TOYO KANETSU K.K.

Annual Report 2011
For the year ended March 31, 2011

Profile
Toyo Kanetsu K.K. (TKK) was established in 1941. Since that time, TKK has
continued to meet the requirements of the industry through our policy of“Customers First.”
The Plant & Machinery Business was established in 1950 when in-house welding
technology was developed for welded storage tanks. Since then, our expertise has
expanded to provide customers with various kinds of storage tanks consisting of
more than 5,300 units varying from crude oil storage tanks to LNG storage tanks.
In particular, we are proud of our outstanding track record in LNG storage tankconstruction in Japan and at overseas sites in Asia, Africa, the Middle East,
Oceania and the Western Hemisphere. Our technical expertise and our outstanding
record of “safety, quality and delivery” have been recognized and appreciated bymajor clients throughout the world.
The Material Handling Systems Business was begun in 1953 for manufacture
and installation of highly standardized conveyor systems. Since that time, thebusiness has continued to develop the technology to meet the needs of our clients. It
supplied one of the largest airport baggage handling systems in the world in 1998 at
Kuala Lumpur International Airport in Malaysia. Also, as a leading provider
company of logistics solutions in Japan, the business has successfully completed
numerous projects such as distribution center systems, truck terminal systems, food
distribution processing centers and postal sorting systems. The business became asubsidiary company of TKK under the name of Toyo Kanetsu Solutions K.K. in 2002
in order to maximize efficiency and also to vitalize TKK Group companies.
The Building Construction Business was started in 1989 for construction ofapartment houses with the application of modular steel frame structures. The
business has expanded to handling total projects from planning to design andexecution, based on its steel structure buildings, supporting a wide range of
construction, from individual residences to housing complexes, other buildings, andlarge-scale shopping complexes. In recent years, we have also pushed into the
steel

pipe

pilingbusiness,makingnewefforts

towardenvironmentallyfriendly execution.
TKK will continue to provide the advanced technology to answer the needs of ourclients for today and tomorrow.

Contents
Consolidated Financial Highlights····················································· 2
To Our Shareholders ····································································· 3
Board of Directors, Auditors and Corporate Officers ······························· 4
Lines of Business ········································································ 4
TKK Group Companies ································································· 5
Analysis of Operating Environment and Results ··································· 6
Business Risks ············································································ 7
Financial Section
Consolidated Balance Sheets ······················································· 9Consolidated Statements of Income and Comprehensive Income ············· 11
Consolidated Statements of Changes in Net Assets ····························· 12
Consolidated Statements of Cash Flows ·········································· 15
Notes to the Consolidated Financial Statements ································· 16
Report of Independent Auditors ···················································· 34
Corporate Data ··········································································· 35
Directory ·················································································· 35

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Financial Highlights
For the years ended March 31

Thousands of
U.S. dollars

Millions of yen

2011

2010

2009

2008

2007

2011

¥ 48,718
26,70917,590
2,180
2,239
2,590
158
(35)
603

¥ 50,446
24,22420,897
2,633
539
2,153
3,863
3,560
504

¥ 47,661
26,392
11,961
5,020
592
3,696
1,867
3,005
533

¥ 49,785
23,355
15,243
5,756
581
4,850
3,686
3,810
415

¥ 45,548
17,02917,316
5,944
521
4,738
1,887
2,836
277

$585,909
321,219
211,544
26,212
26,934
31,149
1,902
(419)
7,252

Shareholders’ Equity
Accumulated Other Comprehensive Income
Minority Interests in Consolidated Subsidiaries
Total Liabilities and Net Assets¥33,792
12,5466,437
281
53,056
19,582
3,735
29,205426
108
53,056¥37,748
12,4907,792
338
58,36820,842
7,250
29,549618
109
58,368¥33,705
13,046
7,920
274
54,94521,555
5,375
27,824102
89
54,945¥30,245
16,324
12,269221
59,05921,272
8,988
26,5642,235
59,059¥30,226
16,956
21,498322
69,002
22,865
14,19524,6517,283
869,002$406,400
150,880
77,417
3,383
638,080
235,51044,918351,226
5,132
1,294
638,080

Order Backlog

50,80757,37966,071

57,412

34,176

611,023

Per Share:
Net Income
Cash Dividends
Shareholders’ Equity

2011
¥1.31
4.00
246.042010¥28.754.00
250.392009¥ 22.99
4.00
222.092008¥ 27.904.00
216.052007¥ 20.52
3.00
231.102011
14,109678

2010
14,027631

2009
14,400629

2008
15,747597

2007
16,797573

For the Years Ended March 31:
Net Sales
Plant & Machinery Business
Material Handling Systems Business
Building Construction Business
Real Estate Utilizing Business
Other
Operating Income
Net Income
Comprehensive Income
Cash Dividends
At March 31:
Current Assets
Property, Plant and Equipment
Investments and Advances
Intangible Fixed Assets
Total Assets
Current Liabilities
Long-Term Liabilities

Yen

Number of Shareholders
Number of Employees

U.S. dollars

The U.S. dollar amounts in this annual report represent translations of Japanese yen at the rate of \83.15=$1.00, solely for readers’ convenience.

2

Toyo Kanetsu K.K. Annual Report 2011

2011
$0.02
0.05
2.96

To Our Shareholders
First of all, we express our deepest sympathy with people
affected by the major earthquake which struck eastern Japanearlier this year and hope for a speedy recovery fromthe disaster.
In fiscal year 2011, ended March 31, 2011, the Japanese
economy benefited from economic growth in the developing
countries of Asia, as a result of which capital investment
showed a movement albeit gradual, toward recovery.
However, the impact of the major earthquake in easternJapan and the resulting electric power shortages have createduncertainty as to the future.
Against this background, the Toyo Kanetsu Group (TKKGroup)’s Plant & Machinery Business posted year-on-yearincreases in both net sales and operating income thanks tothe steady implementation of ongoing large-scale projects
and enhanced project management. Performance in the
Material Handling Systems Business, however, was
impacted by certain projects which proved to have
unprofitable aspects. The result was that our consolidated
business performance showed overall year-on-year decreases
in each of net sales, operating income, and ordinary income.
Profits also registered a substantial decline compared to theprevious year. This was due chiefly to a valuation loss on
write-down of investments in securities and a loss on
adjustment for changes of accounting standard for asset
retirement obligations.
Fiscal year 2011 was a landmark year for the TKK Group,
representing the 70th anniversary of our establishment andalso the last year of the medium-term business plan launchedin fiscal year 2009. So that we can achieve the ultimate goalsof the medium-term business plan—to establish an operatingbase capable of securing stable profits and to fulfill the
consolidated performance targets—we are determined tosteadily implement the plan’s priority measures and to
devote strengthened efforts to operational improvement. The
dividend for the year under review has been set at ¥5 pershare, including a commemorative dividend of ¥1 per sharefor the 70th anniversary of our establishment.
Basic policy of our core businesses
Under the TKK Group’s management vision of being “agroup that sustainably grows and develops backed by its
superior technology, products and services,” the Company’s
Plant & Machinery Business and Material Handling Systems
Business have respective business policies of securing astable profit and revitalizing operations and establishing an
operating base.

[Material Handling Systems Business]
1) Reinforcing price competitivenessWe are actively promoting the introduction of the
Ecoloveyor low-cost conveyor system, which has
excellent energy-saving performance.
2) Reinforcing solutions-based marketing ability
The Multishuttle multipurpose storage system, with its
space-saving features and high performance, is the focusof energetic solutions-based marketing to a wide range ofindustry sectors.
3) Proceeding with overseas expansion
We have delivered a sorting system to a South Korean
food distribution company.
[Building Construction Business]
From operations dependent on construction contracts withspecific customers, we are shifting to operations in thegeneral construction sector, including welfare facilities andother types of building.
We look forward to your continued understanding andsupport in the future.
August 2011
Takeshi Mizukami

President and Representative Director

Progress with the priority measures of the medium-termbusiness plan
[Plant & Machinery Business]
1) Reinforcing price competitiveness
The Batam Plant has been expanded to enhance
production capacity and the installation of fabricating,painting and other facilities is in progress.
2) Promoting research and development
Work is in progress to realize highly efficient welding
methods and new testing technology.
Toyo Kanetsu K.K. Annual Report 20113

Board of Directors, Auditors and Corporate Officers
Directors
President and Representative Director
Managing Director
Director and Senior Corporate Officer
Director
Director and Senior Corporate Officer
Director and Senior Corporate Officer

Takeshi Mizukami
Shinji Shimazaki
Sadao Arita
Toru Yanagawa
Shoji Fujiyoshi
Isao Shimomae

Auditors
AuditorOutside Auditor
Outside Auditor
Outside Auditor

Teruo Nojo
Masaharu Hino
Keiichi Miyakawa
Takashi Nakamura

Corporate Officers
Senior Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer

Tetsuya Watanabe
Shiro Ito
Fumitomo Miyashita
Kazuto Abe
Yukio Kurosaka
Masayuki Takeda
Yasuhiro Yamada
Keisuke Kodama

Lines of Business
Plant & Machinery BusinessTotal engineering and construction forstorage tanks such as low-temperature tanks,
cryogenic tanks, high-pressure sphericaltanks, floating roof tanks, cone roof tanks
and dome roof tanks, including all related
ancillary works such as civil works, piping
and instrumentation.

Material Handling Systems BusinessEngineering, construction and related civil
and construction work for all systemequipment, system devices and ancillaryequipment related to distribution centersystems, truck terminal systems, production
line systems, airport baggage handlingsystems, postal sorting systems, foodprocessing center systems, food production
factory systems, apparel center systems andother systems.

Building Construction BusinessAll-use, structural planning design and construction of condominiums, apartmentbuildings, offices, stores, medical facilities, residential housing, welfare facilities
and warehouses; steel pipe piling design and execution.

4

Toyo Kanetsu K.K. Annual Report 2011

TKK Group Companies
TOYO KANETSU K.K.

(Building Construction Business)(Plant & Machinery Business)(Material Handling Systems Business)

Toyo Miyama Co., Ltd.

P.T. Toyo Kanetsu Indonesia

Toyo Kanetsu Solutions K.K.

AL GHALLILAH ENGINEERING& CONSTRUCTION L.L.C.

K-Techno Inc.

(Other Business)
TKL Co., Ltd.
Toyo Service System K.K.

Toyo Kanetsu (Malaysia) SDN. BHD.
TOYO KANETSU
SINGAPORE PTE. LTD.

Toyo Koken K.K.

Domestic Subsidiaries

TKK-USA, Inc.
Manavis Co., Ltd.

Overseas Subsidiaries

Affiliated Companies

Major Subsidiaries and Affiliated Companies(Domestic)

Toyo Koken K.K.

Toyo Kanetsu Solutions K.K.

Establishment
CapitalBusiness

October 1, 2002
¥400 million
Planning, design, manufacturing,
construction and sales for material
handling systems
April 17, 1992
¥60 million
Distribution business consulting;
servicing, maintenance and tuning of
distribution equipment; parts sales

TKL Co., Ltd.

Establishment
CapitalBusiness

September 13, 1985
¥10 million
Leasing operations and provisional
equipment operations

P.T. Toyo Kanetsu Indonesia

Establishment
CapitalBusiness

September 19, 1986
¥60 million
Building management, real estate andOA-related operations

Toyo Miyama Co., Ltd.

Establishment
CapitalBusiness

August 8, 1988
¥100 million
Design, industrial manufacturing andon-site construction of housecomponents,
steel
construction
housing, stores, offices and otherbuildings

September 9, 1974
US$2,000,000
Manufacturing and sales of tanks andsteel framing

Toyo Kanetsu (Malaysia) SDN. BHD.

Establishment
CapitalBusiness

Toyo Service System K.K.

Establishment
CapitalBusiness

February 11, 1957
¥897.49 million
Design, manufacturing and constructionof winches and hoists, lift ladders,conveyors, balancers, industrial robots
and other machinery(Overseas)

K-Techno Inc.

Establishment
CapitalBusiness

Establishment
CapitalBusiness

April 13, 1992
RM2,000,000
Manufacturing and sales of storage
tanks; manufacturing and sales ofmaterial handling system equipment
and devices

AL GHALLILAH ENGINEERING & CONSTRUCTION L.L.C.

Establishment
CapitalBusiness

May 21, 1997
OMR150,000
Manufacturing and sales of storage
tanks, pressure vessels, and onshore andoffshore steel structures

TOYO KANETSU SINGAPORE PTE. LTD.

Establishment
CapitalBusiness

August 8, 2006
S$500,000
Manufacturing and sales of storage
tanks, pressure vessels, and onshore andoffshore steel structures

Toyo Kanetsu K.K. Annual Report 2011

5

Analysis of Operating Environment and Results
In the fiscal year ended March 31, 2011, the Japanese
economy appeared to be moving, albeit gradually, toward
recovery. This was thanks to growth in exports andproduction and a recovering trend in capital investment,
which were driven by improvements in overseas economies,
especially in the developing countries. However, the impactof the great earthquake which struck eastern Japan in Marchand the resulting electric power shortages mean that a
downturn in the economy is now inevitable.
In the Plant & Machinery Business, the expansion inenergy demand due to the high growth rate in China, India
and other developing countries stimulated numerous plansfor electricity-generating plants, gas supply facilities, oil
refineries and other energy-related projects. In particular, theincreased gas demand which arose from surging crude oil
prices and the use of gas as a way of reducing carbon
dioxide emissions boosted planning activity in the area ofstorage facilities for LNG receipt and distribution.
In the Material Handling Systems Business, a reduction in
the volume of materials handled in the domestic market andan increasing shift toward overseas production in
manufacturing industry were among the factors driving theclosure and integration of logistics centers and the movetoward outsourcing of operations. This meant depressed
levels of activity in the construction of transportation anddistribution centers and warehousing facilities, with theresult that demand for material handling systems is on adecreasing trend.
In the Building Construction Business, tax breaks forhousing loans and the introduction of the “housing ecopoint”
system contributed to a recovery in the number of new
housing starts. In the leased apartment sector, however, thenumber of new starts declined. Business conditions therefore
remained challenging.
Against this business background, consolidated net sales
for the fiscal year amounted to ¥48,718 million(US$585,909 thousand), a decline of 3.4% from the previous
year. Operating income decreased by 33.0% to ¥2,590
million (US$31,149 thousand) and income before
extraordinary items by 39.0% to ¥2,305 million (US$27,726
thousand). Net income fell by 95.6% to ¥158 million(US$1,902 thousand), a decrease due in large part to avaluation loss on write-down of investments in securities
and to a loss on adjustment for changes of accounting
standard for asset retirement obligations. Total orders
received, meanwhile, grew by 2.2% to ¥39,907 million(US$479,938 thousand).
Plant & Machinery BusinessIn overseas markets, the booming energy demand that
accompanied the high rate of economic growth in China,
India and other Asian countries led to an increase in the
trading of LNG, which is effective in reducing carbon
dioxide emissions. One result of this was to stimulate plansfor LNG plants, including storage facilities, in both exporterand importer nations. On the strength of our rich trackrecord and our international competitiveness, we were able
to win contracts for a total of three LNG tanks in theSoutheast Asia and Oceania regions. In the domestic market,
four ongoing LNG tank projects proceeded smoothly, andone of these reached completion according to schedule. In

6Toyo Kanetsu K.K. Annual Report 2011

the maintenance market, we secured a steady supply ofcontracts, among them orders for modification works tofloating-roof tanks following a partial revision to the Fire
Service Law, and an inclusive multi-year contract for tankmaintenance at a large oil refinery.
Thanks to this steady progress with maintenance
operations and ongoing major projects in Japan and overseas,
and with the added benefit of cost-saving measures, thissegment achieved an increase in both sales and profits.
As a result, net sales for the segment totaled ¥26,709
million (US$321,219 thousand), a growth of 10.3% from theprevious year. Operating income increased by 3.1% to¥2,517 million (US$30,269 thousand) and orders receivedrose by 21.2% to ¥24,827 million (US$298,579 thousand).
Material Handling Systems Business
Here we completed the installation of major projects such as
baggage handling systems and cargo handling systems for
airports, sorting systems for retailers, and picking systems
for consumer cooperatives. Although net sales therefore
reached a relatively high level, certain projects which proved
to have unprofitable aspects led to the segment posting an
operating loss. At the same time, there was a decline in thenumber of new large orders received from our main clients,
which are the airport and consumer cooperative sectors, sothat the main focus of business was on the upgrading ofexisting facilities. Against this background, we progressedwith the development of new markets, including winningorders for the Multishuttle automated case storage systemreleased in 2009.
Consequently, net sales declined by 15.8% from theprevious year to ¥17,590 million (US$211,544 thousand)and the segment posted an operating loss of ¥163 million(US$1,962 thousand), contrasting with operating income of¥1,064 million in the previous year. Orders received totaled¥11,422 million (US$137,360 thousand), a decline of 30.4%
from the previous year.
Building Construction Business
Projects in the general construction sector progressedfavourably, with orders received in the growth area of
welfare facilities. However, the mainstays of thesector—leased apartment construction and steel pipe pile
construction projects—continued to present a challenging
environment. The securing of large contracts, meanwhile,
led to a substantial increase from the previous year in orders
received.
Against this background, net sales for the segment
decreased by 17.2% from the previous year to ¥2,180
million (US$26,212 thousand) and operating income by
44.4% to ¥36 million (US$432 thousand). Orders received,
however, increased by 69.4% to ¥3,658 million (US$43,999
thousand).
Other Businesses
Net sales in sectors other than the above totaled ¥2,239
million (US$26,934 thousand), a decline of 16.8% from theprevious year, while operating income in these sectors
declined by 14.5% to ¥482 million (US$5,790 thousand).

Business Risks
The following risks may affect the business results, stock
price and financial position of the TKK Group.
Potential risks associated with international activities
and overseas advance
The TKK Group conducts some operations in overseas
markets, primarily those of the Plant & Machinery Business.
Further, its subsidiary manufactures tank materials inIndonesia. These overseas operations carry inherent risks as
stated below, and the TKK Group’s business results andfinancial position may be adversely affected by such risks.
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 the
TKK Group5) Social confusion arising from acts of terror, war or any
other factors

enter into price competition with the TKK Group. Although
the TKK Group strives to reduce all kinds of costs andreinforce its price competitiveness, such unreasonable
downward pressure on the TKK Group’s earnings may
adversely affect the TKK Group’s business results andfinancial position.
Dependence on business results of specific customers in
the Building Construction Business
The TKK Group’s building construction business depends toa large extent on contracts with specific customers.
Consequently, the TKK Group’s sales generated from thisbusiness may be significantly affected by the businessresults of such customers or other factors that are beyond the
TKK Group’s control. Further, any price reductions that we
make in response to customers’ requests may shrink the
TKK Group’s profit margins.

Exchange rate fluctuations
The TKK Group’s business activities include manufacturing
products, selling materials and implementing construction
operations
overseas.
Foreign-currency-denominatedaccounting items such as sales, expenses and assets aretranslated into Japanese yen for the purpose of preparing
consolidated financial statements. The exchange rates usedin currency conversion may affect the yen-denominatedvalue. As most of our payments and receipts aredenominated in U.S. dollars or euros, a stronger yen will
adversely affect the TKK Group’s business, while a weaker
yen will favorably affect the TKK Group’s business.
The TKK Group makes an effort to minimize the adverse
effects of such exchange rate fluctuations by flexibly
entering into forward exchange contracts or option contracts,
and by implementing structural solutions such as using
overseas manufacturing bases and internationally procuring
raw materials. However, an unexpected change in exchange
rates may adversely affect the TKK Group’s business results
and financial position.
Project risk
The business results of the TKK Group may be affected bysituations where, for customer reasons, projects are
suspended or postponed or the project content is otherwise
altered.
Further, as our projects take the form of inclusive contracts,
deterioration in project profitability may impact on businessresults in the event of a sudden change in the economic
situation leading to unforeseen rises in equipment andmaterial prices, transportation costs, construction costs orother expenses, or in the event of natural disaster, outbreakof disease, serious accident or other eventualities.
Competition for winning orders
All of the major businesses of the TKK Group are being
operated under the make-to-order type system and the TKKGroup is facing severe competition to win orders.
Depending on the circumstances, we recognize thepossibility that a competitor may disregard profitability andToyo Kanetsu K.K. Annual Report 20117

Financial Section
For the years ended March 31, 2011 and 20108

Toyo Kanetsu K.K. Annual Report 2011

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Balance Sheets
At March 31, 2011 and 2010

2011

2010

Thousands of
U.S. dollars(Note 3)2011

Current Assets:
Cash on hand and at bankNotes and accounts receivable
Marketable securities
Investments in leases
Inventories (Note 4)
Deferred tax assets (Note 9)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥7,772
11,631
3,999
2,463
7,379
147
567
(166)
33,792¥8,956
13,511
1,000
3,208
8,882
509
1,840
(158)
37,748$93,466
139,876
48,101
29,61788,747
1,773
6,819(1,999)406,400

Property, Plant and Equipment:
Buildings and structures (Note 6)
Machinery and equipment (Note 6)
Land (Note 7)
Construction in progress
Less: Accumulated depreciation
Total property, plant and equipment

10,077
5,585
8,914
53
(12,083)
12,546

9,898
5,278
8,735
88
(11,509)
12,490121,190
67,166107,204
639(145,319)
150,880

Investments and Advances:
Investments in securities (Notes 5 and 6)
Long-term loans receivable
Other investments
Less: Allowance for doubtful accounts
Total investments and advances

5,200
223
1,338
(324)
6,437

6,617
344
1,189
(358)
7,792

62,535
2,679
16,100(3,897)
77,417281
281¥53,056

338
338¥58,368

3,383
3,383
$638,080

ASSETS
Millions of yen

Intangibles:
Intangible fixed assets
Total intangibles
Total assets
The accompanying notes are an integral part of the consolidated financial statements.

Toyo Kanetsu K.K. Annual Report 2011

9

2011

2010

Thousands of
U.S. dollars(Note 3)2011

Current Liabilities:
Short-term debt and current portion of long-term debt (Note 6)
Notes and accounts payable
Accrued income taxes
Accrued liabilities
Advances from customers
Lease obligations (Note 6)
Accrued bonuses
Reserve for losses on work in progress
Reserve for warranty costs for completed works
Other current liabilities
Total current liabilities¥4,603
2,225
588
4,214
6,790
160
241
304
228
229
19,582¥4,280
2,757
195
4,270
7,357
157
249
717
478
382
20,842$55,354
26,757
7,069
50,682
81,662
1,924
2,894
3,661
2,744
2,763
235,510Long-Term Liabilities:
Long-term debt (Note 6)
Lease obligations (Note 6)
Deferred tax liabilities on revaluation of land (Notes 7 and 9)
Deferred tax liabilities (Note 9)
Accrued retirement benefits for employees (Note 8)
Asset retirement obligations (Note18)
Other long-term liabilities
Total long-term liabilities

600
205
2,174
66
302
298
90
3,735

3,961
365
2,174
280
379
91
7,250

7,216
2,461
26,146
790
3,638
3,584
1,083
44,91818,5801,104
13,271(3,750)29,205

18,5801,104
13,608(3,743)29,549223,453
13,278
159,606(45,111)351,226

118
(6)
792
(478)
426
108
29,739¥53,056

350
(5)
792
(519)
618
109
30,276¥58,368

1,419
(69)
9,528
(5,746)
5,132
1,294
357,652$638,080

LIABILITIES and NET ASSETS
Millions of yen

Commitments and Contingent Liabilities (Note 10)
Net Assets
Shareholders’ Equity:
Common stock:
Authorized: 297,000,000 shares
Issued: 138,730,741 shares
Additional paid-in capital
Accumulated earnings
Less: Treasury stock, at cost
Total shareholders’ equity
Accumulated Other Comprehensive Income:Net unrealized holding gains on investments in securities
Deferred gains or losses on hedges
Unrealized gains on revaluation of land (Note 7)
Foreign currency translation adjustments
Total accumulated other comprehensive income
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of the consolidated financial statements.

10

Toyo Kanetsu K.K. Annual Report 2011

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Income and Comprehensive Income
For the years ended March 31, 2011 and 2010

2011

2010

Thousands of
U.S. dollars(Note 3)
2011

¥48,718
42,142
6,576
3,986
2,590

¥50,446
42,600
7,846
3,983
3,863

$585,909
506,824
79,08547,93631,149

186
(26)
(230)
(286)
71
(285)
2,305

159
(81)
(260)
68
33
(81)
3,782

2,237
(313)
(2,768)(3,438)859(3,423)27,7263
27(1,350)
(0)
67
(298)

241
0
(5)
165
-

32
328
(16,234)(7)811(3,584)19(1,532)
773

57
458
4,240

221
(18,433)
9,293

699
(85)
614
159

211
453
664
-

8,404
(1,021)
7,383
1,910

Minority interests in net income of consolidated subsidiaries
Net Income

1
¥158

16
¥3,5608$1,902

Minority interests in net income of consolidated subsidiaries
Income before minority interests

1
159

-

8
1,910

Other Comprehensive Income
Net unrealized holding gains or losses on investment securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using
equity method

(231)
0
39
(2)

-

(2,778)0467(18)

Total Comprehensive Income

(194)
(35)

-

(2,329)(419)

Total comprehensive income attributable to:owners of the parent
minority interests

(33)
(2)

-

(397)
(22)

Millions of yen

Net Sales
Cost of Sales (Note 12)
Gross profit
Selling, General and Administrative Expenses (Notes 11 and 12)
Operating income
Other Income (Expenses):
Interest and dividend income
Interest expense
Foreign currency exchange gain (loss)
Equity in income (loss) of affiliates
Other, net
Income before extraordinary items
Extraordinary Profit (Loss):
Gain on sale or disposal of property, plant and equipment, net
Gain on sale of investments in securities, net
Loss on write-down of investments in securities, net
Provision for bad debts
Reversal of provision for bad debts
Loss on adjustment for changes of accounting standard for asset
retirement obligations
Other, net
Income before income taxes and minority interests
Income Taxes (Note 9):
Current
DeferredIncome before minority interests

2010

U.S. dollars(Note 3)2011

¥28.75$0.02

Yen

Per Share (Note 22)
Net income

2011

¥1.31

The accompanying notes are an integral part of the consolidated financial statements.

Toyo Kanetsu K.K. Annual Report 201111

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2009, 2010 and 2011

Millions of yen

Balance at March 31, 2009
Cash dividends paid
Net income for the year
Purchase of treasury stockReversal of revaluation reserve forland
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2010

Treasury
stock

Total
shareholders’equity¥10,953
(504)
3,560
-

¥(2,813)(930)¥27,824
(504)
3,560
(930)

-

(401)

-

(401)

-

-

-

-

-

¥18,580¥1,104¥13,608¥(3,743)¥29,549

Number of shares ofcommon stock

Common stock

138,730,741-¥18,580-¥1,104---

138,730,741

Additional
Accumulated
paid-in capital earnings (deficit)

Millions of yen
Net unrealized
holding (gains)losses on
investment
securities

Balance at March 31, 2009
Cash dividends paid
Net income for the year
Purchase of treasury stockReversal of revaluation reserve forland
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 201012

Toyo Kanetsu K.K. Annual Report 2011

Deferred
gains orlosses onhedgesTotal
accumulated
Foreign
Unrealizedothercurrency
gains onrevaluation of translation comprehensive
incomeadjustments
land

Minority
interests

Total net assets

¥338
-

¥40
-

¥376
-

¥(652)
-

¥102
-

¥89
-

¥28,015
(504)
3,560
(930)

-

-

-

-

-

-

(401)

12

-

-

-

12

-

12

¥350

(45)
¥(5)

416
¥792

133
¥(519)

(45)
416
133
¥618

20
¥109

(45)
416
133
20
¥30,276

Millions of yen

Balance at March 31, 2010
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2011

Treasury
stock

Total
shareholders’equity¥13,608¥(3,743)¥29,549

-

(12)

-

(12)

-

-

(483)
158
-

(7)

(483)
158
(7)

-

-

-

-

-

-

138,730,741¥18,580¥1,104¥13,271¥(3,750)¥29,205

Additional
Accumulated
paid-in capital earnings (deficit)

Number of shares ofcommon stock

Common stock

138,730,741¥18,580¥1,104---

Millions of yen
Net unrealized
holding (gains)losses on
investment
securities

Balance at March 31, 2010
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2011

Deferred
gains orlosses onhedgesTotal
accumulated
Foreign
Unrealizedothercurrency
gains onrevaluation of translation comprehensive
incomeadjustments
land

Minority
interests

Total net assets

¥350

¥(5)

¥792

¥(519)¥618¥109¥30,276

-

-

-

-

-

-

(12)

-

-

-

-

-

-

(483)
158
(7)

(232)

-

-

-

(232)

-

(232)

¥118

(1)
¥(6)

¥792

41
¥(478)

(1)
41
¥426

(1)
¥108

(1)
41
(1)
¥29,739

Toyo Kanetsu K.K. Annual Report 201113

Thousands of U.S. dollars (Note 3)

Balance at March 31, 2010
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2011

Treasury
stock

Total
shareholders’equity$163,661$(45,020)$355,372

-

(153)

-

(153)

-

-

(5,804)
1,902
-

(91)

(5,804)
1,902
(91)

-

-

-

-

-

-

138,730,741$223,453$13,278$159,606$(45,111)$351,226

Minority
interests

Total net assets

Common stock

138,730,741$223,453$13,278---

Net unrealized
holding (gains)losses on
investment
securities

Balance at March 31, 2010
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2011

Deferred
gains orlosses onhedgesThousands of U.S. dollars (Note 3)
Total
accumulated
Foreign
Unrealizedothercurrency
gains onrevaluation of translation comprehensive
incomeadjustments
land$4,215$(68)$9,528$(6,243)$7,432$1,316$364,120

-

-

-

-

-

-

(153)

-

-

-

-

-

-

(5,804)
1,902(91)(2,796)---(2,796)-(2,796)$1,419(1)$(69)$9,528497$(5,746)(1)
497$5,132(22)$1,294

(1)
497
(22)
$357,652

The accompanying notes are an integral part of the consolidated financial statements.

14

Toyo Kanetsu K.K. Annual Report 2011

Additional
Accumulated
paid-in capital earnings (deficit)

Number of shares ofcommon stockToyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2011 and 2010

Millions of yen
2011

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Depreciation and amortization
Amortization of long-term prepaid expenses
Increase (decrease) in provision for allowance for doubtful accounts
Increase (decrease) in provision for employees’ retirement benefits
Increase (decrease) in provision for losses on work in progress
Increase (decrease) in provision for warranty costs for completed works
Interest and dividend income
Interest expense
Gain on allotment of shares
Exchange loss (gain)
Equity in loss (income) of affiliates
Loss (gain) on sales of investment securities
Loss (gain) on write-down of investments in securities
Loss (gain) on sale of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss (gain) on transfer of business
Loss on adjustment for changes of accounting standard for asset retirement
obligations
Decrease (increase) in notes and accounts receivables
Decrease (increase) in investments in leases
Decrease (increase) in inventories
Decrease (increase) in advance payments
Decrease (increase) in accrued income
Increase (decrease) in notes and accounts payable
Increase (decrease) in advances from customers
Other
Sub totalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Payments into time deposits (over 3-month term)
Proceeds from withdrawal of time deposits
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of investments in securities
Proceeds from sales of investments in securities
Proceeds from transfer of business
Payments of loans receivableCollection of loans receivable
Other
Net cash used in investing activities
Cash Flows from Financing Activities:
Increase (decrease) in short-term debt, net
Proceeds from long-term debt
Repayment of long-term debt
Purchase of treasury stock
Capital dividend paid
Net cash provided by (used in) financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year (Note 14)

2010

Thousands of
U.S. dollars(Note 3)
2011

¥773
694
85
(27)
(75)
(413)
(250)
(186)
26
(45)
122
286
(26)
1,350
(9)
6
(23)
298

¥4,240
739
134
(174)
(588)
(353)
359
(159)
81
(23)
(68)
0
(283)
39
-

$9,293
8,341
1,017
(319)
(897)
(4,962)(3,003)(2,237)
313
(536)
1,469
3,438
(312)
16,234
(104)
74
(278)
3,584

1,867
565
1,501
1,216
(44)
(551)
(562)
(63)
6,515
200
(25)
(288)
6,402

(568)
580
(140)
(1,153)
39
(545)
4,054
149
6,360
181
(76)
(86)
6,379

22,452
6,793
18,046
14,628(525)(6,631)(6,755)(771)
78,352
2,405(304)(3,462)
76,991

(76)
38
(747)
131
(695)
125
23
(80)
200
23
(1,058)

(76)
36
(632)
522
(215)
0
(30)
161
35
(199)

(914)
457
(8,982)
1,571(8,357)
1,500
278
(962)
2,405
276
(12,728)(1,723)100(1,269)(8)(480)(3,380)
(187)
1,777
9,803
¥11,580(3,653)3,650(1,864)(930)(501)(3,298)
56
2,938
6,865
¥9,803(20,727)
1,203(15,258)(90)(5,768)(40,640)(2,249)21,374
117,893$139,267

The accompanying notes are an integral part of the consolidated financial statements.

Toyo Kanetsu K.K. annual report 201015

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended March 31, 2011 and 2010
1. Basis of Presenting the Consolidated Financial Statements
The accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (hereinafter 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, andare compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments andExchange Law of Japan. The accounts of overseas-consolidated subsidiaries are based on their financial statements prepared inconformity with generally accepted accounting principles and practices prevailing in the respective countries in which thesubsidiaries are incorporated.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau in Japan
have been reclassified in these accounts for the convenience of readers outside Japan.
2. Summary of Significant Accounting Policies(1) Principles of Consolidation and Investments in Affiliated Companies
The consolidated financial statements include the accounts of the Company and those of its subsidiaries in which it has control.
The consolidated financial statements include the accounts of its nine subsidiaries. All significant inter-company transactions
and accounts and unrealized inter-company profits are eliminated on consolidation.
The consolidated subsidiary, Global Eight Corporation has been excluded from consolidated subsidiaries for the year ended
March 31, 2010, according to liquidation.
Investments in affiliated companies in which the Company has significant influence are accounted for under the equity method.
These affiliated companies to which the equity method is applied total three at March 31, 2011 and 2010. Consolidated net
income includes the Company’s equity in the current earnings of those companies after elimination of unrealizedinter-company profits.
The excess of the cost over the underlying net equity of investments in consolidated subsidiaries as well as companies
accounted for on an equity basis, is deferred and amortized on a straight-line basis over a period of five years from the date ofacquisition.
Five overseas subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2010 for the current year
consolidation and at December 31, 2009 for the previous year consolidation, respectively. Material differences ininter-company transactions and accounts arising from the use of the different fiscal year ends are appropriately adjusted for on
consolidation.
(2) Revaluation of Assets and Liabilities of the Subsidiaries
All assets and liabilities of the subsidiaries are fair valued as of the date of acquisition of control.
(3) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits able to bewithdrawn on demand and highly liquid short-term investments with an original maturity of three months or less which carry
only a minor risk of fluctuation in value.
(4) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided at an amount for losses which are expected to occur but cannot be determinedon an item-by-item or group basis. This general allowance is calculated using historical write-off experience from prior periods.
In addition, an amount for expected losses on individual uncollectible receivables is calculated based on management’s
estimate.
(5) Inventories
Inventories are valued at cost as determined by the following methods:
Raw materials……………………….Moving-average method (a carrying amounts on the balance sheet is written down
if the profitability decreases)
Work in process and supplies ………Specific identification method (a carrying amounts on the balance sheet is written
down if the profitability decreases)(6) Financial Instruments(a) Derivatives
All derivatives are stated at fair value except for certain derivatives that are designated as “hedging instruments” (see Note 17.
Derivative and Hedging Activities below).

16

Toyo Kanetsu K.K. Annual Report 2011

(b) Securities to be Held to Maturity
These are accounted for using the amortized cost method (straight-line method).
(c) Investments in Securities
Securities held by the Company and its subsidiaries are classified into two categories:“Investments of the Company in equity securities issued by the affiliated companies” are accounted for by the equity method.
Other investments in debt and equity securities are classified as “Other securities.” “Other securities” with market quotations
are stated at fair value with any unrealized holding gains and losses, net of tax, being reported in separate component of net
assets. The cost of sold is determined by the moving-average method.
“Other securities” without market quotations are stated at cost determined by the moving-average method.
(7) Hedge Accounting
Gains or losses arising from changes in the fair value of the derivatives designated as “hedging instruments” are deferred as an
asset or liability and included in net assets in the same period during which the gains and losses on the hedged items ortransactions are recognized. However, in cases where forward exchange contracts used as hedges meet certain hedging criteria,
the existing foreign currency receivables or payables are translated at their contract rates. In addition, if interest rate swaps
contracts meet certain exceptional criteria, the net amount to be paid or received under these swap contracts is added to or
deducted from the interest on the related hedged liabilities.
Derivatives designated as hedging instruments by the Company are principally forward exchange contracts and interest swaps.
The related hedged items are expected account receivables or payables in foreign currency, and long-term bank loans.
In accordance with the Company’s regulations on the handling of derivative transactions, the Company does not make active
use of individual transactions for speculative purposes but uses them exclusively to reduce exposure to risk from foreignexchange and interest rate fluctuations.
The Company evaluates the effectiveness of its hedging activities by reference to the accumulated gains or losses on thehedging instruments and the related hedged items beginning from the commencement of the hedges. The Company, however,does not evaluate the effectiveness of interest swaps because of exceptional accounting treatment.
(8) Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of maintenance, repairs and minor renewals is charged to current
operations; major renewals and enhancements are capitalized. Depreciation is mainly computed using the declining-balancemethod, except for buildings acquired after April 1, 1998, to which the straight-line method is applied for the Company and its
domestic subsidiaries. The principal estimated the range of useful lives from 3 to 57 years for buildings and from 6 to 13 years
for machinery and equipment. Depreciation of overseas subsidiaries is computed using the straight-line method.
(9) Intangible Assets
Amortization of intangible assets is computed using the straight-line method. Software for internal use is amortized over its
expected useful life (5 years), on a straight-line basis.
(10) Reserve for Losses on Work in Progress
A reserve for losses on work in progress is provided based on an estimate of the total losses which can be anticipated for the
next fiscal year and beyond in respect of construction projects on which eventual losses are deemed inevitable and amounts
thereof can reasonably be estimated.
Work in progress on construction contracts in which losses are envisaged and the reserve for losses on work in progress are notmutually offset but are both presented.
Of the total amount of work in progress on construction contracts in which losses are envisaged, the amount corresponding to
the reserve for losses on work in progress is ¥30 million ($358 thousand) and ¥123 million for the years ended March 31, 2011
and 2010, respectively.
(11) Reserve for Warranty Costs for Completed Works
A reserve for warranty costs for completed works is provided based on the past experience rates for warranty costs andafter-sales service costs for completed works on an item-by-item or group basis.
(12) Income Taxes
The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes andenterprise taxes.
Income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in
respect of temporary differences between the tax base of assets and liabilities and those as reported in the consolidated
financial statements.
Toyo Kanetsu K.K. Annual Report 201117

(13) Accrued Bonuses
Accrued bonuses to employees are provided for at the estimated amounts which the Company and its consolidated subsidiaries
are obligated to pay to employees after the fiscal year-end, based on services provided during the current period.
(14) Accrued Retirement Benefits for Employees
Accrued retirement benefits for employees of the Company and its major consolidated subsidiaries are provided based on theestimated present value of projected benefit obligations and fair value of funded plan assets. For other insignificant
consolidated subsidiaries, accrued retirement benefits for employees are calculated using the simplified method. The amount of
actuarial gains (losses) is amortized on a straight-line basis over five years and recognized as deductions from expenses or
included in expenses, respectively, in the next fiscal year. Prior service cost is recognized as deductions from expenses or
included in expenses, respectively, in the year of occurrence.
(Changes in accounting method)
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries adopted the partial amendmentof the Financial Accounting Standard for Retirement Benefits (Part 3) (Statement No. 19 issued by the Accounting Standards
Board of Japan (hereinafter “ASBJ”) on July 31, 2008).
(15) Significant Accounting Policies for Earnings and Expenses(a) Regarding the accounting policy for the net sales of completed construction contracts and the cost of sales of completed
construction contracts, for work in progress in the years ended March 31, 2011 and 2010, the Company accounted for projects
with an outcome deemed certain on the percentage-of-completion basis (with the estimated stage of completion calculated on
the cost-to-cost basis) and other projects on the completed-contract basis.
(Changes in accounting method)
Regarding the accounting policy for earnings from construction contracts, previously, the Company and some consolidated
subsidiaries accounted for contracts of which period from the beginning of construction work to the date of delivery is one year
or longer on the percentage-of-completion basis and other contracts on the completed-contract basis or upon delivery. Effectivefrom the fiscal year ended March 31, 2010, the Company and some consolidated subsidiaries adopted the Accounting Standard
for Construction Contracts (Statement No. 15 issued by ASBJ on December 27, 2007) and the Guidance on AccountingStandard for Construction Contracts (Guidance No. 18 issued by ASBJ on December 27, 2007). Accordingly, starting withconstruction contracts begun in the year ended March 31, 2010, for work in progress up to March 31, 2010, the Company andsome consolidated subsidiaries accounted for contracts, of which percentage of completion can be reliably estimated on thepercentage-of-completion basis (with the estimated stage of completion calculated on the cost-to-cost basis) and other projects
on the completed-contract basis.
(b) Regarding finance lease transactions, sales and cost of sales were recorded when lease receivables from customers are paid.
(c) One consolidated subsidiary recognizes revenue on the installment basis.
(16) Accounting for Consumption Tax
The Company and its domestic consolidated subsidiaries account for consumption tax by the tax-exclusion method.
(17) Significant Changes in the Basis of Preparation of the Consolidated Financial Statements(a) Application of Accounting Standard for Asset Retirement Obligations
In the year ended March 31, 2011, the Company applied the Accounting Standard for Asset Retirement Obligations (Statement
No. 18 issued by ASBJ on March 31, 2008) and the associated implementation guidance (Guidance No. 21 issued by ASBJ on
March 31, 2008).
As a result, income before extraordinary items for the year ended March 31, 2011, decreased by ¥1 million ($10 thousand) andnet income before income taxes by ¥298 million ($3,584 thousand).
(b) Application of Accounting Standard for Equity Method of Accounting for Investments and Practical Solution on
Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method
In the year ended March 31, 2011, the Company applied the Accounting Standard on Unification of Accounting Policies
Applied to Associates Accounted for Using the Equity Method (Statement No. 16 issued by ASBJ on March 10, 2008) and theassociated Practical Solution (Practical Solution No. 24 issued by ASBJ on March 10, 2008) and made the necessary
amendments to the consolidated accounts.
As a result, accumulated earnings at the beginning of the period decreased by ¥13 million ($152 thousand). The effect on
income before extraordinary items and on income before income taxes was immaterial.
(18) Change in Method of Presentation(Consolidated Statements of Income)In the year ended March 31, 2011, in accordance with the Accounting Standards for Consolidated Financial Statements(Statement No. 22 issued by ASBJ on December 26, 2008), the Company applied the Cabinet Office Ordinance on Partial
Revision of Regulations for Terminology, Forms and Preparation of Financial Statements and Other Regulations (Cabinet
Office Ordinance No. 5, March 24, 2009) to present data under the item of income before minority interests.

18

Toyo Kanetsu K.K. Annual Report 2011

(19) Additional Information
In the year ended March 31, 2011, the Company applied the Accounting Standard for Presentation of Comprehensive Income(Statement No. 25 issued by ASBJ on June 30, 2010). However, the amounts presented for the previous consolidated fiscal
year under accumulated other comprehensive income and total accumulated other comprehensive income represent theamounts for valuation and translation adjustments, and total valuation and translation adjustments.
The amounts for comprehensive income and for other comprehensive income items in the previous year are as indicated below.
Millions ofyenYear ended on March 31, 2010
Comprehensive income attributable to:owners of the parent
minority interests¥3,67620¥3,696

Other comprehensive income
Net unrealized holding gains or losses on investment securities
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted
for using equity method

¥(35)
(47)
15
137
50
¥120

3. United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥83.15=U.S. $1.00, theapproximate rate of exchange prevailing at March 31, 2011, has been used in translation. The inclusion of such amounts are notintended 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.
4. Inventories
Inventories as at March 31, 2011 and 2010 consisted as follows:
Thousands of
U.S. dollars
2011
$16
7,030
81,701$88,747

Millions of yen
2010
2011
¥3
¥1
640
585
8,239
6,793
¥8,882¥7,379March 31
Merchandise
Raw materials and supplies
Work in process
Total

5. Investments in Securities
The aggregate fair value and carrying amounts of securities to be held to maturity with market quotations at March 31, 2011
and 2010 were as follows:
Millions of yen
March 31
Government
bonds and local
government
bonds
Bonds
Other
Total

Thousands of U.S. dollars
2011

2010

2011
Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

¥-

¥-

¥-

¥-

¥-

¥-

$-

$-

$-

587
¥587

600
¥600

(13)
¥(13)

¥-

¥-

¥-

7,054
$7,054

7,216$7,216(162)$(162)

The aggregate acquisition cost and carrying amounts of other securities with market quotations at March 31, 2011 and 2010
were as follows:
Millions of yen
March 31
Equity securities
Bonds
Other
Total

Thousands of U.S. dollars
2011

2010

2011
Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference¥2,060¥2,060¥2,257¥2,257¥197¥197¥3,370¥3,370¥3,957¥3,957¥587¥587$24,778$24,778$27,142$27,142$2,364$2,364

Toyo Kanetsu K.K. Annual Report 201119

The Company writes down the book value of other securities when the market value declines by more than 50%, or the market
value declines by more than 30% but less than 50% and the Company management determines the decline to be other than
temporary. In the year ended March 31, 2011, write-downs of other marketable securities, consisting of stocks with fair value,
were made in the amount of ¥1,350 million ($16,234 thousand).
Proceeds from sale of other securities were ¥82 million ($980 thousand) and nothing for the years ended March 31, 2011 and2010, respectively. On those sales, gross realized gains were ¥27 million ($328 thousand) and nothing for the years ended
March 31, 2011 and 2010, respectively. Gross realized losses were ¥0 million ($0 thousand) and nothing for the years ended
March 31, 2011 and 2010, respectively.
Non-listed stocks whose fair value was not determinable were not included in the above table. For the years ended March 31,
2011 and 2010, the carrying amounts of them in the consolidated balance sheet were respectively ¥2,168 million ($26,078
thousand) and ¥2,442 million.
Commercial paper was not included in the above table as the period to maturity of it was short and the fair value was close to
the book value. For the years ended March 31, 2011 and 2010, the carrying amounts of them on the balance sheet were ¥3,999
million ($48,101 thousand) and ¥1,000 million, respectively.
Investments in affiliates included in investments in securities were ¥1,540 million ($18,521 thousand) and ¥1,857 million forthe years ended March 31, 2011 and 2010, respectively.
6. Short-Term Debt, Long-Term Debt, and Lease Obligations
Short-term debt, long-term debt and lease obligations as at March 31, 2011 and 2010 were as follows:
Thousands of
U.S. dollars
2011

Millions of yen
2010

2011
March 31
Short-term debt
Current portion of long-term debt
Lease obligations (current liabilities)
Long-term debt
Lease obligations (long-term liabilities)
Total

Weighted
averageinterest rate

¥1,381
3,222
160
600
205
¥5,568Weighted
averageinterest rate

¥3,252
1,029
157
3,961
365
¥8,764

0.85%
1.31%
1.29%
-

0.83%
2.27%
1.33%
-

$16,61138,743
1,924
7,216
2,461
$66,955

Note: The above interest rates were calculated by weighted average method based on the balance of debt at the end of the fiscal year.

Secured debt as at March 31, 2011 and 2010 was as follows:

March 31
Short-term debt secured by buildings, machinery and landLong-term debt secured by buildings, machinery and land
Total
Short-term debt secured by investments in securities
Long-term debt secured by investments in securities
Total

Millions of yen
2010
2011
¥470
¥1,3501,850
500¥2,320¥1,850
¥¥-

¥124
214
¥338

Thousands of
U.S. dollars
2011$16,236
6,013$22,249$$-

Assets pledged as collateral for the short-term debt and the long-term debt as at March 31, 2011 and 2010 were as follows:

March 31
Buildings (at net book value)
Machinery (at net book value)
Land
Total
Investments in securities

20

Toyo Kanetsu K.K. Annual Report 2011

Millions of yen
2010
2011
¥535
¥496
9
5
5,459
5,459
¥6,003¥5,960¥-¥361

Thousands of
U.S. dollars
2011$5,97655
65,652$71,683$-

Annual maturities of long-term debt and lease obligations as at March 31, 2011 were as follows:Year ending on March 31,
2013
2014
2015
2016

Long-term debt
Thousands ofMillions of yen
U.S. dollars¥500$6,013100
1,203

Lease obligations
Thousands ofMillions of yen
U.S. dollars
¥74
$887
78
940
53
634
-

7. Revaluation of Land
In accordance with the “Law on Land Revaluation” issued on March 31, 1998 and the “Law Related to the Revision of the
Law of Land Revaluation” issued on March 31, 2001, the Company revalued its business-purpose land. Of the revaluationdifference, the amount related to tax is recognized as a deferred tax liability and the revaluation difference, net of tax, is
recognized as a component of net assets.
The revaluation was performed on March 31, 2002 based on the fixed asset tax revaluation amount set in the “Law on Land
Revaluation” Article. 2, Item 3, and is calculated based on land prices set in the “Law on Land Revaluation” Article.2, Item 4
with certain reasonable adjustments.
The excess of the book value over the current market value of such revalued land held at March 31, 2011 and 2010 amounted
to ¥3,306 million ($39,756 thousand) and ¥3,118 million, respectively.
8. Retirement Benefits Plan
The Company and some consolidated subsidiaries have defined benefits pension plans and employee’s pension funds bymulti-employer plan as the system of defined benefits. The other consolidated subsidiaries have tax-qualified pension plans
and termination allowance plans. The one consolidated subsidiary that operated a tax-qualified pension plan and the one
consolidated subsidiary that operated a termination allowance plan transferred at the beginning of the fiscal year from April 1,
2011, to the Smaller Enterprise Retirement Allowance Mutual Aid System. The Company and certain consolidated subsidiaries
also have the defined contribution pension plans.
The accrued retirement benefits as of March 31, 2011 and 2010 were as follows:
Millions of yen
2010
2011
¥(2,815)¥(2,796)
2,634
2,642
(181)
(154)
(168)
(90)
(349)
(244)
30
58
¥(379)¥(302)March 31
Projected benefit obligations
Plan assets
Net unreserved projected benefit obligations
Unrecognized actuarial differences
Net retirement benefit obligations
Less: Pension costs paid in advanceAccrued retirement benefits for employees

Thousands of
U.S. dollars
2011$(33,634)
31,176(1,858)(1,074)(2,932)706$(3,638)

Net pension and severance costs related to the retirement benefit plans for the years ended March 31, 2011 and 2010 were as
follows:
Millions of yen
2010
2011
¥250
¥117
147
134
46
43
(19)
(26)
33
(26)
(49)
43
41

Thousands of
U.S. dollars
2011$1,405
1,608
519
(316)
(311)
(592)
497

2011
1.5%
1.0%

2010
1.5%
1.0%

Straight-line basis

Straight-line basis

Expensed in the year ofoccurrence
5 years

Expensed in the year ofoccurrence
5 years

March 31
Net pension and severance costs
Service costs
Interest cost
Expected return on plan assets
Net amortization
Amortization of prior service costs
Transfer to defined contribution pension plans

Assumptions used in calculation of the above information were as follows:
March 31
Discount rate
Expected rate of return on plan assets
Method of attributing the projected benefit obligations toperiods of service
Amortization of prior service costs
Amortization of unrecognized actuarial differences

Toyo Kanetsu K.K. Annual Report 201121

9. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income, which in the aggregate resulted in thestatutory income tax rate of approximately 40.7% for the years ended March 31, 2011 and 2010. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.
At March 31, 2011 and 2010, significant components of deferred tax assets and liabilities were as follows:

March 31
Deferred tax assets
Tax losses carried forward
Accrued enterprise tax
Accrued retirement benefits for employees
Accrued bonuses
Allowance for doubtful accounts
Reserve for losses on work in progress
Loss on write-down of investments in securities
Loss on write-down of investments
Impairment losses on fixed assets
Depreciation and amortization

Millions of yen
2010
2011

Thousands of
U.S. dollars
2011

Less: valuation allowance
Gross deferred tax assets

¥909
47
44
98
159
126
337
85
421
61
121
301
475
3,184
(2,641)
543

¥708
23
116
101
172
292
337
85
581
62
444
2,921
(2,377)544$10,935
568
531
1,178
1,906
1,509
4,056
1,020
5,067
735
1,458
3,621
5,714
38,298(31,767)
6,531

Deferred tax liabilities
Deferred tax liabilities on revaluation of land
Net unrealized holding gains on investments in securities
Special item for lease
Other
Gross deferred tax liabilities

2,174
65
1
¥2,240

2,174
206
77
27
¥2,484

26,146782
8$26,936

Asset retirement obligations
Tax effect of investments, etc., in subsidiary due for liquidation
Other

Deferred tax assets and liabilities as at March 31, 2011 and 2010 were recorded in the consolidated balance sheet as follows:
Millions of yen
2010
2011
Deferred tax assets (current assets)
Deferred tax assets (other assets in investments and advances)
Deferred tax liabilities (other current liabilities in current liabilities)
Deferred tax liabilities (long-term liabilities)
Deferred tax liabilities on revaluation of land (long-term liabilities)

¥147
396
66
¥2,174

Thousands of
U.S. dollars
2011

¥509
35
30
280
¥2,174$1,773
4,758
790$26,146

The reconciliation of the statutory income tax rate to the effective income tax rate for the years ended March 31, 2011 and2010 were as follows:
Statutory income tax rate
Increase (decrease) in tax rate due to;Increase and decrease of valuation allowance
Permanently non-deductible expenses
Permanently non-taxable dividends received
Local inhabitant’s tax
Difference in tax rates for foreign subsidiaries
Equity in income of affiliates
Adjustment for unrealized gains and losses

Tax effect of investments, etc., in subsidiary due for liquidation
Other
Effective income tax rate

22

Toyo Kanetsu K.K. Annual Report 2011

2011
40.7%

2010
40.7%

58.5
6.6
(1.9)
3.7
(0.1)
13.2
(2.3)
(39.0)
0.0
79.4%(26.5)
1.5
(0.7)
0.6
(0.2)
(0.6)
0.6
0.3
15.7%

10. Commitments and Contingent Liabilities
As at March 31, 2011, the Company was contingently liable for the affiliated company as follows:
Thousands of
U.S. dollars
2011$4,680Millions of yen
2010
2011
¥500
¥389

March 31
Trade liabilities

11. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2011 and 2010 were as
follows:
Thousands of
U.S. dollars
2011$16,720
4,831
1,118
1,442
611

Millions of yen
2010
2011
¥1,318¥1,390
402
97
93
172
120
4
51

Year ended on March 31
Salaries and benefits
Bonuses
Accrued bonuses
Pension and severance costs
Allowance for doubtful accounts

12. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years
ended March 31, 2011 and 2010 were ¥318 million ($3,821 thousand) and ¥344 million, respectively.
13. Supplements for Consolidated Statements of Changes in Net Assets
Type and number of shares as at March 31, 2011 and 2010 were as follows:
Thousands of sharesYear ended on March 31
Issued stock
Common stock
Number of issued stock at the beginning of the fiscal year
Increase in number of stock
Decrease in number of stock
Number of issued stock at the end of the fiscal year

2011

2010

138,731
138,731

138,731
138,731

Treasury stock
Common stock
Number of treasury stock at the beginning of the fiscal year
Increase in number of stock
Decrease in number of stock
Number of treasury stock at the end of the fiscal year

18,25046
18,296

12,9905,260
18,250For the year ended March 31, 2011, treasury stock increased by 46 thousand shares resulting from purchasing shares less than
one unit.
For the year ended March 31, 2010, treasury stock increased by 5,260 thousand shares resulting from purchasing treasury stock
5,088 thousand shares based on decision in the board of director’s meeting and purchasing 172 thousand shares less than one
unit.
Cash dividends paid to shareholders from the beginning of the effective date were as follows:
Approved by annual general shareholders’ meeting
Date of approval
Type of shares
Date of record
Effective date
Dividends per share
Amount of cash dividends

2011

2010

June 29, 2010
Common stock
March 31, 2010
June 30, 2010
¥4.00 ($0.05)¥483 million($5,804 thousand)June 26, 2009
Common stock
March 31, 2009
June 29, 2009
¥4.00
¥504 million

Toyo Kanetsu K.K. Annual Report 201123

Cash dividends for the year ended March 31, 2011 as a date of record but an effective date subsequent to the current fiscal year
were as follows:
Resolution
approved by
Annual generalshareholders’meeting held on
June 29, 2011

Type ofsharesDate ofrecordEffective
date

Paid from

Common stock

March 31,2011

June 30,
2011

Accumulated
earnings

Amount of cash dividends
Millions ofThousands ofyen
U.S. dollars

Per share
(Yen)
¥5.00

¥603

$7,252The dividend per share includes a commemorative dividend of ¥1.00 per share to mark the 70th anniversary of the Company’s
establishment.
14. Cash and Cash Equivalents
Cash and cash equivalents as at March 31, 2011 and 2010 for the purpose of statement of cash flows consisted of:March 31
Cash on hand and at bankLess: Time deposits, over 3-month term
Less: Other
Commercial paper (Marketable securities)
Money held in trust (Marketable securities）
Cash and cash equivalents

Millions of yen
2010
2011
¥8,956¥7,772
(152)
(190)
(1)
(1)
1,000
1,999
2,000
¥9,803¥11,580

Thousands of
U.S. dollars
2011$93,466(2,285)(15)
24,04824,053$139,267

15. Leases
Lessee
The future payments due under non-cancellable operating lease transactions were as follows:
March 31
Within one year
Over one year

Millions of yen
2010
2011
¥¥10
33
¥¥43

Thousands of
U.S. dollars
2011
$124
390
$514

Lessor
The breakdown of investments in leases on the consolidated balance sheets was as follows:
March 31
Current assets
Receivables from lease rental revenue
Estimated salvage value
Interest income
Investments in leases

Millions of yen
2010
2011
¥2,610144(291)¥2,463Thousands of
U.S. dollars
2011¥3,491156(439)¥3,208$31,384
1,732(3,499)$29,617

Expected amount of collection from receivables of lease rental revenue in each annual period are as follows:Year ended on March 31
Within one year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Over 5 years

24

Toyo Kanetsu K.K. Annual Report 2011

Millions of yen
2010
2011
¥1,189¥1,078
1,017
811
750
393
333
223
164
76
¥38
¥29

Thousands of
U.S. dollars
2011$12,967
9,749
4,723
2,680
913
$352

16. Financial Instruments(1) Overview(A) Policy for financial instruments
The Company raises funds required for its operations through borrowings from banks. In the event temporary surplus of funds
arise, the Company invests them in financial instruments, which are highly secured.
In accordance with the Company’s policy for derivative transactions, such transactions are used to reduce exposure to the risks
specified in (B) and derivative transaction is not used for speculation purpose.
(B) Description of financial instruments and related risk and risk management systems
Notes and accounts receivable and investments in leases are exposed to customer credit risk, while certain receivables
denominated in foreign currency are exposed to the risk of foreign currency exchange rate fluctuation. In the case of customer
credit risk, the Company seeks to minimize risk by regularly monitoring the status of receivables using management charts andother methods; in the case of risk from foreign currency exchange rate fluctuation, measures to minimize risk include making
borrowings denominated in foreign currency as necessary.
Marketable securities are exposed to credit risk of invested entity. To mitigate such risk, the Company invests in short-termcommercial papers of high credit rating and high security and in money trusts under the prescribed internal procedures.
Investments in securities are exposed to credit risk of invested entity and to the risk of fluctuations in market price. These
consist primarily of shares in listed companies with which the Company has business relationship. The investments are held in
the form of other marketable securities and are subject to regular checks of fair value.
Short-term loans receivable and long-term loans receivable consist primarily of loans to equity-method affiliates. These loans
are exposed to credit risk, but business performance trends, operational developments, and other factors are subjected toconstant scrutiny to keep track of the financial situation of the invested entity.
Notes and accounts payable and accrued liabilities are exposed to liquidity risk, while certain liabilities denominated in foreign
currency are exposed to risk of foreign currency exchange rate fluctuation. In the case of liquidity risk, the Company seeks tominimize risk by regularly preparing cash flow worksheets and using other methods; in the case of risk of foreign currency
exchange rate fluctuation, measures to minimize risk include entering into forward exchange contracts as necessary.
Within Company borrowings, short-term debt consists primarily of finance relating to routine business transactions, while
long-term debt consists primarily of temporary advances for major projects and finance relating to investments in leases.
Borrowings at variable interest rates are exposed to risk of interest rate fluctuation. In order to avoid this risk by fixing interest
rates for major long-term debt, interest rate swaps are used as a hedging instrument for individual contracts. Interest rate swaps
are limited to the debt where the application of exceptional treatment is allowed under accounting principles generally adopted
in Japan. Evaluation of the effectiveness of the hedge is omitted here. For the liquidity risk, efforts to minimize risk are madeby regularly preparing financing charts and similar methods.
Lease obligations consist of those investments in leases involving properties for which lease transfers have been carried out
and are exposed to liquidity risks. Efforts to minimize risk are however made by regularly preparing cash flow worksheet andsimilar methods.
The execution and management of derivative transactions is carried out in accordance with the Company’s policies forderivative transactions. When using derivatives, in order to minimize credit risk, the Company enters into transactions
exclusively with financial institutions with high credit rating. For information on hedge accounting, including hedging
instruments, hedging policy, and the method of evaluating hedge effectiveness, refer to Note 2. Summary of Significant
Accounting Policies (7) Hedge Accounting.
(C) Supplementary notes on fair value of financial instruments, etc.
In addition to fair value based on market price, the fair value of financial instruments may include prices calculated on areasonable basis where a market price is not available. The calculation of the price is based on variable factors and the price istherefore subject to fluctuation depending on the different assumptions made and other factors. It should further be noted that
contract value of derivative transactions referred to in Note 17. Derivative and Hedging Activities does not represent themarket risk involved in the derivative transactions.
(2) Fair value of financial instruments, etc.
The carrying amounts in the consolidated balance sheet and fair values and the corresponding differences at March 31, 2011
and 2010 (the consolidated accounting date) are as set out below. In the case of items where estimation of the fair value isrecognized to be very difficult, the relevant item is not included in the table below (see note *4 below).

Toyo Kanetsu K.K. Annual Report 201125

Year ended March 31, 2011
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases
Allowance for doubtful accounts (*1)(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets
Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due
within one year)(l) Lease obligations (including amount due
within one year)
Total liabilities
Derivative transactions (*2)(m) Transactions not covered by hedge
accounting(n) Transactions covered by hedge accounting
Total derivative transactions

Year ended March 31, 2010
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases
Allowance for doubtful accounts (*1)(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets
Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due
within one year)(l) Lease obligations (including amount due
within one year)
Total liabilities
Derivative transactions (*2)

26

Toyo Kanetsu K.K. Annual Report 2011

Carrying amountMillions of yen
Fair value

Differences¥7,772
11,631(39)
11,592¥7,772¥-

11,592

-

3,999
2,319
(15)
2,304

3,999

-

2,371

66

3,031
120
223
(11)
212
¥29,030

3,078
120

47
0

211
¥29,1430¥113¥2,225
1,381
3,987¥2,225
1,381
3,987

¥-

3,822

3,830

8

365

389

24

¥11,780¥11,812

¥32

¥0

¥0

¥-

(1)
¥(1)

(1)
¥(1)

¥-

Carrying amount¥8,956
13,511(34)
13,477
1,000
3,052
(30)
3,022

Millions of yen
Fair value

Differences¥8,956¥-

13,477

-

1,000

-

3,136

114

4,175
120
344
(13)
331
¥31,081

4,137
120

(38)
0

331
¥31,157

0¥(76)¥2,757
3,252
4,015¥2,757
3,252
4,015

¥-

4,990

5,012

22

522

562

40

¥15,536¥15,598

¥62

¥(1)

¥(1)

¥-

Year ended March 31, 2011
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases
Allowance for doubtful accounts (*1)(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets
Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due
within one year)(l) Lease obligations (including amount due
within one year)
Total liabilities
Derivative transactions (*2)(m) Transactions not covered by hedge
accounting(n) Transactions covered by hedge accounting
Total derivative transactions

Carrying amountThousands of U.S. dollars
Fair value

Differences$93,466
139,876(471)
139,405$93,466$-

139,405-

48,101
27,885(166)
27,71948,101-

28,518799

36,458
1,443
2,679
(136)
2,543
$349,135

37,014
1,443

556
0

2,543
$350,490

0$1,355$26,757
16,611
47,952$26,757
16,611
47,952$-45,95946,058

99

4,385

4,676

291

$141,664$142,054

$390

$(7)

$(7)

$-

(9)
$(16)

(9)
$(16)

$-

*1. The allowances for doubtful accounts included in notes and accounts receivable, investments in leases, and long-term loans
receivable have been deducted.
*2. Net credits and liabilities arising from derivative transactions are presented on a net basis; in the case of an overall net
liability, the amount is presented in parentheses.
*3. Fair value calculation method for financial instruments and notes on marketable securities and derivative transactions[Assets](a) Cash on hand and at bank and (b) Notes and accounts receivable
As these are mainly settled over short periods and the fair value is close to the book value, these are stated at therelevant book value.
(c) Marketable securities
As the period to maturity is short and the fair value is close to the book value, these are stated at the relevant bookvalue.
(d) Investments in leases
These are presented at present value consisting of receivables from lease receivables, following elimination of estimatedresidual value, discounted at a rate consisting of the base rate for the period to maturity and an allowance for credit risk.
(e) Investments in securities
Fair value reflects stock exchange price or the price quoted by the financial institution dealing with the Company. For
related notes, see Note 5. Investments in Securities.
(f) Short-term loans receivable and (g) Long-term loans receivable
These are stated at present value, consisting of the principal at the balance sheet date and interest receivable up to therepayment date, discounted at an interest rate applicable at the balance sheet date.
[Liabilities](h) Notes and accounts payable (i) Short-term debt and (j) Accrued liabilities
As these are settled over short periods and the fair value is close to the book value, these are stated at the relevant bookvalue.

Toyo Kanetsu K.K. Annual Report 201127

(k) Long-term debt (including amount due within one year)
Fair value of long-term debt with variable interest rate is estimated based on cash flow of repayments of principal andinterest determined together with the applicable interest rate swap, which is accounted for under exceptional method.
The cash flow is discounted at a reasonable estimate of the interest rate that would apply if a new borrowing of the sameamount for the same term were to be made.
(l) Lease obligations (including amount due within one year)
These are treated similarly to investments in leases (Item (d) in the Assets section above), but since the credit risk istransferred to the creditor of the investment in leases that constitutes the liability, they are stated at present value
discounted at the base rate without risk.
[Derivative transactions]
For related notes, see Note 17. Derivative and Hedging Activities.
*4. As there is no market price for non-listed stocks (carrying amount in consolidated balance sheet ¥2,168 million ($26,078
thousand) and ¥2,442 million for the years ended March 31, 2011 and 2010, respectively) and it is also not practicable to
make estimates of future cash flow, etc., and fair value. These stocks are therefore not included in the item (e) Investments
in securities in the Assets section above.
*5. The carrying amounts for (d) Investments in leases in the above table does not include residual value.
*6. Repayment schedule subsequent to the end of the fiscal year of monetary debt and marketable securities with maturity
dates are as follows:
Millions of yen
As at March 31, 2011
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Investment in securities
Securities to be held to maturity
Short-term loans receivable
Long-term loans receivable
Total

Within one year

1 to 5 years

5 to 10 years

Over 10 years¥7,74011,592
4,000
916¥1,361

¥27

¥-

120
¥24,368600
169¥2,130

¥27

42
¥42

Millions of yen
As at March 31, 2010
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Short-term loans receivable
Long-term loans receivable
Total

Within one year

1 to 5 years

5 to 10 years

Over 10 years¥8,927
11,861
1,000
964
120
1
¥22,873¥1,616
2,021
288¥3,925

¥37
¥37

¥42
¥42

Thousands of U.S. dollars
As at March 31, 2011
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Investment in securities
Securities to be held to maturity
Short-term loans receivable
Long-term loans receivable
Total

Within one year

1 to 5 years

5 to 10 years

Over 10 years$93,086
139,405
48,106
11,019$16,371

$329

$-

1,443
$293,059

7,216
2,035
$25,622

$329

508
$508

*7. Repayment schedule of long-term debt and other interest-bearing debt is mentioned in Note 6. Short-Term Debt,
Long-Term Debt, and Lease Obligations.
(Additional information)
From the fiscal year ended March 31, 2010, the Company and its consolidated subsidiaries applied the Accounting Standard
for Financial Instruments (Statement No. 10 issued by ASBJ on March 10, 2008) and the Guidance on Disclosures about Fair
Value of Financial Instruments (Guidance No. 19 issued by ASBJ on March 10, 2008).

28

Toyo Kanetsu K.K. Annual Report 2011

17. Derivative and Hedging Activities
As of March 31, 2011, derivative transactions, for which hedged accounting have been applied, are as indicated below. There
were no relevant transactions as of March 31, 2010.
Millions of yen

As at March 31, 2011
Forward exchange contract
Sell U.S. dollar

As at March 31, 2011
Forward exchange contract
Sell U.S. dollar

Due within one
year

Contract value
Due after one
year

Total

Fair value

Unrealized
gain (loss)

¥498

¥-

¥498

¥499

¥(1)

¥498

¥-

¥498

¥499

¥(1)

Fair value

Unrealized
gain (loss)

Due within one
year

Thousands of U.S. dollars
Contract value
Due after one
Total
year

$5,988$-$5,988$5,997$(9)$5,988$-$5,988$5,997$(9)

Note: The fair value of the above was based on the price quoted by the financial institution dealing with the Company.
In the years ended March 31, 2011 and 2010, derivative transactions, for which hedged accounting have been applied, are as
follows:(1) Currency-related

As at March 31, 2011
Forward exchange contract
Buy Euro

As at March 31, 2010
Forward exchange contract
Buy U.S. dollar
Buy Euro

As at March 31, 2011
Forward exchange contract
Buy Euro

Due within one
year

Millions of yen
Contract value
Due after one
Total
year

Fair value

¥372

¥-

¥372

¥371

¥372

¥-

¥372

¥371

Due within one
year
¥616
255
¥871

Due within one
year

Millions of yen
Contract value
Due after one
Total
year
¥¥-

¥616
255
¥871

Thousands of U.S. dollars
Contract value
Due after one
Total
year

Fair value

¥619
251
¥870

Fair value$4,474$-$4,474$4,467$4,474$-$4,474$4,467*1. The principal object of the hedge is accounts payable in the balance sheets.
*2. Payables hedged by the above contracts, which met certain hedging criteria for deferral hedge accounting, were translated
at the relevant contract rates.
*3. The fair value of the above was based on the price quoted by the financial institution dealing with the Company.
(2) Interest-related

As at March 31, 2011
Interest rate swaps(receivable rate variable/payable rate fixed)

Due within one
year¥3,050Millions of yen
Contract value
Due after one
Total
year
¥500

¥3,550Fair value(*4)

Toyo Kanetsu K.K. Annual Report 201129

As at March 31, 2010
Interest rate swaps(receivable rate variable/payable rate fixed)

As at March 31, 2011
Interest rate swaps(receivable rate variable/payable rate fixed)

Due within one
year
¥380

Due within one
year$36,685

Millions of yen
Contract value
Due after one
Total
year
¥3,790Fair value¥4,170(*4)

Thousands of U.S. dollars
Contract value
Due after one
Total
year
$6,013

Fair value$42,698(*4)*4. As items to which exceptional treatment of interest rate swaps is applicable are treated as a single unit with the long-term
debt covered by the hedge, the fair value is included in the fair value indicated for the relevant long-term debt.
18. Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheets as of March 31, 2011
a. Outline of relevant asset retirement obligations
These are obligations under the Ordinance on Prevention of Asbestos Hazards relating to certain facilities for lease.
b. Method of calculation of amount of relevant asset retirement obligations
For the facilities in a. above, calculations are based on estimated costs in the event of asbestos removal operations.
c. Increase/decrease in total amount of relevant asset retirement obligations for the year ended March 31, 2011.
March 31
Balance at beginning of year
Increase/decrease during year
Balance at end of year

Millions of yen
2011
¥298
¥298

Thousands of
U.S. dollars
2011$3,584$3,584

From the fiscal year ended March 31, 2011, the balances shown are amounts for the beginning of the year reflecting theCompany’s application of the Accounting Standard for Asset Retirement Obligations (Statement No. 18 issued by ASBJ on
March 31, 2008) and the associated implementation guidance (Guidance No. 21 issued by ASBJ on March 31, 2008).
19. Real Estate for Leasing
In the Tokyo area and other districts, the Company and certain of its subsidiaries undertake leasing of part of their businesspremises or of land and buildings used for residential leasing. In the year ended March 2011, the net rent income on therelevant real estate for leasing was ¥302 million ($3,633 thousand) with rent income recorded under net sales and rent
expenses under cost of sales.
The carrying amounts in the consolidated balance sheet of the relevant real estate for leasing, the change during the period, andthe fair value are as set out below.
Millions of yen
2010
2011

Thousands of
U.S. dollars
2011

March 31
The carrying amounts in the consolidated balance sheet
Balance at the beginning of the fiscal year
Change during the fiscal year
Balance at the end of the fiscal year

¥5,45120
5,470¥6,310(859)
5,451$65,552237
65,788Fair value at the end of fiscal year

¥3,892¥3,989$46,807*1. The carrying amounts in the consolidated balance sheet are the acquisition cost, net of accumulated depreciation andaccumulated impairment loss.
*2. The change during the fiscal year ended March 31, 2011, was due mainly to an increase in leased area accounting for ¥61
million ($734 thousand). The main reasons for the changes in the year ended March 31, 2010, were decrease in leased area
accounting for ¥366 million, sale of land accounting for ¥316 million, and sale of depreciation assets accounting for ¥107
million.
*3. Fair value of significant properties at March 31, 2011 and 2010 represents a price based on appraised value determined by
an external real estate appraiser. Fair value of insignificant properties is based on index considered to appropriately reflectmarket price.

30

Toyo Kanetsu K.K. Annual Report 2011

(Additional information)
From the fiscal year ended March 31, 2010, the Company and its consolidated subsidiaries applied the Accounting Standard
for Disclosures about Fair Value of Investment and Rental Property (Statement No. 20 issued by ASBJ on November 28, 2008)
and the Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental Property (Guidance No.
23 issued November 28, 2008).
20. Segment Information
Effective the fiscal year ended March 31, 2011, the Company has adopted Accounting Standard for Segment Information
Disclosure (Statement No.17 issued by ASBJ on March 27, 2009) and the associated implementation guidance (Guidance
No.20 issued by ASBJ on March 21, 2008). Segment information for the year ended March 31, 2010 has been restated inaccordance with such accounting standards for comparative purposes.
(1) Outline of Reporting Segments
The Company’s reporting segments consist of components of its business for which separate financial information is available
and which are evaluated regularly by the Company’s board of directors in deciding the allocation of operational resources andin assessing business performance.
The TKK Group conducts its operations on the basis of a comprehensive business strategy formulated to cover the products
and services of its different business segments and of the Company’s subsidiary Toyo Kanetsu Solutions K.K.
Accordingly, the Company recognizes the following reporting segments, which consist of segments handling different products
and services: Plant & Machinery Business; Material Handling Systems Business; and Building Construction Business.
The operations of the Plant & Machinery Business consist chiefly of the design, manufacture, and installation of storage tanks
for LNG, LPG, crude oil, and other gases and liquids and maintenance operations for these various types of tank. The Material
Handling Systems Business engages chiefly in the development, design, and installation of material distribution systems
consisting mainly of sorting, picking, and conveying systems, and the maintenance of these various systems. The Building
Construction Business engages chiefly in the design, construction, and management of buildings of various types including
apartment buildings, office buildings, welfare facilities, and warehouses.
(2) Method of Calculation of Amounts for Net Sales, Income or Loss, Assets, and Other Items for Reporting Segments
The accounting methods applied to the reporting segments are the same as those specified above in Note 2. Summary of
Significant Accounting Policies. The income of the reporting segments is based on operating income. Intersegmental
transactions are entered at the actual amount.
(3) Information on Amounts for Net Sales, Income or Loss, Assets, and Other Items for Reporting Segments
Millions of yen

Year ended March 31, 2011
Sales
Sales to external customers
Inter-segment sales
Total
Operating income
AssetsOther items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets

Plant &
MachineryBusiness

Reporting segment
Material
Building
Handling
Construction
Systems
Business
Business

Subtotal

Other

Adjustments

Total¥26,70926,7092,517¥17,590
17,590(163)¥2,1802,180
36¥46,479
46,4792,390¥2,239
746
2,985
482

¥(746)(746)(282)¥ 48,718
48,7182,590

20,042

8,556

2,008

30,606

10,238

12,21253,056

273

240

9

522

157

15

694

635

62

1

698

33

6

737

Millions of yen

Year ended March 31, 2010
Sales
Sales to external customers
Inter-segment sales
Total
Operating income
AssetsOther items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets

Plant &
MachineryBusiness

Reporting segment
Material
Building
Handling
Construction
Systems
Business
Business

Subtotal

Other

Adjustments

Total¥24,224
24,224
2,440¥20,897
20,897
1,064¥2,6332,633
65¥47,754
47,754
3,569¥2,692
835
3,527
562

¥(835)(835)(268)¥ 50,446
50,446
3,863

20,763

12,5303,235

36,528

10,294

11,54658,368

250

248

13

511

207

21

739

371

114

5

490

44

166

700

Toyo Kanetsu K.K. Annual Report 201131

Year ended March 31, 2011
Sales
Sales to external customers
Inter-segment sales
Total
Operating income
AssetsOther items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets

Plant &
MachineryBusiness

Thousands of U.S. dollars
Reporting segment
Material
Building
Other
Handling
Construction
Subtotal
Systems
Business
Business

Adjustments

Total$321,219
321,219
30,269$211,544
211,544(1,962)$26,212
26,212432$558,975
558,975
28,739$26,934
8,977
35,911
5,790$(8,977)(8,977)(3,380)$585,909
585,909
31,149241,033

102,904

24,144

368,081

123,125

146,874

638,080

3,281

2,891

111

6,283

1,887

171

8,341

7,640

740

13

8,393

392

72

8,857

(4) Differences between Segmental Totals and Consolidated Financial Statement Totals and Main Factors in Difference(a) Operating income
March 31
Sum total of reporting segments operating income
Income in Other category
Corporate expenses (*)
Other adjustments
Operating income in consolidated financial statements

Thousands of
U.S. dollars
2011

Millions of yen
2010
2011

¥2,390¥3,569$28,739

482
(290)
8
¥2,590

562
(281)
13
¥3,8635,790(3,485)
105$31,149* Corporate expenses are chiefly expenses for administrative and other managerial divisions that do not belong to areporting segment.
(b) Assets
March 31
Sum total of reporting segments assets
Assets in Other category
Corporate assets (*)
Other adjustments
Total assets of consolidated financial statements

Millions of yen
2010
2011
¥36,528¥30,606
10,294
10,238
11,622
12,248(76)(36)¥58,368¥53,056

Thousands of
U.S. dollars
2011$368,081
123,125
147,297(423)$638,080* Corporate assets are chiefly Company cash and deposits and assets relating to the administration department forinvestments in securities, which do not belong to a reporting segment.
(5) Information by Individual Product or Service
March 31
Sales to external customers
Storage tanks, etc.
Storage tank maintenance operations
Material handling systems and machinery, etc.
Apartment and office buildings, etc.
Other
Total

Millions of yen
2011

Thousands of
U.S. dollars
2011¥17,557
9,153
17,5902,180
2,238¥48,718$211,145
110,073
211,545
26,212
26,934$585,909

Millions of yen
2011

Thousands of
U.S. dollars
2011(6) Geographical Information
March 31
Sales to external customers
Japan¥38,808$466,719
South-east Asia
701
8,431
Middle East
4,186
50,338
Oceania
1,853
22,290Africa2,907
34,958
Other
263
3,173
Total
¥48,718$585,909
Note: Net sales figures are categorized by country or region based on the location of the contract. Regarding tangible fixed assets,
as the amount of the tangible fixed assets located in Japan accounts for more than 90% of the amount of tangible fixed assets
recorded in the consolidated balance sheets, the relevant information has been omitted.

32

Toyo Kanetsu K.K. Annual Report 2011

(7) Information on Main Customers
March 31
Sales to external customers
Joint Venture of TKK-Shimizu Corp.

Millions of yen
2011

Thousands of
U.S. dollars
2011¥4,959$59,634

21. Related Party Transactions
Material transactions of the Company with its related companies, excluding transactions with consolidated subsidiaries which
are eliminated in the consolidated financial statements and other than those disclosed elsewhere in these financial statements,
in the year ended March 31, 2010 were as set out below. There were no relevant transactions in the year ended March 31, 2011.
Year ended on March 31, 2010
Toyo Miyama Co., Ltd.
Amounts of transaction:
Guarantee obligation (*2)
Guarantee commission received (*2)
Balance at the end of fiscal year:
Other current liabilities

Millions of yen

¥500
4
¥1

Manavis Co., Ltd.
Amounts of transaction:
Sales of plant and land (*3)
Proceeds from sales
Gain on sales
Interest income received
Balance at the end of fiscal year:
Other current assets
Other investments
Other current liabilities

¥746
274
6
123
123
¥6

*1. The terms and conditions of the above transactions are on an arm’s-length basis.
*2. Certain of the operating liabilities are covered by debt guarantee.
*3. These are determined by negotiation with reference to the price as appraised by a real estate appraiser. The payment conditions
stipulate 50% on delivery and the balance in three equal yearly payments with the interest rate set at a reasonable level withreference to market interest rates.
*4. The transaction price does not include consumption taxes.
*5. The relationships with each related company were as follows:
Name of relatedcompany

Paid-in
capitalToyo Miyama Co., Ltd.

¥100 million

Manavis Co., Ltd.

¥45 million

Principal
business
Architecturalbusiness
Cosmetic andcleaning products

Equity ownership percentage
by the Company

Relationship

49.0% (direct)

Guarantee obligation

12.8% (direct)
3.3% (indirect)

Interlocking directorates

22. Amount Per Share
Amounts per share at March 31, 2011 and 2010 and for the years then ended were as follows:Yen
Net assets
Net income

2011¥246.04
1.31

2010¥250.39
28.75

U.S. dollars
2011
$2.96
0.02

Diluted net income per share for the years ended March 31, 2011 and 2010 has not been presented because no potentiallydilutive shares of common stock were outstanding.
Net income per share was calculated on the following basis:

Net income
Net income not available to shareholders of common stock
Net income available to shareholders of common stock

Weighted-average number of outstanding shares of common stock

Millions of yen
2010
2011
¥3,560¥158¥3,560¥158

Thousands of
U.S. dollars
2011$1,902$1,902Thousands of shares
2010
2011
123,819
120,451

Toyo Kanetsu K.K. Annual Report 2011

33

34

Toyo Kanetsu K.K. Annual Report 2011

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

297,000,000

Capital Stock Issued

138,730,741

Number of Shareholders

14,109Security Traded

Tokyo Stock Exchange Market, 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/
Plant & Machinery Business
Tel: +81-3-5857-3109 Fax: +81-3-5857-3173
Material Handling Systems Business(Toyo Kanetsu Solutions K.K. Head Office)Tel: +81-3-5857-3126 Fax: +81-3-5857-3180
Building Construction Business
Tel: +81-3-5857-3160 Fax: +81-3-5857-3186

Osaka 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

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.
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/

P.T. Toyo Kanetsu Indonesia(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

K-Techno Inc.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3155 Fax: +81-3-5857-7248
URL: http://k-techno.co.jp
TKL Co., Ltd.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-5606-6377
URL: http://www.web-tkl.co.jp

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

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 Kanetsu K.K. Annual Report 201135

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/