 year
1,055

Fair value(Note)

Fair value
calculation
method(Note)(Thousands of U.S. dollars)
Type of derivativetransaction, etc.

Principal hedged
itemsInterest rate swap
Exceptionaltransactions
treatment of interest
Receive variable,
rate swaps
pay fixed

Long-term loans
payableClassification(Note)

Contract
amount9,900

Portion ofcontract
amount over
1 year
9,367

Fair value(Note)

Fair value
calculation
method(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that ofcorresponding long-term loans payable, as those interest rate swaps are treated as an adjustment to long-term loans
payable as hedged items.

Notes - Retirement benefits
1. Summary of retirement benefit plans adopted
The Company and certain consolidated subsidiaries have defined benefit corporate pension plans as defined benefit
plans, and certain consolidated subsidiaries have a small and medium sized enterprise retirement allowancecooperative plan and lump-sum retirement plans.
In addition, the Company and certain consolidated subsidiaries have defined contribution corporate pension plans.
The Company and certain consolidated subsidiaries participate in Nihon Sangyo Kikai Kougyo Kouseinenkin Kikin(pension fund of Japan industrial machinery manufacturers). For this fund, since the amount of pension plan assets
corresponding to contributions by the respective companies cannot be reasonably calculated, the fund is accounted
for similar to defined contribution plans.
Nihon Sangyo Kikai Kougyo Kouseinenkin Kikin provided approval for transfer of benefit obligation (future terms
portion) on April 1, 2015.

36

Toyo Kanetsu K.K. Annual Report 2016

2. Defined benefit plans(1) Reconciliation between beginning balance and ending balance of retirement benefit obligations
Previous fiscal year
(From April 1, 2014
to March 31, 2015)
Beginning balance of retirement benefit
obligations
Service cost
Interest expenses
Unrecognized net actuarial gain or loss
Retirement benefits paid
Past service cost
Other
Ending balance of retirement benefit
obligations(2)¥3,075 million$27,304 thousand

176
48
36
(304)
–
17

170
44
257
(229)
41
(16)

1,509
390
2,282
(2,033)
364
(142)

3,075

3,342

29,675Reconciliation between beginning balance and ending balance of pension plan assets

Beginning balance of pension plan assets
Expected return on plan assets
Unrecognized net actuarial gain or loss
Amount of employer contribution
Retirement benefits paid
Other
Ending balance of pension plan assets(3)¥3,101 million

Current fiscal year
(From April 1, 2015
to March 31, 2016)

Previous fiscal year
(From April 1, 2014
to March 31, 2015)¥3,040 million
28
312
169
(301)
–
3,249

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥3,249 million$28,849 thousand
31
275
(112)
(994)
326
2,894
(219)
(1,944)
(4)
(35)
3,271

29,044Retirement benefit obligations and pension plan assets at the end of the fiscal year and reconciliation of net
defined benefit liability and net defined benefit asset on consolidated balance sheet
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Retirement benefit obligations under
funded system
Pension plan assets
Retirement benefit obligations under
unfunded system
Net amount of assets and liabilities
stated in the consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net amount of assets and liabilities
stated in the consolidated balance sheet

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥2,995 million¥3,340 million$29,657 thousand(3,249)(3,271)(29,044)

(253)

69

612

79

2

17

(173)

71

630

350
(524)

462
(390)

4,102
(3,462)

(173)

71

630

Toyo Kanetsu K.K. Annual Report 2016

37

(4)

Retirement benefit expenses and components thereofService cost
Interest expenses
Expected return on plan assets
Amortization of net actuarial gain or
loss
Amortization of past service cost
Retirement benefit expenses pertaining
to defined benefit plans

Previous fiscal year
(From April 1, 2014
to March 31, 2015)¥176 million
48(28)

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥170 million$1,509 thousand
44
390
(31)
(275)

(121)

(114)

(1,012)

–

41

364

74

111

985

(5)

Remeasurements of defined benefit plans, net of tax on consolidated statement of income and comprehensive
income
The components of remeasurements of defined benefit plans, net of tax (before tax effects deduction) are as
follows:
Previous fiscal year
(From April 1, 2014
to March 31, 2015)
Past service cost
Actuarial gains and losses
Total

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥– million
143¥– million(474)$– thousand(4,208)

143

(474)

(4,208)(6) Remeasurements of defined benefit plans on consolidated balance sheet
The components of remeasurements of defined benefit plans (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2014
to March 31, 2015)
Unrecognized past service cost
Unrecognized net actuarial gain or loss
Total

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥– million(505)¥– million(21)$ – thousand
(186)

(505)

(21)

(186)

(7) Pension plan assets(i) Major components of pension plan assets
Ratio of major components for total pension plan assets is as follows:
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Current fiscal year
(From April 1, 2015
to March 31, 2016)

Bonds
SharesGeneral account
Other

31%
34
31
4

29%
31
31
9

Total

100

100

(ii) Method of establishing expected long-term rates of return on plan assets
In order to determine the expected long-term rates of return on plan assets, the current and forecast
distribution of plan assets and the current and expected long-term rates of return from the diverse assets thatcomprise the plan assets are taken into consideration.

38

Toyo Kanetsu K.K. Annual Report 2016

(8) Matters relating to the basis for actuarial calculations
Main basis for actuarial calculations
Previous fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

1.50%

0.25%

1.00%

1.00%

Discount rate
Expected long-term rates of return on pension plan
assets(Note) The Company applied a 1.50% discount rate in its calculation at the beginning of the current fiscal year.
However, as a result of the review of the discount rate at the end of the fiscal year, the Company
determined that a fluctuation in the discount rate would have material impact on the amount of retirement
benefit obligations. Therefore, the discount rate was changed to 0.25%.
3. Defined contribution plans
The required contribution from the Company and its consolidated subsidiaries into the defined contribution pension
plans was ¥40 million in the previous fiscal year and ¥42 million ($372 thousand) in the current fiscal year.
4. Multi-employer plan
The required contribution amount to the employees’ pension fund plan under the multi-employer plan, which isaccounted for in the same manner as a defined contribution plan, was ¥152 million in the previous fiscal year and¥80 million ($710 thousand) in the current fiscal year.
(1)

Funded status of multi-employer planPrevious fiscal year
(As of March 31, 2014)

Plan assets
Sum of actuarial obligations calculated forfinance status of pension plan and minimum
reserve
Net amountCurrent fiscal year
(As of March 31, 2015)¥74,916 million¥83,744 million$743,597 thousand¥100,891 million¥104,880 million$931,273 thousand¥(25,975) million¥(21,136) million$(187,675) thousand(2) Group’s proportion of total contributions to planPrevious fiscal year 3.82%(From April 1, 2014 to March 31, 2015)
Current fiscal year 3.76%(From April 1, 2015 to March 31, 2016)(3) Supplementary explanation
Major factors for the net amount in (1) above are the balance of past service liabilities (¥23,226 million as of March
31, 2014 and ¥22,875 million ($203,116 thousand) as of March 31, 2015) and deficit amount (¥2,749 million as ofMarch 31, 2014 and ¥1,739 million ($15,441 thousand) as of March 31, 2015) for pension financing calculation.
The principal and interest of past service liabilities in this plan are amortized equally over 20 years, and the Group
recorded special contributions applied to such amortization (¥74 million for the previous fiscal year and ¥56 million($497 thousand) for the current fiscal year) as expenses in the consolidated financial statements.
The deficit amount in pension financing (¥2,749 million as of March 31, 2014 and ¥1,739 million ($15,441
thousand) as of March 31, 2015) will be filled up as needed by an increase in the rate of special contributions orother methods based on recalculation of pension financing.
The proportions in (2) above are not consistent with the proportions actually funded by the Group.
Notes - Share options, etc.
Not applicable

Toyo Kanetsu K.K. Annual Report 201639

Notes - Tax effect accounting
1. Significant components of deferred tax assets and liabilities
Previous fiscal year
(As of March 31, 2015)
Deferred tax assets
Tax loss carry-forward
Accrued business tax
Net defined benefit liability
Provision for bonuses
Allowance for doubtful accounts
Provision for loss on order received
Loss on valuation of investment securities
Loss on valuation of investments in capital
Impairment loss
Depreciation
Asset retirement obligations
Other
Subtotal
Valuation reserve
Total deferred tax assets
Deferred tax liabilities
Revaluation reserve for land
Valuation difference on available-for-salesecurities
Other¥978 million
89
108
94
100
107
289
42
186
79
72
197

Current fiscal year
(As of March 31, 2016)¥881 million
53
141
84
85
140
278
39
181
26
101
181

$7,822 thousand
470
1,251
745
754
1,243
2,468
346
1,607
230
896
1,607

2,345
(1,668)2,196(1,531)

19,499(13,594)

677

665

5,904

1,611

1,529

13,576

879

602

5,345

172

259

2,299

Total deferred tax liabilities
2,663
2,390
21,221(Note)The net deferred tax assets as of March 31, 2015 and March 31, 2016 are included in the items below of theconsolidated balance sheet.

Previous fiscal year
(As of March 31, 2015)
Current assets－Deferred tax assets
Non-current assets－Deferred tax assets

40¥455 million
81

Current fiscal year
(As of March 31, 2016)¥380 million
41$3,374 thousand
364

Current liabilities－Deferred tax liabilities

22

10

88

Non-current liabilities－Deferred tax liabilities

888

607

5,389

－Deferred tax liabilities for land revaluation

1,611

1,529

13,576

Toyo Kanetsu K.K. Annual Report 2016

2. Main components causing significant differences between the statutory effective tax rate and the actual effective
tax rate after application of tax effect accounting
Previous fiscal year
(As of March 31, 2015)

Current fiscal year
(As of March 31, 2016)

Statutory effective tax rate
Adjustments
Increase/decrease in valuation reserve
Expenses not deductible for income tax purposes, such asentertainment expenses
Income not included for income tax purposes, such as dividends
received
Per capita levy of inhabitant taxes
Effect of differences in tax rates applicable to subsidiaries fromtax rate applicable to the Company
Adjustment of deferred tax assets at end of period resulting
from tax rate changes
Amortization of goodwill
Retained earnings of overseas subsidiaries
Other

35.64%

33.06%(6.04)(0.41)

0.91

1.41(0.44)(0.27)

0.73

1.27(0.60)(0.21)

1.26

1.08

0.50
–
0.11

0.65
2.96
0.23

Actual effective tax rate

32.07

39.77

3. Changes in the amounts of deferred tax assets and deferred tax liabilities due to changes in the rates of income
taxes
On March 29, 2016, the “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and the“Act for Partial Amendment of the Local Tax Act, etc.” (Act No. 13 of 2016) were enacted in the Diet, and as aresult, corporation tax rates were lowered, among other changes, from the fiscal year beginning on or after April 1,
2016. Consequently, the statutory tax rate used for calculating deferred tax assets and deferred tax liabilities has
been reduced from the previous rate of 32.26% to 30.86% for temporary differences expected to be reversed in thefiscal year beginning on April 1, 2016, and to 30.62% for temporary differences expected to be reversed in and after
the fiscal year beginning on April 1, 2018.
As a result of this change in tax rates, the amount of deferred tax liabilities (amount net of deferred tax assets)
increased by ¥3 million ($26 thousand), the amount of income taxes - deferred increased by ¥34 million ($301
thousand), the amount of valuation difference on available-for-sale securities increased by ¥30 million ($266
thousand).
In addition, deferred tax liabilities for land revaluation decreased by ¥77 million ($683 thousand), and revaluation
reserve for land increased by the same amount.
Notes - Asset retirement obligations
Of asset retirement obligations, items recorded on the consolidated balance sheeta) Outline of asset retirement obligations
The asset retirement obligations of the Group are obligations in certain facilities for rent under the Ordinanceon Prevention of Asbestos Hazards.
b) Calculation method for determining asset retirement obligation amountThe amount of asset retirement obligations was calculated assuming an estimated period of use of 31 years
from acquisition, and using a discount rate from 2.2%.
c) Increase (decrease) in total asset retirement obligations
Previous fiscal year
(From April 1, 2014
to March 31, 2015)
Beginning balance
Increase from purchase of property, plant andequipment
Reversal¥300 million

Ending balance

Current fiscal year
(From April 1, 2015
to March 31, 2016)¥224 million$1,988 thousand

–

107

950

(75)

–

–

224

332

2,947

Toyo Kanetsu K.K. Annual Report 201641

Notes - Real estate for lease, etc.
The Company and certain subsidiaries rent out a space such as in their business places as well as land mainly forrental housing and buildings in the Tokyo metropolitan area and other areas. Rental profit related to the real estate
for rent, etc. for the previous fiscal year was ¥355 million (rent income is recorded in net sales, and rent expenses
are recorded in cost of sales). Rental profit related to the real estate for rent, etc. for the current fiscal year was ¥310
million ($2,752 thousand) (rent income is recorded in net sales, and rent expenses are recorded in cost of sales).
Carrying amounts on the consolidated balance sheet, changes during period for the previous and current fiscal years
and fair values of the real estate for rent, etc. are as follows:(Millions of yen)
Current fiscal year
(From April 1, 2015
to March 31, 2016)

Previous fiscal year
(From April 1, 2014
to March 31, 2015)
Carrying amount on the consolidatedbalance sheet
Balance at
beginning of period

5,296

6,103

Increase (decrease)during period

806

(739)

Balance at end of
period

6,103

5,364

4,090

3,684

Fair value at end of period(Thousands of U.S. dollars)
Current fiscal year
(From April 1, 2015
to March 31, 2016)

Previous fiscal year
(From April 1, 2014
to March 31, 2015)
Carrying amount on the consolidatedbalance sheet
Balance at
beginning of period

47,02554,191

Increase (decrease)during period

7,156(6,561)

Balance at end of
period54,191

47,629Fair value at end of period
36,31632,711(Notes) 1. Carrying amount on the consolidated balance sheet is calculated by subtracting accumulated depreciation andimpairment loss from acquisition cost.
2. The increase (decrease) during period for the previous fiscal year primarily consist of an increase in rentable space(¥829 million) and decrease due to depreciation (¥22 million). The increase (decrease) during period for thecurrent fiscal year primarily consist of a decrease in rentable space (¥693 million ($6,153 thousand)) and decrease
due to depreciation (¥45 million ($399 thousand)).
3. Fair value of property whose amount has significance at the end of the period is an amount based on a value
investigation report by an external real property appraiser, and that of other property whose amount has little
significance is an amount based on an index which is believed to reflect a market value appropriately.

42

Toyo Kanetsu K.K. Annual Report 2016

Notes - Segment information, etc.
[Segment information]
1. Description of reportable segments
The reportable segments of the Company are components for which discrete financial information is available
and whose operating results are regularly reviewed by the Board of Directors of the Company to make decisions
about resource allocation and assess their performance.
The Group develops comprehensive business strategies and engages in business activities for respective products
and services of divisions by product and service in the Company and of Toyo Kanetsu Solutions K.K., asubsidiary of the Company.
Accordingly, the Company is comprised of segments by product and service, and its reportable segments consistof “Plant & Machinery Business” and “Material Handling Systems Business.”“Plant & Machinery Business” designs, builds, and executes construction works of, storage tanks for LNG, LPG,
crude oil and other gas and liquid and provides maintenance services and other operations for these tanks.
“Material Handling Systems Business” develops, designs, builds and executes construction works of, logistics
systems focusing on sorting, picking and conveying systems and provides maintenance services and otheroperations for these systems.
2. Method of measurements of sales, profit (loss), asset, liability, and other items for each reportable segment
The accounting procedures for the reporting operating segments are nearly the same as those stated in“Significant accounting policies for preparation of the consolidated financial statements.” Profits of thereportable segments are based on operating income. Intersegment transactions are based on actual transaction
amounts.
3. Disclosure of sales, profit (loss), asset, liability, and other items for each reportable segment
Previous fiscal year (From April 1, 2014 to March 31, 2015)(Millions of yen)

Reportable segments
Plant &
MachineryBusiness
Sales
Sales to externalcustomers
Transactions withother segments

Material
Handling
Systems Business

Other(Note)

Total

Adjustment

Total

29,425

15,68945,115

7,341–

52,457

–

－

–

466

(466)

–
52,457

Total

29,425

15,68945,115

7,808

(466)

Segment profit

2,789

401

3,191

800

(403)

3,588

Segment assets

14,374

10,461

24,836

12,356

18,73655,928

310

254

564

231

10

806

489

891

1,381

124

3

1,509

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)“Other” includes the building construction business, manufacturing and sales of industrial facilities and equipment, realestate rental operations, leasing operations and other operations.

Toyo Kanetsu K.K. Annual Report 201643

Current fiscal year (From April 1, 2015 to March 31, 2016)(Millions of yen)

Reportable segments
Plant &
MachineryBusiness
Sales
Sales to externalcustomers
Transactions withother segments

Material
Handling
Systems Business

Other(Note)

Total

Adjustment

Total

22,78817,20639,995

6,577–

46,572

–

–

–

592

(592)

–
46,572

Total

22,78817,20639,995

7,170

(592)

Segment profit

1,921

667

2,588

855

(419)

3,024

Segment assets

12,88814,34027,2298,173

15,96551,368

249

314

563

174

26

765

298

687

985

181

22

1,189

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Thousands of U.S. dollars)
Reportable segments
Plant &
MachineryBusiness
Sales
Sales to externalcustomers
Transactions withother segments

Other(Note)

Total

Adjustment

Total

202,344

152,779

355,132

58,399–413,532

–

－

–

5,256

(5,256)–
413,532

Total

202,344

152,779

355,132

63,665(5,256)

Segment profit

17,057

5,922

22,9797,591(3,720)26,851

Segment assets

114,437

127,330

241,777

72,571

141,759

456,117

2,210

2,788

4,999

1,545

230

6,792

2,646

6,100

8,746

1,607

195

10,557

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)

44

Material
Handling
Systems Business“Other” includes the building construction business, manufacturing and sales of industrial facilities and equipment, realestate rental operations, leasing operations and other operations.

Toyo Kanetsu K.K. Annual Report 2016

4. Differences between total amounts for reportable segments and amounts in the consolidated financial statements
and main details of these differences (matters relating to difference adjustments)
Profit(Millions of yen)
Current fiscal year

Previous fiscal year

Reportable segments total

3,191

2,588

Profit of “other”

800

855

Corporate expenses (Note)

(425)

(432)

22

12

3,588

3,024

Other adjustments
Operating income in the consolidated
financial statements
Profit(Thousands of U.S. dollars)
Current fiscal year

Reportable segments total

22,979Profit of “other”

7,591

Corporate expenses (Note)(3,835)

Other adjustments

106

Operating income in the consolidated
26,851
financial statements(Note) Corporate expenses mainly represent expenses related to administrative divisions such as the general affairs division,
which are not attributable to the reportable segments.
(Millions of yen)
Asset

Previous fiscal year

Current fiscal year

Reportable segments total

24,836

Assets of “other”

12,3568,173

Corporate assets (Note)

18,761

16,019Other adjustments

27,229(25)(53)

55,92851,368(Thousands of U.S. dollars)
Asset

Current fiscal year

Reportable segments total

241,777

Assets of “other”

72,571

Corporate assets (Note)

142,239

Other adjustments(Note)(470)

456,117
Corporate assets mainly represent assets related to divisions managing cash and deposits, investment securities andother assets of the Company, which are not attributable to the reportable segments.

Toyo Kanetsu K.K. Annual Report 201645

[Information associated with reportable segments]
Previous fiscal year (From April 1, 2014 to March 31, 2015)
1. Information for each product and service(Millions of yen)
Storage tank, etc.

Maintenanceservices ofstorage tanks

Logistics systemequipment, etc.

18,883

10,542

15,689

Sales to external customers

Other

Total

7,341

52,457

2. Information about geographical area
(1) Sales(Millions of yen)
Japan

Southeast Asia

36,758(Note)

Middle East

14,724

Oceania7

Africa

Total

Other

939

0

26

52,457

Sales are classified by country or region on the basis of construction sites.

(2) Property, plant and equipment
Japan(Millions of yen)Southeast Asia

12,049

Oceania

Total

1,527

0

13,577

3. Information for each of main customers
This information has been omitted since sales to a specific customer account for less than 10% of net sales in the
consolidated statement of income.
Current fiscal year (From April 1, 2015 to March 31, 2016)
1. Information for each product and service(Millions of yen)
Storage tank, etc.

Maintenanceservices ofstorage tanks

Logistics systemequipment, etc.

13,887

8,901

17,206

Sales to external customers

Other

Total

6,577

46,572(Thousands of U.S. dollars)
Storage tank, etc.

Maintenanceservices ofstorage tanks

Logistics systemequipment, etc.

123,308

79,035

152,779

Sales to external customers

Other
58,399

Total
413,532

2. Information about geographical area
(1) Sales(Millions of yen)
Japan

Southeast Asia

Oceania

Other

Total

36,171

8,923

1,068

409

46,572(Thousands of U.S. dollars)

Japan

Southeast Asia

Oceania

321,177
79,231
9,483(Note) Sales are classified by country or region on the basis of construction sites.

46

Toyo Kanetsu K.K. Annual Report 2016

Other

Total

3,631

413,532(2) Property, plant and equipment
Japan(Millions of yen)Southeast Asia

12,440Oceania
1,171

Total
50

13,661(Thousands of U.S. dollars)

Japan

Southeast Asia
110,459

Oceania

10,397

Total
443

121,301

3. Information for each of main customers
This information has been omitted since sales to a specific customer account for less than 10% of net sales in the
consolidated statement of income.
[Disclosure of impairment loss on non-current assets for each reportable segment]
Previous fiscal year (From April 1, 2014 to March 31, 2015)
Not applicable
Current fiscal year (From April 1, 2015 to March 31, 2016)(Millions of yen)
Reportable segments
Plant & Machinery
Business
Impairment loss

Material Handling
Systems Business

–

–

Other
(Note)

Adjustment

19

–

Total
19

(Thousands of U.S. dollars)
Reportable segments
Plant & Machinery
Business
Impairment loss
(Note)

Material Handling
Systems Business

–

–

Other
(Note)

Adjustment

168

–

Total
168

The amount of “other” is an amount related to manufacturing and sales of industrial facilities and equipment.

[Amortization and unamortized balance of goodwill for each reportable segment]
Previous fiscal year (From April 1, 2014 to March 31, 2015)
Reportable segments
Plant & Machinery
Business

Material Handling
Systems Business(Millions of yen)
Other
(Note)

Adjustment

Total

Amortization in thecurrent fiscal year

–

–

62

–

62

Ending balance

–

–

124

–

124

(Note)

The amount of “other” is an amount related to manufacturing and sales of industrial facilities and equipment.

Current fiscal year (From April 1, 2015 to March 31, 2016)
Reportable segments
Plant & Machinery
Business

Material Handling
Systems Business(Millions of yen)
Other
(Note)

Adjustment

Total

Amortization in thecurrent fiscal year

–

–

62

–

62

Ending balance

–

–

62

–

62

Toyo Kanetsu K.K. Annual Report 2016

47

(Thousands of U.S. dollars)
Reportable segments
Plant & Machinery
Business

Material Handling
Systems Business

Other(Note)

Adjustment

Total

Amortization in thecurrent fiscal year

–

–

550

–

550

Ending balance

–

–

550

–

550

(Note)

The amount of “other” is an amount related to manufacturing and sales of industrial facilities and equipment.

[Information associated with related parties]
Subsidiaries and others
1.
Related party transactions
Not applicable2.

Notes concerning the parent company or important affiliated companies
Not applicable

Notes - Per share information
Previous fiscal year
(From April 1, 2014
to March 31, 2015)

Current fiscal year
(From April 1, 2015
to March 31, 2016)

Net assets per share¥315.91¥333.91$2.96

Basic earnings per share¥26.08¥17.45$0.15(Note)(Note)

1.
2.

The amount of diluted earnings per share is not provided because there are no potential shares.
The basis for calculation for basic earnings per share is as follows:
Previous fiscal year
Current fiscal year
(From April 1, 2014
(From April 1, 2015
to March 31, 2015)
to March 31, 2016)

Profit attributable to owners of parent¥3,019 million¥1,906 million

–

–

–

Profit attributable to owners of parent pertaining tocommon shares

3,019

1,906

16,924

Average number of outstanding common shares

115,788
thousands shares

109,260
thousands shares

Profit not relating to common shareholders$16,924 thousand

Notes - Significant events after reporting period
Cancellation of treasury shares
The Company’s Board of Directors made a resolution on May 12, 2016 for the Company to cancel treasury
shares pursuant to the provision of Article 178 of the Companies Act, and cancelled those shares on May 25,
2016 according to the particulars stated below.
(1) Type of the cancelled shares
Common shares(2) Total number of cancelled shares
12,000 thousand shares

48

Toyo Kanetsu K.K. Annual Report 2016

(v)Annexed consolidated detailed schedules

Annexed consolidated detailed schedule of corporate bonds
Not applicable
Annexed consolidated detailed schedule of borrowings
Beginning balance(Millions of yen)[Thousands of U.S.
dollars]

Classification

Ending balance(Millions of yen)[Thousands of U.S.
dollars]

Average interest
rate (%)

Repayment due¥2,518[$22,358]¥2,357[$20,928]

0.89–

Current portion of long-term loans
payable728[6,464]

60
[532]

1.35

–

Long-term loans payable (excluding
current portion)

615[5,460]1,155[10,255]

0.93

Total

3,863
[34,301]

3,572[31,717]–

Short-term loans payable(Notes) 1.
2.

Between 2017 and 2020–

In calculating the average interest rate, the weighted average interest rate on the ending balance of loans payable,
is shown.
Repayment of long-term loans payable (excluding the current portion) scheduled within five years after thebalance sheet date are as follows:
Due after 1 year
through 2 years

Long-term loans
payableDue after 2 years
through 3 years¥60 million[$532 thousand]¥15 million[$133 thousand]Due after 3 years
through 4 years

Due after 4 years
through 5 years¥480 million[$4,262 thousand]¥600 million[$5,327 thousand]Annexed consolidated detailed schedule of asset retirement obligations
A schedule of asset retirement obligations has been omitted since matters to be stated in the schedule are stated as
notes prescribed in Article 15-23 of the Ordinance on Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements.

(2) Other information
Quarterly information for the current fiscal year
First quarter(Cumulative)(Cumulative period)
Net sales(From April 1, 2015
to June 30, 2015)

Second quarter(Cumulative)

Third quarter(Cumulative)(From April 1, 2015
(From April 1, 2015
to September 30, 2015) to December 31, 2015)

Current fiscal year

(From April 1, 2015 toMarch 31, 2016)(Millions of yen)

10,572

23,28734,272

46,572

Profit before income taxes(Millions of yen)

790

1,047

2,825

3,161

Profit attributable to owners ofparent(Millions of yen)

478

541

1,747

1,906

Basic earnings per share

4.23

4.83

15.73

17.45

First quarter

Second quarter

Third quarter

Fourth quarter(Yen)(Accounting period)
Basic earnings per share

(Yen)

4.23

0.57

11.04

1.53

Toyo Kanetsu K.K. Annual Report 2016

49

(Cumulative period)(From April 1, 2015
to June 30, 2015)

Second quarter(Cumulative)

Third quarter(Cumulative)(From April 1, 2015
(From April 1, 2015
to September 30, 2015) to December 31, 2015)

Current fiscal year

(From April 1, 2015 toMarch 31, 2016)

Net sales(Thousands of U.S. dollars)

93,873

206,774

304,315

413,532

Profit before income taxes(Thousands of U.S. dollars)

7,014

9,296

25,08428,067

Profit attributable to owners ofparent(Thousands of U.S. dollars)

4,244

4,803

15,512

16,924

Basic earnings per share(U.S. dollars)

0.03

0.04

0.13

0.15

First quarter

Second quarter

Third quarter

Fourth quarter

0.03

0.00

0.09

0.01

(Accounting period)
Basic earnings per share(U.S. dollars)

50

First quarter(Cumulative)

Toyo Kanetsu K.K. Annual Report 2016

(TRANSLATION)
INDEPENDENT AUDITOR’S REPORT
June 29, 2016
To the Board of Directors of
Toyo Kanetsu Kabushiki Kaisha
GYOSEI & CO.
Representative Partner
Engagement Partner
Certified Public Accountant

Takayuki Nakagawa (seal)

Representative Partner
Engagement Partner
Certified Public Accountant

Tetsuo Noguchi(seal)Engagement Partner
Certified Public Accountant

Satoshi Ogawa(seal)

Audit of Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited the accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (the “Company”)
and its subsidiaries, which comprise the consolidated balance sheet as of March 31, 2016, and the consolidated
statements of income and comprehensive income, the consolidated statement of changes in equity, cash flows forthe fiscal year from April 1, 2015 to March 31, 2016, and significant accounting policies for preparation of theconsolidated financial statements, other notes, and annexed consolidated detailed schedules, all expressed inJapanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparation and fair presentation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of the Company and its subsidiaries as of March 31, 2016, and the consolidated

Toyo Kanetsu K.K. Annual Report 201651

results of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in Japan.
Emphasis of Matter
As stated in “Notes - Significant events after reporting period,” the Company’s Board of Directors made aresolution on May 12, 2016 for the Company to cancel treasury shares and cancelled those shares on May 25, 2016.
This matter does not have any impact on our opinion.
Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited management’s report on internal control over financial reporting of the Company as of March 31, 2016.
Management’s Responsibility for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and forthe preparation and fair presentation of its report on internal control in accordance with assessment standards forinternal control over financial reporting generally accepted in Japan. There is a possibility that misstatements may
not be completely prevented or detected by internal control over financial reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal control
audit. We conducted our internal control audit in accordance with auditing standards for internal control overfinancial reporting generally accepted in Japan. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether management’s report on internal control is free from material
misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of theassessment of internal control over financial reporting in management’s report on internal control. The procedures
selected depend on the auditor’s judgment, including the significance of effects on reliability of financial reporting.
An internal control audit includes examining representations on the scope, procedures and results of the assessmentof internal control over financial reporting made by management, as well as evaluating the overall presentation ofmanagement’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the management’s report on internal control referred to above, which represents that the internal
control over financial reporting of the Company as of March 31, 2016 was effective, presents fairly, in all material
respects, the results of the assessment of internal control over financial reporting in accordance with assessment
standards for internal control over financial reporting generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with the Certified Public
Accountants Act.
The above represents a translation, for convenience only, of the original report issued in the Japanese language.

52

Toyo Kanetsu K.K. Annual Report 2016

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

297,000,000

Capital Stock Issued

115,030,741

Number of Shareholders

12,839Security Traded

Tokyo Stock Exchange, First Section

Transfer Agent and Registrar

The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

Annual Meeting

The annual meeting of shareholders is normally held in June in Tokyo, Japan

Directory
Head Office
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-3170
URL: http://www.toyokanetsu.co.jp/global/

Plant & Machinery Business
Tel: +81-3-5857-3109 Fax: +81-3-5857-3173

Material Handling Systems BusinessOsaka Sales Office
1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan

Plant & Machinery Business
Tel: +81-72-645-2520 Fax: +81-72-645-2532

Material Handling Systems Business(Toyo Kanetsu Solutions K.K. West Japan Sales Office)Tel: +81-72-645-2530 Fax: +81-72-645-2532(Toyo Kanetsu Solutions K.K. Head Office)Tel: +81-3-5857-3126 Fax: +81-3-5857-3180

Chiba Plant
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-36-7161 Fax: +81-438-36-8211

Domestic Subsidiaries

Overseas Subsidiaries

Toyo Kanetsu Solutions K.K.

P.T. Toyo Kanetsu Indonesia

19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3126 Fax: +81-3-5857-3180
URL: http://www.tksl.co.jp/en(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62 (21) 570-7805 / 7739 Fax: +62 (21) 570-3950

Toyo Kanetsu Builtec K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-6800-3156
URL: http://www.web-tkb.com

Toyo Service System K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3200 Fax: +81-3-5857-3201
URL: http://www.toyoservice.co.jp

Toyo Koken K.K.

TOYO KANETSU SINGAPORE PTE. LTD.
38, Robinson Road, #17-00, The Corporate Office,Singapore 068906
Tel: +62 6228 0561 Fax: +62 6223 1735

Toyo Kanetsu (Malaysia) SDN. BHD.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60 (86) 338122 Fax: +60 (86) 338123

19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3161 Fax: +81-3-5857-3198
URL: http://www.toyokoken.co.jp/en

Toyo Kanetsu K.K. Annual Report 201653

19-20, Higashisuna 8-chome, Koto-ku,
Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-3170
URL: http://www.toyokanetsu.co.jp/global/